Scribd Logo
Unggah

Selamat datang di Scribd!

  • Business and Transfer Taxation by Tabag (Pages 1-50)

    Diunggah oleh

    Abigail Leron
    361 tayangan50 halaman
    gb

    Hak Cipta

    © © All Rights Reserved

    Format Tersedia

    DOCX, PDF atau baca online dari Scribd

    Apakah menurut Anda dokumen ini bermanfaat?

    Apakah konten ini tidak pantas?

    Laporkan Dokumen Ini
    gb

    Hak Cipta:

    © All Rights Reserved
    Unduh sebagai DOCX, PDF atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    361 tayangan50 halaman

    Business and Transfer Taxation by Tabag (Pages 1-50)

    Diunggah oleh

    Abigail Leron
    gb

    Hak Cipta:

    © All Rights Reserved
    Unduh sebagai DOCX, PDF atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    dari 50
    ‘The modes and mechanics of acquiring ownership and other real rights over property are fairly complex. One can gain, transfer and lose ownership on a number of ways. Under the New Civil Code (NCC), ownership may be acquired through: ‘AP 712 (New Civil Code 1. Occupation *Owmership is acquired by ‘ jon and by intellectual 2. intelectual creation ada Corsican jones real rights ove property are acquired and transmitted by 4. Donation law, by donation by testate 5. Tradition Ee et in consequence of certain 6. Contract «contracts, by tradition. They may 5 aso be acquired by means of 7. Prescription oan 8. Succession Transfer Taxes and Succession Defined Transfer taxes are taxes imposed upon the gratuitous disposition of private properties or rights. 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 consideration. Hence, gratuitous transfers are essentially donations. The reverse side of gratuitous transfer is ‘onerous, one where the transferee gives consideration in return for the property or right(s) received. “However, onerous transfers are subject to business taxes instead of transfer taxes. Business taxes are discussed in chapters 7 to 11 of this book. Gratuitous transfer or donation may take effect at the time of death of the donor or during the lifetime of both the donor and the donee. The former is known as “donation mortis causa” subject ‘to estate tax while the latter is known as “donation inter vivos” subject to donor's tax. Consequently, sransfer taxes, which are typically assessed on the net value of the taxable assets transferred, fall {into two basic categories, namely; estate tax and donor's tax. ‘Succession 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 his will or by operation of law (Art.774 NCC). The inheritance includes all the property, rights and obligations of a person which are not extinguished by his death (Art. 776 NCC). The rights to the succession are transmitted from the moment of death of the decedent (Art. 777 NCC), notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary. = eee tre | Obligations Obligations “Cut-off Period: “The amount of obligations acquired/Inherited by an Asofthe date of death of the helt should not be more than the combined value of the properties and rights inherited. testator. Nature of Transfer Taxes ‘The subject matter of a transfer tax is the privilege of the transferor to gratuitously transfer property or rights which takes effect at the date of death of the transferor (known as transfer ‘mortis causa subject to estate tax) or during the lifetime of the donor and the donee (known as transfer inter vivos subject to donor's tax). Although the amount of transfer tax is based on net state or net gifts, it shall not be construed as a property tax. On this basis, transfer tax is classified ‘as “excise tax” or privilege tax imposed on the act of passing the ownership of property and not ‘on the value of the property or right. The Law that Governs the Imposition of Estate Tax Itis a well settled rule that estate taxation is governed by the statute in force at the time of death of the decedent. The estate tax accrues as the date of death of the decedent and the accrual of the tax is distinct from the obligation to pay the same. Upon the death of the decedent, succession takes place and the right of the State to the tax the privilege to transmit the estate vests instantly upon death (Section 3, RR 2-2003). In the Philippines, succession itself (excluding the tax aspect) is governed by the new civil code. Chapter 1 Pedro suffered an unexpected heart attack causing his death on November 1, 2015. His estate composed of the following: Cashin bank 1,000,000 Commercial building 5,000,000 cars 1,000,000 House and lot 3,000,000 Juan is the only heir of the decedent. Pedro’ remains were cremated on November 8, 2015. The executor of Pedro’ estate filed the estate tax return and paid the corresponding estate tax on January 15, 2016. The properties let by the decedent were finaly distributed to Juan on February 14, 2016. Answer the following: Question 1: When will te transfer of ownership from the decedent to the heir take effect? ‘+ Answer: November 1, 2015. The rights to the succession are transmitted from the moment of death of the decedent, notwithstanding the actual transfer dated February 14,2016 (Art.777 NCQ) Question 2: When should the estate tax accrue? ‘ + Answer: November 1, 2015 The executorisallowed under the tax code tofile and pay the corresponding estate tax within six (6) months from the date of death (discussed in Chapter 5), however, the estate tax due accrues immediately at the time of death. It shall be noted that the accrual ofthe estate taxis distinct from the obligation to pay the same (RR 2-2003); (Lorenzo vs. Posadas, 64 Phil. 353) Question 3: Assume that Pedro's total outstanding liabilities as of the time of his death amounted. t0P 12,000,000. How much of the outstanding liabilities of the decedent should be assumed by Juan? + Answer: P10,000,000 Limited only to the extent ofthe value of properties and rights inherited. Kinds of Succession (Art. 778 NCC): Whenever a person dies leaving property (inheritance), a question normally arises as to how his property or estate will be dealt with by those he/she left behind. The answer depends on whether or not a decedent left a “will” at the time of his death. The definition of “succession” in the tax code as discussed in page 2, clearly states that the inheritance are transmitted either by his will (with last will and testament) or by operations of law (in the absence of a last will and testament, the provisions of the civil code on succession shall apply). A person is normally said to have died testate if he left a will atthe time of his/her death and a person is said to have died intestate if such a person died without leaving a will. To summarize, succession may be classified as: Succession and Transfer Taxes 1. Testamentary or testate succession. A type of succession that results from the designation of an heir, made in a will executed in the form prescribed by law. 2. Legal or intestate succession. A. type of succession which is effected by operations of law (based on the provisions of the civil code regarding succession) since the decedent did not ‘execute a will or if the last will and testament executed by him is void. 3. Mixed succession. A type of succession which is effected partly by “will” and partly by operation of law. The following cases illustrate the different types of succession. Case A:Testamentary Succession "1 ‘Assume the same data in ilustration #1.In addition, Pedro left a duly executed last will and testament transferring all his properties to Juan upon his death, Case B: Intestate or Legal Succession ‘Assume the same data in illustration #1 except that Pedro did not execute a last will and testament during his lifetime and Juan is the only legal heir qualified to inherit his properties. In such a case, an intestate or legal succession exists. The estate ofthe decedent will be disposed of in accordance with | . the provisions of aw on inheritance/succession. Case C: Mixed Succession ‘Assume the same data in illustration #1, Assume further that Pedro left a duly executed last will and testament transferring all his properties to Juan upon his death. The last will and testament was dated November 1, 2014 or exactly one year before Pedro's death. In addition, assume that from the preparation of the “wil* up to the date of his death, rental income from the commercial building amounted to P250,000. Of this amount, 150,000 was used to acquire a parcel land in Makati while the balance of P100,000 was deposited in a new bank account. Since the parcel of land and the new bank ‘account were acquired by the decedent after November I, 2014, the aforementioned properties were rot included in his will. Hence, a mixed succession exists. Some of the estate will be transferred in ‘accordance with the duly executed will (testamentary) while the new parcel of land in Makati and the new bank account will be distributed by operations of law (intestate or legal succession). Causes of Legal Succession or Intestacy 1. Ifa person dies without a will, or with a void will, or one which has subsequently lost its Case A: Void Will Juan Dela Cruz devised in his“will’ one of his parcels of land located in Valle Verde Subdivision to.one ‘of his daughters, Maria Dela Cruz. Juan can neither write nor read “Chinese Mandarin’ but it was the language used in his last will and testament. In such a case, the “wil shall be considered void. As 2 tule the last will and testament shall be executed in a language or dialect known to the testator to be considered valid. 5. Other causes such as: a. Non-fulfillment of the suspensive condition attached to the institution of heir. Suspensive condition is a condition depending upon the happening of an uncertain event which must be fulfilled before an obligation arises. }. Preterition (omission in the testator’s will of one, some or all of the compulsory heirs in the direct line which has the effect of annulling the institution of heir). c. Fulfillment of “resolutory condition”. A resolutory condition refers to a condition whereby, upon fulfillment terminates an already enforceable obligation. 4. Expiration of term or period of institution. e. Non-compliance or impossibility of compliance with the will, Repudiation of the instituted heir. Elements of Succession 1. Decedens is the general term applied to the person whose property is transmitted through succession, whether or not he left a will. If he left a will, he is called a testator (Art. 775 NCC). Executoris a person designated in the last will and testament to carry out the provisions of the decedent's will. He also performs a fiduciary duty such as taking care of the decedent's estate prior to final disposition to the heirs. Administrator is a person appointed by the court and performs the same duty, in lieu of an executor, if the latter refused to accept the ‘appointment, failed to qualify under the law or the last will and testament did not appoint one. 2, Inheritance (Estate) - Include all the property, rights and obligations of a person which are not extinguished by death and all which have accrued thereto since the opening of succession. Rights which are purely personal are not transmissible for they are extinguished by death (Art. TI6NCC). 3. Successors ‘An heir or successor is a person who is called to the succession either the provision of a will or by operation of law (Art. 782 NCC). Devisees and legatees are persons to whom gifts of real and personal property are respectively given by virtue of a will. Successors or heirs are classified under the law as follows: a. COMPULSORY HEIRS ~ those who succeed by force of law to some portion of the inheritance, in an amount predetermined by law, known as the legitime. They succeed whether the testator likes it or not. They cannot be deprived by the testator of their legitime except by disinheritance properly effected. Chapter Kinds of compulsory heirs: + Primary ~ those who have precedence over and exclude other compulsory heirs (ie. legitimate children and descendants). *+ Secondary ~ those who succeed only in the absence of the primary compulsory heirs; (ce. legitimate parents and ascendants). + Concurring - those who succeed together with the primary or secondary compulsory heirs; e.g illegitimate children and descendants and surviving spouse. ‘TABLE 1-1: COMPULSORY HEIRS Primary Compulsory ‘Secondary Compulsory Legitimate children and theirlegitimate Legitimate parents and legitimate descendants. ascendants. (They inherit only in default of Surviving spouse a iegkinane chien ancl their E. Illegitimate parents (no other descendants) ifescanvaraseohanste x ese ‘They inherit only in default of A’ &“C: NOTE: Brothers and sisters are neither compulsory heirs nor strangers. However, they may be voluntary heirs. VOLUNTARY HEIRS ~ those instituted by the testator in his will to succeed to the inheritance of the portion thereof of which the testator can freely dispose. Free portion refers to the portion or value leftin the estate after deducting the legitimes of the compulsory heirs. A voluntary heir is determined through the last will and testament. LEGAL OR INTESTATE HEIRS - those who succeed to the estate of the decedent by operation of law (decedent died without a valid will or his estate was not entirely disposed of by will) Composition of Gross Estate The gross estate is divided into two main categories for succession purposes, the legitime and free portion as shown below: Compulsory Hers ae This portion of the estate is reserved by law specifically to compulsory {1.75% of the estate) | > | heirs as provided in Table 1-1, regardless of whether or nota last will and : ‘testament was prepared. Refer also to Table 1-3 for the sharing of legitimes by the compulsory heirs Compulsory Heirs and/or Voluntary Hers, pene + As provided in the last will and testament. (1e.25% ofthe estate) In the absence of a will this portion ofthe estate shall be distributed ‘to “intestate heirs’ based in the order of priority as provided in Table 1.2below. “Succession and Transfer Taxes NEA SLOT) NOTE: Inthe illustration, C and D are siblings. Their common parents are A and B, Gis the daughter of Cand E; is the son of D and F. ‘Mis the son of G and K; Nis the daughter of J and L. ‘A.C Gand M, in that order, are relatives in the descending direct line. From A to Ciis one degree: from C to G is another degree and from G to Mis another degree. 'N,J,D and B, in that order, are relatives in the ascending direct line, Gand M, are relatives of D, Jand N in the collateral ine. Gis the niece of D, Dis the uncle of G; Jis the nephew of C, Cis the aunt of Hand | are first cousins; they are four degrees apart, H to C, Cto AB, AB to d and D tol. Mand Nare second cousins; they are six degrees apart. 10. Because of G's marriage to K, K becomes H's brother-in-law, H being G's brother. They become relatives by affinity. Affinity is the connection existing in consequence of a marriage between each, of the martied spouse and the kindred of the other. ‘Succession and Transfer Taxes Ic divide by the number of LC, whether they survive alone or with ‘concurring compulsory heir(CH) TLC % ss % 2ormore | ic Equal to ss its ic ¥ | Allthe concurring CH get from the half free portion, the share of ss i _| the Ss having preference over that ofthe IC, whose share may ic veof1 LC | suffer reduction pro-rata because there is no preference among themselves PA Ve_| Whether they survive alone or with concurring CH UPA Ye __| tCsucceed in the ¥ in equal shares ic % TPA % ss % PA. ve ss ve ic wa iC 1/2__| Divide equally among the IC s TE ic 13 s 12__| 13 if marriage isin articulo mortis and deceased spouse dies “within 3 months afterthe marriage ? 4 P ‘Excluded | Children inheritin the amounts established in the foregoing rules Any child_| ttdepends ° %& | Only the parents of Care included. Grandparents and other ss v4 ___| ascendants are excluded. Chapter ‘Case A: Namaalam Nha died leaving an estate valued at P12,000,000. The surviving heirs were his ‘spouse, 2 legitimate children and 1 illegitimate child, Required: Distribute the estate by applying the rules on egitimes. Answer: ‘The distribution of his estate should be as follows (Based on Table 1-3) Legitimate Children (1/2): 6,000,000 + Legitimate child # 1 3,000,000 + Legitimate child # 2 3,000,000 legitimate child (1/2 0f 1 Lc) 1,500,000 Surviving Spouse (1/4) 3,000,000 Free Portion (remainder) 1,500,000 Total 1P12,000,000. NOTE: + Thellegitime of the legitimate children as provided in the table of legtime is ofthe total estate {regardless of the number of legitimate children) + Thellegitime of an illegitimate child is v4 ofthe legitime of 1 legitimate child. + The egitime ofthe surviving spouse is Yas provided in the table oflegitime ‘+ The remaining portion in this particular case isthe free portion. It may be given by the testator to anyone in accordance with his wishes. However, only those voluntary heirs included in the provisions ofthe will should be recognized, (Case B: Assume the amount of estate is P12,000,000 and the decedent s survived only by his two (2) illegitimate children. The distribution of the estate under intestate succession should be: legitimate Child (1/2); (P3M per LC) 6,000,000 Free Portion (1/2), ‘6.000,000 Total 12,000,000 Case C: Assume the same data in Case B except that the testator provided P8,000,000 to Ana (his secretary) through his last will and testament. Obviously, the legitimes of the two (2) illegitimate children were impaired, The amount of estate lft after deducting the P8,000,000 will nt be enough 10 satisfy the legitimes of the compulsory heirs amounting to P6,000,000. Hence, the amount to be given to the secretary should be modified or reduced to P6,000,000 to satisfy the legitimes. The distribution of the decedent’ estate should be as follows: legitimate Child (1/2); (P3M per LC.) 6,000,000 Secretary free Portion); (1/2) 000,000 Total P12.900.000 ‘A willis an act whereby a person is permitted, with the formalities prescribed by law, to control toa certain degree the disposition of his estate to take effect after his death (Art. 783 NCC). It is a document whereby a person, called the “testator”, disposes of his or her properties or “estate” to take effect upon his or her death. ‘The making of a will is a strictly personal act. It cannot be left in whole or in part of the discretion of a third person, or accomplished through the instrumentality of an agent of attorney. Alll persons who are not expressly. prohibited by law may make a will. The persons prohibited by. law to make a will are those below 18 years old and those who are not of sound mind at the time of its execution. ‘The law presumes that every person is of sound mind, in the absence of proof to the contrary. ‘The burden of proof that the testator was not: ‘of sound mind at the time of making his dispositions is on the person who opposes the probate of the will. If the testator, one month, or less, before ‘making his will was publicly known to be insane, the person who maintains the validity ‘of the will ‘must prove that the testator made it during a lucid interval. Supervening incapacity does not invalidate an effective will, nor is the will of an incapable -validated by the supervening of capacity. ‘A married woman may make a will without the consent of her husband, and without the: authority” of the court. A married woman may dispose by will of all her separate property as well as her share of the conjugal partnership or absolute community property. Kinds of Wills 1. NOTARIAL OR ORDINARY OR ATTESTED WILL ~ is one which is executed in accordance with the formalities prescribed by Art. 804 to 808 of the New Civil Code, Requisites for a Valid Notarial Will a). Itmust be in writing and executed in a language or dialect known to the testator. 'b) It must be subscribed at the end thereof by the testator himself or by the testator’s name ‘written by some other person in his presence and by his express direction. ©) It must be attested and subscribed by three or more credible witnesses in the presence of the testator and of one another. The following are disqualifed from being witnesses to a will (Art, 821 NCC): + Any person not domiciled in the Philippines. + ‘Those who have been convicted of falsification of a document, perjury, or false testimony. Chapter? =—__ SK Revocation of Wills and Testamentary Dispositions ‘Awill may be revoked by the testator at any time before his death any waiver or restriction of this right is void (Art. 828). A revocation done outside the Philippines, by a person who does not have his démicile in the Philippines, is valid when it is done according to the law of the place where the will was made, or according to the law of the place in which the testator had his domicile at the time and if the revocation takes place the Philippines when itis in accordance with the provisions of the new civil code. Modes of Revoking a Will 1. By implication of law 2, By some will, codicil, or other writing executed as provided in case of wills 3, By burning, tearing, cancelling, or obliterating the will with the intention of revoking it, by the testator himself, or by some other person in his presence, and by his express direction. If burned, torn, cancelled, or obliterated by some other person, without the express direction of the testator, the will may still be established, and the estate distributed in accordance therewith, if its contents, and due execution, and the fact of its unauthorized destruction, cancellation, or obliteration are established according to the Rules of Court. Subsequent wills which do not revoke the previous ones in} Art.837 NCC: an express manner, annul only such dispositions in the prior | -fafter making a will the wills as are inconsistent with or contrary to those contained in | testator makes asecond the latter wills. A revocation made in a subsequent will shall | wllexpressly revoking the take effect, even if the new will should become inoperative by firstthe revocation of the 4 second will does not revive reason of the incapacity of the heirs, devisees or legates | the fist will which can be designated therein, or by their renunciation. A revocation of a | revived only by another will will based on a false cause or an illegal cause is null and void. | or

    Anda mungkin juga menyukai