SAMPLEX

 NOTES   Important  Features  of  Exempt  Transfers  

   
1. Political  Donation  during  election:   I. Items   1   –   3   have   common  
Political   Contributions   –   As   a   rule,   prerequisites:  
any   contributions   given   to   a. Involve   two   (2)  
candidates,   political   parties   or   transmissions   of   property   or  
coalition   of   parties   are   not   subject   to   rights;  
donor’s   tax   as   long   as   the   following   b. Transmissions   are   stipulated  
conditions  are  met:   in  the  last  will  and  testament  
a) The   contribution   is   for   by  the  first  decedent;  and  
campaign  purposes;  and   c. First   transmissions   has   been  
b) Duly   reported   to   the   subjected  to  estate  tax,  while  
COMELEC   the  second  transfer  is  exempt  
*The   campaign   contribution   is   subject   from   transfer   taxes   (estate  
to  donor’s  tax  on   the   part   of   the   donor,   if   tax  or  donor’s  tax  as  the  case  
the   campaign   contributions   are   not   may  be)  
reported  to  the  COMELEC.   • Note:   In   all   cases,   the   second  
  transfer   is   not   subject   to   transfer  
*Unreported   contributions   to   candidates   taxes  because  there  is  no  gratuitous  
or   political   parties   may   be   assessed   and   transfer   of   ownership   as   the  
the   corresponding   donor’s   tax   may   be   transfer   is   only   to   follow   route   of  
imposed  as  follows:   transfer   in   accordance   with   the  
a) 30%   donor’s   tax,   if   given   to   Will.  
stranger;  or    
b) 2%  to  15%  donor’s  tax,  if  given  to   II.  Items  1  to  3  are  excluded  from  gross  
relatives.   estate   to   prevent   double   taxation,  
  while  the  exclusion  of  item  4  is  based  
2. Fideicommissary  Transmission:   on  public  policy.  
Sec.   87   of   the   NIRC   –   following    
acquisitions   and   transmissions   are   III. Item   4   is   actually   considered   a  
exempt  from  Estate  Tax:   deduction   from   gross   estate   because  
a) The   merger   of   usufruct   un   the   the   said   testamentary   donations  
owner  of  naked  title;   should   first   be   reported   as   part   of   the  
b) The   transmission   or   delivery   of   gross   estate   before   deducting   the  
the   inheritance   or   legacy   by   the   same.  
fiduciary   heir   or   legatee   to   the    
fideicommissary;    
c) The   transmission   from   the   first   • Note:   Failure   to   include   the  
heir,   legatee,   or   done   in   favor   of   property   transferred   to   social  
another   beneficiary   in   welfare,   cultural   or   charitable  
accordance  with  the  desire  of  the   institutions   will   impair   the   power  
predecessor;  and   of  the  BIR  to  assess  taxes  properly.  
d) All   bequests,   devises,   legacies   or   This   rule   is   not   applicable   to   items  
transfers   to   social   welfare,   1,  2  and  3.  
cultural,   and   charitable    
institutions,   no   part   of   the   net   3. Property   Previously   Taxed  
income   of   which   goes   to   the   (Vanishing  Deductions)  202:  
benefit   of   any   individual;   To  lessen  the  heavy  burden  of  paying  
provided,  however,  that  not  more   estate   tax   due   to   the   short   period   of  
than   30%   of   the   said   bequests,   property   transfers   by   reason   of   early  
devises,  legacies,  or  transfer  shall   deaths,   the   property   previously  
be   used   by   such   institutions   for   subjected  to  estate  or  donor’s  tax  may  
administration  purposes.   be  allowed  to  be  reduced  to  a  certain  
  determined  amount.  
  -­‐ Purpose  is  to  minimize  the  effect  
  of   the   double   taxation   on   the  
 
 same   property   within   a   short   *MIE   are   subject   to   income  
period  of  time.   taxes  but  exempt  payment  of  
-­‐ If   the   same   property   is   included   business  taxes.  
in  the  gross  estate  of  the  present    
decedent,   its   value   may   be   5. Donor’s  Tax  
deducted   in   computing   the   net   Relatives  
taxable   estate,   subject   to   the   -­‐ Brothers,   sisters,   (whole/half-­‐
following  conditions:   blood),   spouse,   ancestor   and  
a. Five   Year   Rule   –   present   lineal  descendant;  or  
decedent  died  within  five  (5)   -­‐ By   consanguinity   (by   blood)   in  
years   from   receipt   of   the   the   collateral   line   within   the  
property   through   gratuitous   fourth  degree  of  relationship  
transfer;   -­‐ Tax  Rate:  2%  -­‐  15%  
b. Philippine   Situs   Rule   –    
property   being   claimed   as   Strangers  
vanishing   deduction   must   be   -­‐ Do   not   belong   to   the   definition  
located  in  the  Philippines;   under   Relatives   for   donor’s   tax  
c. Previous   Transfer   Taxes   purposes;  
Rule   –   estate   or   donor’s   tax   -­‐ Relative  by  affinity  or  by  virtue  of  
must  have  been  actually  paid   marriage.   Except   for   the   spouse,  
on  such  property;   there   are   no   blood   and   legal  
d. No   Previous   Vanishing   relationships   of   relative   by  
Deduction  Rule   –   No   similar   affinity;  and  
deduction  have  been  allowed   -­‐ Business  Organizations  
for   the   same   property   in   the    
estate  of  the  immediate  prior   On  Marriage  (Dowry)  
decedent   to   the   present   -­‐ Law  allows  gifts  given  by  natural  
decedent;   or   adopting   parents   to   be  
e. Same   Property   Rule   –   reduced  by  P10,000,  provided:  
property  must  be:   a. Gift   on   account   of  
i. Same   property   marriage;  
received   from   b. Donne   must   be   their  
decedent/donor;   legitimate,   recognized  
ii. Acquired   in   natural   or   adopted  
exchange   for   children;  
property   so   c. Gift   is   made/given  
received.   before   the   celebration   of  
  marriage   or   within   1  
4. Marginal  Income  Earners  (MIE)   year  thereafter.  
-­‐ Are   unemployed   individuals   or    
unlicensed   professionals   that   do   *Gift   to   the   children   of  
not   realized   gross   sales   or   conjugal   property   is   a   single  
receipts   exceeding   P100,000   in   gift   by   any   the   parents  
any  12-­‐month  period.   unless,   by   common  
-­‐ Includes:   agreement,   the   gift   is   made  
a. Agricultural   by  both  parents;  
growers/producers   *Each  spouse  is  considered  a  
(farmers/fishermen)   donor  of  his  or  her  interest  in  
selling   directly   to   the   property   and   therefore,  
ultimate  customers;   each   of   the   spouse   can   claim  
b. Small  sari-­‐sari  store;   a  separate  exemption  in  case  
c. Small   carinderias   or   their  child’s  marriage.  
“turo-­‐turo”;      
d. Drivers/operators   of   a   6. Inclusions  in  the  Gross  Estate  
single  unit  tricycle.   -­‐ Properties   Owned  are  owned  by  
the   decedent   at   the   time   of   his  
death   to   the   extent   of   his   equity  
 or   interest   in   such   property,   completed   by   the   done  
whether   exclusive   conjugal   or   prior   to   the   donor’s  
communal,   or   common   death.  
ownership;    
-­‐ Properties   already   transferred   *Not   included   in   the   Gross  
but   still   owned   are   other   Estate,  are:  
properties   still   owned   by   the   -­‐   Separate   (exclusive)  
decedent   at   the   time   of   his   death   properties   of   the   surviving  
but   were   already   transferred   spouse;  
during   his   lifetime   by   virtue   of   -­‐   Properties,   interests,   rights  
taxable  transfer,  such  as:   and  all  income  accruing  after  
a. Revocable  Transfer;   the   death   of   the   decedent;  
b. Transfer   in   and  
contemplation  of  death;   -­‐   Properties   or   transfer  
c. Transfer   for   insufficient   exempt   by   law   from   estate  
consideration;   tax.  
d. Property   passing   under    
the   general   power   of   *Note:  
appointment;  and   1.   Revocable   transfers  
e. Proceeds   of   life   covers:  
insurance   policy   payable   -­‐   Transfer   with   retention   of  
to   a   revocable   interest   to   income   or   with  
beneficiary   right   to   designate   persons  
-­‐ Decedent’s   Accrued   Interests   who   will   enjoy   income   or  
are   all   interests,   earning   s   and   property;  
remaining   valuable   rights   -­‐   Donations   mortis   causa  
accruing   to   the   decedent   at   the   even   without   retention   of  
time  of  his  death   even   if   received   interest   while   the   decedent  
or   collected   after   his   death,   such   still  lives;  
as:   -­‐   Conditional   transfer   if   the  
a. Accrued   rent   or   interest   transferee   predeceased   the  
income;   transferor,  the  property  shall  
b. Accrued   profit   in   return  to  the  transferor.  
business   and/or      
partnerships;   7. Business   Tax   on   Sale   of  
c. Declared   dividend   on   or   Agricultural   products,   Casual   Sale  
before   his   death   not   yet   &  Privilege  Store  
collected;  and   -­‐ Importation   and   sale   of  
d. Usufruct   right   Agricultural   and   Marine   food  
transferrable  to  his  heirs   products,   which   includes  
-­‐ Revocable   Transfer   refers   to   a   livestock   and   poultry,   in   their  
transfer   of   property   with   original   state   are   both   exempt  
retention  or  reservation  of  rights   from  business  tax  (VAT  &  OPT)  
over   the   property   by   the   donor   -­‐ Original   State   means   that   meat,  
(decedent)   while   he   still   lives,   fish,   vegetables   ad   other  
such  as:   agricultural   and   marine   food  
a. By   gift   where   the   donor   products   have   undergone   the  
has   reserved   the   power   simple   processes   of   preparation  
to   alter,   amend,   and   or   preservation   for   the   market,  
revoke  donation;   such   as   freezing,   drying,   salting,  
b. The   donor   retains   the   broiling,   roasting,   smoking   or  
option  to  relinquish  such   stripping.  
power   in   contemplation   -­‐ Casual   Sale   is   an   occasional   sale  
of  death;   of   goods   or   services   by   a   person  
c. Conditional   transfers   who   is   not   engaged   in   business,  
where   attached   which   involves   selling   of  
conditions   are   not   personal   properties   or  
 belongings   not   used   in   business,   *Request   of   extension   shall   be   filed  
such  as:   with   the   RDO   where   estate   is  
a. Sale   of   house   and/or   lot   required  to  secure  TIN  and  file  ETR.  
classified  as  capital  asset    
(not   used   in   business);   9. Valuation   of   Gross   Estate   &  
and   Deductions  on  Gross  Estate  
b. Sale   of   personal   assets   -­‐ Date  of  valuation  is  at  the  time  of  
not  used  in  business.   death   because   the   transfer   of  
*Casual   Sales   are   not   subject   properties  from  the  dead  to  living  
to   business   tax   but   to   income   takes   effect   at   the   moment   of  
tax   death;  
-­‐ Privilege   Stores   or   tiangges   are   -­‐ Date   of   Death   Fair   Market  
temporary   stalls   for   the   purpose   Value  Rule  –  GENERAL  RULE  
of   selling   variety   of   goods   or   -­‐ Gross   amount   of   properties   on  
services   for   special   events   such   Gross   Estate   shall   not   be  
as   fiestas   for   not   more   than   15   diminished  by:  
days  in  a  year.   a. Encumbrances   or  
-­‐ These   stores   are   not   subject   to   mortgage   loans   attached  
business  tax,  but  is  only  required   to  the  property;  
to  file  annual  income  tax  return.   b. Portion  of  claims  that  are  
  worthless  like  bad  debts;  
8. Rules  on  filing  of  Estate  Tax  Return   c. Taxes,   and   other  
(ETR)   permissible  deductions;  
-­‐ ETR   shall   be   filed   if   the   gross   d. Share   of   the   surviving  
estate  exceeds  P200,000;   spouse  in  the  conjugal  or  
-­‐ ETR   showing   a   gross   value   communal  property;  
exceeding   P2,000,000   shall   be   e. Any   subsequent  
supported   with   a   statement   duly   contingency  affecting  the  
certified  by  CPA;   estate  
-­‐ Shall   be   filed   within   6   months    
from  the  decedent’s  death;   10. Inter  Vivos  Transfer  tax  
-­‐ Reasonable   extension   for   filing   -­‐ Donor’s  tax  shall  not  apply  unless  
the   return,   not   exceeding   30   days   and   until   there   is   a   completed  
shall   be   granted   b   the   BIR   and  perfected  gift  during  the  life-­‐
Commissioner   or   any   authorized   time  of  the  donor  and  the  done.  
Revenue   Officer   –   meritorious   -­‐ The  law  in  force  at  the  time  of  the  
cases;   completion   and   perfection   of   the  
-­‐ General   Rule   –   executor,   donation   shall   govern   the  
administrator   or   the   heirs   shall   imposition  of  the  donor’s  tax  
pay  the  estate  tax  imposed  under    
the  Code  at  the  time  the  return  is   11. Ordinary  Deductions  
filed;   Funeral  Expenses  
-­‐ BIR  Comm  may  extend  te  time  for   -­‐ Amount   of   deductible   funeral  
payment   of   such   tax   or   any   part   expense   from   the   decedent’s  
thereof   not   to   exceed   5   years   in   gross  estate  is  the  lowest  amount  
case  estate  is  settled  through  the   of  the  ff:  
courts,   or   2   years   in   case   the   a. Actual   funeral   expense  
estate  is  settled  extra-­‐judicially;   (paid   or   payable)   up   to  
*No  extension  shall  be  granted  by  the   the  time  of  interment;  
BIR   Comm   by   reason   of   negligence,   b. Amount   equal   to   5%   of  
intentional   disregard   of   rules   and   the  gross  estate;  
regulation,  or  fraud  on  the  part  of  the   c. Statutory   limit   of  
taxpayer.   P200,000  
*Late  payment  after  statutory  date  of   d. Memorial   Plans   actually  
the   tax   but   within   the   extension   paid   subject   to   statutory  
period  shall  be  subject  to  interest  but   limit   provided:   must   be  
not  to  surcharge.  
 included   as   part   of   the   *Entirely   exclusive   –   married,  
gross  estate   residential  house  and  lot  –  maximum  
*Duly   supported   by   receipts,   allowable   deduction   is   P1,000,000,  
invoices  or  other  evidence  to   the  excess  of  P300,000  is  subject  to  
show  actually  incurred.   tax;  
*Components:   *Entirely   exclusive   of   Surviving  
-­‐   Interment   and/or   Spouse  –  NO  AMOUNT  is  allowable  as  
cremation  fees;   deduction.  
-­‐   Mourning   apparel   bought    
and   used   in   the   burial   Medical  Expense  
occasion;   -­‐ Maximum  of  P500,000  
-­‐Expenses   for   the   decedent’s   -­‐ Incurred   (paid   or   unpaid)   within  
wake,   including   food   and   1   yr   prior   to   his   death   with  
drinks  before  the  burial;   receipts;  
-­‐   Expenses   for   the   death   -­‐ Incurred   within   1   yr   from   death  
notices   published,   telegrams   in   excess   of   P500,000   is   not  
and   cablegrams   sent   to   allowed  
relatives  of  the  deceased;    
-­‐   Fees   and   charges   for   the   13. Included  in  the  Gross  Estate  
rites   and   ceremonies   -­‐ Properties   Owned  are  owned  by  
incident  to  the  burial;  and   the   decedent   at   the   time   of   his  
-­‐   Cost   of   burial   lot,   death   to   the   extent   of   his   equity  
tombstone  or  monument  but   or   interest   in   such   property,  
excluding  cost  for  the  upkeep   whether   exclusive   conjugal   or  
unless   it   is   in   the   form   of   communal,   or   common  
legacy.   ownership;  
  -­‐ Properties   already   transferred  
12. Special  Deductions   but   still   owned   are   other  
-­‐ New   deductions   that   are   properties   still   owned   by   the  
categorically  permitted  by  special   decedent   at   the   time   of   his   death  
laws  to  reduce  the  net  estate.   but   were   already   transferred  
Family  Home   during   his   lifetime   by   virtue   of  
-­‐ Requisites:   taxable  transfer,  such  as:  
o Certified   by   Brgy.   f. Revocable  Transfer;  
Captain;   g. Transfer   in  
o Included  in  gross  estate;   contemplation  of  death;  
o Lower   amount   of   the   h. Transfer   for   insufficient  
decedent’s   interest   or   consideration;  
P1,000,000   i. Property   passing   under  
-­‐ Amount   equivalent   to   the   current   the   general   power   of  
FMV   of   the   decedent’s   family   appointment;  and  
home,   not   exceeding   P1,000,000   j. Proceeds   of   life  
–  excess  shall  be  subject  to  estate   insurance   policy   payable  
tax   to   a   revocable  
*Unmarried   head   of   the   family   beneficiary  
decedent   –   unmarried   and   head   of   -­‐ Decedent’s   Accrued   Interests  
the   family   –   allowable   deduction   is   are   all   interests,   earning   s   and  
P1,000,000,  the  excess  of  P300,000   remaining   valuable   rights  
is  subject  to  tax;   accruing   to   the   decedent   at   the  
*Family   Home   is   communal   time  of  his  death   even   if   received  
property  –  married  and  family  home   or   collected   after   his   death,   such  
is   communal   –   P650,000   allowable   as:  
deduction;   e. Accrued   rent   or   interest  
*Partial   Exclusive   –   married,   income;  
residential   lot   is   exclusive   property   f. Accrued   profit   in  
and  house  is  communal  property;   business   and/or  
partnerships;  
 g. Declared   dividend   on   or   7. Foreign   shares,   obligations   or  
before   his   death   not   yet   bonds   acquired   Philippine  
collected;  and   business  situs;  
h. Usufruct   right   8. Philippine   Partnership   or  
transferrable  to  his  heirs   industry  share  or  rights  
-­‐ Revocable   Transfer   refers   to   a   Non-­‐resident  Alien  
transfer   of   property   with   No  Reciprocity  
retention  or  reservation  of  rights   -­‐ Within   Philippines   Nos.   1-­‐4   and  
over   the   property   by   the   donor   5-­‐8  
(decedent)   while   he   still   lives,   With  Reciprocity  
such  as:   -­‐ 1  and  2  only  
d. By   gift   where   the   donor    
has   reserved   the   power   14. Rate   on   donation   to   relatives   and  
to   alter,   amend,   and   strangers  
revoke  donation;   Relative  2%-­‐15%  
e. The   donor   retains   the   Strangers  30%  
option  to  relinquish  such  
power   in   contemplation  
of  death;  
f. Conditional   transfers  
where   attached  
conditions   are   not  
completed   by   the   done  
prior   to   the   donor’s  
death.  
 
*Not   included   in   the   Gross  
Estate,  are:  
-­‐   Separate   (exclusive)  
properties   of   the   surviving  
spouse;  
-­‐   Properties,   interests,   rights  
and  all  income  accruing  after  
the   death   of   the   decedent;  
and  
-­‐   Properties   or   transfer  
exempt   by   law   from   estate  
tax.  
-­‐  Real  Properties  
-­‐  Tangible  Personal  Properties  
-­‐  Intangible  Personal  Properties  
 
Summary  of  Properties  Included:  
Resident  Alien  &  Filipino  
1. Real   or   immovable   within   and  
outside;  
2. Tangible   Personal   within   and  
outside;  
3. Intangible   Personal   within   and  
outside;  
4. Franchised   Exercise   within   and  
outside;  
5. Domestic   shares,   obligations   or  
bonds;  
6. Foreign   shares,   obligations   or  
bonds   (85%   business   located   in  
Phil.)