TRANSFER TAXESESTATE TAX THE LAW THAT GOVERNS THE IMPOSITION OF ESTATE TAX 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.ESTATE TAX a 0 eS Rate Graduated 5%-20% on thene! 6% based on the net value of Valve of the estate the estate Deductions Family Home 1M 10M Stondard IM 5M Funeral Expenses 5% of Gross Estate > 200K none Judicial Expenses allowed none Medical Expense 00K none Time of Filing 6 months from date of death —_—_‘| year from date of death Payment by installments No provisions 2years in cose of insufficient cash without civil penalty & interest CPA Certification 2M 5M Withdrawal on deposits of none 6% Final Tax decedent Notice of Death Within 2 months repeaiedESTATE TAX RATE OF ESTATE TAX The transfer of the net estate of every decedent, whether resident or non- resident of the Philippines, as determined in accordance with the NIRC, shall be subject to an estate tax at the rate of six percent (6%).ESTATE TAX What are included in gross estate? For resident alien decedents/citizens: a) Real or immovable property, wherever located b) Tangible personal property, wherever located c) Intangible personal property, wherever located For non-resident decedent/non-citizens: a) Real or immovable property located in the Philippines. b) Tangible personal property located in the Philippines ¢) Intangible personal property - with a situs in the PhilippinesESTATE TAX What are excluded from gross estate? » GSIS proceeds/ benefits » Accruals from SSS » Proceeds of life insurance where the beneficiary is imevocably appointed » Proceeds of life insurance under a group insurance taken by employer (not taken out upon his life) » War damage payments » Transfer by way of bona fide sales » Transfer of property to the National Government or to any of its political subdivisions » Separate property of the surviving spouse » Properties held in trust by the decedentESTATE TAX What will be used as basis in the valuation of property? » The properties subject to Estate Tax shall be appraised based on its fair market value at the time of the decedent's death. » The appraised value of the real estate shall be whichever is higher of the fair market value, as determined by the Commissioner (zonal value) or the fair market value, as shown in the schedule of values fixed by the Provincial or City Assessor. » If there is no zonal value, the taxable base is the fair market value that appears in the latest tax dectaration. » If there is an improvement, the value of improvement is the construction cost per building permit or the fair market value per latest tax declarationESTATE TAX What are the allowable deductions for Estate Tax Purposes? For a citizen or resident alien 1, Standard deduction — A deduction in the amount of Five Million Pesos (P5,000,000.00) shall be allowed as an additional deduction without need of substantiation. 2. Claims against the estate, 3. Claims of the deceased against insolvent persons where the value of the decedent's interest therein is included in the value of the gross estate 4. Unpaid mortgages, taxes and casualty losses 5. Property previously taxed 6. Transfers for public use 7. The family home - fair market value but not to exceed P10,000,000.00 8. Amount received by heirs under Republic Act No. 4917 Net share of the surviving spouse in the conjugal partnership or community propertyESTATE TAX What are the allowable deductions for Estate Tax Purposes? For a non-resident alien 1, Standard deduction - P500,000.00 2. Proportion of the following deductions a, Claims against the estate, b. Claims of the deceased against insolvent persons where the _ value of the decedent's interest therein is included in the value of the gross estate c. Unpaid mortgages, taxes and casualty losses 3. Property previously taxed 4, Transfers for public use Net share of the surviving spouse in the conjugal partnership or community propertyESTATE TAA CITIZEN OR RESIDENT Gross estate: Conjugal Exclusive Total Less: Rea! property Personal property Deductions: Standard deduction (P5 M) Glsiny cgcins! he estate debt instrument wes netarized: statement showing disposition of proceeds of Claims of the deceased against insolvent persons Unpaid morigages. taxes ond casualty losses Properties previous'y faxed [vanishing deduction) Transters for public use Family home (not to exceed P10 M) ‘Amount received by heirs under RA 4917, provided such amount is included in gross estate of decedent Shore of the surviving spouse (50% of net conjugal estate) Net Taxable Estate @ Estate tax (6%)ESTATE TAA NON RESIDENT Gross estate: Conjugal = Exclusive Total Real property Personal properly less: Deductions: Standard deduction (P500 K) Proportion of the follawing: + Glgims agains! tne estate. deb} instrument was potorized: statement showing disposition of proceeds of + Cloims of the deceased against insolvent persons + Unpaid mortgages. taxes and casually losses Properties previously toxed (vanishing deduction) Transfers for public use Shore of the surviving spouse (50% of net conjugal estate) Net Taxable Estate + Estate tax (6%)ESTATE TAX When to file and pay? File estate tax return and pay tax within one (1) year from date of death. How about installment Payments? If case the available cash of the estate is insufficient to pay the total estate tax due, payment by installment shall be allowed within to (2) years from the statutory date forits payment without civil penalty and interest. When is CPA Certification required? If gross estate exceeds P5 million, attach to estate taxreturn a certified statement of assets and itemized deductions.ESTATE TAX + Tax clearance is required before any transfer of shares may be made in the name of new owners, however, + Ifa bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall allow any withdrawal from the said deposit account, subject toa final withholding tax of six percent (6%), without such certification from the CIR.DONOR'S TAX Rate Relative Graduated 2%- 15% 6% First P100,000 of net giftisexempt —P250,000-Exempt 2% on P100,001 to P200,000 15% on omount over P10 M ‘Stranger 30% 6% Exemption Dowries or gifts on. allowed none account of mariageDONOR’S TAX THE LAW THAT GOVERNS THE IMPOSITION OF DONOR'’S TAX » The donor’s tax is not a property tax, but is a tax imposed on the transfer of property by way of gift inter vivos. (Lladoc vs. Commissioner of Internal Revenue, L-19201, June 16, 1965, 14 SCRA, 292) » The donor's tax shall not apply unless and until there is a completed gift. The transfer of property by gift is perfected from the moment the donor knows of the acceptance by the donee: it is completed by the delivery, cither actually or constructively, of the donated property to the donee. > Thus, the law in force at the time of the perfection/completion of the donation shall govern the imposition of the donor's tax.DONOR’S TAX Donations or gifts with at least P250,000 worth will be charged a donor’s tax of 6% flat rate. This will be charged regardless of the relationship between the donor and the donee.DONOR’S TAX TRANSFER FOR LESS THAN ADEQUATE AND FULL CONSIDERATION Where property, other than real property referred to in Section 24(D), is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the fair market value of the property exceeded the value of the consideration shall, for the purpose of the tax imposed, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year: Provided, however, that a sale, exchange, or other transfer of property made in the ordinary course of business (a transaction which is a bona fide, at arm’s length, and free from any donative intent) will be considered as made for an adequate and full consideration in money or money’s worth.DONOR’S TAX EXEMPTION OF CERTAIN GIFTS; » Gifts Made by a Resident or by a Nonresident not a Citizen of the Philippines » 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 » 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:SAMPLE COMPUTATIONILLUSTRATION: DONATIONS MADE ON: JANUARY 30, 2018 — P2,000,000 MARCH 30, 2018 = — 1,000,000 AUGUST 15, 2018 = 500,000 SOLUTION/COMPUTATION: DATE OF DONATION AMOUNT 1. JANUARY 30, 2018 P2,000,000 JANUARY 30, 2018 DONATION LESS: EXEMPT GIFT a 2,000,000 250,000 1,750,000 DONOR’S TAX P_ 105,000Continuation... DATE OF DONATION AMOUNT DONOR'S TAX 2. MARCH 30, 2018 1,000,000 MARCH 30, 2018 DONATION 1,000,000 ADD: JANUARY 30, 2018 DONATION 2,000,000 LESS: EXEMPT GIFT 250.000) TOTAL 2,750,000 ‘TAX DUE THEREON 165,000 LESS: TAX DUE/PAID ON JANUARY DONATION 105,000 TAX DUE/PAYABLE ON THE MARCH DONATION P 60,000 aContinuation... DATE OF DONATION AMOUNT DONOR'S TAX 3. AUGUST 15,2018 500,000. AUGUST 15, 2018 DONATION 500,000 ADD: JANUARY 2018 DONATION 2,000,000 MARCH 2018 DONATION 1,000,000 LESS: EXEMPT GIFT (250,000) TOTAL 3.250.000 TAX DUE THEREON 195,000 LESS: TAX DUE/PAID ON JAN/MARCH DONATION 165,000 TAX DUE/PAYABLE ON THE AUGUST DONATION P 30,000 a