Reyes, Joselle J.

1. A died leaving his surviving spouse, B, and his three children, C, D and E, as his only
heirs. Since B does not want to participate in the distribution of the estate, she renounced
her hereditary share in the estate. Is the renunciation subject to Donor’s Tax? (5 points)
No. The renunciation is not subject to donor’s tax because general renunciation by an heir of
his/her share in the inheritance is not subject to donor's tax unless specifically and
categorically done in favor of identified heir or heirs to the exclusion of the other co-heirs in
the hereditary estate. Hence, the renunciation is not subject to Donor’s Tax.

2. Differentiate Input Tax from Output Tax. ( 5 points)

Input Tax refers to the Value Added Tax due from or paid by a VAT-registered person on
importation of goods or local purchase of goods, properties, or services, including lease or
use of properties, in the course of his trade or business while in Output Tax, the VAT due on
the sale or lease of taxable goods or properties or services by any person registered or
required to register under the National of Internal and Revenue Code. Input Tax may either
be a regular 12% input VAT, a 2% transitional input VAT, or a 4% presumptive input VAT;
while Output tax may either be a regular 12% VAT or 0% VAT.

3. What is the Destination Principle? ( 5 points)

The destination principle provides that the destination of the goods determines taxation or
exemption from tax. Export sales of goods which are subject to 0% rate or zero rated, while
importation of goods are subject to the 12 % VAT. Exports are zero rated because the
consumption of such goods will be made outside Philippines, while import of goods are
subject to 12% VAT because they are consumption made within the Philippines.

4. Give the VAT treatment for the transactions (sale of goods and sale of services) involving
PEZA-registered enterprises. (10 points)

Tax Treatment of Sales to and by PEZA-registered enterprises:

a. Any sale of goods, property or services made by a VAT registered supplier from the
Customs Territory to any registered enterprise operating in the eco zone, regardless
of the class or type of the latter’s PEZA registration, shall be subject to 0% VAT.

b. Sale of goods, property and services by a VAT-exempt supplier from the Customs
Territory to a PEZA registered enterprise shall be EXEMPT from VAT, regardless of
whether or not the PEZA registered buyer is subject to taxes under the NIRC or
enjoying the 5% special tax regime.

c. Sales made by a PEZA registered enterprise

a. Sale of goods by a PEZA registered enterprise to a buyer from the Customs

Territory shall be treated as a technical importation made by the buyer.
b. Sale of services by a PEZA registered enterprise to a buyer from the Customs
Territory is NOT embraced by the 5% special tax regime, hence, such seller shall be
subject to 12% VAT.
c. Sale of goods by a PEZA registered enterprise to another PEZA registered
enterprise shall be EXEMPT from VAT.
 d. Sale of services by ecozone enterprise to another ecozone enterprise shall be
exempt from VAT if PEZA registered seller is subject to 5% special tax regime which
is subject to 0% VAT if PEZA registered seller is subject to taxes under NIRC.

5. Are association dues collected by a condominium corporation subject to VAT? ( 5 points)

No, association dues collected by a condominium corporation is not subject to VAT because
these fees do not come from transactions involving the sale, barter, or exchange of goods or
property, nor are they generated by performance of services. Hence, not subject to tax.

6. Is the sale of e-books and e-journals appearing at regular intervals with fixed prices for
subscription and sale subject to VAT? (5 points)
No, the sale of e-books, e-journals which appear at regular intervals, available
for subscription and sale at fixed prices, and are not principally devoted to the publication of
paid advertisements, were considered exempt from value-added tax (VAT).

7. A bought two (2) adjacent condominium units which he intended to combine so as to fit his
family. Each unit has a Gross Selling Price of PhP2,000,000.00. The units were separately
documented. After two (2) years, A decided to sell the two (2) units. Is the sale subject to
VAT? (5 points)

No, the sale is not subject to VAT because in this case the condominium units are
considered as capital assets not intended for sale or lease by the owner itself. VAT only
applies when there is sale, barter, exchange, lease of goods or properties and use of
services. Hence, in this case it is VAT exempt for it is not made in the course of business.

8. Discuss the rules on prescriptive periods involving the claim for refund of Input VAT. (10
points)
The Rules o
9. Kendra, an American citizen, was a permanent resident of the Philippines. She died in
Korea leaving the following properties:
a. Condominium in Seoul, South Korea;
b. Shares in Ayala Corporation (Philippines); and
c. House in Lot in Makati City, Philippines.

What should be included in her Gross Estate? (5 points)

The properties that should be included in her Gross Estate are the following:
Shares in Ayala Corporation which is located in the Philippines and her house and Lot in
Makati City which is also within the Philippines because only those properties tangible or
intangible located in the Philippines should be included in the Gross estate.

10. A has been diagnosed with breast cancer. According to her doctor, she only has six (6)
months to live. After her first chemotherapy session, she decided to sell her rest house in
Tagaytay for a valuable and sufficient consideration to her best friend. A died three (3)
months later. The BIR included her rest house and part of her gross estate. Is BIR correct?
(5 points)
 No, the BIR is not correct in including the rest house and part of her gross esate because
the property no longer belonged to A being the subject of sale between her and her best
friend.
Hence, BIR is not correct.

11. During the course of the 50-year marriage of A and B, they were able to accumulate the
following properties:
House where their family is currently residing - 10,000,000
Car - 1,000,000
Bank deposit under joint account - 5,000,000
Agricultural Lot - 2,000,000

A died due to cardiac arrest. How much is the estate tax? (10 points)

House where their family is currently residing- 10,000,000

Car- 1,000,000
Bank Deposit under joint account- 5,000,000
Agricultural Lot- 2,000,000
Gross Estate - 18,000,000
Less: Standard Deduction- 5,000,000
Family Home- 10,000,000
=3,000,000
Less: Share of the surviving spouse( 18,000,000x50%) =9,000,000
Total =6,000,000

12. What are the requisites for the deductibility of Vanishing Deduction? (5 points)
The requisites for the deductibility of Vanishing Deduction are the following:
a. Present decedent must have died within five (5) years from the date of death of prior
decedent or date of gift.
b. The property with respect to which deduction is claimed must have formed part of the
gross estate situated in the Philippines of the prior decedent or taxable gift of the donor.
c. The property must be identified as the same property received from the prior decedent
or donor or the one received in exchange therefore.
d. The estate taxes on the gift must have been finally determined and paid.
e. No vanishing deduction on the property was allowed to the prior estate.

13. What are the requisites for the deductibility of Family Home? (5 points)

Requisites for Deductibility [Sec. 6(7.2), RR 12-2018]

1. The decedent was married (or if single, was the head of the family).
2. Along with the decedent, any of the beneficiaries must be dwelling in the family
home.
3. The family home as well as the land on which it stands must be owned by the
decedent.
4. The family home must be the actual residential home of the decedent and his family
at the time of his death, as certified by the Barangay Captain of the locality where
the same is situated.
 5. The total value of the family home must be included as part of the gross estate.
6. Allowable deduction must be in an amount equivalent to whichever is lowest of:
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), or
c. P10,000,000.

14. A made the following donations:

on 30 January 2020 - 2,000,000
on 28 May 2020 - 1,000,000
on 10 August 2020 - 500,000
Compute for the Donor’s Tax. (10 points)

2,000,000 plus 1,000,000 plus 500,000 is equal to 3,500,000.

The total of 3,500,000 will be deducted 250,000 which is equal to 3,250,000.
Then the total of 3,250,000 will then be multiplied to 6% which is in the amount of 195,000.
Hence, the Donor’s Tax is in the amount of 195,000.

15. Is a donation to a political candidate subject to Donor’s Tax? (5 points)

No. Under the Law, donation to a candidate is not subject to Donor’s Tax because
contributions duly reported to the BIR are not subject to donor’s tax, as long as it is utilized in
his campaign. Unutilized or excess campaign funds, that is, campaign contributions net of
the candidate’s campaign expenditures, shall be considered as subject to income tax and
must be included in the candidate’s taxable income.

16. Give examples of gifts which are exempted from Donor’s Tax. (5 points)

The following are the instances where gifts made are exempt from donor’s tax
a. 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
b. Gifts in favor of an educational and or charitable, religious, cultural or social welfare
corporation, institution, accredited non-government organization, trust or
philanthropic organization or research institution or organization, not more than 30%
of said gifts shall be used by such donee for administration purposes.
c. Encumbrances on the property donated if assumed by the donee in the deed of
donation.
d. Donations made to entities exempted under special laws.