Professional Documents
Culture Documents
Tandayu Ass1-Bus - TransferTax
Tandayu Ass1-Bus - TransferTax
or rights.
Gratuitous transfer - is one that neither imposes burden nor requires consideration
from transferee or recipient.
Onerous transfer - is one where the transferee gives consideration in return for the
property or rights received. However, onerous transfers are subject to business taxes
instead of transfer taxes.
ELEMENTS OF SUCCESSION
I. DECEDENT - the general term applied to the person whose property is transmitted
through succession, whether or not he left a will. If he left a will, he is called a
testator.
Executor is a person designated in the last will and testament to carry out the
provisions of the decedent’s will. He also performs a fiduciary duty such as taking
care of the decedent’s estate prior to final disposition to the heirs.
Administrator is a person appointed by the court and performs the same duty, in lieu
of an executor, if the latter refused to accept the appointment, failed to qualify
under the law or the last will and testament did not appoint one.
II. INHERITANCE (ESTATE) – include all the property, rights and obligations of a person
which are not extinguished by death and all which have accrued thereto since the
opening of succession. Rights which are purely personal are not transmissible for
they are extinguished by death.
III. SUCCESSORS - a person who is called to the succession either the provision of a will
or by operation of law.
Devisees - persons to whom gifts of real property are given by virtue of a will
Legatees - persons to whom gifts of personal property are given by virtue of a will.
CLASSIFICATION OF HEIRS
A. COMPULSORY HEIRS – those who succeed by force of law to some portion of the
inheritance, in an amount predetermined by law, known as the legitime. They
succeed whether the testator likes it or not. They cannot be deprived by the
testator of their legitime except by disinheritance properly effected.
i. Primary – those who have precedence over and exclude other compulsory
heirs (i.e., Legitimate children and descendants)
ii. Secondary – those who succeed only in the absence of the primary
compulsory heirs; (i.e., legitimate parents and ascendants)
iii. Concurring – those who succeed together with the primary or secondary
compulsory heirs; e.g., illegitimate children and descendants and
surviving spouse.
B. VOLUNTARY HEIRS – those instituted by the testator in his will to succeed to
the inheritance of the portion thereof of which the testator can freely
dispose. A voluntary heir is determined through the last will and testament.
C. LEGAL OR INSTESTATE HEIRS – those who succeed to the estate of the decedent by
operation of law (decedent died without a valid will or his estate was not
entirely disposed of by will).
KINDS OF SUCCESSION
1. TESTAMENTARY OR TESTATE SUCCESSION - results from the designation of an heir, made
in a will executed in the form prescribed by law
2. LEGAL OR INTESTATE SUCCESSION - effected by operations of law (based on the
provisions of the civil code regarding succession) since the decedent did not
execute a will or if the last will and testament executed by him is void.
3. MIXED SUCCESSION - effected partly by “will” and partly by operation by law.
CAUSES OF LEGAL SUCCESSION OR INTESTACY
A. If a person dies without a will, or with a void will, or one which has subsequently
lost its validity.
Illustration 3:
Case A: Void Will
X devised in his will one of his parcels of land in Arcillas Subdivision to one of his
sons, Jess. X can neither write nor read “Chinese Mandarin” but it was the language used
in his last will and testament. In such a case, the “will” shall be considered void. As a
rule, the last will and testament shall be executed in a language or dialect known to the
testator to be considered valid.
Case B: “Will” which has subsequently lost its validity
On the eve of November 2, 2018, a day after executing his last will and testament, the
testator accidentally obliterated the same. The testator was not able to prepare a new
“will” before his death. Consequently, there is no more “last will and testament” to speak
of. An intestate or legal succession
exists. At the time of the decedent’s death, his estate shall be disposed of by operations
of law.
B. When the “Will” does not institute an heir.
Illustration 4:
Assume the same data in illustration #3-Case A, except that there was no heir identified
in last will and
testament. The devisee was simply described in the “will” as follows:
“I am devising my parcel of land in Valle Verde Subdivision to my closest and favorite
daughter.”
Assume further that the testator has five (5) children.
Pedro D. Magiba (signed)
November 1, 2017
No heir was identified in the will. As a result, there is no valid “will” because of the
absence of an
instituted heir.
C. Partial institution of heir. Consequently, intestacy takes place as to the
undisposed portion.
Illustration #5 (Partial Institution):
Refer to Case C of illustration #2.
COMPOSITION OF GROSS ESTATE The gross estate is divided into two main
categories for succession purposes, the legitime and free portion as shown below:
LEGITIME - part of a testator’s property which he cannot dispose of because the law has
reserved it for certain heirs who are, therefore, called compulsory heirs (Art. 886 NCC).
The compulsory heirs cannot be deprived of their legitime by the testator except by
disinheritance properly effected.
FREE PORTION - portion of the estate which the testator can freely dispose of. Hence,
anyone may inherit from free portion (compulsory or voluntary heirs). Nonetheless,
voluntary heirs may inherit only if mentioned in the will. In the absence of a provision
in the will, voluntary heirs will not inherit anything. In such cases, the free portion
shall be disposed of to intestate heirs based in the order of priority as presented
below:
1. Legitimate children or descendants
2. Legitimate parents or ascendants
3. Illegitimate children or descendants
4. Surviving spouse
5. Brothers and sisters, nephews and nieces
6. Other collateral relatives within the 5th degree
7. State
COLLATERAL RELATIVES
CONSANGUINITY - relation of persons descending from the same stock or common ancestors.
These persons are known as blood relatives, and are said to be related by blood or
consanguinity.
o LINEAL CONSANGUINITY - may be descending or ascending, is that which subsists
between persons of whom one is descended in a direct line from the other
o COLLATERAL CONSANGUINITY - subsists between persons who have the same ancestors, but
who not descend (or ascend) one from the other. Proximity of relationship is
determined by the number of generations. Each generation forms a degree.
AFFINITY - connection existing in consequence of a marriage between each of the married
spouse and the
kindred of the other
Note:
1. In the illustration, C and D are siblings. Their common parents are A and B.
2. G is the daughter of C and E; J is the son of D and F.
3. M is the son of G and K; N is the daughter of J and L.
4. A, C, G and M, in that order, are relatives in the descending direct line. From A to
C is one degree; from C to G is another degree and from G to M is another degree.
5. N, J D and B, in that order, are relatives in the ascending direct line.
6. C, G and M, are relatives of D, J and N in the collateral line.
7. G is the niece of D, D is the uncle of G; J is the nephew of C, C is the aunt of J.
8. H and I are first cousins; they are four degrees apart, H to C, C to AB, AB to D and
D to I.
9. M and N are second cousins; they are six degrees apart.
10. Because of G’s marriage to K, K becomes H’s brother-in-law, H being G’s
brother. They become relatives by affinity.
WILLS
o An act whereby a person is permitted, with the formalities prescribed by law, to control to
a certain degree the disposition of his estate to take effect after his death. It is a
document whereby a person, called the “testator”, disposes of his or her properties or
“estate” to take effect upon his or her death.
o It is strictly a personal act. It cannot be left in whole or in part of the discretion of a
third person, or accomplished through the instrumentality of an agent or attorney. All
persons who are not expressly prohibited by law may make a will. The persons prohibited by
law to make a will are those below 18 years old and those who are not of sound mind at the
time of its execution.
o The law presumes that every person is of sound mind, in the absence of proof to the
contrary. The burden of proof that the testator was not of sound mind at the time of making
his dispositions is on the person who opposes the probate of the will.
KINDS OF WILLS
1. NOTARIAL OR ORDINARY OR ATTESTED WILL – one which is executed in accordance with the
formalities prescribed by Art 804 to 808 of the New Civil Code.
REQUISITES FOR A VALID NOTARIAL WILL
o It must be in writing and executed in a language or dialect known to the testator.
o It must be subscribed at the end thereof by the testator himself or by the
testator’s name written by some other person in his presence and by his express
direction.
o It must be attested and subscribed by three or more credible witnesses in the
presence of the testator and of one another.
The following are disqualified from being witnesses to a will (Art. 821 NCC):
Any person not domiciled in the Philippines.
Those who have been convicted of falsification of a document, perjury, or false
testimony.
In the absence of bad faith, forgery, or fraud, or undue and improper pressure and
influence, defects and imperfections in the form of attestation or in the language used
therein shall not render the will invalid if it is proved that the will was in fact
executed and attested in substantial compliance with all the requirements of the law. (Art
795 NCC)
2. HOLOGRAPHIC WILL – is a written will which must be entirely written, dated and signed
by the hand of the testator himself. It is subject to no other form and it may be made in
or out of the Philippines and need not be witnessed (Art. 811 NCC). In case of any
insertion, cancellation, erasure or alteration in a holographic will, the testator must
authenticate the same by his full signature.
CODICIL - a supplement or addition to a will, made after the execution of a will and
annexed to be taken as a part thereof, by which any disposition made in the original will
is explained, added to or altered. In order that a codicil may be effective, it shall be
executed as in the case of a will.
PROBATE OF A WILL - a court procedure by which a will is proved to be valid or
invalid. In the probate of a holographic will, it shall be necessary that at least one
witness who knows the handwriting and signature of the testator explicitly declare that
the will and the signature are in the handwriting of
the testator. The proceedings in the absence of a last will and testament is called
“intestate proceedings”.
FOREIGN WILLS
The “will” of an alien who is abroad produces effect in the Philippines if made with the
formalities prescribed by the law of the place in which he resides, or according to the
formalities observed in his country, or in conformity with those which the Philippine
civil code prescribes. A will made in the
Philippines by a citizen or subject of another country, which is executed in accordance
with the law of the country of which he is a citizen or subject, and which might be proved
and allowed by the law of his own country, shall have the same effect as if executed
according to the laws of the Philippines.
RULE OF REGULARITY
General Rule: Commercial activities engaged by dealers of goods or services are subject to
business tax.
Exceptions: Sale of Services by a NON-RESIDENT foreign person(NRA)
INCIDENTAL TRANSACTIONS
Accompanying transactions but not the major part of a business.
1. Sale of scrap material
2. Sale of Ordinary asset rather than Inventory
3. Transaction deemed sale
Transaction deemed sale
1. Transfer, use, or consumption NOT IN THE COURSE OF BUSINESS of goods or
properties originally intended for sale or for use in the course of business;
2. Distribution or transfer to:
a. Shareholders or investors as share in the profits of the VAT-registered
persons; or
b. Creditors in payment of debt;
3. Consignment of goods if actual sale is not made within sixty (60) days following
the date such goods were consigned; and
4. Retirement from or cessation of business, with respect to inventories of taxable
goods existing as of such retirement or cessation.
TRANSACTIONS BY PROFIT OR NONPROFIT
Business may be pursued by any person, regardless of whether or not the business is a non-
stock non-profit private organization or government entity.
General rule: non-stock non-profit organizations are tax exempt.
Exceptions:
a. Failure to secure a Certificate of Tax Exemption
b. Failed to renew Certificate of Tax Exemption
TRANSACTIONS CONSUMMATED IN THE PHILIPPINES
Consumption/destination principle – The place of sale is presumed to be the place of
consumption.
General rule: Business transactions rendered/incurred in the Philippines are subject
to business tax.
Exception:
a. Not consummated within the Philippines is subject to 0% VAT, VAT-exempt or OPT-
exempt
b. Cross-border (PEZA registered, etc.
TYPES OF BUSINESS TAXES
Types
1. Value Added Tax (VAT)
2. Other Percentage Taxes (OPT)
3. Excise Taxes
Tax Base
1)Seller of Goods – Gross Sales
2)Seller of Services – Gross Receipts