PART 2

Transfer taxes
Ar-Rashid Taradji, CPA, JD

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A.
INTRODUCTION TO
TRANSFER TAXES
A. INTRODUCTION TO TRANSFER
TAXES
Transfer tax is tax imposed upon the gratuitous
transfer of property ownership. It is a privilege
tax which is imposed on the act of passing
ownership of property and not a tax on the
property itself.
Gratuitous transfer is one that neither imposes
burden nor requires consideration from
transferee or recipient. The transfer of ownership
is free because of the absence of financial
considearation.
TYPES OF TRANSFER TAXES

Estate Tax
An excise tax imposed upon the right of transmitting
property at the time of death, and the privilege of
controlling the disposition of one’s property to take
effect upon death.
Tax on donations mortis causa Upon the death
Donor’s (Gift) Tax
Tax imposed on the privilege of transmitting one’s
property to another during his lifetime without
adequate and full valuable consideration.
Tax on donations inter vivos During lifetime
ESTATE TAX VS. DONOR’S TAX

Estate tax is imposed upon privilege to transmit

property upon death, while donor’s tax is tax
imposed upon one’s privilege to transfer during
lifetime. Not the property, but the right/privilege to transfer
DONATION INTER VIVOS VS.
DONATION MORTIS CAUSA
Donation Mortis Causa Donation Inter Vivos

Made in consideration of death, without

the donor’s intention to lose the thing Made without such consideration but
conveyed or its free disposal in case of out of donor’s generosity
survival

It is not a contract, but a legacy. It is a contract of donation.

The transfer of the property is effected The transfer of ownership is made
upon the death of the donor. during the lifetime of the donor.
Acceptance by the donees is not
Acceptance by the donees is required.
required.
SUMMARY

Object of

Effectivity Type Tax Nature

Taxation

Privilege to
Upon death Mortis
Estate Tax Transfer Excise Tax
of the donor Causa
Gratuitously
Gratuitous
Transfer During the
Privilege to
lifetime of
Inter Vivos Donor’s Tax Transfer Excise Tax
the donor
Gratuitously
and donee
B.
ESTATE TAXES
B. ESTATE TAX

It is an excise tax or privilege tax and its object is

to tax the shifting of economic benefits and
enjoyment of property from the dead to the
living.
JUSTIFICATION OF ESTATE TAX

Benefit-received theory
Privilege theory or the State partnership theory
Succession to the property of a deceased person is not
a fundamental right. Consequently, the legislature can
burden such succession with a tax.
Ability to pay theory
Those who have more properties to transfer to their
heirs upon death shall pay more estate tax.
ACCRUAL

It accrues as of the death of the decedent,

notwithstanding the postponement of the actual
possession or enjoyment of the estate by the
beneficiary.
Upon the death of the decedent, succession takes
place and the right of the State to tax the
privilege to transmit the estate vests instantly
upon death.
The date of the death of the decedent
DOES THE POSTPONEMENT OF POSSESSION
POSTPONE THE PAYMENT OF THE ESTATE TAX AS
WELL?
No. A transmission by inheritance is taxable at the
time of the decedent’s death notwithstanding the
postponement of the actual possession or
enjoyment of the estate by the beneficiary.
FILING OF ESTATE TAX RETURN

Decedent died before 2018: within 6 months after

death
Decedent died on or after Jan. 1, 2018: within 1
year from date of death
Rationale: The law to be applied is the law in force as of
the date of death of the decedent.
Under meritorious cases, filing of the estate tax
return may be extended for a period of not more
than 30 days.
The taxpayer is the estate itself
WHO IS THE TAXPAYER?

The “estate” of the decedent as a juridical person.

WHO IS LIABLE TO PAY THE ESTATE
TAX?
Primarily liable: Administrator or executor
Secondarily liable: Any of the heirs

Executor - Testate; designated in the will

Administrator - Intestate; court appointed
PERSONS AUTHORIZED TO
MANAGE THE ESTATE
Executor – the person nominated by a testator to
carry out the directions and requests in his will
and to dispose of his property according to his
testamentary provisions after his death
Administrator – the person appointed by the
court, in accordance with the governing statute,
to administer and settle intestate estate and such
testate estate as no competent executor
designated by the testator.
FORMULA FOR ESTATE TAX

Decedent dies as a SINGLE person

Decedent dies as a MARRIED person
DECEDENT DIES AS A SINGLE
PERSON
GROSS ESTATE XXX
LESS: DEDUCTIONS
Ordinary Deductions XXX
Special Deductions XXX (XXX)
TAXABLE NET ESTATE XXX
MULTIPLY: APPLICABLE RATE %
ESTATE TAX DUE XXX
FOREIGN TAX CREDIT (XXX)
ESTATE TAX PAYABLE XXX
DECEDENT DIES AS A MARRIED
PERSON
GROSS ESTATE XXX
LESS: DEDUCTIONS
Ordinary Deductions XXX
Special Deductions XXX (XXX)
NET ESTATE XXX
LESS: SHARE OF SURVIVING SPOUSE (XXX)
TAXABLE NET ESTATE XXX
MULTIPLY: APPLICCABLE RATE %
ESTATE TAX DUE XXX
FOREIGN TAX CREDIT (XXX)
ESTATE TAX PAYABLE XXX
BASIC CONCEPTS
OF WILLS AND
SUCCESSION
BASIC CONCEPTS OF SUCCESSION
AND WILL
Succession
It is a mode of acquisition by virtue of which the
property, rights, and obligations to the extent of the
value of the inheritance, of a person are transmitted
through his death to another or others either by will or
by operation of law.
Elements of Succession
Decedent – person whose property is transmitted
through succession
Heir – person called to succession
Estate – refers to all the property, rights, and
obligations of a person which are not extinguished by
his death
BASIC CONCEPTS OF SUCCESSION
AND WILL
Types of Succession:
Testamentary – that which results from the designation
of an heir, made in a will executed in the form
prescribed by law. The decedent executed a last will
and testament.
Legal or Intestate – that which is effected by operation
of law or transmission of properties where:
There is no will or
If there is a will, the same is void or lost its validity, or nobody
succeeds in the will.
Mixed – that which is effected partly by a will and by
operation of law.
TESTAMENTARY SUCCESSION

Kinds of Wills
Notarial or Ordinary Will – one which is executed in
accordance with the formalities prescribed by law (Art.
804-808 of the Civil Code). It is signed and dated in
front of 3 or more witnesses and acknowledged by the
presence of a notary public.
Holographic Will – a written will which must be entirely
written, dated, and signed by the hand of the testator
himself, without the necessity of any witness.

Codicil is a supplement or addition to a will, made after the

execution of a will and annexed to be taken as aa part
thereof, by which any disposition made in the original will is
explained, added to, or altered.
TESTAMENTARY SUCCESSION

Kinds of successors in a testamentary succession

Legatee– an heir to a particular personal property
Devisee– an heir to a particular real property given by
virtue of a will
DECEDENT’S ESTATE

LEGITIME – is the portion of the testator’s

property which could not be disposed of freely
because the law has reserved it for the
compulsory heirs.
FREE PORTION – is that part of the whole estate
which the testator could dispose of freely
through written will irrespective of his
relationship to the recipient.
KINDS OF HEIRS

Compulsory Heirs – they inherit with or without a

will. The compulsory heirs are entitled to the
legitime, with or without a will, unless validly
disinherited.
Primary Compulsory Heirs
Legitimate children and descendants
Illegitimate children
Widow or widower
Secondary Compulsory Heirs
Legitimate parents and ascendants
Take note that secondary compulsory heirs only inherit in
default of legitimate children and descendants,
KINDS OF HEIRS

Voluntary Heirs – they inherit only if they are in the

will.
Intestate Heirs
The compulsory heirs in testamentary succession are also
heirs in intestate succession. They are entitled to their
legitime.
However, as to the free portion of the estate, it shall be
distributed to the following intestate heirs as follows (order
of priority):
Legitimate children
Legitimate parents
Illegitimate children
Spouse
Brothers or sisters
Relatives by consanguinity up to 5ᵗʰ civil degree
State
SAMPLE

A instituted B (legitimate son) and C and D

(brothers) as his heirs to an estate of P600,000.
B is a compulsory heir
C and D are voluntary heirs
The legitime of a legitimate child is ½ of the
estate.
B, as compulsory heir P300,000
B, as voluntary heir 100,000
C, as voluntary heir 100,000
D, as voluntary heir 100,000
TOTAL P600,000
SUMMARY OF LEGITIMES

LEGEND:
LCD Legitimate Children and/or Descendants
ILCD Illegitimate Children and/or Descendants
SS Surviving Spouse
LPA Legitimate Parents and/or Ascendants
SUMMARY OF LEGITIMES

½ legitime to the LCD (divide among them)

LCD only
½ free portion

LPA is excluded (since they are secondary compulsory heirs

only).
LCD and LPA
½ legitime to the LCD (divide among them)
½ free portion

If 1 LCD only,
½ legitime to the LCD
¼ legitime to the SS
LCD and SS ¼ free portion
If more than 1 LCD,
½ legitime to the LCD (divide among them)
Legitime of SS equal to that of 1 LCD

½ legitime to the LCD (divide among them)

LCD and ILCD
Legitime of ILCD is equal to ½ of the legitime of each LCD
SUMMARY OF LEGITIMES
½ legitime to the LCD (divide among them)
If only 1 LCD, ¼ legitime to the SS or if more than 1 LCD,
LCD, SS, and ILCD
equal to that of 1 LCD
Legitime of ILCD is ½ of the legitime of 1 LCD

½ legitime to the parent/s

LPA only
½ free portion

½ legitime to the LPA

LPA and SS ¼ legitime to the SS
¼ free portion

½ legitime to the LPA

LPA and ILCD ¼ legitime to the ILCD
¼ free portion

½ legitime to LPA
1/8 legitime to SS
LPA, SS and ILCD
¼ legitime to ILCD
1/8 free portion
SUMMARY OF LEGITIMES

1/3 legitime to SS
SS and ILCD 1/3 legitime to ILCD
1/3 free portion

½ legitime to ILCD
ILCD only
½ free portion
DETAILED FORMULA FOR MARRIED
PERSON
GROSS ESTATE CPG/ACP Exclusive Total

Real property XXX XXX

Tangible personal p. XXX XXX
Intangible property XXX XXX
Certain transfers XXX XXX
Total XXX XXX XXX
DETAILED FORMULA FOR MARRIED
PERSON
LESS:
ORDINARY DED. CPG/ACP Exclusive Total
ELIT XXX XXX
Transfer for Public Use XXX XXX
Vanishing Deductions
CPG - XXX
ACP XXX XXX (XXX)
Net Community/Exc.
before special ded. XXX XXX XXX
DETAILED FORMULA FOR MARRIED
PERSON
LESS:
SPECIAL DEDUCTIONS CPG/ACP Exclusive Total
Standard Deduction (XXX)
Family Home (XXX)
Amount Received under RA4917 (XXX)
Net Estate before share of SS XXX
LESS: Share of Surviving Spouse (1/2) (XXX)
NET TAXABLE ESTATE XXX
Estate Tax Rate %
ESTATE TAX DUE XXX
GROSS ESTATE
Consists of all properties and interests in
properties of the decedent at the time of his
death as well as properties transferred during
lifetime but in substance was only transferred at
the time of death.
The estate shall be appraised at its fair market
value (FMV) as of the time of the death regardless
of its appreciation or depreciation. However, the
appraised value of real property as of the time of
death shall be, whichever is the higher of –
The FMV as determined by the Commissioner of
Internal Revenue or
The FMV as shown in the schedule of values fixed by
the Provincial and City Assessors
TAXABILITY OF ESTATE, DEPENDING UPON
CITIZENSHIP OR RESIDENCE OF THE DECEDENT

Tangible Personal Intangible Personal

Real Property
Property Property

In Out In Out In Out

RC

NRC

RA

NRA
-
-
-

*Intangible personal property with a situs in the Philippines, unless exempted on the basis of reciprocity.
INTANGIBLE PERSONAL PROPERTY

The following are considered situated in the Philippines:

Franchise which must be exercised within the Philippines

Shares, obligations, or bonds, issued by any domestic
corporation
Shares, obligations, or bonds, issued by any foreign
corporation 85% of the business of which is located in the
Philippines
Shares, obligations, or bonds, issued by a foreign corporation,
if such shares, obligations or bonds have acquired a business
situs in the Philippines
shares or rights in any partnership, business or industry
established in the Philippines
RULE ON RECIPROCITY

The rule on reciprocity applies only to NRA, particularly on

mortis causa donations when the properties are intangible
personal property which are located in the Philippines.
The rule applies if the decedent at the time of his death was a
citizen and resident of a foreign country which at the time of
his death did not impose a transfer tax on intangible personal
property of the citizens of the Philippines not residing in that
foreign country.
The rule applies if the laws of the foreign country of which the
decedent at the time of his death allows a similar exemption
from transfer taxes of every character or description in
respect of intangible personal property owned by citizens of
the Philippines not residing in that foreign country.
EXCLUSIONS
FROM GROSS
ESTATE
EXCLUSIONS FROM GROSS ESTATE

Capital or exclusive property of the surviving

spouse
Properties outside the Philippines of a NRA
decedent
Intangible personal property in the Philippines of
a NRA when the rule of reciprocity applies
EXEMPT TRANSFERS

The merger of usufruct in the owner of the naked title

The transmission or delivery of the inheritance or legacy
of the fiduciary heir or legatee to the fideicomissary
The transmission from the first heir, legatee or donee in
favor of another beneficiary, in accordance with the will
of the predecessor
All bequests, devices, legacies or transfers to social
welfare, cultural and charitable institutions no part of
the net income of which inures to the benefit of any
individual: provided not more than 30% of the said
bequests, legacies or transfers shall be used by such
institutions for administration purposes
MERGER OF USUFRUCT IN THE
OWNER OF THE NAKED TITLE
Usufruct is defined as a real right, of a temporary
nature, which authorizes its holder to enjoy all
the benefits which results from the normal
enjoyment of another’s property, with the
obligation to return, at the designated time,
either the same thing, or in special cases, its
equivalent.
In a usufruct, there are 2 rightful claimants to a
thing, namely:
Usufructuary Usufruct - the rights to use, enjoy the
Owner of the naked title property and its fruits but not under in
your title
MERGER OF USUFRUCT IN THE
OWNER OF THE NAKED TITLE

Is the transfer of the

property to his children
taxable?

What happens if the son dies

ahead of the daughter, and
the usufruct is transferred to
usufruct naked title the latter?
EXEMPT TRANSFERS: EXAMPLE

P dies leaving a piece of land to Q in usufruct,

and to R in naked ownership. The land is subject
to estate tax in the estate of P. Upon the death of
Q, the usufruct shall be merged into the naked
ownership of R, who shall then become the
absolute owner of the property.
The transmission of the usufruct from Q to R shall
be exempt from estate tax.
TRANSMISSION FROM FIDUCIARY
HEIR TO THE FIDEICOMMISSARY
Fideicommissary substitution is that by virtue of
which a testator institutes a first heir, and
charges him to preserve and transmit the whole
or part of the inheritance later on to a second
heir.
taxable exempt
Here,
Bob – testator
Ben – first heir or fiduciary heir
Bea – second heir or
Bob institutes Ben as his first heir.
The will states that Ben should
fideicommissary
preserve and transmit later on the
estate to Bea, Ben’s daughter. one generation away from fiduciary heir
EXEMPT TRANSFERS: EXAMPLE

S died leaving a piece of land to T, a grandson, to be

owned by him for 4 years, with the obligation to
preserve it, after which, one-half shall be given to U, a
great grandson, and the other half to be retained by T.
This is fideicomissary substitution. The fiduciary heir, T,
is entrusted with the obligation to preserve the property
and transmit it to the fideicomissary heir, U, with the
substitution not going beyond one degree from the heir
originally instituted, and both heirs being alive at the
time of the testator’s death. The transmission from S to
T is subject to estate tax. The transmission from T to U
shall be exempt from estate tax
EXCLUSIONS UNDER SPECIAL LAWS

Benefits received by members of the GSIS and the SSS

by reason of death;
Amounts received from the Philippines and the United
States governments for damages suffered during the
last war;
Benefits received by beneficiaries residing in the
Philippines under laws administered by the U.S.
Veterans Administration;
Bequests, legacies or donations mortis causa to social
welfare, cultural, or charitable organizations; but
bequests to religious and educational institutions are
not exempt;
Grants and donations to the Intramuros Administration.
INCLUSTIONS IN
GROSS ESTATE
INCLUSIONS IN THE GROSS ESTATE

Properties physically in the estate

Property in which decedent had an interest
Proceeds of life insurance unless designation of
beneficiary is irrevocable
Properties no longer physically in the estate or
“taxable transfers”
Transfers in contemplation of death
Transfers taking effect at death
Transfers with retained interest
Revocable transfers
Property passing under General Power of Appointment
Transfers for insufficient consideration
1. PROPERTY IN WHICH DECEDENT
HAD AN INTEREST
Covers property beneficially owned by the
decedent (includes property wherein legal title is
not in the name of the decedent but is
beneficially owned by the decedent).
Land registered in the name of a trustor or a dummy
Stock certificates in the name of the decedent’s
stockbroker or held by a bank in trust for the decedent
Conversely, if the decedent merely holds title to a
property only as a guardian or trustee or in some
other fiduciary capacity (i.e., naked title), he
would not be considered as having an interest in
such property. gross estate of the beneficiary
2. TRANSFERS IN CONTEMPLATION
OF DEATH
This is an example of property no longer physically in
the patrimony of the decedent at the time of death
(prior inter vivos transfer), but by fiction of law is
brought back into the patrimony of the decedent.
The transfer is motivated by the thought of death.
E.g. decedent suffers a stroke but survives. A day after, he
donates his properties to his children. The donated property,
while no longer physically in the estate of the decedent at
the time of his death, would still result in inclusion because
the transfer was motivated by the thought of death.
The test used to determine if the transfer is motivated
by the thought of death is the “facts and
circumstances” test. Some factors considered include
age, health, length of time between the transfer and
death, concurrent making of a will, and other similar
circumstances.
3. TRANSFERS TAKING EFFECT AT
DEATH
Rationale: These transfers are essentially
equivalent to testamentary dispositions. The
effect is the same as when transfers are provided
for in a last will and testament.
Example:
Father donates the house and lot to his son. However,
father retains the title and possession, to be transferred
only when he dies. In the meantime, father continues to
live in the house until he dies.
What is the test to determine whether a transfer
takes effect at death?
The possession or enjoyment is conditional upon
surviving the decedent. Thus, if the transferee can get
possession and enjoyment while the transferor is living,
the property shall not be included in the transferor’s
gross estate.
4. TRANSFERS WITH RETAINED
INTEREST
The decedent must have retained an interest in
the property for a specified period.
Two-fold test to determine whether decedent
made a transfer with retained interest:
Has the decedent retained an interest (i) for his life, or
(ii) for a period that does not in fact end before his
death?
Did the decedent retain (i) possession or enjoyment of
the property, or (ii) the right to the income from the
property, or (iii) the right to designate the person who
shall possess or enjoy the property, or (iv) the right to
designate the person who shall receive the income.
4. TRANSFERS WITH RETAINED
INTEREST
Example:
For life: Decedent transfers property to a trust with the
income therefore payable to himself “for as long as I
live” and upon his death, the corpus shall be distributed
to his children.
For a period which does not in fact end before
decedent’s death: Decedent, aged 40, transfers property
to a trust with the trust agreement providing that
decedent shall receive the trust income for 10 years, at
the end of which period, the trust terminates and the
corpus shall be distributed to the decedent’s children.
The decedent dies, however, within the 10-year period.
4. TRANSFERS WITH RETAINED
INTEREST
ILLUSTRATION:

Father owns an
income-producing
TRUST
property

The property is
held in trust
where the Son is
the beneficiary.

Income–producing Property

Father Son

The income is
given to the The corpus is
Father “as long as given to the Son
I live” upon the Father’s
death.
4. TRANSFERS WITH RETAINED
INTEREST
Example:
Possession or enjoyment of the property: Decedent
donated a Juan Luna painting to the National
Museum but reserved the right to keep it for life.
Right to the income from the property: Decedent
transfers property to a trust, with the income payable
to him for life.
Right to designate person who shall possess or enjoy
the property or income therefrom: Decedent transfers
property to a trust, retaining for his life the right to
say who may enjoy the transferred property or the
income therefrom.
5. REVOCABLE TRANSFERS

Elements:
1. Transfer of property was made (by trust or
otherwise)
2. But, the enjoyment thereof was subject to
change (at the date of decedent’s death)
3. Through the exercise of a power by the decedent
alone or in conjunction with any other person
4. Power exercised is the power to alter, amend,
revoke, or terminate the transfer
5. Or where any such power is relinquished in
contemplation of death
5. REVOCABLE TRANSFERS

Example:
A creates a trust to pay income to B for life, while
the corpus shall go to C, but A reserves the right
to invade corpus and accelerate enjoyment in C’s
favor.
Here, C does not have full enjoyment and it is the
retained power to accelerate the enjoyment which
results in the inclusion.
5. REVOCABLE TRANSFERS

ILLUSTRATION:

TRUST

The property is
held in trust.

Son Daughter
Income–producing Property
Father
Father owns an
income-producing
property Income is given
to the son for life.

Corpus is given
to Daughter
upon Son’s death

BUT, Father may altogether “invade” corpus

even before Son’s death and accelerate
transfer to Daughter.
5. REVOCABLE TRANSFERS

“Subject to change in enjoyment”

If the decedent could take back the property
transferred until death
If the decedent could accelerate the beneficiary’s
enjoyment of the property
6. GENERAL POWER OF
APPOINTMENT
A power of appointment is the right to designate
the person or persons who will succeed to, or will
become beneficial owners of, the property of a
prior decedent.
A power of appointment may be a general power
of appointment or a limited power of appoint.
Personalities involved:
Prior decedent (donor) – the grantor of the power of
appointment
Decedent – the grantee of the power of appointment
Successor/s – the person/s who will succeed to the
property
6. GENERAL POWER OF
APPOINTMENT exception: if the power is limited
or special.
EXAMPLE:
A transfers property to a trust, with B as income
beneficiary, and granted C the right to direct the
trustee, by will, to transfer the property to
anybody whom C nominates.
A: Prior decedent (grantor of power of appointment)
C: Decedent (grantee of power of appointment)
Anybody: successors who will succeed to the property
If C (decedent) exercised or released the general
power of appointment by will or by deed in
certain instances, the property subject to the
power will be included in C’s gross estate.
6. GENERAL POWER OF
APPOINTMENT
To C – right to
designate
successor to
property via
B
will
A

TRUST C
To B –
possession
or income

Anyone

Upon release of the GPA by will, S succeeds to the property upon C’s death.
6. GENERAL POWER OF
APPOINTMENT
Rationale:
The right to determine who may become the
beneficial owner of a property is such an important
attribute of outright ownership that a question may
be raised whether for estate tax purposes, it should
be considered the equivalent of an ownership
interest includable in the decedent’s gross estate.
If the holder or grantee exercised the power of
appointment during his lifetime, the holder or
grantee has made no transfer of an “interest” in
property which may be taxed under Section 85(A).
6. GENERAL POWER OF
APPOINTMENT
Requisites for inclusion:
Existence of a general power of appointment
An exercise of such power by the decedent by
will or by deed in certain cases and
The passing of the property by virtue of such
exercise
6. GENERAL POWER OF
APPOINTMENT
A power is general when it authorizes the grantee
or decedent to appoint anyone, possibly
including himself, his estate, his creditors or
creditors of his estate.
A power is special where the grantee or decedent
can appoint only a restricted or designated class
of persons other than himself. Property which
passes under a special power of appointment is
not includible in the gross estate.
7. PROCEEDS OF LIFE INSURANCE

Proceeds of insurance under policies taken out

by the decedent upon his life shall be includable
if the beneficiary is:
The estate of the decedent, his executor or his
administrator, or
A 3ʳᵈ person, unless the designation of the beneficiary is
irrevocable
When are proceeds of life insurance excludable?
When the beneficiary is a 3ʳᵈ person (e.g., wife or kids of
the insured) and the designation is irrevocable.
Rule:
1. Beneficiary
2. Nature of designation
7. PROCEEDS OF LIFE INSURANCE

Is the beneficiary
the estate,
Case Policy Taxable?
executor or
administrator?

1 Revocable Yes Yes

2 Revocable No Yes

3 Irrevocable Yes Yes

4 Irrevocable No No

5 Silent No Yes
SUMMARY OF “TAXABLE
TRANSFERS”
Transfer in contemplation of death – ownership over
property would have transmitted upon death, but
preempted by the decedent because he was
motivated by the thought of death
Transfer taking effect at death – no different from a
testamentary disposition since the decedent retains
during his lifetime possession and enjoyment
Transfer with retained interest – where decedent
retained during his lifetime (i) possession or
enjoyment, (ii) right to income, (iii) right to designate
person who shall possess or enjoy, or (iv) right to
designate person who shall receive income.
SUMMARY OF “TAXABLE
TRANSFERS”
Revocable transfer – where decedent has the
right to exercise during his lifetime the power to
alter, amend, revoke, or terminate the transfer
Property passing under GPA – where decedent
exercises a general power to name the person
who shall succeed to the property
VALUATION OF ESTATE AND AMOUNT TO BE
INCLUDED IN CASES COVERED BY SEC. 85(B), (C),
AND (D)
In a (1) transfer in contemplation of death, (2)
transfer taking effect at death, (3) transfer with
retained interest, (4) revocable transfer, and (5)
property passing under a general power of
appointment, the value to include in gross estate
shall be determined under the following rules:
If the transfer was in the nature of bona fide sale for an
adequate and full consideration in money or money’s
worth, no value shall be included in the gross estate
If the consideration received on the transfer was
insufficient, the value to include in the gross estate
shall be the excess of the FMV of the property at the
time of the decedent’s death over the consideration
received
VALUATION OF ESTATE AND AMOUNT TO BE
INCLUDED IN CASES COVERED BY SEC. 85(B), (C),
AND (D)
If there was no consideration received on the
transfer (as in donation mortis causa), the value
includible shall be the FMV of the property at the
time of death
DETERMINE THE AMOUNT
INCLUDABLE IN THE GROSS ESTATE:
FMV at the time of transfer 100,000
Consideration received 100,000
FMV at the time of death 180,000

Answer: NONE
DETERMINE THE AMOUNT
INCLUDABLE IN THE GROSS ESTATE:
FMV at the time of transfer 100,000
Consideration received 60,000
FMV at the time of death 180,000

Answer: 120,000
DETERMINE THE AMOUNT
INCLUDABLE IN THE GROSS ESTATE:
FMV at the time of transfer 100,000
Consideration received None
FMV at the time of death 180,000

Answer: 180,000
PROPERTY
RELATIONS
BETWEEN
SPOUSES
PROPERTY RELATIONS

Absolute Community of Property (ACP)

Conjugal Partnership of Gains (CPG)
Complete Separation of Property
Others

The determination of gross estate of a married

decedent shall depend on the system of property
relationship governing the spouses.
TAKE NOTE:

In the absence of a marriage settlement, or when

the regime of property agreed upon is void, the
property relations will depend on the date of
marriage:
Before the effectivity of the Family Code (before August
3, 1988), apply CPG.
On or after the effectivity of the Family Code (August 3,
1988 onwards), apply ACP.
ABSOLUTE COMMUNITY OF
PROPERTY (ACP)
When does ACP apply?
When the marriage settlement between the spouses
explicitly provides, or
In the absence of any express agreement, and the
marriage was celebrated on or after August 3, 1988.
What consists ACP?
It consists of all the property owned by the spouses at
the time of celebration of the marriage and those
properties acquired after marriage
ABSOLUTE COMMUNITY OF
PROPERTY (ACP)
EXCLUSIONS FROM ACP
Property acquired during the marriage by
gratuitous title by either spouse, and the fruits as
well as the income thereof, if any,
Unless it is expressly provided by the donor, testator or
grantor that they shall form part of the community
property.
Property for personal and exclusive use of either
spouse.
However, jewelry shall form part of the community
property.
Property acquired before the marriage by either
spouse who has legitimate descendants by a
former marriage, and the fruits as well as the
income, if any of such property.
ABSOLUTE COMMUNITY OF
PROPERTY (ACP)
CHARGES UPON AND OBLIGATIONS OF THE ACP
The ACP shall be liable for:
The support of the spouses, their common children, and legitimate children of either spouse;
however, the support of illegitimate children shall be governed by the provisions of the
Family Code on support.
All debts and obligations contracted during the marriage by the designated administrator
spouse for the benefit of the community or by both spouses, or by one spouse with the
consent of the other;
Debts and obligations contracted by either spouse without the consent of the other to the
extent that the family may have been benefited;
All taxes, liens, charges and expenses, including major or minor repairs upon the community
property;
All taxes and expenses for mere preservation made during marriage upon the separate
property of either spouse used by the family.
Expenses to enable either spouse to commence or complete a professional or vocational
course, or other activity for self-improvement;
Ante-nuptial debts of either spouse insofar as they have redounded to the benefit of the
family;
The value of what is donated or promised by both spouse in favor of their common legitimate
children for the exclusive purpose of commencing or completing a professional or vocational
course of either activity for self improvement;
Ante-nuptial debts of either spouse, the support of illegitimate children of either spouse, and
liabilities incurred by either spouse by reason of a crime or quasi delict, in case of absence or
insufficiency of the exclusive property of the debtor spouse, the payment of which shall be
considered as advances to be deducted from the share of the debtor-spouse upon liquidation
of the community; and
Expenses of litigation between the spouses unless the suit is found to be groundless.
ABSOLUTE COMMUNITY OF
PROPERTY (ACP)
Donation of community property by either spouse
Either spouse may dispose by will of his or her interest in
the community property.
Neither spouse may donate any community property
without the consent of the other. However, either spouse
may, without the consent of the other, make moderate
donations from the community property for charity or on
occasions of family rejoicing or family distress.
The death of either spouse does not give an automatic
license for the surviving spouse to donate or dispose the
community property. Judicial or extrajudicial liquidation
of the community property must be made first,
otherwise, any encumbrance or disposition shall be void
CONJUGAL PARTNERSHIP OF GAINS
(CPG)
When does CPG apply?
When the marriage settlement between the spouses
explicitly provides, or
In the absence of any express agreement, and the
marriage was celebrated before August 3, 1988.
CONJUGAL PARTNERSHIP OF GAINS
(CPG)
What consists CPG?
Those acquired by onerous title during the marriage at
the expense of the common fund, whether the
acquisition be for the partnership or for only one of the
spouses
Those obtained from the labor, industry, work or
profession of either or both of the spouses
The fruits, natural or industrial, or civil, due or received
during the marriage from the common property, as well
as the net fruits from the exclusive property of each
The share of either spouse in the hidden treasure which
the law awards to the finder or owner of the property
where the treasure is found
CONJUGAL PARTNERSHIP OF GAINS
(CPG)
What consists CPG?
Those acquired through occupation such as fishing or
hunting;
Livestock existing upon dissolution of the partnership
in excess of the number of each kind brought to the
marriage by either spouse
Those which are acquired by chance, such as winnings
from gambling or betting. However, losses therefrom
shall be borne exclusively by the loser-spouse.
CONJUGAL PARTNERSHIP OF GAINS

EXCLUSIONS FROM CPG

Those properties brought to the marriage as his
or her own
Those properties each spouse acquires during
marriage by gratuitous title
That which is acquired by right of redemption, by
barter or by exchange with the property
belonging to only one of the spouses; and
That which is purchased with exclusive money of
the wife or of the husband.
CONJUGAL PARTNERSHIP OF GAINS

CHARGES UPON THE OBLIGATIONS OF THE CPG

Support of the spouses, their common children, and legitimate children of either
spouses; however, the support of illegitimate children shall be governed by the
provisions of the Family Code on support;
All debts and obligations contracted during marriage by the designated
administrator spouse for the benefit of the community, or by both spouses, or by one
with the consent of the other;
Debts and obligations contracted by either spouse without the consent of the other
to the extent that the family may have been benefited;
All taxes, liens, charges, and expenses, including major or minor repairs upon the
conjugal property;
All taxes and expenses for mere preservation made during the marriage upon the
separate property of either spouses;
Expenses to enable either spouse to commence or complete a professional,
vocational course, or other activity for self-improvement;
Ante-nuptial debts of either spouse insofar as they have redounded to the benefit of
the family
The value of what is donated or promised by both spouse in favor of their common
legitimate children for the exclusive purpose of commencing or completing a
professional, vocational course of either activity for self improvement; and
Expenses of litigation between the spouses unless the suit is found to be groundless.
CONJUGAL PARTNERSHIP OF GAINS

PROPERTIES BOUGHT IN INSTALLMENT

Property bought on installments paid partly from
exclusive funds of either or both spouses and
partly from conjugal funds belongs to the buyer
or buyers if full ownership was vested before the
marriage.
If ownership was vested during marriage, then it
is a conjugal property. Otherwise, it is part of the
exclusive property of the purchaser-spouse.
PRACTICE EXERCISE

Tanny bought a slightly used Isuzu Sportivo Car for

P900,0000 payable in 24 months. Later on, he married
Ferry. At that time, he had already paid P700,000 for the
car. During the marriage, the monthly amortizations
were paid out of the conjugal funds of the spouses. Two
years after the marriage, Tanny died. If the value of the
car at the time of his death was P750,000, how much
should be included as (a) conjugal property and (b)
exclusive property in the gross estate of Tanny if full
ownership over the property was vested:
1. Before the marriage
Exclusive Conjugal
2. During the marriage
Before During Before During
750K 700k 200K 750K
CONJUGAL PARTNERSHIP OF GAINS

OWNERSHIP OF CREDIT
Whenever an amount or credit payable within a
period of time belongs to one of the spouses, the
sums which may be collected during the
marriage in partial payments or by installments
on the principal shall be the exclusive property of
the spouse.
Interest falling due during the marriage on the
principal shall belong the conjugal partnership.
CONJUGAL PARTNERSHIP OF GAINS

OWNERSHIP OF IMPROVEMENTS IN A SEPARATE

PROPERTY
When the cost of the improvement made by the
conjugal partnership and any resulting increase in value
are more than the value of the property at the time of
the improvement, the entire property of one of the
spouses shall belong to the conjugal partnership, subject
to the reimbursement of the value of the property of the
owner-spouse at the time of the improvement.
Otherwise, said property shall be retained in ownership
by the owner-spouse, likewise subject to reimbursement
of the costs of the improvement.
 SUMMARY
PROPERTY ACP CPG

Properties acquired before marriage Common Exclusive

Properties acquired during marriage

From exclusive property Exclusive Exclusive

From common property Common Common

Those obtained from labor, industry, work

Common Common
or profession of either or both spouses

Exclusive (unless the

donor or testator
From gratuitous title expressly provided that Exclusive
it shall form part of the
community property)
SUMMARY
PROPERTY ACP CPG

Common or
Exclusive.
Always
Fruits or Income RULE: The fruit
Common
shall follow the
source.

Property for personal and exclusive use of Exclusive (except

Exclusive
either spouse jewelry)

Property acquired before the marriage by

either spouse who has legitimate
descendants by a former marriage, and the Exclusive

fruits as well as the income, if any, of such

property.

TAKE NOTE: There is a presumption that property acquired during marriage is

presumed to belong to the spouses as common property, unless provided otherwise.
REGIME OF COMPLETE SEPARATION
OF PROPERTY
Complete separation of property shall govern if the future
spouses agree in the marriage settlements that their
property relations during the marriage shall be governed
by the said regime.
To each spouse shall belong all earnings from his or her
profession, business or industry and all fruits, natural
industrial or civil, due or received during the marriage
from his or her separate property
Both spouses shall bear the family expenses in proportion
to their income, or, in case of insufficiency or default
thereof, to the current market value of their separate
properties.
Both spouses shall be solidarily liable.
PROPERTY REGIME OF UNIONS
WITHOUT MARRIAGE
When a man and a woman who are capacitated to marry each
other, live exclusively with each other as husband and wife
without the benefit of marriage or under a void marriage
Their wages and salaries shall be owned by them in equal shares
and the property acquired by both of them through their work or
industry shall be governed by the rule on co-ownership.
In the absence of proof to the contrary, properties acquired while
they lived together shall be presumed to have been obtained by
either joint efforts, work or industry, and shall be owned by them
in equal shares.
A party who did not participate in the acquisition by the other
party of any property shall be deemed to have contributed jointly
in the acquisition thereof if the former’s efforts consisted in the
care and maintenance of the family and of the household.
Neither party can encumber or dispose by act inter vivos his or
her share in the property during cohabitation and owned in
common without the consent of the other, until after the
termination of their cohabitation.
PROPERTY REGIME IN COHABITATIONS OF SPOUSES
WHO ARE INCAPACITATED TO MARRY EACH OTHER

When common-law spouses (1) suffer from legal

impediments to marry or (2) when they do not live
exclusively with each other as husband and wife
Only the property acquired by both of them through their
actual joint contribution of money, property or industry
shall be owned in common and in proportion to their
respective contributions.
In the absence of proof to the contrary, their
contributions and corresponding shares are prima facie
presumed to be equal.
The share of any party who is married to another shall
accrue to the absolute community or conjugal
partnership, as the case may be, if existing under valid
marriage
ALLOWABLE
DEDUCTIONS
ALLOWABLE DEDUCTIONS

Deductions are items which the law on estate tax

allows, as amended, to be subtracted from the
value of the gross estate in order to arrive at the
net taxable estate.
As a rule, deductions from gross estate are
presumed to be common deductions unless
specifically identified as exclusive.
ALLOWABLE DEDUCTIONS

The following are the items deductible from the decedent’s estate:
ORDINARY DEDUCTIONS
Expenses, Losses, Indebtedness, Taxes, etc. (ELIT)
Claims against the estate
Taxes paid
Unpaid mortgages and taxes
Losses
Claims against insolvent persons
Transfer for public use
Property previously taxed or “Vanishing Deduction”
SPECIAL DEDUCTIONS
Family home
Standard deduction
Amount received by heirs under RA No. 4917
SHARE OF THE SURVIVING SPOUSE
DEDUCTIONS FROM THE GROSS ESTATE
OF A CITIZEN AND RESIDENT DECEDENT
Claims against the estate
Claims against insolvent persons
Unpaid mortgages and taxes
Losses
Transfer for public use
Property previously taxed or “Vanishing Deduction”
Family home (P10M)
Standard deduction (P5M)
Amount received by heirs under RA No. 4917
Share of Surviving Spouse
DEDUCTIONS FROM THE GROSS ESTATE
OF NON-RESIDENT ALIEN DECEDENT
Pro-rated claim against the estate, insolvent
persons and unpaid mortgages
Transfer for public use
Property previously taxed or “Vanishing
Deduction”
Standard deduction (P500,000)
Share of Surviving Spouse
1. CLAIMS AGAINST THE ESTATE

To be deductible, claim must have been

enforceable against the decedent if he were
living
Requisites for deductibility:
Liability represents personal obligation of decedent
existing at the time of his death
Liability was contracted in good faith and for adequate
consideration in money or money’s worth
Debt is valid in law and enforceable in court
Debt must not have been condoned by creditor and
action to collect from decedent not prescribed
1. CLAIMS AGAINST THE ESTATE

If claim is a simple loan, there must be a debt

instrument which was notarized.
If the loan was contracted within 3 years from the
decedent’s death, the executor or administrator is
required to submit a statement showing the
disposition of the proceeds of the loan
Deductible amount of claim is valued as of the death
of the decedent irrespective of post-death
developments.
Deductible from gross estate, provided the value of
the decedent’s interest in the claim is included in the
gross estate.
1. CLAIMS AGAINST THE ESTATE

For a non-resident alien, the proportion of the

claims against the estate which the value of such
part bears to the value of his entire gross estate
wherever situated shall be allowed. The point is,
you apportion deductible claims according to the
proportionate value of the estate located in the
Philippines as against his total gross estate
worldwide.
2. UNPAID DEBTS/MORTGAGES

Requisites:
The FMV of the mortgaged property
undiminished by the mortgage indebtedness
should be included in the gross estate
Contracted in good faith
For an adequate and full consideration
3. UNPAID TAXES

Requisite:
The tax must have accrued before the death of
the decedent
The following are not deductible:
Any income tax upon income received after death
Property taxes not accrued before death
Estate tax from the transmission of his estate
4. CLAIMS AGAINST INSOLVENT
PERSONS
Requisite:
Value of the claims is included in the gross estate
and
The insolvency of the debtor must be established
5. CASUALTY LOSSES
Requisite:
Incurred during the settlement of the estate.
Settlement period is the period allowed by law to
file and pay the estate tax as follows:
Decedent died before 2018 – within 6 months after
death
Decedent died on or after Jan. 1, 2018 – within 1 year
after death
Arising from fires, storms, shipwreck, or other
casualties, or from robbery, theft, or
embezzlement
Not compensated by insurance
Not claimed as deduction for income tax
purposes
Incurred not later than the last day for the
payment of the estate tax.
6. TRANSFERS FOR PUBLIC USE

The amount of all bequests, legacies, devices or

transfers to or for the use of the government, or
any political subdivision for exclusively public
purposes, shall be deductible.
Requisites:
Given to the Government of the Philippines
Must be testamentary in character or
By way of donation mortis causa executed by the
decedent before his death
Exclusively for public purpose
7. VANISHING DEDUCTION

Requisites:
The decedent died within 5 years from receipt of the
property from a prior decedent or donor
The property is located in the Philippines
The property must have formed part of the taxable
estate of the prior decedent or the taxable gift of the
donor and the transfer tax relative thereto had been
paid
The property on which vanishing deduction is being
taken must be identified as the one received from the
prior decedent or donor or something acquired in
exchange therefore
No vanishing deduction on the property was
allowable to the estate of the prior decedent
7. VANISHING DEDUCTION

Property may change hands several times within

a very short period of time by reason of death of
the owner shortly after receiving the property by
gift or inheritance.
EXAMPLE: Father dies in 2010 leaving a house and lot,
survived by an only son. The son inherits the house and
lot. In 2011, the son died in a vehicular accident. The
house and lot will form part of the son’s estate which
will again be subject to estate tax.
This subjects the property to double taxation,
because the tax is imposed on each transfer.
The vanishing deduction is meant to mitigate the
effects of double taxation.
7. VANISHING DEDUCTION

Amount Deductible:

100% If prior decedent died within 1 year

More than 1 year but not more than 2

80%
years

More than 2 years but not more than

60%
3 years

More than 3 years but not more than

40%
4 years

More than 4 years but not more than

20%
5 years
7. VANISHING DEDUCTION -
FORMULA
Value of Estate Previously Taxed (lower between
FMV at the time of death vs. FMV at the time of
inheritance or donation)
LESS: Mortgage paid by present decedent
Initial Basis
LESS: Share in Expenses (ELIT)
Final Basis of Estate
x Applicable Rate
Amount of Vanishing Deduction

Share in Expenses = ELIT x (Initial Basis/Gross Estate of

Present Decedent)
7. VANISHING DEDUCTION -
EXAMPLE
Mr. Fiero died on November 20, 2020. Some of the properties he left
are the following:
Other information:
The gross estate of the decedent amounts to P3,000,000.
The car was mortgaged for P50,000 when it was acquired and
Mr. Fiero paid the same before he died.
The allowable ordinary deductions totaled P325,000 which
includes judicial expenses of P30,000 and funeral expenses of
P150,000.

Mode of Date FMV @ FMV @

Asset
Acquisition Acquired acquisition death
Land Purchase 7-3-16 500,000 350,000

Car Donation 10-2-19 800,000 980,000

7. VANISHING DEDUCTION -
EXAMPLE
Value of Car P 800,000
LESS: Mortgage paid by present decedent (50,000)
Initial Basis P 750,000
LESS: Share in Expenses (ELIT)
(750,000/3,000,000) x P145,000* (36, 250)
Final Basis of Estate P 713,750
x Applicable Rate 80%
Amount of Vanishing Deduction P 571,000

*ELIT = P325,000 – 30,000 – 150,000 = P145,000

SPECIAL DEDUCTIONS - SUMMARY

Citizen or Resident NRA

Standard Deduction P 5,000,000 P500,000

FMV but not to exceed

P10M
Family Home FMV/2 but not to exceed
Purely exclusive P10M
Not allowed
Purely common Add the properties
Mixed applying the foregoing
rules but the total amount
shall not exceed P10M

Benefits under Ra 4917 Amount of death benefits Not allowed

STANDARD DEDUCTION

The amount deductible without any required

substantiation is P5,000,000 if the decedent dies
on or after January 1, 2018.
Prior to TRAIN law, the standard deduction is
P1,000,000.
A standard deduction of P500,000 shall be
allowed to non-resident alien decedent
beginning January 1, 2018.
FAMILY HOME

REQUISITES:
The decedent is married or head of a family
The family home must be the actual residential
home of the decedent and his family at the time
of his death, as certified by the Barangay Captain
of the locality the family home is situated
It is located in the Philippines
The value of the family home is included in the
gross estate
FAMILY HOME

The amount deductible is the LOWER between

the actual interest and the limit.
Actual interest:
Purely Exclusive: 100% FMV
Purely Common: 100% FMV /2
Mixed:
Exclusive Property: 100% xxx
Add: Common Property: 100%/2 xxx
Total: xxx
AMOUNT RECEIVED BY HEIRS
UNDER RA 4917
REQUISITES:
Include such amount in the gross estate
Amount deductible – amount received by the
heirs from the decedent’s employer as a
consequence of the death of the decedent
employee
SHARE OF THE SURVIVING SPOUSE

Capital of the surviving spouse of a decedent

(e.g., conjugal share) shall not form part of the
gross estate of the decedent
Applicable only to married decedents
Amount deductible:
Common Properties xxx
Less: Common Deductions (xxx)
Net Common Properties before xxx
Special Deductions
Divide by: 2
Share of the Surviving Spouse xxx
FOREIGN
TAX
CREDITS
FOREIGN TAX CREDITS

Purpose
The net taxable estate of a decedent who was a
resident or citizen of the Philippines includes his net
taxable estate within and without the Philippines. It is
possible that the decedent’s net estate without the
Philippines was subjected to transfer taxes as well by
the country where the property is located. There is
therefore a possibility of double taxation of the same
property. The purpose of the estate tax credit is to
avoid or mitigate the effects of double taxation.
FOREIGN TAX CREDITS

Any estate tax imposed by the authority of a

foreign country shall be credited as against the
estate tax imposed by the Philippines, subject to
the following limitations:
The amount of the credit in respect to the tax paid to
any foreign country shall not exceed the same
proportion of the tax against which such credit is taken,
which the decedent’s net estate situated within such
country taxable bears to his entire net estate
The total amount of the credit shall not exceed the
same proportion of the tax against which such credit is
taken, which the decedent’s net estate situated outside
the Philippines taxable bears to his entire net estate.
FOREIGN TAX CREDITS

Who can claim?

Only resident or citizen decedents can claim tax credit.
Amount deductible:
The LOWER between the actual estate tax paid abroad
and the limit.
Limit depends on how many foreign country is
involved:
If only 1 foreign country is involved:
If more than 1 foreign country is involved
FOREIGN TAX CREDITS - LIMIT

If only 1 foreign country is involved

FOREIGN TAX CREDITS - LIMIT

If more than 1 foreign country is involved

LIMIT 1: Per foreign country where there was estate

tax paid

LIMIT 2: Total of ALL foreign countries involved:

PRACTICE EXERCISE

Bobby died single, leaving properties in the

Philippines and abroad. The following are his data:

Net estate, PH - P250,000

Net estate, US - P200,000
Net estate, HK - P350,000
US tax paid - P15,000
HK tax paid - P6,000

Compute the estate tax due after tax credit.

PRACTICE EXERCISE
Total Net Estate
P800,000

Estate Tax (6%)

48,000

Less: Tax Credit

US:
Actual - 15,000
Limit - 12,000 (200/800 x 48,000)
Allowed - 12,000

HK:
Actual - 6,000
Limit - 21,000 (350/800 x 48,000)
Allowed - 6,000

LIMIT 1 - 18,000 (12,000 + 6,000)

LIMIT 2 - 33,000 (550/800 x 48,000)

CREDIT ALLOWED: 18,000

Estate Tax Payable

30,000
ADMINISTRATIVE
PROVISIONS
COMPLIANCE REQUIREMENTS

Estate tax return required to be filed where

estate tax is due or regardless of the value of the
estate, where the estate consists of registrable
property (real property, motor vehicles)
Estate tax return showing gross value exceeding
P5,000,000 must be accompanied by a CPA
certification.
COMPLIANCE REQUIREMENTS

Time for filing: Within 1 year from decedent’s death

Extension to file: 30-day extension may be granted in
meritorious cases
Estate tax rate: 6% of net estate
Time for payment: Pay-as-you-file
Extension to pay: If payment would impose undue
hardship upon estate or heirs, time for payment of tax
or portion thereof may be granted not exceeding 5
years (if settled judicially) or 2 years (if settled
extrajudicially)
Bond may be required
Payment within extension period is subject to interest, but
not to surcharge
Payment after extension subject to interest and surcharge
COMPLIANCE REQUIREMENTS

Payment by installment: may be allowed in case

available cash of estate is insufficient to pay the
total estate tax due
Cash installment shall be made within 2 years
Estate tax return required to be filed within 1 year from
decedent’s death
Frequency (monthly, quarterly, etc.), deadline, and
amount of each installment shall be indicated in the
return, subject to prior approval of the CIR
No interest or surcharge if payment within the 2-year
period
In case of lapse of 2 years, remaining balance due and
demandable are subject to interest and surcharge.
COMPLIANCE REQUIREMENTS

Partial disposition of estate and application of

proceeds to estate tax due: may be allowed by
the BIR
Refers to conveyance of property for cash
Estate tax return filed within 1 year from decedent’s
death
Subject to BIR approval
Request must be with notarized undertaking that
proceeds of sale shall be applied to payment of estate
tax due
Estate shall pay to BIR the proportionate estate tax of
property intended to be disposed
Estate tax due and demandable in case of failure to pay
estate tax out of proceeds, plus additions to the tax
COMPLIANCE REQUIREMENTS

Place of filing and payment:

In case of resident decedent – RDO where decedent is
domiciled at the time of death
In case of non-resident decedent – RDO where
executor/administrator is registered or required to
register, if no executor/administrator, at RDO 39
COMPLIANCE REQUIREMENTS

6% final withholding tax on bank deposit

Bank account frozen if bank has knowledge of death of
depositor
Withdrawal may be allowed, but subject to 6% final
withholding tax
PRACTICE EXERCISE

Spouses Love and Joe Goldberg, resident Filipinos and

married on January 27, 1980, are on a road trip for their
summer vacation in Baguio City. Unfortunately, they figured
on an accident. Love survived, but Joe instantaneously died
from the car accident.
At the time of Joe’s death, they have conjugal real properties
worth P15,000,000. Furthermore, Joe has an exclusive real
property worth P12,000,000 subject to a P500,000 mortgage.
Their Family Home acquired during marriage is worth
P16,500,000 subject to P2,000,000 mortgage.
Compute the Net Taxable Estate and the Estate Tax Due.
 EXCLUSIVE CONJUGAL TOTAL

Real Properties (excluding FH) 12,000,000 15,000,000 27,000,000

Personal Properties - - -

Family Home - 16,500,000 16,500,000

Taxable Transfers - - -

GROSS ESTATE 12,000,000 31,500,000 43,500,000

Less: Ordinary Deductions (500,000) (2,000,000) (2,500,000)

Estate After Ordinary Deductions 11,500,000 29,500,000 41,000,000

Less: Family Home (7,250,000)

Standard Deduction (5,000,000)

Net Estate 28,750,000

Less: Share of Surviving Spouse (14,750,000)

NET TAXABLE ESTATE 14,000,000


EXCLUSIVE CONJUGAL TOTAL

NET TAXABLE ESTATE

14,000,000

Estate Tax Rate

6%

ESTATE TAX DUE

840,000

Less: Tax Credits

-

Tax Payable

840,000
THANK
YOU