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TAX 2

A. Transfer Taxes - (Secs. 84 to 104 of the NIRC as amended by RA 10963)

I. Nature of Transfer Taxes

II. Estate Tax

A. Nature of Estate Tax

1. Definition – Sec 104, NIRC – includes real and personal properties, whether tangible or intangible, or mixed,
wherever situated.

SEC. 104. Definitions. - For purposes of this Title, the terms 'gross estate' and 'gifts' include real and
personal property, whether tangible or intangible, or mixed, wherever situated: Provided, however, That
where the decedent or donor was a nonresident alien at the time of his death or donation, as the case may
be, his real and personal property so transferred but which are situated outside the Philippines shall not be
included as part of his 'gross estate' or 'gross gift': Provided, further, That franchise which must be exercised
in the Philippines; shares, obligations or bonds issued by any corporation or sociedad anonima organized or
constituted in the Philippines in accordance with its laws; shares, obligations or bonds by any foreign
corporation eighty-five percent (85%) of the business of which is located in the Philippines; shares,
obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a
business situs in the Philippines; shares or rights in any partnership, business or industry established in the
Philippines, shall be considered as situated in the Philippines: 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.

The term 'deficiency' means:

(a) the amount by which tax imposed by this Chapter exceeds the amount shown as the tax by the donor
upon his return; but the amount so shown on the return shall first be increased by the amount previously
assessed (or Collected without assessment) as a deficiency, and decreased by the amounts previously
abated, refunded or otherwise repaid in respect of such tax, or

(b) if no amount is shown as the tax by the donor, then the amount by which the tax exceeds the amounts
previously assessed, (or collected without assessment) as a deficiency, but such amounts previously
assessed, or collected without assessment, shall first be decreased by the amount previously abated,
refunded or otherwise repaid in respect of such tax.

2. Rate of Tax (Sec 84) – 6% of net estate (As amended by RA 10963)

Section 84. There shall be levied, assessed, collected and paid upon the transfer of the net estate as
determined in accordance with Sections 85 and 86 of every

3. The Law that governs the imposition of Estate Tax – (Sec. 3, RR 2-2003) – It is 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 of
the 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 tax the privilege to transmit the
estate vests instantly upon death.
4. Is Estate Tax a Property Tax or Excise Tax?

Separate Opinion of Justice Bersamin in CIR vs. Pilipinas Shell,


GR No. 188497 dated February 19, 2014

B. Composition of the Gross Estate


1. Sec 104 NIRC – Definitions
2. Sec 5, RR 2-2003 – Valuation of Gross Estate
3. Who are subject to estate taxes?
a. Filipino citizens and resident aliens – on properties within and without the Philippines
b. Non-resident aliens – properties which at the time of his death were situated in the Philippines – (Sec 86 [B] NIRC –
net estate of non-resident decedent, not a citizen of the Philippines)
1) Rule on Reciprocity
2) Rules on Intangible Personal Property
CIR vs. Campos Rueda (42 SCRA 23)
CIR vs. Fisher (1 SCRA 93)

4. Gross Estate (Secs. 85 and 104)


a. Valuation Rules (Sec. 5 of RR No. 2-03)
1. Real Property (Sec 88 NIRC)
2. Personal Property (applicability of RR No. 6-2013)
3. Shares of Stock
4. Usufruct (Sec 88 NIRC)
(A). Decedent’s Interest
(B). Transfer in Contemplation of Death
(C). Revocable Transfer
(D). Property Passing Under General Power of Appointment - Correlate with Sec. 87
(E). Proceeds of Life Insurance
(F). Prior Interest
(G) Transfers for Insufficient Consideration
(H).Capital of Surviving Spouse

C. Deductions Allowed to Estate (Sec. 86 NIRC)


1. Allowed to Residents and Citizens
a. Standard Deduction – P5,000,000
b. Claims against the Estate
- Requisites for deductibility
i. Simple Loan
ii. Unpaid obligation from purchase of goods
iii. Court Settlement
Dizon vs. CTA (GR No. 140944 dated April 30, 2008)
c. Claims against insolvent persons
d. Unpaid Mortgages, Taxes and Casualty Losses
i. Rules
e. Property Previously Taxed (Vanishing Deductions)
i. Requisites for deductibility
ii. Rationale for grant
f. Transfers for Public Use
g. Family Home – P10,000,000
h. Amount Received by Heirs Under Republic Act No. 4917

2. Allowed to Nonresident aliens (See also Sec. 86 D)


a. Limitation (Sec. 7 RR No. 2-03) Correlate with Sec. 86(D) on tax credits for estate taxes paid to foreign country

D. Exemption of certain acquisitions and transmissions (Sec 87)

E. Estate Tax Returns and Payment of Tax (Secs. 90 and 91)


1. When required and contents
2. Time of Filing / Extension of time to file
3. Place of Filing
4. Time of Payment / Extension of time to pay
5. CPA Certification
F. Other Matters
1. Who is liable to pay? [Sec. 91 (D)]
Estate of Vda. De Gabriel vs. CIR (GR No. 155541 dated January 27, 2004)
a. Discharge of Executor or Administrator from Personal Liability (Sec. 92)
b. Liability of Heirs
CIR vs. Pineda (21 SCRA 105)
2. Payment Before Delivery by Executor Sec. 94
Marcos II vs. CA 273 SCRA 47
3. Duties of Certain Officers (Sec. 95)
4. Restitution of Tax Upon Satisfaction of Outstanding Obligations (Sec. 96)
5. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights (Sec. 97)
PNB vs. Santos, GR No. 208295 dated December 10, 2014

III. Donor’s Tax

A. Nature of Donor’s Tax


Lladoc vs. Vs. CIR ( 14 SCRA 292)
Pirovano vs. CIR (14 SCRA 232)

1. Definition
Donor's tax is imposed upon any person, natural or juridical, resident or non-resident, who transfers or causes to
transfer by gift or donation, whether direct or indirect, in trust or otherwise, real, personal, tangible or intangible
property.
Donor’s tax is an excise tax imposed on the privilege of transferring property by way of a gift inter vivos based
on pure act of liberality without any or less than adequate consideration and without any legal compulsion to
give.
2. Composition of Gross Gift (Secs. 98 and 104)

SEC. 98. Imposition of Tax. -

(A) There shall be levied, assessed, collected and paid upon the transfer by any person, resident or nonresident, of the
property by gift, a tax, computed as provided in Section 99.

(B) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the
property is real or personal, tangible or intangible.

SEC. 104. Definitions. - For purposes of this Title, the terms 'gross estate' and 'gifts' include real and personal property,
whether tangible or intangible, or mixed, wherever situated: Provided, however, That where the decedent or donor was a
nonresident alien at the time of his death or donation, as the case may be, his real and personal property so transferred
but which are situated outside the Philippines shall not be included as part of his 'gross estate' or 'gross gift': Provided,
further, That franchise which must be exercised in the Philippines; shares, obligations or bonds issued by any corporation
or sociedad anonima organized or constituted in the Philippines in accordance with its laws; shares, obligations or bonds
by any foreign corporation eighty-five percent (85%) of the business of which is located in the Philippines; shares,
obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs
in the Philippines; shares or rights in any partnership, business or industry established in the Philippines, shall be
considered as situated in the Philippines: 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.

The term 'deficiency' means:

(a) the amount by which tax imposed by this Chapter exceeds the amount shown as the tax by the donor upon his
return; but the amount so shown on the return shall first be increased by the amount previously assessed (or
Collected without assessment) as a deficiency, and decreased by the amounts previously abated, refunded or
otherwise repaid in respect of such tax, or

(b) if no amount is shown as the tax by the donor, then the amount by which the tax exceeds the amounts previously
assessed, (or collected without assessment) as a deficiency, but such amounts previously assessed, or collected
without assessment, shall first be decreased by the amount previously abated, refunded or otherwise repaid in
respect of such tax.

3. Tax Rate (Sec. 99[A]) – 6% of total gifts in excess of P250,000 exempt gift made during the calendar year

Over But Not Over The Tax Shall be Plus Of the Excess Over
P 100,000 Exempt
P 100,000 200,000 0 2% P100,000
200,000 500,000 2,000 4% 200,000
500,000 1,000,000 14,000 6% 500,000
1,000,000 3,000,000 44,000 8% 1,000,000
3,000,000 5,000,000 204,000 10% 3,000,000
5,000,000 10,000,000 404,000 12% 5,000,000
10,000,000 1,004,000 15% 10,000,000

4. Contributions to a candidate, political party or coalition of parties for campaign purposes governed by Election Code
(Sec. 99[B])

B. Composition of the Gross Gifts (Sec. 104)


1. Residents and Citizens
2. Non-resident alien
a. Rule on Reciprocity
b. Rules on Intangible Personal Property
3. Corporations
4. Valuation of Gifts made in property (Sec. 102)
5. Exemption of Certain Gifts (Sec. 101[A])
a. Residents and Citizens
b. Non-resident aliens
c. Corporations

SEC. 101. Exemption of Certain Gifts. - The following gifts or donations shall be exempt from the tax provided for in this
Chapter:

(A) In the Case of Gifts Made by a Resident. -

(1) Dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents
to each of their legitimate, recognized natural, or adopted children to the extent of the first Ten thousand pesos
(P10,000):

(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; and

(3) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution,
accredited nongovernment organization, trust or philanthropic organization or research institution or organization:
Provided, however, That not more than thirty percent (30%) of said gifts shall be used by such donee for
administration purposes. For the purpose of this exemption, a 'non-profit educational and/or charitable corporation,
institution, accredited nongovernment organization, trust or philanthropic organization and/or research institution or
organization' is a school, college or university and/or charitable corporation, accredited nongovernment organization,
trust or philanthropic organization and/or research institution or organization, incorporated as a non-stock entity,
paying no dividends, governed by trustees who receive no compensation, and devoting all its income, whether
students' fees or gifts, donation, subsidies or other forms of philanthropy, to the accomplishment and promotion of
the purposes enumerated in its Articles of Incorporation.
(B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. -

(1) 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.

(2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution,
foundation, trust or philanthropic organization or research institution or organization:Provided, however, That not
more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes.

(C)Tax Credit for Donor's Taxes Paid to a Foreign Country. -

(1) In General. - The tax imposed by this Title upon a donor who was a citizen or a resident at the time of donation
shall be credited with the amount of any donor's tax of any character and description imposed by the authority of a
foreign country.

(2) 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 net gifts situated within such country taxable under this
Title bears to his entire net gifts; and

(b) The total amount of the credit shall not exceed the same proportion of the tax against which such credit is
taken, which the donor's net gifts situated outside the Philippines taxable under this title bears to his entire net
gifts.

C. Other Matters
1. Rule on Political Contributions [Sec. 99B]
Secs. 13 and 14 RA No. 7166

Section 13. Authorized Expenses of Candidates and Political Parties. - The agreement amount that a candidate
or registered political party may spend for election campaign shall be as follows:

(a) For candidates. - Ten pesos (P10.00) for President and Vice-President; and for other candidates
Three Pesos (P3.00) for every voter currently registered in the constituency where he filed his certificate
of candidacy: Provided, That a candidate without any political party and without support from any
political party may be allowed to spend Five Pesos (P5.00) for every such voter; and

(b) For political parties. - Five pesos (P5.00) for every voter currently registered in the constituency or
constituencies where it has official candidates.

Any provision of law to the contrary notwithstanding any contribution in cash or in kind to any candidate or
political party or coalition of parties for campaign purposes, duly reported to the Commission shall not be
subject to the payment of any gift tax.

Section 14. Statement of Contributions and Expenditures: Effect of Failure to File Statement. - Every candidate
and treasurer of the political party shall, within thirty (30) days after the day of the election, file in duplicate
with the offices of the Commission the full, true and itemized statement of all contributions and expenditures in
connection with the election.

No person elected to any public offices shall enter upon the duties of his office until he has filed the statement
of contributions and expenditures herein required.
The same prohibition shall apply if the political party which nominated the winning candidate fails to file the
statement required herein within the period prescribed by this Act.

Except candidates for elective barangay office, failure to file the statements or reports in connection with
electoral contributions and expenditures are required herein shall constitute an administrative offense for which
the offenders shall be liable to pay an administrative fine ranging from One thousand pesos (P1,000.00) to
Thirty thousand pesos (P30,000.00), in the discretion of the Commission.

The fine shall be paid within thirty (30) days from receipt of notice of such failure; otherwise, it shall be
enforceable by a writ of execution issued by the Commission against the properties of the offender.

It shall be the duty of every city or municipal election registrar to advise in writing, by personal delivery or
registered mail, within five (5) days from the date of election all candidates residing in his jurisdiction to
comply with their obligation to file their statements of contributions and expenditures.

For the commission of a second or subsequent offense under this section, the administrative fine shall be from
Two thousand pesos (P2,000.00) to Sixty thousand pesos (P60,000.00), in the discretion of the Commission. In
addition, the offender shall be subject to perpetual disqualification to hold public office.

RR No. 7-2011 dated February 16, 2011

RMC 30-2016 dated March 14, 2016


Abello vs. CIR, GR No. 120721 dated February 23, 2005

2. Transfer for Less than adequate and full consideration (Sec. 100) – where property, other than real property, is
transferred for less than an adequate and full consideration in money or money’s worth,….deemed a gift subject to
donor’s tax; exception: if made in the ordinary course of trade or business …. will be considered as made for an
adequate and full consideration in money or money’s worth.
(RR No. 6-2008 on shares of stock as amended by RR 6-2013)
Philamlife vs. SOF, GR No. 210987 dated November 24, 2014
4. Tax Credit for Donor’s Taxes paid to a Foreign Country [Sec. 101 (C)]
5. The Law that governs the imposition of Donor’s Tax
(Sec. 11 RR No. 2-03)
6. Renunciation of share in the conjugal partnership or absolute community; and, hereditary estate (Sec. 11 RR No. 2-
03)
7. Capacity to Buy
Sps. Evono CTA EB Case No. 705 dated June 4, 2012

D. Filing and Payment of Returns (Sec. 103) / (Sec. 13 RR No. 2-03)


1. Requirements
2. Time and Place of Filing
3. Notice of Donation – Exemption from Donor’s Tax (Sec 13 [C], RR No. 2-03)