TRANSFER AND

BUSINESS
TAXATION
Atty. Mariel Joy Espiritu, CPA
Course Outline

▪ Module 1: Modes of Acquiring Ownership and Concepts of Transfer Taxes

▪ Module 2: Transfer Taxation – Estate Tax
▪ Module 2: Transfer Taxation – Donor’s Tax
▪ Module 3: Business Taxes
REVIEW OF THE CONCEPT OF
TAXATION
TAXATION
- Is the process by which the sovereign,
through its lawmaking body, raises
income to defray the necessary expenses
of the government.
PURPOSE OF TAXATION

▪ PRIMARY PURPOSE: raise fund to promote general welfare and

protection of its citizens and to enable it to finance its multifarious
activities.

▪ NON-REVENUE OBJECTIVES: a tool to carry out the national objective

of social and economic development
▪ REGULATORY PURPOSE – for the protection of health, safety and morals; to dissuade the
consumers from excessive intake of these potentially harmful products
▪ COMPENSATORY PURPOSE – promotion of the general welfare through economic
development; to achieve social justice through redistribution of income using the
progressive system of taxation; or to alleviate the margin between the rich and the poor
▪ IMPLEMENTATION OF THE POWER OF EMINENT DOMAIN
TAXES
Are the enforced proportional and
pecuniary contributions levied by the
lawmaking body of the State, by virtue of
its sovereignty, upon the persons or
property within its jurisdiction for the
support of the government and all the
public needs
ESSENTIAL CHARACTERISTICS OF TAXATION

▪ Enforced contribution
▪ Generally payable in money
▪ Laid by some rule of apportionment
▪ Levied on persons or property and on acts, transactions, rights, or
privileges
▪ Levied by the State which has jurisdiction over the person or property
▪ Levied by the lawmaking body of the State
▪ Levied for public purpose
 NATURE OF TAXATION

▪ Power of taxation is INHERENT IN SOVEREIGNTY being essential to the

existence of every government
▪ It is essentially A LEGISLATIVE FUNCTION. It falls under the general power of
law making
▪ Subject to CONSTITUTIONAL AND INHERENT LIMITATIONS
▪ Equal protection of the laws
▪ Due process of law
▪ Rule of uniformity
▪ Equity in taxation
▪ Territoriality
▪ International Comity
▪ Exemption of governmental agencies from taxation
▪ Prohibition against delegation of legislative power
▪ Levy of tax must be for public purpose
UNDERLYING THEORY AND BASIS OF TAXATION

1. LIFEBLOOD THEORY – taxes are the lifeblood of the government for without taxes, the
government can neither exist nor endure

2. NECESSITY THEORY – the sovereign state can not continue without the means to pay its
expenses; and that for those means, it has the right to compel all citizens and property
within its limits to contribute

3. BENEFITS PROTECTION THEORY – the basis of taxation is found in the reciprocal duties
of protection and support between the State and its inhabitants. The State receives taxes
to carry on its mandate while the inhabitants or citizens pays the portion of taxes
demanded in order that he may be secured in the enjoyment of the benefits of an
organized society.
BASIC PRINCIPLES OF A SOUND TAX SYSTEM

1. FISCAL ADEQUACY – sources of revenue should be sufficient to meet the demands of the
public expenditure

2. EQUALITY OR THEORETICAL JUSTICE – tax burden should be proportionate to the

taxpayer’s ability to pay

3. ADMINISTRATIVE FEASIBILITY – tax laws should be capable of convenient, just, and

effective administration.
CLASSIFICATION OF TAXES

1. As to subject matter:
▪ Personal, Poll or Capitation – tax of a fixed amount imposed on individuals residing
within a specified territory without regard to property or their occupation
▪ Property – tax imposed on property, whether real or personal, in proportion either to
its value or in accordance with some other reasonable method of apportionment
▪ Excise – tax imposed upon the performance of an act, enjoyment of a privilege, or
other engaging in an occupation

2. As to who bears the burden

▪ Direct – demanded from the person who is intended or bound to pay it
▪ Indirect – imposed upon goods before they reach the customer who ultimately pays
for it not as tax but as part of the purchase price
 CLASSIFICATION OF TAXES

3. As to determination of amount
▪ Specific – tax imposed by the head or number, or by some standard of weight or
measurement
▪ Ad Valorem – tax fixed in proportion to the value of the property

4. As to purpose
▪ General, fiscal or revenue – for the general purpose of the government
▪ Special or regulatory – imposed for a special purpose

5. As to authority imposing the tax

▪ National – imposed by the national government
▪ Municipal or local – imposed by the LGUs
 CLASSIFICATION OF TAXES

6. As to graduation or rate
▪ Proportional – based on a fixed percentage of the amount of the property, income or
other basis to be taxed
▪ Progressive or graduated – where the rate increases as the tax base increases
▪ Regressive – tax rate decreases as the tax base increases
TRANSFER AND BUSINESS TAXATION

Busine
Estate Donors
ss
Taxes Modes of Tax
Taxes
Acquiring Donation VAT
Ownership
Basic
concepts Percentage
Net Gift
of Taxes
Succession
Preparation
Gross Donor’s
of BIR
Estate Tax
Forms
Deductions
from Gross
Estate and
Net Estate
MODES OF ACQUIRING OWNERSHIP

1. OCCUPATION
2. INTELLECTUAL CREATION
3. PRESCRIPTION
4. LAW
5. SUCCESSION
6. DONATION
7. TRADITION
OCCUPATION

Art. 713. Things appropriable ▪ Is a mode of acquisition through the seizure

by nature which are without an of corporeal things which do not have an
owner, such as animals that are owner with the intention of acquiring them in
the object of hunting and accordance with the rules prescribed by law
fishing, hidden treasure and
abandoned movables, are ▪ The requisites are:
acquired by occupation. 1. There must be seizure
(Civil Code of the Philippines) 2. The thing seized must be corporeal
3. The thing seized must not have an owner
4. There must be intention to acquire
ownership over the things
5. There must be compliance with the rules
prescribed by law
 INTELLECTUAL CREATION

Art. 721. By intellectual creation, the ▪ Intellectual creation is a mode by virtue of

following persons acquire ownership: which the author acquires intellectual
(1) The author with regard to his property or ownership over the products of
literary, dramatic, historical, legal, his intellect, with the consequent power to
philosophical, scientific or other work; authorize or refuse publication or
(2) The composer; as to his musical
production of such products.
composition;
(3) The painter, sculptor, or other
artist, with respect to the product of
his art;
(4) The scientist or technologist or
any other person with regard to his
discovery or invention.
PRESCRIPTION

▪ Prescription, in general, is a mode of acquiring (or losing) ownership

and other real rights through the lapse of time in the manner and
under conditions laid down by law.
▪ As when ownership of land is acquired by adverse possession for the
period of time required under the law, provided the necessary legal
conditions or requisites are present.
▪ Ordinary acquisitive prescription – possession in good faith with just
title for 10 years
▪ Extraordinary acquisitive prescription – Uninterrupted adverse
possession for 30 year if without good faith and just title
 LAW

Art. 681. Fruits naturally falling upon ▪ By virtue of law directly vests the
adjacent land belong to the owner of said ownership of the thing in a certain
land. individual once the prescribed requisites or
conditions are present or complied with
Art. 445. Whatever is built, planted or
sown on the land of another and the
improvements or repairs made thereon,
belong to the owner of the land, subject
to the provisions of the follow

Art. 457. To the owners of lands

adjoining the banks of rivers belong the
accretion which they gradually receive
from the effects of the current of the
waters.
 SUCCESSION

Art. 774. Succession is a mode of ▪ Succession is acquisition of property,

acquisition by virtue of which the rights, and obligations transmitted from
property, rights and obligations to the the time of death of the person.
extent of the value of the inheritance,
of a person are transmitted through ▪ Testate – when decedent left a will
his death to another or others either ▪ Intestate – when decedent left no will
by his will or by operation of law.
▪ Mixed
 DONATION

Art. 725. Donation is an act of ▪ An act of liberality whereby one person

liberality whereby a person disposes disposes a thing in favor of another who
gratuitously of a thing or right in favor accepts it.
of another, who accepts it.

Art. 726. When a person gives to

another a thing or right on account of
the latter's merits or of the services
rendered by him to the donor,
provided they do not constitute a
demandable debt, or when the gift
imposes upon the donee a burden
which is less than the value of the
thing given, there is also a donation.
 TRADITION

▪ A Derivative mode wherein the property is transmitted by means of just title, there
being an intention and capacity on both side of the parties.
▪ Kinds of Tradition:
▪ Real – delivery or transfer of a thing from hand to hand if movable, or by a
certain material or possessory act if it is immovable
▪ Constructive – delivery of a movable or immovable thing by means of acts or
signs thereof by means of:
▪ Traditio symbolica – delivery of a symbol such as keys
▪ Traditio longa manu – by pointing out which must be within sight
▪ Traditio brevi manu – when one is already in possession of a thing under a title which
is not of ownership (ex. When a lessee purchases the leased property)
▪ Traditio constitutum possessorium – when one alienates a thing belonging to him but
continues in possession thereof