ESTATE TAX  Accrual of the inheritance tax is distinct from the obligation to
pay the same. Section 1536, as amended, of the Administrative
Q: What is Estate Tax?
 is a tax levied, assessed, collected and paid upon the transfer of
the net estate of every decedent, whether resident or non-
resident of the PH
Q: Nature of Estate Tax?
 It is not against the property of the decedent, nor is it a claim
against the estate as such, but it is against the interest or
property right which the heir, legatee, devisee, etc., has in the
property formerly held by decedent.
 It is a proceeding in rem
 Its enforcement and collection is through the executive branch of
the government (BIR)
 It is an excise tax or privilege and its object is to tax the shifting of
economic benefits and enjoyment of property from the dead to
the living.
Q: What is the purpose or objective of levying estate tax?
 It is the most appropriate and effective method for taxing the
“privilege” which the decedent enjoys of controlling the
disposition at death of property accumulate during life.
 Note, however, Sec. 9. 4, 9.5, 9.6 of RR 12-2018, in relation to
Q: What is the new rate of estate tax?
 6% net estate of every decedent whether resident or non-
resident of the Philippines (Sec. 2. RR 12-2018)
Q: When does inheritance tax accrue and when must it be satisfied?
Code, imposes tax upon "every transmission by virtue of
inheritance, devise, bequest, gift mortis causa, or advance in
anticipation of inheritance, devise, or bequest." The tax therefore
is upon transmission or the transfer or devolution of property of a
decedent, made effective by his death. According to article 657 of
the Civil Code, "the rights to the succession of a person are
transmitted from the moment of his death." "In other words",
said Arellano, C. J., ". . . the heirs succeed immediately to all of
the property of the deceased ancestor. The property belongs to
the heirs at the moment of the death of the ancestor as
completely as if the ancestor had executed and delivered to them
a deed for the same before his death."
However, it does not follow that the obligation to pay the tax
arose as of the date. The time for the payment on inheritance tax
is clearly fixed by section 1544 of the Revised Administrative Code
as amended by Act No. 3031, in relation to section 1543 of the
same Code. Subsection (b) of Sec. 1544, in substance provides
that, “… the payment shall be made by the executor or
administrator before delivering to each beneficiary his share.”
(Lorenzo v. Posadas, G.R. No. 43082, June 18, 1937)
Sec. 91 (A) and (B):
Time for payment of the estate tax
- As a general rule, the estate tax imposed under the NIRC shall
be paid at the time the return is filed by the executor,
administrator or the heirs. (NOTE: Estate tax return is filed,
generally, within 1 year from the death of the decedent
 unless the CIR found it meritorious to extend not more than
thirty (30) days.)
Extension of time to pay estate tax
- Condition: Undue hardship upon the state or “any” of the
heir
- Time: not to exceed 5 years – settled in court
: not to exceed 2 years – extrajudicial
- NO extension: Negligence, intentional disregard of rules and
regulations, or fraud.
- Bond “may” be furnished provided not exceeding double the
amount of tax.
- After statutory due date and within extension period: Subject
to interest but not surcharge.
Q: What is the law that governs the imposition of estate tax?
 The statute in force at the time of the death of the decedent
Q: When is an estate tax return required? (RR 12 – 2018, Sec 9.1)
 All cases of transfers subject to tax;
 When the gross estate consists of registered or registrable
property such as real property, motor vehicle, shares of stock or
other similar property.
GROSS ESTATE
Q: What is Gross Estate?
 The totality of the value of all property of the decedent at the
time of his death, whether real or personal, tangible or
intangible, wherever situated. Provided, in case of non-resident
decedent who at the time of his death was not a citizen of the PH,
only part of the entire gross estate which is situated in the PH
shall be included.
 In other words, these are properties which the decedent owned,
existing and can dispose to the extent of the interest therein at
the time of his death, including revocable transfers and transfers
for insufficient consideration.
Q: Gross vs. Net Estate?
 The main distinction between the gross estate and the net estate
is that the gross estate is the totality of all the properties in which
the decedent had an interest existing at the time of his death
while the net estate is what remains after subtracting from the
gross estate the allowable decuctions. The gross estate is not
subject to tax while the net estate is the basis for imposing the
estate tax (Domondon, 2014).
1. RESIDENT, NON-RESIDENT ALIEN
Q: Composition of the Gross Estate?
a. Resident AND citizens
- All properties, real or personal, tangible or intangible,
wherever situated.
b. Non-resident aliens
- Only properties situated (whether real or tangible personal)
in the PH
- Intangible personal property unless there is reciprocity
provided for under Sec. 104 of NIRC
Q: For purposed of taxation, what does “residence” means?
  Residence is synonymous to domicile and are used
interchangeably. It refers to the permanent home, the place to
which whenever absent, one intends to return. Therefore, not
necessary the actual place of residence.
2. RECIPROCITY OF EXEMPTION
Q: What is the reciprocity of exemption?
 Sec. 104
xxx xxx xxx
Provided, still further, that no tax shall be collected under this
Title in respect of intangible personal property:
(a) if the decedent at the time of his death or the donor at the
time of the donation was a citizen and resident of a foreign
country which at the time of his death or donation did not
impose a transfer tax of any character, in respect of intangible
personal property of citizens of the Philippines not residing in
that foreign country, or
(b) if the laws of the foreign country of which the decedent or
donor was a citizen and resident at the time of his death or
donation allows a similar exemption from transfer or death taxes
of every character or description in respect of intangible
personal property owned by citizens of the Philippines not
residing in that foreign country.
NOTE: Amounts withdrawn from deposit accounts of a decedent
subjected to final withholding tax are not included from gross
estate for purposes of computing estate tax.
 Reciprocity must be total, that is, with respect to transfer or
death taxes of any and every character, in the case of the
Philippine law, and to legacy, succession, or death taxes of any
and every character, in the case of the California law. Therefore,
if any of the two states collects or imposes and does not exempt
any transfer, death, legacy, or succession tax of any character, the
reciprocity does not work. (Collector vs. Fisher, 1 SCRA 93)
3. VALUATION OF GROSS ESTATE
Q: How do you value the estate for estate tax purposes?
The properties comprising the gross estate shall be valued based on their
fair market value as of the time of death. (“date-of-death valuation
rule”)
Q: What is Fair market value?
 Fair Market Value is the price at which any seller will sell and any
buyer will buy both willingly without any force or intimidation. It
is the price which a property will bring when it is offered by one
who desires to buy and one who is not compelled to sell.
Q: How is fair market value determined?
Real Property Fair market value determined by:
(whichever is higher)
1. the CIR (zonal value) or
2. that shown in the schedule of values
fixed by Provincial and City Assessors
(assessed value)
 NOTE: If there is no zonal value, use the
FMV in the latest tax declaration.
Personal Whether tangible or intangible, appraised
Property at FMV. “Sentimental value” is practically
disregarded.
Shares of Stock If unlisted:
1. Unlisted common - book value
2. Unlisted preferred - par value.
3. Book Value for common shares,
appraisal surplus shall not be considered as
well as the value assigned to preferred
shares.
If listed:
The fair market value shall be the
arithmetic mean between the highest and
lowest quotation at a date nearest the
date of death, if none is available on the
date of death itself.
Usufructuary, use The probable life of the beneficiary in
or habitation, accordance with the latest basic standard
annuity mortality table shall be taken into account
Improvement 1. The construction cost per building
permit or
2. FMV per latest tax declaration
Q: What items/transfers should be included in the gross Estate? [DTR-
GLII]
a. Decedent’s interest at the time of death
b. Transfers in contemplation of death
c. Revocable transfers
d. Property under general power of appointment
e. Proceeds of a life insurance taken out by the decedent upon his
own life where the beneficiary is the estate, his executor or
administrator irrespective of whether or not insured retained
power of revocation or any beneficiary designated as revocable
f. Prior Interest
g. Transfers for insufficient consideration
A. Decedent’s Interest
This refers to the extent of equity or ownership participation of the
decedent on any property physically existing and present in the gross
estate, whether or not in his possession, control or dominion. It also
refers to the value of any interest in property owned or possessed by the
decedent at the time of his death (Tabag, 2015).
The decedent’s interest includes any interest including its fruits, having
value or capable of being valued, transferred by the decedent at his
death. Rental income from buildings and dividends from investments,
interest on bank deposits which have accrued at the time of his death
qualify as decedent’s interest which should be included in the gross
estate.
In other words, the decedent must have had an interest in property at
the time of his death in order that such property interest may be taxable
or includible in his gross estate.
B. TRANSFER IN CONTEMPLATION OF DEATH
Refers to the transfer, by trust or otherwise, of properties or interest
therein made by the decedent during his lifetime.
It is a transfer motivated by the thought of impending death although
death may not be imminent:
1. When the decedent has, at any time, made a transfer in
contemplation of or intended to take effect in possession or
enjoyment at or after death; or
2. When decedent has, at any time, made a transfer under which
he has retained for his life or for a period not ascertainable
without reference to his death or any period which does not in
fact end before his death:
a. Possession, enjoyment or right to income from the
property; or
b. The right alone or in conjunction with any other person
to designate the person who will possess or enjoy the
property or income there from.
XPN: In case of a bona fide sale for an adequate and full consideration in
money or money’s worth.
NOTE: The concept of transfer in contemplation of death has a technical
meaning. This does not constitute any transfers made by a dying person.
It is not the mere transfer that constitutes a transfer in contemplation of
death but the retention of some type of control over the property
transferred. In effect, there is no full transfer of all interests in the
property inter vivos.
“CONTEMPLATION OF DEATH” means the thought of death is the
impelling cause of transfer
C. REVOCABLE TRANSFER
Refers to the transfer where the transferor has reserved the right to alter,
amend or revoke such transfer, regardless of whether the power is
exercised during lifetime, and whether the power is exercised by him
alone or in conjunction with some else.
It is included in the gross estate because of the tremendous power and
control which the transferor can exercise over the property at any time.
Hence, there was really no genuine transfer of the property.
It is a transfer by trust or otherwise, where the enjoyment thereof was
subject at the date of his death to any change through the exercise of a
power to alter or amend or revoke or terminate such transfer by:
1. Decedent alone;
2. By the decedent in conjunction with any other person without
regard to when or from what source the decedent acquired such
power, to alter, amend, revoke or terminate; or
3. Where any such power is relinquished in contemplation of the
decedent’s death other than a bone fide sale for an adequate and
full consideration in money or money’s worth (Sec. 85(C)(1),
NIRC).
The power to alter, amend or revoke shall be considered to exist on the
date of decedent’s death even though:
1. The exercise of the power is subject to a precedent giving of
notice; or
2. The alteration, amendment or revocation takes effect only on
the expiration of a stated period for the exercise of the power,
whether or not on or before the date of the decedent’s death
a. Notice has been given
 b. The power has been exercised. under the concept of an
owner
In such cases, proper adjustment shall be made representing the interest
which would have been excluded from the power if the decedent had
lived, and for such purpose if notice has not been given or the power has
Properties passing under a GPA is includible as part of a decedent’s estate
not been exercised on or before the date of his death, such notice shall
through
be considered to have been given, or the power exercised on the date of
his death (Sec. 85(C)(2), NIRC). 1. Will

2. Deed executed in contemplation of death, or intended to take

D. Property Passing Under General Power of Appointment. effect in possession or enjoyment at, or after his death
“POWER OF APPOINTMENT” is a right to designate by will or deed the 3. Deed under which he has retained for his life or for any
person or persons who are to receive certain property from the estate of period not ascertainable without reference to his death
a prior decedent. or for any period which does not in fact end before his
death:
It is considered as “GENERAL” when it gives to the donee the power to
appoint any person he pleases, including himself. a. The possession, enjoyment or right to income
from the property; or
It is “SPECIAL” when the donee can appoint only among a restricted or
designated class of persons other than himself. b. The right to designate the person who will
GPA SPA
possess or enjoy the property or income
As to nature Donee has the power to Donee appoints the therefrom (Sec. 85[D], NIRC).
appoint any person he successor to the property
chooses or enjoy the who is within a limited It is included in the gross estate because the power of the Donee to
property without restriction group or class of persons dispose the said property through power of appointment is equivalent
according to the will of the
Donor
to an act of dominion, which is an essential attribute of ownership.
As to tax Makes appointed property, Not includible in the gross
implica-tions for all intents, the property estate of the Donee when Q: Differentiate Transfer in Contemplation of Death vs. GPA?
of the donee; thus, forms he dies
part of the gross estate of TCP GPA
the Donee
Effectivity At or after For his life or any period
As to effects Donee holds the appointed Donee holds the appointed
death not ascertainable w/o
property with all the property in trust or under
reference to his death or
attributes of ownership the concept of a trustee
for any period which
 does not in fact end
before his death
Means By trust or Property passed under
otherwise GPA and by will or by
deed
E. PROCEEDS OF LIFE INSURANCE
1. Part of the gross estate to the extent of the amount receivable when
the beneficiary in a life insurance is:
a. The estate of the decedent, his executor or administrator taken
out by the decedent upon his own life regardless of whether the
designation is revocable or irrevocable; OR
b. A third person, other than the decedent’s estate, executor, or
administrator provided that the designation is not irrevocable
Under the Insurance Code, in the absence of an express designation, the
presumption is that the beneficiary is revocably designated.
Notwithstanding the foregoing, in the event the insured does not change
the beneficiary during his lifetime, the designation shall be deemed
irrevocable (Sec. 11, R.A. 10607).
2. Not part of the gross estate when:
a. Proceeds from a life insurance policy is receivable by a 3rd person
(NOT the decedent’s estate, executor or administrator) AND that
the said beneficiary is designated as irrevocable;
b. Where the life insurance was not taken by the decedent upon his
own life even though the beneficiary is the decedent’s estate,
executor, or administrator;
c. Accident insurance proceeds. NIRC specifically mentions only life
insurance policies;
d. Proceeds of a group insurance policy taken out by a company for
its employees;
e. Proceeds of insurance policies issued by the GSIS to government
officials and employees are exempt from all taxes;
f. Benefits accruing from SSS law;
g. Proceeds of life insurance payable to heirs of deceased members
of military personnel.
To determine the conjugal or separate character of proceeds, the
following factors are considered:
1. Policy taken before marriage – Source of funds determines
ownership of the proceeds of life insurance
2. Policy taken during marriage
a. Beneficiary is estate of the insured – Proceeds are
presumed conjugal; hence, one-half share of the surviving
spouse is not taxable
b. Beneficiary is third person – Proceeds are payable to
beneficiary even in premiums were paid out of the
conjugal
F. PRIOR INTEREST
Prior Interest are all transfers, trusts, estates, interests, rights, powers
and relinquishment of powers made, created, arising existing, exercised
or relinquished before or after the effectivity of the NIRC or on January 1,
1998 (Sec. 85, NIRC).
Coverage of prior interest:
 1. Transfers in contemplation of death
2. Revocable transfers
4. EXCLUSION FROM GROSS ESTATE:
3. Life insurance proceeds to the extent of the amount receivable by
the estate of the deceased, executor or administrator under
policies taken out by the decedent upon his own life or to the
extent of the amount receivable by any beneficiary not expressly
designated as irrevocable
G. TRANSFER FOR INSUFFICIENT CONSIDERATION
When a transfer is for insufficient consideration, only the excess of the
fair market value of the property at the time of the decedent’s death over
the consideration received shall be included in the gross estate.
This is applicable to:
1. Transfers in contemplation of death
2. Revocable transfers
3. Transfers under general power of appointment
NOTE: The above transfers should be made/exercised for a consideration
in money/money’s worth but is not a bona fide sale for an adequate and
full consideration in money and money’s worth.
It is also subject to Donor’s Tax if there is no reference to:
1. Revocable transfer
2. Contemplation of death
3. General power of appointment.
NOTE: It is subject to estate tax if the 3 instances mentioned are present
(Sec. 100 in rel. to Sec 85[B], NIRC).
a. CAPITAL OF SURVIVING SPOUSE
Refers to the exclusive property of the surviving spouse.
Exclusive properties under the system of absolute community of
properties (ACP):
1. 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;
2. Property for personal and exclusive use of either spouse.
However, jewelry shall form part of the community property;
3. 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.
Exclusive properties under the system of conjugal partnership of
gains (CPG):
Art. 109 of the Family Code provides that the following shall be
the exclusive property of each spouse:
1. That which is brought to the marriage as his or her own;
2. That which each acquires during the marriage by gratuitous
title (note that the fruits and income of those acquired by
gratuitous title during marriage shall be community
property);
3. That which is acquired by right of redemption, by barter or by
exchange with property belonging to only one of the spouses;
and
 4. That which is purchased with exclusive money of the wife or partnership or community
the husband. property

NOTE: Particular Section does not apply to separation of property

because, in that case, there will be no division. A. FUNERAL EXPENSE (NOT INCLUDED IN TRAIN)

b. Amounts received as compensation for personal injuries and Funeral Expenses include:
damages which led to the death of a decedent (because the said 1. Mourning apparel of the surviving spouse and unmarried minor
amount is not yet a property of the decedent existing as of the children of the deceased, bought and used in the occasion of the
time of his death) burial;
5. DEDUCTION FROM GROSS ESTATE 2. Expenses of the wake preceding the burial including food and
drinks;
Citizen or resident of the PH Non-resident alien of the PH 3. Publication charges for death notices;
a. Standard deduction - a. Standard deduction - 4. Telecommunication expenses in informing relatives of the
P5,000,000.00 P500,000.00 deceased;
b. Claims against the estate b. Proportion of the total losses 5. Cost of burial plot, tombstone monument or mausoleum but not
c. Claims of the deceased against and indebtedness which the their upkeep. In case deceased owns a family estate or several
insolvent persons value of such part bears the burial lots, only the value corresponding to the plot where he is
d. Unpaid mortgages, taxes and value of his entire gross estate buried is deductible;
casualty losses wherever situated including: (PH 6. Interment and/or cremation fees and charges;
e. Property previously taxed GE/World GE) 7. All other expenses incurred for the performance of the ritual and
f. Transfer for public use - Claims against the estate ceremonies incident to the interment.
g. Family Home - Claims of the deceased
h. RA 4917 against Not included:
i. Net share of the surviving insolvent persons 1. Expenses incurred after the interment
spouse in the conjugal partnership - Unpaid mortgages, taxes and 2. Cost of dinner to commemorate 1st death anniversary
or community property casualty losses.
c. Property previously taxed NOTE: Expenses must be duly supported by receipts or invoices or other
d. Transfer for public use evidence to show that they are actually incurred. (RR 2-2003)
e. Net share of the surviving
Q: What is the rate of funeral expense?
spouse in the conjugal
If Filipino decedent (whether resident or non-resident) or of a resident 3. Court fees
alien decedent: 4. Accountant’s fees
5. Appraiser’s fees
The amount deductible is the lower between:
6. Clerk hire
1. actual funeral expenses (paid or unpaid); or 7. Costs of preserving and distributing the estate
2. 5% of the gross estate 8. Costs of storing or maintaining property of the estate
**But not exceeding P200,000. 9. Brokerage fees for selling property of the estate (Sec. 6[A][2], R.R.
2-2003)
If the decedent is a Non-Resident Alien (NRA):
NOTE: The above list is not exclusive. Expenses, as long as it qualifies as
The amount deductible is the lower between: judicial cost, may be deducted. E.g. Cost of publication in probate of will
1. (PH GE/ World GE) x Actual Funeral Expense (World); or NOTE: Judicial Expenses should be supported by sworn statement of
2. 5% of the PH gross estate account issued and signed by the creditor.
**But not exceeding P200,000.
NOTE: Expenses incurred in the administration and settlement in
extrajudicial proceedings is allowed. However, deduction is limited to
2. JUDICIAL EXPENSE (NOT INCLUDED IN TRAIN) ADMINISTRATION EXPENSES actually and necessarily incurred.
Expenses allowed as deduction under this category are those incurred in 3. CLAIMS AGAINST THE ESTATE
the:
Claims are debts or demands of a pecuniary nature which could have
1. Inventory-taking of assets comprising the gross estate; been enforced against the deceased in his lifetime and could have been
2. Administration; reduced to simple money judgments.
3. Payment of debts of the estate;
4. Distribution of the estate among the heirs. (e.g. notarial fees) Sources of claims (CTO):

NOTE: These deductible items are expenses incurred during the 1. Contract
settlement of the estate but not beyond the last day prescribed by law, or 2. Tort
the extension thereof, for the filing of the estate tax return. 3. By Operation of law

Examples of judicial expenses: Requisites for its deductibility (2015 Bar) [TiG-VaCS]

1. Fees of executor or administrator 1. The liability represents a personal obligation of the deceased
2. Attorney’s fees existing at the Time of his death except unpaid obligations
 incurred incident to his death such as unpaid funeral expenses
and unpaid medical expenses;
2. The liability was contracted in Good faith and for adequate and
full consideration in money or money’s worth;
3. Must be a debt or claim must be Valid and enforceable in court;
4. Indebtedness must not have been Condoned by the creditor or
the action to collect from the decedent must not have prescribed
(R.R. 2-2003); and
5. It must be duly Substantiated.
 Simple Loan
- Debt instrument duly notarized
- Certification from the creditor as to the unpaid debt,
including interest as of the time of death duly notarized
- Proof of financial capacity of the creditor to lend the
amount at the time the loan was granted, as well as
balance sheet
- Statement under oath executed by administrator or
executor reflecting the disposition of the proceeds of the
loan, if contracted w/ in 3 years prior to the death of the
decedent.
 If unpaid obligation arose from purchase of goods or services
- Documents evidencing the purchase of goods or services
- Certification from the creditor as to the unpaid debt,
including interest as of the time of death duly notarized
- Certified true copy of the latest audited balance sheet of
the creditor with detailed schedule of its receivable
showing the unpaid balance of the decedent-debtor.
 Settlement made through Court
NOTE: Unpaid taxes such as income and real estate taxes that have
accrued after the death of the decedent are not deductible from gross
estate as they are properly chargeable to the income of the estate (Dela
Vina v. Collector, 65 Phil. 620).
D. CLAIMS AGAINST INSOLVENT PERSONS
Requisites for deductibility:
1. The full amount of the receivables be included first in the gross
estate; and
2. The incapacity of the debtors to pay their obligation is proven not
merely alleged.
NOTE: Judicial declaration of insolvency is not necessary. It is enough that
the debtor’s liabilities exceeded his assets.
E. UNPAID MORTGAGES, TAXES AND CASUALTY LOSSES
Requisites for its deductibility of unpaid mortgage:
1. The value of the property to the extent of the decedent’s interest
therein, undiminished by such mortgage or indebtedness is
included in the gross estate; and
2. The mortgage indebtedness was contracted in good faith and for
an adequate and full consideration in money or money’s worth.
NOTE: In case unpaid mortgage payable is being claimed by the estate,
and the loan is found to be merely an accommodation loan where the
loan proceeds went to another person, the value of the unpaid loan, to
the extent of the decedent’s interest therein must be included as a
receivable of the estate.
If there is a legal impediment to recognize the same as receivable of the
estate, said unpaid obligation/ mortgage payable shall not be allowed as a
deduction from the gross estate (Section 86(A)(1))(e), NIRC).
Where the decedent owned only one-half of the property mortgaged so
that only one-half of its value was included in his estate, only one-half of
the mortgage debt was deductible, even though the executor paid the
entire debt, the liability of the decedent being solidary, inasmuch as the
executor would be subrogated to the rights of the mortgagee as against
the co-owner and co-mortagagor (Parrot v. Commissioner, 279 U.S. 870).
Requisites for its deductibility taxes:
Taxes which have accrued as of the death of the decedent which were
unpaid as of the time of death are deductible.
Taxes not deductible are those accruing after death, such as:
1. Income tax on income received after death
2. Property tax not accrued before death
3. Estate tax due from the transmission of his estate
Requisites for its deductibility losses:
Losses are allowed as deductions from the gross estate of a Filipino
citizen whether resident or non-resident and resident alien are allowed
provided that they:
1. Were incurred during the settlement of the estate;
2. Arise from fire, storm, shipwreck, or other casualties, or robbery,
theft or embezzlement;
3. Are not compensated by insurance or otherwise;
4. Not claimed as a deduction from Income Tax; and
5. Occur not later than the last day prescribed by law or any
extension thereof for payment of the estate tax.
NOTE: Judicial expenses allowed as deductions include only those
incurred not later than the last day prescribed by law or any extension
thereof for the filing of the return (6 months extendible to 30 days) while
in losses, the period is up to the last day prescribed by law or any
extension thereof for the payment of estate tax (6 months extendible to 2
years for extrajudicial settlement while extendible for 5 years for judicial
settlement).
Losses are allowed as deductions from the gross estate of non-resident
alien decedent:
The same items herein shall be allowed as deduction but only the
proportion of such deductions which the value of his gross estate in
the Philippines bears to the value of his entire gross estate, wherever
situated shall be deducted.
NOTE: Casualty loss can be allowed as deduction in one instance only,
either for income tax purposes or estate tax purposes.
F. PROPERTY PREVIOUSLY TAXED – VANISHING DEDUCTIONS
“Vanishing Deduction” is the deduction allowed from the gross estate of
citizens, resident aliens and non-resident estates for properties which
were previously subject to donors or estate taxes.
NOTE: The purpose of vanishing deduction is to lessen the harsh effects
of double taxation.
The rate of deduction depends on the period from the date of transfer to
the death of the decedent, as follows:
 PERIOD DEDUCTION Formula for computing the vanishing deductions:
1 day to 1 year 100%
1 year and 1 day to 2 80% First:
years
2 years and 1 day to 60% Initial Basis (Value of property previously taxed)
3 years
3 years and 1 day to 40% LESS: Mortgage debt paid, if any (first deductions) = New Initial basis
4 years
4 years and 1 day to 20% Second:
5 years
More than 5 years No deduction New Initial Basis x (ELIT+Transfers for Public Use)
allowed Gross Estate

NOTE: In property previously taxed, there are two (2) transfers of
property. Within a period of 5 years, the same property has been
transferred from the first to the second decedent or from a donor to the
decedent. In such case, the first transfer has been subject to a transfer
tax. The second transfer would now be subject to a vanishing deduction
as provided in the code.
Requisites for its deductibility: [5-P2INT]
1. The present decedent died within 5 years from receipt of the
property from the prior decedent or donor;
2. The property on which vanishing deduction is being claimed is
located within the Philippines;
3. The property formed Part of the taxable estate of the prior
decedent or of the taxable gift of the donor;
4. The estate Tax on the prior succession or donor’s tax on the gift
must have been finally determined and paid;
5. The property on which the vanishing deduction is taken must be
Identified as the one received or acquired; and
6. No vanishing deduction was allowed on the same
= Second deduction
Third:
New Initial basis
LESS: Second deduction = Basis for Vanishing Deduction
Fourth:
Basis for Vanishing Deduction
Multiplied by 100%, 80%, etc. (as the case may be) = Vanishing deduction
Rules in vanishing deductions:
1. The deduction allowed is only in the amount finally determined
as the value of such property in determining the value of the gift,
or the gross estate of such prior decedent;
2. Only to the extent that the value of such property is included in
the decedent’s gross estate;
3. Only if in determining the value of the estate of the prior
decedent, no deduction was allowed for property previously
taxed in respect of the property of properties given in exchange
therefore;
 4. Where a deduction was allowed of any mortgage or lien in Refers to the corporate Refers to the entire machinery of
governmental entity through which the central government, as
determining the gift tax, or the estate tax of the prior decedent, the functions of government are distinguished from the different
which were paid in whole or in part prior to the decedent’s death, exercised throughout the forms of local Governments. The
then the deduction allowable for property previously taxed shall Philippines, including, save as the National Government then is
contrary appears from the context, composed of the three great
be reduced by the amount so paid; the various arms through which departments the executive, the
5. Such deduction allowable shall be reduced by an amount which political authority is made effective legislative and the judicial (Mactan
bears the same ratio to the amounts allowable as deductions for in the Philippines, whether Cebu v. Marcos, G.R. No. 120082,
pertaining to the autonomous September 11, 1996).
expenses, losses, indebtedness, taxes and transfers for public use regions, the provincial, city,
as the amount otherwise deductible for property previously taxed municipal, or barangay subdivisions,
or other forms of local government.
bears to the value of the decedent’s estate; and
6. Where the property referred to consists of two or more items,
the aggregate value of such items shall be used for the purpose of Difference of Sec. 86(A)(3) and Sec. 87(D) of the NIRC
computing the deduction.
SEC. 86(A)(3) SEC. 87(D)
It contemplates transfers by a It contemplates transfers to
citizen or resident of the social welfare, cultural and
G. TRANSFER FOR PUBLIC PURPOSE Philippines in favor of the charitable institutions which are
Government of the Philippines or exempted from estate tax.
Requisites for deductibility: [WIG-PD] any political subdivision thereof,
for public purpose which are
1. The disposition is in a last Will and testament; deducted from the gross estate
2. To take effect after Death;
3. In favor of the Government of the Philippines or any political H. FAMILY HOME
subdivision thereof;
An amount equivalent to the current fair market value of the decedent’s
4. For exclusive Public purposes; and
family home: Provided, however, that if the said current fair market value
5. The value of the property given is Included in the gross estate.
exceeds P10M, the excess shall be subject to estate tax.
In case of a non-resident alien decedent, the property transferred must
“Family Home” is the dwelling house, including the land where it is
be located within the Philippines and included in the gross estate.
situated where the married person or an unmarried head of the family
Government of the Republic of the Philippines v. National Government and his family resides.

GOVERNMENT OF THE NATIONAL GOVERNMENT

PHILIPPINES
It is deemed constituted on the house and lot from the time that it is
constituted as a family residence and is considered as such so long as any
of the beneficiaries actually resides therein.
NOTE: Actual occupancy for the house and lot as the family residence
shall not be considered interrupted or abandoned in such cases as the
temporary absence from the constituted family home due to travel or
studies or work abroad etc. The family home is generally characterized by
permanency, that is, the place to which, whenever absent for business or
pleasure, one still intends to return (R.R. No. 2-2003).
Beneficiaries of a family home:
a. The husband and wife – legally married
b. Unmarried or legally separated head of a family
- with one or both parents, one or more brothers or sisters, or
with one or more legitimate, recognized natural or legally
adopted children dependent upon him for chief support, who are
not more than 21 yrs., unmarried, and not gainfully employed, or
regardless of age are incapable of self-support because of mental
or physical defect.
c. Those living with husband and wife or head of a family
a. The current FMV of the family home as declared or
included in the gross estate, or
b. The extent of the decedent’s interest (whether
conjugal/community or exclusive property), whichever is
lower, but not exceeding P10, 000,000.
NOTE: The estates of non-resident decedents are not allowed to
avail the family home deduction because they do not have a
family home in the Philippines since aliens are expressly
prohibited by the Constitution from acquiring lands. For purposes
of availing the family home deduction to the extent allowable a
person may constitute only one family home.
STANDARD
I. SHARE IN THE CONJUGAL PROPERTY
After deducting the allowable deductions appertaining to the conjugal or
community properties included in the gross estate, the share of the
surviving spouse must be removed to ensure that only the decedent’s
interest in the estate is taxed.
J. STANDARD DEDUCTION

Citizen or resident of the PH Non-resident alien of the PH

Requisites for its deductibility: P5,000,000.00 P500,000.00
K. AMOUNT RECEIVED BY HEIRS UNDER RA 4917 or otherwise known as
1. The family home must be the actual residential home of the
an act providing for retirement of employees of private firms shall not
decedent and his family at the time of his death, as certified by
be subject to attachment, levy, execution or any tax whatsoever
the Barangay Captain of the locality where the family home is
situated;
2. The total value of the family home must be included as part of
6. Tax Credit for Estate Tax
the gross estate of the decedent; and
3. Allowable deduction must be in the amount equivalent to: What is estate tax credit?
It is a remedy against international double taxation. to minimize the
onerous effect of taxing the same property twice, tax credit against
Philippine estate tax is allowed for estate taxes paid to foreign countries.
Only the estate of a citizen or a resident alien at the time of death can claim
tax credit for any estate taxes pain in a foreign country.
What is the rule on tax credit to estate taxes paid to a foreign country?
General Rule: The tax imposed shall be credited with the amounts of any
estate tax imposed by the authority of a foreign country.
What are the limitations on credit?
Limitations on Credit – the amount of the credit taken under this section
shall be subject to each of the following limitations:
a. The amount of the credit in respect to the tax paid to any 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 under this title bears to his entire net estate
(per country basis); and
Net estate (1 foreign country) x Phil estate tax
Entire net estate
b. The total a mount 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 is taxable
under this Title bears to his entire net estate (overall basis).
Net estate (all foreign countries) x Phil Estate Tax
Entire net estate
7. Exemptions for Certain Acquisitions
What acquisitions and transmission are exempt from estate tax?
Under Section 87, the following shall not be taxed:
a. the Merger of usufruct in the owner of the naked title;
b. the TRANSMISSION or DELIVERY of the inheritance or legacy by
the fiduciary heir or legatee to the fideicommissary;
Provided that:
i. The substitution must not go beyond one degree from the heir
originally instituted;
ii. The fiduciary or the first heir must be both living at the time of
death of the testator.
c. the TRANSMISSION from the first heir, legatee or done in favor of
another beneficiary, in accordance with the desire of the
predecessor; and
d. ALL bequeaths, devises, legacies or transfer to social welfare,
cultural and charitable institutions. Provided that:
i. No part of the net income of which inures to the benefit of
ant individual; and
ii. Not more than 30 percent of the said bequests, devises, or
transfers shall be used by such institutions for
administration purposes.
How is estate tax computed?
1. List down all the common (conjugal or community) property
2. List down all the separate or exclusive property of the decedent (exclude
the separate or exclusive property of the surviving spouse)
3. Include the family home either in (a) or (b), depending on the status of
the house and lot
4. The resulting total is the gross estate
5. Deduct the appropriate deductions 6. The resulting balance is the net
estate
7. Deduct the special deductions: (1) share of the surviving spouse (1/2) of
the net common properties and (2) family home
8. The resulting balance is the taxable net estate 9. Compute the estate tax
using the graduated estate tax rates
10. Deduct any tax credits
11. The resulting balance is the estate tax due and payable
8. Estate Tax Returns (Sec. 90, NIRC)
When is an estate tax return required?
It is required in the following cases:
1. Transfers subject to tax; or
2. Even if exempt from estate tax but the gross value of estate exceeds
P200,000; or
3. Regardless of the gross value of the estate, where the said estate
consists of registered or registrable property (Sec. 90[A], NIRC).
Note: TRAIN law increased the gross value of an estate for which a return
should be filed from previous amount of P2m to P5m, to be supported with
a statement duly certified by CPA.
i. Time to file
It is filed within 1 year from the decedent’s death. A schedule of partition
and the order of the court approving the same shall be furnished the
Commission within 30 days after the promulgation of such order. (Sec.
90[B], NIRC). Extension to file an estate tax return is allowed in meritorious
cases but not to exceed 30 days (Sec. 90[C], NIRC).
Where to file?
1. If it is a resident decedent - To an authorized agent bank, RDO, Collection
Officer, or duly authorized Treasurer in the city or municipality where the
decedent was domiciled at the time of his death, or to the Office of the CIR.
2. If it is a non-resident decedent - To the RDO or to the Office of the CIR
(Sec. 90[D], NIRC).
ii. Payment of tax (Section 91)
When should the estate tax be paid?
General Rule: At the time the return is filed by the executor, administrator
or the heirs
Exception: The CIR, if he finds that the payment on the due date would
impose undue hardship, may grant an extension of:
1. Not to exceed 5 years in case the estate is settled judicially;
2. Not to exceed 2 years in case the estate is settled extrajudicially
Exception to the exception: If taxes are assessed by reason of negligence,
international disregard of rules and regulations and fraud on the part of
the taxpayer, no extension will be granted by the Commission.
Payment by installment: if estate is insufficient, can be paid in installment
within 2 years from statutory date for its payment without civil penalty
9. Obligations of executors, administrators, officers and others
Who is liable for the payment of the estate tax?
The estate tax imposed under the Tax Code shall be paid by the executor
or administrator before the delivery of the distributive share in the
inheritance to any heir or beneficiary.
The beneficiary shall be subsidiary liable for the payment of the portion of
the estate tax to the extent of his distributive share.
No judge shall authorize the executor or judicial administrator to deliver a
distributive share to any party interested in the estate unless a certification
from the Commission that the estate tax has been pain is shown.
In CIR V. GONZALES [NOVEMBER 24, 1966], the Supreme Court held that
estate taxes are satisfied from the estate and are to be paid by the executor
or administrator. Where there are 2 or more executors, all of them are
severally liable for the payment of the estate tax. Failure to pay the estate
taxes before distribution of the estate would subject the executor or
administrator to criminal liability. It is immaterial that an heir administers
only 1/3 of the estate and will receive as her share only said portion, for
her right to the estate comes after taxes. As an administratrix, she is liable
for the entire estate tax. As an heir, she is liable for the entire inheritance
tax.
May estate tax be collected even after the distribution to the heirs?
Yes. As held in GOVERNMENT V. PAMINTUAN [OCTOBER 11, 1930], a claim
for taxes and assessments whether assessed before or after the death of
the decedent, is not required to be presented to the committee on claims
and appraisals. The Heirs are liable for the deficiency income taxes, in
proportion to their share in the inheritance.
As held in CIR V. PINEDA [SEPTEMBER 15, 1967], an heir is individually
answerable for the part of the tax proportionate to the share he received
from the inheritance. His liability, however, cannot exceed the amount of
his share. On the other hand, a holder of property belonging to the estate
is liable for the tax up to the amount of the property in his possession.
How can the BIR recover such unpaid tax liabilities?
The BIR can recover in 2 ways:
1. It may recover said liability from all the heirs who shall share
proportionately; or
2. It may go against the property held by an heir if the same is sufficient to
cover the whole tax liability (in which case, the heir who paid can seek
reimbursement from his/her co-heirs) CIR V. PINEDA
Note: In both instances, the respective heirs may not be held accountable
for more than the share he/she inherited.
Is the approval of the probate court or the court settling the estate of the
decedent a mandatory requirement in the collection of the estate tax?
No. As held in MARCOS II V. CA [JUNE 5, 1997], it is discernible that the
approval of the court, sitting in probate, or as a settlement tribunal over
the deceased is not a mandatory requirement in the collection of estate
taxes. It cannot therefore be argued that the Tax Bureau erred in
proceeding with the levying and sale of the properties allegedly owned by
the late President, on the ground that it was required to seek first the
probate court's sanction. There is nothing in the Tax Code, and in the
pertinent remedial laws that implies the necessity of the probate or estate
settlement court's approval of the state's claim for estate taxes, before the
same can be enforced and collected.
What are the duties of the following officers?
ROD:
a. shall not register in the Registry of Property any document
transferring real property or real rights therein or any chattel
mortgage, by way of gits inter vivos or mortis causa, legacy,
 inheritance unless s certification from the Commissioner that the Donor’s tax is imposed upon the transfer by any person, resident or non-
tax fixed and actually due had been paid resident, of any property by gift.
b. Shall immediately notify the Commissioner or RD, Revenue District
What law governs the imposition of donor’s tax?
Officer or Revenue Collection Officer or treasurer of city/mun of
the non payment of the tax discovered The donor’s tax is governed by the statute in force at the time of the
transfer.
Bank
What is a donor’s tax?
a. If bank has knowledge of the death of a person, who maintained a
bank deposit alone, or jointly with another, it shall allow any A donor’s tax is an excise tax imposed on the privilege to transfer property
withdrawal from said deposit, subject to a final withholding tax of by way of gift inter vivos based on pure act of liberality without any or less
6 percent (an amendment of the TRAIN) than adequate consideration and without any legal compulsion to give.
DONORS TAX What is the nature of a donor’s tax?
1. Imposition of Gift Tax It is an excise tax on the privilege of the donor to give or on the transfer of
property by way of gift inter vivos. It is not a property tax (Lladoc v. CIR [14
What donations are covered by the donor’s tax?
SCRA 292])
The donor’s tax is imposed only on donaitons inter vivos. Donations mortis
Coverage of the Tax )Section 104)
causa partake of the nature of testamentary dispositions are subject to
estate tax RESIDENT, NON-RESIDENT NONE-RESIDENT ALIEN DONOR
CITIZEN, RESIDENT ALIEN DONOR
In the case of Gestopa v CA [October 5, 2000], the Supreme Court held
1. Real property wherever 1. Real property situation in the
that the donation of the deceased spouses to their illegitimate daughter
situated Philippines
was a donation inter vivos. The spouses executed the deed out of love and 2. Personal property wherever 3. Personal property
affection for the donee, which is a mark of a donation inter vivos. The situated a. Tangible property situated in
donor reserved sufficient properties for their maintenance in accord with a. Tangible and intangible the Philippines
their standing in society, indicating the donor intended to part with the b. Intangible personal property
property donated. And, the donee accepted the donation, which is only with a situs in the Philippines
required in donations inter vivos. unless exempted on the basis of
reciprocity.
When is donor’s tax imposed?
What are the requisites of a valid donation?
1. Capacity of donor;
2. Donative intent (intention to donate);
3. Delivery, whether actual or constructive, of the subject gift; and
4. Acceptance by the done 5. Form prescribed by law.
Note: (1) As to (1) – All persons who may contract or dispose of their
property may make a donation (Art. 735, NCC). The donor’s capacity shall
be determined as of the time of the making of the donation (Art. 737, NCC).
What is the rate of tax payable by donor?
General: Shall be 6 percent computed on the basis of the total gifts in
excess of Php 250,000.00.
Further, any contribution in cash or in kind to any candidate, political party
or coalition of parties for campaign purposes shall be governed by the
Election Code, as amended.
Transfers subject to donor’s tax:
1. Transfer in trust or otherwise, whether the gift is direct or indirect and
whether the property is real or personal, tangible or intangible;
2. Include not only the transfer of ownership in the fullest sense but also
the transfer of any right or interest in property, but less than title;
3. Where property, other than real property subject to capital gains tax, is
transferred for less than an adequate and full consideration in money or
money’s worth, then the amount by which the FMV of the property
exceeded the value of the consideration shall, for the purpose of the
donor’s tax, be deemed a gift, and shall be included in computing the
amount of gifts made during the calendar year.
4. Renunciation by the surviving spouse of his/her share in the conjugal
partnership or absolute community after the dissolution of the marriage in
favor of the heirs of the deceased spouse or any other person/s is subject
to donor’s tax;
5. However, general renunciation by an heir, including the surviving
spouse, of his/her share in the hereditary estate left by the decedent is not
subject to donor’s tax, unless specifically and categorically done in favor of
identified heir/s to the exclusion or disadvantage of the other co-heirs in
the hereditary estate. (Reason: In general renunciation, there is no
donation since the renouncer has never become the owner of the
property/share renounced.)
6. Transfers of any right or interest. Transfers subject to donor’s tax not
only include transactions where there is a transfer of ownership, but also
where there is a transfer less than title.
What are the requisites for a donation of a movable to be valid?
1. Donation may be oral or in writing
2. If oral, the donation must be accompanied with delivery
3. If value is more than Php 5,000, the donation must be in writing and
accepted in writing. (Art. 748, NCC)
What are the requisites for a donation of an immovable to be valid?
1. It must be in public document
2. The property donated and the value of the charges which the done must
satisfy must be specified
3. The donee must accept through a deed or similar instrument. (Art. 749,
NCC)
What are the requirements for a donation to be subject to donor’s tax?
1. Property donated is not real property that is a capital asset
2. The transfer is for less than adequate consideration
3. The transfer is inter vivos
Transfers which may be constituted as donation
a) Sale/exchange/transfer of property for insufficient consideration
b) Condonation/remission of debt
What are considered donations for tax purposes?
1. Sales, exchanges and other transfers of property for less than an
adequate and full consideration in money or money’s worth
Except: Transfers of real property considered as capital assets which is
subject to CGT.
2. Condonation or remission of debt where the debtor did not render
service in favor of the creditor
Note: Condonation or remission of a debt would constitute a donation to
the extent of the fair value of the debt condoned or remitted. Therefore,
the creditor would be considered a donor for donor’s tax purposes and
would be liable for the tax thereon.
Gross gifts – All property, real or personal, tangible or intangible, that was
given by the donor to the donee by way of gift, without the benefit of any
deduction (Sec. 104, NIRC).
Net gift is the net economic benefit from the transfer that accrues to the
donee.
NOTE: If a mortgaged property is transferred as a gift, but imposing upon
the donee the obligation to pay the mortgage liability, then the net gift is
measured by deducting from the fair market value of the property the
amount of mortgage assumed
2. Transfer of Inadequate consideration
When is there a transfer for less than an adequate and full consideration
in money or money’s worth?
Where property, other than real property classified as capital asset subject
to final capital gains tax, is transferred for less than an adequate and full
consideration in money or money’s worth, the amount by which the fair
market value of the property exceeded the value of the consideration shall,
for purposes of donor’s tax, be deemed a gift.
Note: (1) The element of donative intent is conclusively presumed in
transfers of property for less than an adequate or full consideration in
money or money’s worth.
(2) Why is real property, classified as capital asset, that is transferred for
less than an adequate and full consideration in money or money’s worth
not deemed a gift subject to donor’s tax? Well, it is already subject to final
capital gains tax, which is 6% of the gross selling price of fair market value
of the property, whichever is higher. So what the seller avoids in the
payment of the donor’s tax, it pays for in CGT.
3. Exemption from Gift Tax
Enumerate the exemptions from gross gifts (exempt from donor’s tax)
1. Dowries or donations made:
a. on account of marriage
b. before its celebration or within one year thereafter
c. by parents to each of their legitimate, recognized natural or
adopted children d. to the extent of the first php10,000
 2. Gifts made to or for the use of the national government or any
entity created by any of its agencies which is not conducted for
profit, or to any political subdivision of the said government
3. Gifts in favor of an education and/or charitable, religious, cultural
or social welfare corporation, institution, accredited NGO, trust or
philanthropic organization or research institution or organization
provided not more than 30% of said gifts will be used by such done
for administrative purposes.
What exemptions are allowed to nonresident aliens?
Non-resident aliens are exempt from donor’s tax with respect to (2) and
(3) as enumerated above
In addition to exemptions provided under Section 101 of the Tax Code,
are there any other exemptions allowed on gross gift?
1. Encumbrances on the property donated if assumed by the donee
2. Donations made to entities exempted under special laws (e.g. IBP, IRRI,
National Museum, National Library)
3. Amount specifically provided by the donor as a diminution of the
property donated.
4. Athlete’s Prizes and Awards (see RA 7549)
What are the requisites for dowries or gifts made on account of marriage
to be exempted?
1. The gift was made on account of marriage 2. It was made before or
within one year after the celebration of marriage 3. Donor is a parent 4.
Donee is a legitimate, recognized natural or adopted child of the donor 5.
The amount of the gift exempted is only to the extent of the first P10,000
(per parent, if made out of conjugal or community funds)
What are the requisites for gifts in favor of an education and/or
charitable, religious, cultural or social welfare corporation,
institution, accredited NGO, trust or philanthropic organization or
research institution or organization to be exempted?
1. Not more than 30% of the said gift should be used for administrative
purposes
2. The donee must be a non-stock, non-profit organization or institution 3.
The donee organization or institution should be governed by trustees who
do not receive any compensation
4. Said donee devotes all of its income to the accomplishment and
promotion of its purposes
5. The NGO must be accredited by the Philippine Council for NGO
Certification
6. The donor engaged in business shall give notice of donation on every
donation worth at least P500,000 to the RDO which has jurisdiction over
his place of business within 30 days after receipt of the qualified donee’s
institution’s duly issued Certificate of Donation (RR 2-2003)
What are the requisites for a donation given to athletes as prize or award
to be exempted?
The donation must be prize or award given to athletes:
1. In local and international sports tournaments and competitions
2. Held in the Philippines or abroad;
3. Sanctioned by their respective national sports associations (RA 7549)
Note: Remember Section 32(B)(7)(d), Tax Code which provides that all
prizes and awards granted to athletes in local and international
competitions and tournaments, whether held in the Philippines or abroad,
and sanctioned by their national sports associations are excluded from
gross income.
Exempted from donor’s tax under other special laws:
1. RA 2707 - Donation to International Rice Research Institute (IRRI)
2. RA 3676 - Donation to Ramon Magsaysay Award Foundation (RMAF)
3. RA 3850 - Donation to Philippines Inventors Convention (PIC)
4. PD 181 - Donation to Integrated Bar of the Philippines (IBP)
5. PD 205 - Donation to the Development Academy of the Philippines
6. Donation to social welfare, cultural or charitable institution, no part of
the net income of which inures to the benefit of any individual, if not more
than 30% of the donation shall be used by the donee for administration
purposes
7. PD 292 - Donation to Aquaculture Department of the Southeast Asian
Fisheries Development Center of the Philippines
8. RA 8492 - Donation to the National Museum
9. RA 1006 - Donation to the National Library
10. PD 294 - Donation to the National Social Action Council
Are political contributions considered gifts and therefore liable for
donor’s tax?
Under Section 13 of RA 7166, such contributions, be duly reported to the
COMELEC, shall no be subject to the payment of any gift tax.
Note: In Abello v. CIR [February 23, 2005], the Supreme Court ruled that
the contributions made by certain partners of the ACCRA law firm to the
campaign of Senator Edgardo Angara constitute as a donation subject to
donor’s tax. However, this was decided before RA 7166. The Court noted
that subsequent to the donations involved in the case, Congress approved
RA 7166 on November 25, 1991, providing in Section 13 thereof that
political/electoral contributions, duly reported to the Commission on
Elections, are not subject to the payment of donor’s tax. RA 7166 provides
no retroactive effect.
4. Person Liable
Who are liable for donor’s tax?
Every person, whether natural or juridical, resident or nonresident, who
transfers or causes to transfer property by gift, whether in trust or
otherwise, whether the gift is direct or indirect and whether the property
is real or personal, tangible or intangible. In other words, the donor is
always liable to pay the donor’s tax.
What is the rule for donations made by husband and wife?
Husband and wife are considered as separate and distinct taxpayer's for
purposes of the donor's tax. However, if what was donated is a conjugal
or community property and only the husband signed the deed of donation,
there is only one donor for donor's tax purposes, without prejudice to the
right of the wife to question the validity of the donation without her
consent pursuant to the pertinent provisions of the Civil Code of the
Philippines and the Family Code of the Philippines. (see RR 2-2003)
In Tang Ho v. Board of Tax Appeals [November 19, 1955], the Supreme
Court held that a donation of property belonging to the conjugal
partnership, made during its existence, by the husband alone in favor of
the common children, is taxable to him exclusively as sole donor. To be a
donation by both spouses, taxable to both, the wife must expressly join the
husband in making the gift. Her participation cannot be implied. In case a
donation was made by the parents in favor of their children, consisting of
cash form the CPG, then only one parent may claim the exemption granted
by the law.
What is the basis in computing donor’s tax?
The tax shall be computed on the basis of the total net gifts made during
the calendar year in accordance with the graduated donor’s tax rates.
4. Tax Credit
General Rule: The tax imposed upon a donor who was a citizen or a country where he is domiciled at the time of transfer, or directly with the
resident at the time of donation shall be credited with the amount of any Office of the Office of the Commissioner.
donor’s tax of any character and description imposed by the authority of a
foreign country. 6. Political Contribution: tax treatment

Limitations: Are donations for political campaign purposes exempted from donor’s
tax?
a. The amount of the credit in respect to the tax paid to any country
shall not exceed the same proportion of the tax against which such YES. Any contribution in cash or in kind to any candidate, political party, or
credit is taken, which net gifts situated within such country taxable coalition of parties for campaign purposes, reported to COMELEC shall not
under this title bears to his entire net gifts; and be subject to payment of any gift tax (Sec. 99[C], NIRC; R.R. 2-2003).
b. 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 gift situated outside the Philippines is taxable under
this Title bears to his entire net gifts.

Valuation of Gifts Made in Property

- If made in property, the FMV thereof at the time of the gift shall
be considered the amount of the gift.

5. Tax Return (time and filing and payment)

Time and place of filing:

Shall be filed within 30 days after the date the gift is made and the tax due
thereon shall be pain at the time of filing. Except incases where the
Commission otherwise permits, the return shall be filed and the tax paid to
an authorized bank agent, the Revenue District Officer, Revenue Collection
Officer or duly authorized treasurer of the city or municipality where the
donor is domiciled at the time of the transfer or of there be no legal
resident in the Philippines, with the Office of the Commission. If made by
non-resident may be filed with the Phil Embassy per Consulate in the