Chapter 15 — Estate Tax Payable DETERMINATION OF ESTATE TAX Over Not Over Basic Tax | Plus% | Of Excess over : P 200,000 Exempt S : P_ 200,000 500,000 Ri 0 5% P_ 200,000 500,000 2,000,000 15,000 8% 500,000 2,000,000 5,000,000 135,000 | 11% 2,000,000 5,000,000 | 10,000,000 465,000 15% 5,000,000 10,000,000 = 1,215,000 20% 10,000,000 Illustration 1 Assume a resident decedent had net taxable estate of P3,000,000. The estate tax shall be computed by reference to the applicable bracket to which the net taxable estate falls. —Tax Due_ Net taxable estate P 3,000,000 Less: Lower limit of the estate bracket + -> where the net taxable estate qualifies __2,000,000 P 135,000 ‘ Excess P 1,000,000 ‘Multiply by: bracket marginal rate 11% _ 110,000 ‘Estate tax due P__245,000 Over ButNotOver BasicTax _Plus% Of excess over eos P_ 500,000 _ 00 P 15,000 8% P 500; L2,000,000 135,000 11% Illustration 2 Assume a decedent had a P8,000,000 net taxable estate. The estate tax shall be: Net taxable estate Less: Lower limit of the estate bracket spots r- > where the net taxable estate qualifies —5.000,000 P 465,000 ' Excess ‘ Multiply by: bracket ma P 3,000,000 | Estate tax due eee 15% __450,000chapter 15 - Estate Tax Payable jsTATE TAX PAYABLE The estate tax due is the actual amount payable. If the estate of the decedent aid estate taxes abroad, the estate tax due will be reduced by foreign tax credit. It must be recalled, however, that only resident or citizen decedent canclaim foreign tax credit. DETERMINATION OF FOREIGN TAX CREDIT The foreign tax credit shall depend on whether a single foreign country or multiple countries are involved. Single Foreign Country The foreign tax credit shall be whichever is lower of the actual foreign estate tax paid and the following limit: ieeel _ one taxable estate x Philippine estate tax due World net taxable estate Multiple Foreign Countries The lower of actual estate tax and the foregoing limit for each country is determined first. The final foreign tax credit shall be the lower of the total of the tax credit allowable per country and the world estate tax credit limit computed as: Total foreign net taxable estate_ philippine estate tax due World net taxable estate Illustration 1: One foreign country ' A resident decedent paid P110,000 estate tax in Japan. The following shows a breakdown of his net taxable estate: Net taxable estate in the Philippines P 1,200,000 Net taxable estate in Japan _1,800,000 World net taxable estate P_3,000,000 The estate tax on the P3,000,000 world net taxable estate is P245,000 per estate tax table. The estate tax credit shall be: Actual foreign estate tax paid P__110,000 Limit: (P1,800,000/P3,000,000 x P245,000) P__147.000 Foreign tax credit - LOWER P10 515Chapter 15 — Estate Tax Payable The estate tax payable shall be computed as: Estate tax due P 245,000 Less: Foreign tax credit 110,000 Estate tax payable P__135,000 Illustration 2: Multiple foreign countries A citizen decedent had the following data: Net taxable _Estate tax —Estate__ Hong Kong P 1,700,000 P 200,000 Korea 2,800,000 250,000 Philippines 1,500,000 Total P_6,000,000 The estate tax on the P6,000,000 world net taxable estate is P615,000. Limit 1: Per country limit HongKong __Korea__ ___Total__ Actual estate taxpaid P 200,000 P 250,000 Limit: - P1.7M/P6M x P615,000 174,250 - P2.8M/P6M x P615,000 287.0 — LOWER P_174,250 P 250,000 P 424,250 Limit 2: Total foreign countries Lower in Limit 1 P 424,250 Limit 2: (P1.7M+P2.8M)/P6M x P615,000 P_ 461,250 Final Foreign Tax Credit (LOWER) P_424,250 The estate tax payable shall be computed as: Estate tax due P 615,000 Less: Foreign tax credit 424,250 Estate tax payable P__ 190,750 Determination of the Net Taxable Estate Per Country Illustration 1: Single decedent - foreign tax credit Asingle citizen decedent died leaving the following gross estate and deductions: 516