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Tax 2 Seatwork Group 4
Tax 2 Seatwork Group 4
Tax 2 Seatwork Group 4
School of Law
Taxation Law 2
Seatwork
By:
Robin Santana
April Rose Almazan
Janelle Ann Buhangin
Dynachen Amy Diwan
Cathrine Lagodgod
Mona Mendoza
ESTATE TAX
Section 22 of the TRAIN law amends Section 84 of the Tax Code, which provides for
the estate-tax rate. Previously, a tax based on the value of the net estate of the
decedent, whether resident or nonresident of the Philippines, was computed based
on a tax schedule where an estate worth P200,000 and over was taxed from 5
percent to 20 percent. Under the TRAIN law, it will now be subject to a flat rate of 6
percent.
Section 23 of the TRAIN law amends Section 86 of the Tax Code, which provides for
the computation of the net estate or, effectively, the deductions allowed to the gross
estate of an individual.
The TRAIN law removes funeral expenses, judicial expenses and medical expenses as
allowable deductions.
Instead, the law increases the Standard Deduction to P5 million, which previously
only amounted to P1 million. Only available to citizens (resident or nonresident) and
resident aliens, TRAIN law now provides that nonresident aliens can avail themselves
of a standard deduction, although only up to P500,000.
Another TRAIN law significant change from the old tax rule is that now, family homes
that are worth up to P10 million will be exempted from estate tax. Previously, only
family homes worth P1 million are exempted.
Section 24 of the TRAIN law repeals Section 89 of the Tax Code. The repealed
provision provides for when a notice of death should be filed and the period to file
the same.
Section 25 of the TRAIN law amends Section 90 of the Tax Code, which provides for
the procedural requirements for the estate-tax return.
The TRAIN law requires that estate-tax returns showing a gross value exceeding P5
million must be certified by a certified public accountant. This is P3 million higher
than the old tax rule, which only required CPA certifications for estate-tax returns
that exceed a gross value of P2 million. The TRAIN law has also increased the period
for filing of estate-tax returns from six months from the decedent’s death to one
year.
Section 26 of the TRAIN law amends Section 91(c) of the Tax Code, which provides
for the payment of estate tax by installment.
Under the TRAIN law, payment by installment has been particularly simplified.
However, the law has provided for an implied limitation of two years for the payment
of the full estate-tax liability, which was previously not contained in the old tax rule.
Section 27 of TRAIN Law amends Section 97 of the Tax Code, which concerns
allowable withdrawals from the deceased person’s account.
Under the old Tax Rule, only withdrawals up to P20,000 are allowed. The
administrator of the estate or any one of the heirs may, when authorized by the
commissioner, withdraw an amount not exceeding P20,000. However, the Train Law
has increased allowable withdrawals from the deceased person’s account to any
amount, subject to a 6-percent final withholding tax.
10,000 000
NEW TAX RATE:
TAX BASE TAX RATE
Value of Net 6%
Estate*
OTHER CHANGES
ON ADMINISTRATIVE PROCEDURES:
Repeals the provision requiring the filing
of notice of death of the decedent by
his/her executor, administrator or any of
FILING OF NOTICE OF DEATH the legal heirs within (2) months after
the decedent’s death.
Section 28 of the TRAIN Law amends Section 99 of the Tax Code, which provides that
A.) the tax for each calendar year shall be six percent (6%) computed on the basis
of the total gift in excess of Two hundred fifty thousand pesos (P250,000)
exempt gift made during the calendar year.
B.) The tax rate payable by donor if the done is a stranger is deleted. There is no
longer a need to categorize whether the gift was given in favor of a relative or
a stranger. A uniform tax rate of 6% for donations to relatives or strangers.
Section 29 of the TRAIN Law amends Section 100 of the tax Code. Train Law also
added as an exception to the general rule (in a transfer of less than an adequate and
full consideration in money or money’s worth) that a sale, exchange or transfer of
property made in the ordinary course of business (i.e., bona fide transfer, at arm’s
length, and free from donative intent) will be considered as made for an adequate
and full consideration in money or money’s worth. In other words, a sale or exchange
of property for less than adequate and full consideration is subject to donor’s tax.
The burden of proving that the same is being made in the ordinary course of
business apparently lies with the donor.
Section 30 of the TRAIN Law amends Section 101 of the Tax Code, which deletes the
provision exempting from the donor’s tax dowries or gifts made by parents to each of
their legitimate, recognized natural, or adopted children on account of marriage.
CHANGE IN RATE
A. In General
100,000 Exempt
A. InGeneral
OTHER CHANGES
Inserts an additional provision under
Section 100of the Tax Code, which provides
TRANSFER FOR LESS THAN ADEQUATE that a bona fide, at arm’s length and
AND FULL CONSIDERATION donative-intent free sale, exchange or
other transfer of property made in the
ordinary course of business shall be
considered as made for an adequate and
full consideration in money or money’s
worth and is therefore not subject to
donor’s tax.
Deletes the provision exempting from the
IN THE CASE OF GIFT MADE BY PARENT donor’s tax dowries or gifts made by
ON ACCOUNT OF MARRIAGE parents to each of their legitimate,
recognized natural, or adopted children on
account of marriage.
B. Group’s Opinion on the salient revisions by R.A. 10963 as far as transfer taxation
are concerned.
The revision of tax laws as estate and donor’s taxes are concerned is that the
computation is simpler. Computing the estate tax and donor’s tax used to be very
complicated with different rates. Under the new tax reform law, the estate and
donor’s tax will have a single, fixed rate of 6%. It aims to make the tax system more
efficient, simpler and fairer.
The said salient revisions are equalizing change that citizens should support and
not to contradict. The impact of these revisions will surely not be beneficial to us as
of this time but the long term effect of it will be surely beneficial for the future.
The legislative intent of passing the TRAIN law was to increase the revenue of
the State in order to fund government projects and infrastructures. The
implementation of the TRAIN Law has the goal of increasing revenue gradually up to
the year 2020 in order to fund the specific projects and infrastructures of the
government.
With the drastic changes in the imposition of tax due to the implementation of
the TRAIN Law such changes have led to the increase in the revenue collected by the
BIR which would help fund the projects of the government. With the positive effect
of the TRAIN on the revenue collected by the BIR government projects and
infrastructures would no longer be delayed due to lack of funds and all projects and
infrastructures would be able to be accomplished by the funds from the revenues
being collected. With the increase in the revenue the government would be able to
continue its operation since it is with these revenues that the government is able to
operate.
Due to the lower estate tax rates, it will improve compliance with the law
therefore BIR may collect the target revenue for the period of year in order to
achieve the goals of TRAIN. From the previous law, most of the heirs didn’t bother
filing and paying the estate taxes, which explains why many of the properties being
bought and sold are still in the names of long deceased persons. Today, due to the
simpler steps of filing and lower rate it might change the non-compliance of filing
and paying of estate taxes. It remains to be seen whether collection of estate taxes
will improve.