Transfer and Business Taxation
the properties and rights inherited.
RA No. 8424 - National Internal Revenue
Code of 1997 or Tax Code of the
Philippines.
RA No. 10963 - Tax Reform for
Acceleration and Inclusion Act.
RA No. 11469 - Bayanihan to Heal as One
Act.
SUCCESSION AND TRANSFER TAXES
Ownership maybe acquired through:
1. Occupation
2. Intellectual creation
3. Law
4. Donation
5. Tradition
6. Contract
7. Prescription
8. Succession
Transfer taxes are taxes imposed upon
the gratuitous disposition of private
properties or rights. Gratuitous
transfer is one that neither imposes
burdens nor requires consideration from
transferee or recipient.
Onerous transfer, one where the
transferee gives consideration in
return for the property or rights
received. It is subject to business
taxes instead of transfer taxes.
Gratuitous transfer may take effect at
the time of death of the donor
“donation mortis causa” or during the
lifetime of both the donor and the
donee “donation inter vivos”.
Transfer taxes which are typically
assessed on the net value of the
taxable assets transferred, fall into
two basic categories; estate tax and
donor’s tax.
Succession is a mode of acquisition by
virtue of which, the property, rights
and obligations to the extent of the
value of the inheritance, of a person
are transmitted through his death to
another or others either by his will or
by operation of law.
The amount of obligations
acquired/inherited by an heir should
not be more than the combined value of
Although the amount of transfer tax is
based on net estate or net gifts, it
shall not be construed as a property
tax.
Transfer tax is classified as “excise
tax” or privilege tax imposed on the
act of passing the ownership of
property and not on the value of the
property or right.
The estate tax accrues as the date of
death of the decedent and the accrual
of the tax is distinct from the
obligation to pay the same.
Beginning 2018 (TRAIN LAW), the
executor is allowed under the tax code
to file and pay the corresponding
estate tax within one year from the
date of death, however the estate tax
due accrues immediately at the time of
death. It shall be noted that the
accrual of the estate tax is distinct
from the obligation to pay the same.
The outstanding obligation or
liabilities of the transferee is
limited only to the extent of the value
of properties and rights inherited.
KINDS OF SUCCESSION
The definition of succession in the tax
code clearly states that inheritance
are transmitted either by his will or
by operations of law (in the absence of
a last will and testament, the
provisions of the civil code on
succession shall apply).
Died testate - if he/she died leaving a
will or testament.
Died intestate - if he/she died without
living a will or testament.
Succession maybe classified as:
1. Testamentary or testate succession.
A type of succession that results from
the designation of a heir, made in a
will executed in the form prescribed by
law.
2. Legal or intestate succession. A
type of succession which is effected by
operations of law since the decedent
did not execute a will or if the last
will and testament executed by him is
void.
3. Mixed succession. A type f
succession which is effected partly
will and partly by operation of law.
CAUSES OF LEGAL SUCCESSION OR
INTESTACY:
1. If a person dies without a will, or
with a void will, or one which has
subsequently lost its validity.
2. When the will does not institute an
heir.
3. Partial institution of heir.
Consequently, intestacy takes place as
to the undisposed portion. - mixed
succession occurs.
4. When the heir instituted is
incapable of succeeding.
5. Non-fufillment of the suspensive
condition attached to the institution
of heir. Suspensive condition is a
condition depending upon the happening
of an uncertain event which must be
fulfilled before an obligation arises.
6. Preterition - omission in the
testators will of one, some or all the
compulsory heirs in the direct line
which has the effect of annulling the
institution of heir.
7. Fulfillment of resolutory condition.
A resolutory condition refers to a
condition whereby, upon fulfillment
terminates an already enforceable
contract.
8. Expiration of term or period of
institution.
9. Non-compliance or impossibility of
compliance with the will.
10. Repudiation of the instituted heir.
ELEMENTS OF SUCCESSION
1. Decedent is 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 testator.
Executor is a person designated in the
last will and testament to carry out
the provisions of the decendant’s will.
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 he law or the
last will and testament did not appoint
one.
2. Inheritance ( estate ) - include all
the property, rights and obligations of
a person which are not extinguish by
death and all which have accrued
thereto since the opening of the
succession. Rights which are purely
personal are not transmissible for they
are extinguished by death.
3. Successors - An heir or successor is
a person who is called to the
succession either the provision of a
will or by operation of law.
Devisees and legatees are persons to
whom gifts of real and personal
property are respectively given by
virtue of will.
Successor of heirs - classified under
the law:
1. 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 legitimate except by
disinheritance properly effected.
Primary - those who have precedence
over and exclude other compulsory
heirs. Legitimate children and
descendants.
Secondary - those who succeed only in
the absence of the primary compulsory
heirs. Legitimate parents and
ascendants.
Concurring - those who succeed together
with the primary or secondary
compulsory heirs. Illegitimate children
and descendants and surviving spouse.
Primary compulsory
A. Legitimate children and their
illegitimate descendants.
B. Surviving spouse
C. Illegitimate children and their
descendants, legitimate or
illegitimate.
Secondary compulsory
D. Legitimate parents and legitimate
ascendants. They inherit only in
default of A.
E. Illegitimate parents ( no other
descendants). They inherit only in
default of A and C.

2. 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. Free portion or value
left in the estate after deducting the
legitimes of the compulsory heirs. A
voluntary heir is determined through
the last will and testament.

3. Legal or intestate heirs - those who

succeed to the state of the decedent by
operation of law.

Legitime and free portion are the

composition of gross estate.

Legitime - this portion of the estate

is reserved by law specifically to
compulsory heirs, regardless of whether
or not a last will and testament was
prepared.

Free portion - As provided in the last

will and testament.
- in the absence of a
will, this portion of the state shall
be distributed to intestate heirs based
in the order of priority.

Order of priority
1. Legitimate children or descendants
2. Legitimate parents or ascendants
3. Illegitimate children or descendants
4. Surviving spouse
5. Brothers and sister, nephews and
nieces
6. Other collateral relatives within 5th
degree.
7. State