1. Death / Estate taxes 3. Benefits received by beneficiaries residing in the Philippines under laws administered by the US Veterans Administration.

- those levied on the gratuitous transfers of property upon one’s death, formerly comprised of the estate and 4. Amounts received from the Philippines and the US Governments for damages suffered during WWII.
inheritance taxes: Both taxes are now integrated into one estate tax. 5. Retirement benefits of officials and employees of private firms if included in gross estate.
2. Gift Taxes 6. Proceeds of group insurance.
- Are imposed on the gratuitous transfers of property during one’s lifetime, formerly comprised of the donor’s
and donee’s gift taxes; both taxes are now integrated into a donor’s tax. EXEMPTION FROM ESTATE TAX
Nature: It is not a direct tax on property nor is it a capitation tax, that is, the tax is laid neither on the property, A. The first P200, 000.00 value of the estate (sec. 84 NIRC)
nor on the transferee or transferor, but on the right of the decedent to transmit his estate. B. The merger of the usufruct in the owner of the naked title.
Benefit-Received Theory : For the performance of services rendered by the government in the distribution of C. The transmission from the first heir, legatee, or donee in favor of another beneficiary in accordance with the
the estate of the decedent and other benefits that accrue to the estate and the heirs, the state collects the tax. desire of the predecessor.
Redistribution of Wealth Theory: Estate tax is a contributing factor to the inequalities in wealth and income. D. All bequest, devises, legacies or transfers to social welfare, cultural and charitable institutions, no part of the
The imposition of death tax reduces the property received by the successor bringing about a more equitable net income of which inured to the benefit of any individual and provided that not more than 30% of the said
distribution of wealth in society. bequest, etc shall be used by such institution for administration purposes.
Ability to pay theory: The receipt of inheritance places assets in the hands of the heirs and beneficiaries E. Intangible personal property of non-resident aliens under the principle of reciprocity.
thereby creating an ability to pay the tax and thus, ability to contribute to governmental income; and F. Retirement benefits of employees of private firms from private pension plans approved by the BIR.
Privilege theory or State Partnership theory : Inheritance is not a right but a privilege granted by the state G. Amount received for war damages.
and large estates have been acquired only with the protection of the state. The State, as a “passive and silent H. Grants and donations to the Intramuros administration.
partner” in the accumulation of property has the right to collect the share which is properly due to it.
Incidence or burden of estate of taxT Ordinary Deductions (ELIT):
PREDECESSOR – the object of the tax is the property which has been held or accumulated by the deceased and Funeral Expenses: The amount deductible is equal to 5% of the gross estate or the amount of the actual
the tax has fallen upon him in the sense it has affected the amount of the property which he could dispose. funeral expenses whichever is lower, but in no case to exceed P200,000;
SUCCESSOR – the tax is not paid by the predecessor who has no liability till he dies and who is free to ignore the “Actual funeral expenses” are those which were actually incurred in connection with the interment or burial of
duty if he wishes, while the successor comes into less than he would have, and has no kind of redress. the deceased and paid for from the estate of said deceased.
No Personal Incidence - the estate tax has no personal incidence at all, merely falling upon the estate as such. Requisites: a) The expenses must be due to the interment, wake and burial; hence, expenses on the death
anniversary are not included
Reciprocity : There is reciprocity if the foreign country of which the decedent was a citizen or resident at the b) The expenses must have been shouldered by the estate and not by other people
time of his death: Judicial expenses of the testamentary or intestate proceedings
1.) Did not impose an estate tax; or - Requisite: “administration expenses” to those actually incurred in the administration of the estate.
2.) Allowed a similar exemption from estate tax with respect to intangible personal property owned Claims against the decedent’s estate
by Filipino citizens - Debts or obligations of the decedent that is enforceable
residing in that foreign country. against the estate provided that the following requisites are
met: They were contracted in good faith and for an adequate and full consideration in money or money’s worth.
GROSS ESTATE They must be existing against the estate. They must be legally enforceable obligations of the decedent and
the total value of all property, whether real or personal, tangible or intangible belonging to the decedent at the ought to be enforced by the claimants. They must be reasonably certain in amount; and; At the time the
time of his death, situated within or outside the Philippines, where such decedent was a resident or citizen of the indebtedness was incurred, the debt instrument was duly notarized and if the loan was contracted within three
Philippines. (3) years before the death of the decedent, the administrator or executor shall submit a statement showing the
In the case of a nonresident alien decedent, it shall include only property situated in the Philippines. disposition of the proceeds of the loan.
Claims against the insolvent persons
Requisites for deductibility: a) The amount of said claims has been initially included as part of the gross
Property Included in the Gross Estate (INCLUSIONS): estate; and b) The incapacity of the debtors to pay their obligations is proven and not merely alleged.
A. In case of resident citizens, nonresident citizens and resident aliens: Unpaid mortgages indebtedness
1. Real Property within and without the Philippines; Requisites for deductibility:
2. Tangible personal property within and without the Philippines; and a) The fair market value of the property mortgaged without deducting the mortgage indebtedness has been
3. Intangible personal property within and without the Philippines. initially included as part of his gross estate;
B. In cases of nonresident aliens: b) The mortgage indebtedness was contracted in good faith and for an adequate and full consideration in
1. Real property within the Philippines; money or money’s worth.
2. Tangible personal property within the Philippines and; Casualty Losses (TRECUSO)
3. Intangible personal property within the Philippines, unless there is reciprocity in which case, it is not taxable. - They include all losses incurred during the settlement of the estate arising from fires, storms, shipwreck or
Note: These are either: other casualties or from robbery, theft or embezzlement.
A) Properties actually owned at the time of death - Requisites for deductibility:
B) Properties deemed by law to be owned by the decedent a) Losses not compensated by an insurance or otherwise;
under Sec. 85 b) Losses that were not claimed as a deduction for income tax purposes; and
c) Losses incurred not later than the last day for payment of the estate tax (6 months from death).
Inter Vivos Transfers Subject to Estate Tax :The gross estate extends to gratuitous transfers made by the d) Include the worth of the property in the gross estate
decedent during his lifetime which are treated by the law as substitutes for testamentary dispositions. They are e) File a sworn declaration of the fact of loss within 45 days from its occurrence
transfers inter vivos in form but mortis causa in substance. Unpaid Taxes: Unpaid income tax on income due or received before death of the decedent, and real property
taxes, which have accrued prior to the death of the decedent (real property taxes accrued at the beginning of
INCLUSIONS the year but may be paid before or at the end of each quarter) are deductible.
1. Decedent’s interest at a specific property Vanishing / Alternating Deduction Or Property Previously Taxed
2.Transfer in contemplation of death an amount allowed to reduce the taxable estate of a decedent where the property was:
3. Transfer with retention or reservation of certain rights a. received by him from prior decedent by gift, bequest, devise or inheritance, or
4.Transfer of property under a general power of appointment b. transferred to him by gift, has been the object of previous transfer deduction.
5.Transfer for insufficient consideration
6.Proceeds of life insurance VANISHING DEDUCTION: because the rate of deduction gradually diminishes and entirely vanishes depending
7. Prior Interest upon the time interval between the two (2) successive transfers.
Requisites for deductibility:
Exclusions from Gross Estate: 1. The present decedent must have acquired the property by inheritance or by donation. 2. The property must
1. The merger of usufruct in the naked title have been acquired within five (5) years prior to the death of the present decedent3. The property must have
2. The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicommissary; formed part of the gross estate of the prior decedent if acquired by inheritance, or the taxable gift of the donor if
3. The transmission from the first heir, legatee or done in favor of another beneficiary, in accordance with the desire of the predecessor acquired by donation. 4. The estate tax or the donor’s tax, as the case may be, must have been paid on the
4. All bequests, devises, legacies or transfer to social welfare, cultural and charitable institution, no part of the net income of which inures to previous transfer. 5. The property must be identified as the one received from the prior decedent or from the
the benefit of any individual, provided that not more than 30% of said bequest, devises or legacies or transfers shall be used by such donor, as the case may be. 6. The estate of the prior decedent must not have previously availed of the
institution for administrative purposes. vanishing deduction on the subject property

Exemptions from Estate Tax Under Special Laws. Transfers For Public Use : Requisites: 1. The disposition must be testamentary in character. 2. To take effect
1. Benefits received by members from GSIS, SS by reason of death; after death. 3. In favor of the government of the Philippines, or any political subdivision thereof.4. Exclusively for
2. Proceeds of GSIS life insurance public purpose. 5. Included in the gross estateFamily HomeRefers to the dwelling house, including the land on
which it is situated, where the husband and wife, or an unmarried person who is the head of the family and Primarily Liable : Executor or administrator - before delivery to any beneficiary of his distributive shares. After
members of their immediate family resides as certified by the Barangay Captain of the locality. due payment, the executor or administrator shall be discharged from personal liability.
Subsidiarily Liable : Beneficiary - to the extent of his distributive share, liable for the portion of the estate tax as
his distributive share bears to the value of the total net estate.
E. Standard Deduction Of P1, 000,000.00
on top of other deductions, unlike the optional standard deduction which is in lieu of other deductions; hence, it
does not include the P 200,000 exemption DONOR’S TAX / GIFT TAX
A. NATURE
F. Medical Expenses - It is an excise (privilege) tax, imposed on the privilege of the donor to give or on the privilege of the done to
Requisites: Must be incurred by the decedent within one (1) year receive. It is not a tax on the property as such because its imposition does not rest upon general ownership. The
prior to his death : Must be duly substantiated by receipts; and Must not exceed P500, 000 tax is imposed without reference to the death of the donor unlike in the case of estate tax.

Amounts Received By Heirs Under RA 4917 From The Decedent’s Employer As A Consequence Of The Donation / Gift : an act of liberality whereby a person disposes gratuitously of a thing or right in favor of
Death Of The Decedent–Employee, Provided That Such Amount Is Included In The Gross Estate Of another who accepts it. For tax purposes, the term has a much wider meaning, it includes:
The Decedent. any transfer in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or
personal, tangible or intangible. (Sec. 98)
I) Tax Credit For Estate Tax Paid To A Foreign Country any transfer of property by gift, except in forced sales and in the sale of real property which is a capital asset, for
Requisites: 1. Prove that the foreign estate tax has been paid 2. Prove reciprocity : that in the decedent’s less than and adequate and full consideration in money or money’s worth. (Sec. 100)
foreign country, a similar tax credit is given to Filipinos
c. Condonation or remission of debt, where the creditor merely desires to benefit a debtor and without any
Valuation of Property consideration therefore cancels the debt.
The estate shall be appraised at its fair market value (FMV) at the time of death of the decedent (Sec.88, NIRC).
This is regardless of any subsequent contingency affecting the estate. (Lorenzo vs. Posadas, 64 Phil. 353) . Real Requisites Of A Taxable Gift:
Property higher amount of : 1.) CAPACITY of the donor to make the donation;
a) FMV as determined by the Commissioner 2.) DONATIVE INTENT or INTENT on the part of the donor to make a gift;
- This is the zonal value (of the land) as fixed by the CIR, and can be obtained from the BIR website or 3.) DELIVERY, whether actual or constructive, of the gift; and
regional office ACCEPTANCE of the gift by the donee.
b) FMV fixed by the provincial or city assessor
- This is the value as shown in the tax declaration of the property Kinds Of Gift Taxes:
- Use this amount for real properties with no zonal values (i.e. real properties other than land such as 1. Donor’s tax or tax levied on the act of giving; it supplements the estate tax; and
buildings and improvements) 2. Donee’s tax or tax levied on the act of receiving; it was formerly the counterpart of the inheritance
tax, which has been integrated into an estate tax.
Filing of Return and Payment of Tax
By whom? An estate tax return under oath is required by law to be filed by the executor, administrator, or any of DEDUCTIONS / EXEMPTIONS FROM GIFT TAX
the legal heirs: 1. Gifts Made by a Resident: a.) Dowries or gifts made on account of marriage before its celebration or within
Where the gross value of the estate exceeds P200,000 though exempt from the estate tax; or Regardless of the one year thereafter by parents to each of their legitimate, illegitimate or adopted children to the extent of the
gross value of the estate, where the said estate consists of registered or registrable real property, such as real first P10,000.00. Requisites: The donation must be given on account of marriage. The parent must give it to
property (land, bank accounts, others with definite records), motor vehicle, shares of stock or other similar his child. The child must be either the legitimate, recognized natural or legally adopted child of the donor, and; It
property for which a clearance from the Bureau of Internal Revenue is required as a condition precedent for the must be given before or one year after the celebration of the marriage.
transfer of ownership thereof in the name of the transferee. 2. b.) Gifts made to or for the use of the National Government or any of its agencies which is not conducted for
profit, or to any political subdivision of the said government. c.) Gifts in favor of educational, charitable, religious,
When to file? The return shall be filed within 6 months from the decedent’s death. The Commissioner shall have cultural or social welfare corporation, institutions, foundations, trust or philanthropic organization, research
the authority to grant, in meritorious cases, a reasonable extension not exceeding 30 days for filing the return. institution or organization, or accredited non-government organization. Provided, that no more than 30% of said
gifts shall be used by such donee for administration purposes.
Where to file? Except in cases where the Commissioner otherwise permits, the return shall be filed with:if the
decedent is a resident, an authorized agent bank, Revenue District Officer , Revenue Collection Officer , duly Intangible personal properties considered situated in the Philippines. Franchise which must be exercised in the
authorized treasurer of the city or municipality where the decedent was domiciled at the time of his death, or Philippines . Shares of stocks issued by any corporation or sociedad anonima organized or constituted in the
Philippines in accordance with its laws.
* if the decedent is a non-resident Shares of stocks issued by any foreign corporation 85% of the business of which is situated in the Philippines.
with the Revenue District Office where his executor/administrator is registered; Shares of stock issued by a foreign corporation, if such shares, obligations, or bonds, have acquired a business
with the Revenue District Office having jurisdiction over the residence of the executor/administrator; situs in the Philippines; and
with the Office of the Commissioner if the decedent has no executor or administrator  Shares or rights in any partnership, business or industry established in the Philippines.
Stranger : one who is not a :
6.) Extension for Payment: allowed in meritorious cases when the Commisioner finds that the payment of the (a) brother/sister (whole or half blood), spouse, ancestor and lineal descendant (b) relative by consanguinity in
esate tax on the due date would impose undue hardships upon the estate or any heir : the collateral line; within the fourth degree of relationship
At most 2 years – if estate extrajudicially settled At most 5 years – if estate judicially settled 2.) donations made between individuals and business organizations are considered donations to strangers
NOTE: The taxpayer must not be guilty of 3.) donations made between business organizations are considered donations made to strangers
a) negligence
b) intentional disregard of the rules and regulations, or Void Donations Are Not Subject To Donor’s Tax
c) fraud Such as:Between husband and wife, even if the relationship has not been solemnized.
the taxpayer may also be required to pay a bond not exceeding double the amount of tax and with such Between persons guilty of adultery or concubinage.
sureties, as the Commissioner deems necessary Between those found guilty of the same criminal offenses.
Between those made to a public officer or his wife, descendants, ascendants by reason of his office.

f Gross Estate >2M, additional requirement: Requisites to be exempt from gift tax :
- must submit a certificate of an independent CPA stating: 1. Donor is engaged in business
1. itemized assets of the decedent with corresponding gross value at the time of his death; 2. Donee is any of the organizations mentioned under Sec. 101(A3) and Sec. 101 (B2)
or if NRA, that part of his gross estate situated in the Philippines 3. Donor must give notice to the RDO on every donation worth at least P50,000.
2. itemized deductions from the gross estate 4. The notice must be given within 30 days from the issuance by the donee of a Certificate of Donation.
3. amount of tax due, whether paid or still due and outstanding 5. The certificate of Donation must be attached to the notice.

Liability for Payment of Estate Tax