April 4- ESTATE TAX--10963
----ETR + payment ALWAYS COME TOGETHER.
2 transfer taxes
1. estate tax – death tax collected only upon death of
property owner
2. donor’s tax – gift tax; imposed while the giver is giving
something as a gift
Another set of transfer tax in business taxes—STOCK
TRANSFER TAX
---bayanihan act changes (see magsombol tax 1 notes)
Date in the problem 2017 – prior = apply tax code
2018 beyond= apply TRAIN law
Train law: NOTICE OF DEATH HAS BEEN DELETED.
TAX CODE: notice of death is required when any body
who dies leaving behind properties (any kind) worth
more than P20k. The family has to submit it to BIR within
30 days. Extension of 30 days prayed for w/in original 30
day period.
Pag di nagcomply—penalty.
CIR does not have the power to waive penalties.
Notice of death required even when 20k and below
If among the properties left behind is a registrable
property---cannnot be transferred without BIR clearance.
The shares of stock cannot be transferred without bir
clearance.
Motorbike
Real properties
Example: relative with very old motorbike. Binigay mo sa
pamangkin mo. Need ng notice of death.
Tax code rate= 5, 8, 11, 15, 20 %
Train law= 6% [death occurred 2018 beyond]
CONSTI= “evolve” a progressive scheme. Thus, unitary
taxes not prohibited. No, in the case of Kapatiran ng
Manggagawa, the Supreme Court held that the
imposition of a unitary rate is not violating progressive
scheme because it only says in the Constitution that the
Congress should evolve a progressive scheme of
taxation. It is not mandatory but directory.
Train law= estate tax payable w/in 1 year from death.
Extended period (1yr) prayed for during 1 year period.
Kahit makahingi ng extension, interest not suspended.
Surcharge lang hindi ipapataw.
Tax code= w/in 6 mos from death, no extension.
NB: estate tax is IR tax—need tax return. {estate tax
return –identify peso value of all properties left behid}
-----submit tax return w/in 6 mos from death
ABSOLUTE RULE= NO ESTATE TAX PAYMENT, NO
TRANSFER, NO PARTITION.
KAHIT WALANG PERA OR FINANCIAL CAPACITY TO
PAY—BAYAD PARIN ANG estate/ HEIRS NOT
LIABLE. (ibenta properties na naiwan, yun ang
pangbayad)
Can bir enforce collection when the will is under
probate?
---YES. Section 218: nobody can stop bir from tax
collection. Even pending appeal, estate proceedings,
probate, bir is allowed to enforce collection.
General concept of estate tax:
Only natural persons leaving behind properties will be
subject to estate tax. Corporations dissolved do not pay
estate tax.
---right of succession in corpo (whatever happens to
CORPORATORS will not affect existence of corporation)
2 kinds of decedent involved in estate tax:
1. Resident decedent---Resident Citizen, NRC, Resident
Alien
2. Non-resident decedent—non-resident alien with
properties in the Ph.
RESIDENT ALIEN- foreigner permanently staying in PH
 Income tax for income WITHIN PH
Estate tax—yung income naitatago (LMAO) ; WE
ARE CHARGING THE RESIDENT ALIENS ON ALL
THEIR PROPERTIES (real, personal, intangible
personal) WHEREVER SITUATED –even abroad.
 Kuha ng certification sa embassy na walang
properties abroad.
Resident decedent—composition of estate: all
properties (within / without)
Estate has a separate TIN. Hindi Tax Identification
Number ng anak.
NON-RESIDENT DECEDENT – PROPERTIES WITHIN
THE PH
CEDULA- community development tax
Theories justifying estate tax: BBRAS
1. Back Tax Theory- presumes that during the lifetime
of the decedent, he did not pay the govt the correct
amount of taxes.
2. Benefit-received theory- presumes that there is a will
left behind; the family has received benefits from the
services rendered by the court
3. redistribution of wealth theory- to help reduce
undue concentration of wealth; estate tax imposed to
reduce property received by successor—imposing higher
taxes on ppl leaving behind huge properties to serve
those less fortunate
4. Ability to pay principle- looking at the people
inheriting; receiving windfall so they have now an ability
to pay---so they should also share in the costs of the
government | based on the fact that the receipt of
inheritance creates an ability to pay, thus, the recipient
has the ability to contribute to govt income
5. State-taxpayer partnership theory- for every single
centavo that comes to you, the govt is your silent partner
in the accumulation of wealth
This estate tax is levied on the transmission of
PRIVATE properties only. Payment of real estate tax is
not proof of ownership; tax declaration is just a
preparatory document in support of claiming title.
---squatter walang ipapamana
THE LAW AT THE DEATH APPLIES TO ESTATE TAX.
Estate tax is an excise tax- tax levied on the right of the
decedent to pass ownership of his properties to another
person upon his death. Tax on his right to transmit
properties to his qualified heirs.
!! Estate tax is EXEMPT from the doctrine of
TERRITORIALITY.
TAX CODE: MAS MURA ANG DONOR’S TAX KAYSA
ESTATE TAX.
 IF u are donating to relatives within 4 th civil
degree -2 to 15%
 If donating to strangers – 30%
TRAIN LAW- 6% lahat
If nagbayad ng donor’s tax pero estate tax dapat—
considered as an ADVANCE payment ng estate tax.
Q: sino ang party primarily liable na idala yung estate tax
sa bir?
IN THIS ORDER:
1. administrator
2. executor
3. qualified heir
What if nakasanla mga lupa? Bayad parin estate tax.
Original owner pa rin may-ari. Kahit ikaw nagtubos hindi
sayo yan.
Kahit punta ka sa china, if properties are here, PH
law susundin.
If di mahati yung lupa, advise to form a corporation
among heirs. Hati sila sa shares of stock.
Is repudiation of an inheritance subject to estate tax?
NO. kasi di naman sa kanila yung properties. Hindi rin
subject sa donor’s tax kasi properties parin ng
magulang. You cannot donate something that is not
yours. Subject to estate tax ONLY AT TIME OF
PARTITION.
Inheritance is capital. If inenegosyo mot as nagkaroon
ng income, then the fruit of the inheritance is subject to
inheritance.
The estate is a separate juridical person. May sariling
TIN.
ETax Return ilagay lahat ng peso value ng properties.
Add all. The total is the gross estate of the decedent.
This is an IR tax so may deductions.
Natira= NET ESTATE.
Sa net estate, ½ lang subject to estate tax. ½ goes to the
surviving spouse.
What ever remains after deducting the share of the
spouse is taxed to the rate of (QUALIFY)
 Tax code rate= 5, 8, 11, 15, 20
%
 Train law= 6% [death occurred
2018 beyond]
Properties included in the gross estate:
1. real properties
2. personal properties
3. tangible & intangible (included bank deposits, shares
of stock)
4. life insurance proceeds—kailangan binili mismo ng
decedent during his lifetime.
5. testamentary substitutes – properties that were
transferred during the lifetime of the decedent. Under the
eyes of the law, kasali pa rin yan sa gross estate. INTER
VIVOS transfers of the decedent.
NB: ALL OTHER INSURANCE NON-TAXABLE
EXCEPT Life insurance policy. Other insurance
proceeds (accident) not taxable bc they may be
compensation for injuries sustained.
(property Insurance) Mere return of capital not subject
to income tax
Capital not subject to tax but if you use it on business
and it generates money—it is FRUIT OF CAPITAL.
IF FRUIT OF LABOR
FRUIT AND CAPITAL AND LABOR COMBINED
====IF PERA MO GALING SA CL + CL, SUBJECT TO
INCOME TAX. IF HINDI GALING CL CL, ibang tax ang
papasok.

Yung mga hindi pumapasok sa clcl---EXCLUSIONS
tawag don. Excluded sa income tax.
SURVIVOR’S ACCOUNT
CASE: 2 kinds of savings account. If the spouses
maintained a survivor’s account (winner takes
all—and/or account; can withdraw without the consent of
the other party; pag namatay isa, lahat punta sa buhay. )
NB: an AND/OR ACCOUNT IS NOT SUBJECT TO
ESTATE TAX. (CIR V. VITUG)
IF JOINT ACCOUNT –AND ACCOUNT
- ½ subject to estate tax
- ½ belongs to surviving spouse
Life insurance proceeds considered exclusions from
income tax. If the proceeds are used in business, and
out of such investment profits are realized, then subject
to income tax.
{estate tax—bumalik na finally}
When is life insurance proceeds subject to estate tax
(forms part of gross estate)?
1. if the estate has a court- appointed
ADMINISTRATOR.
2. if there is no court-appointed admin, but there is an
EXECUTOR
3. when the policy purchased is a REVOCABLE policy. If
policy is ambiguous, it is considered a revocable policy.
4. when the proceeds is given to the estate.
Properties included in the gross estate:
1. real properties
2. personal properties
3. tangible & intangible (included bank deposits,
shares of stock)
4. savings account / deposit (QUALIFIED- see joint
acc and in the name of decedent alone)
5. life insurance proceeds—kailangan binili mismo ng
decedent during his lifetime. (qualified)
6. testamentary substitutes – properties that were
transferred during the lifetime of the decedent. Under
the eyes of the law, kasali pa rin yan sa gross estate.
INTER VIVOS transfers of the decedent.
Testamentary substitutes (part of gross estate):
1. Transfers in contemplation of death
- Alam niyang mamatay na siya
2. Revocable transfers
o nakasulat sa transaction pwede bawiin
o It is immaterial whether or not the
right/power to revoke has actually been
exercised.
3. transfers with reservation of certain rights
and interests
o income= 8M. tax rate= 35%
o tax avoidance (means adopted to lessen
the burden of taxation is legal)
o tax avoidance pag nitransfer niya yung
properties niya sa pangalan ng mga
anak niya bago siya mamatay.
o Sa deed of transfer nakalagay: “while
the transferor is still alive, siya pa rin
kukuha ng income or gagamit”
 Part of the gross estate bc only
naked title is transferred.
4. Transfers for insufficient consideration
- Nagbenta ng property na wala sa
presyo.
- Binabargain niya properties niya with no
knowledge of his impending death.
“INSUFFICIENT CONSID” =marked
difference of 30% between Fair value
and selling price
10 m x 30% = 3M ibawas mo sa 10m na
principal. Ibig sabihin wag mo ibenta for
lower than 7m.
12m x 30%= 3.6m ibawas mo sa value
ng property= 8.4M
Dito sa insufficient consid, gamitin ang
doctrine of 3-YEAR PRESUMPTION
- Pag namatay si decedent, the BIR can
only go back 3 years prior to death to
determine if the presence of properties
sold for insufficient consideration.
5. properties passing under a general power of
appointment/ attorney
- if yung pinapagawa mo may legal implication,
need ng written authority under SPA/GPA.
Otherwise, void.
SPA GPA
No tax implication Has tax implication
Illustration: ginawan ng GPA yung nephew to
take care of properties left by principal (who
went abroad.)
Namatay si agent. All those properties left in his
care will be considered HIS PROPERTIES.
Reason: if GPA, lahat magagawa mo. Anything
under the sun. pwede mo pa alisin name ng
owner tas ipalit sayo.

When principal dies, all written authorities are
automatically REVOKED.
Cassey: A person with a GPA can do anything
to the property that is under his custody; hence
in taxation that property belongs to him.
 so when that person holding a GPA
dies, even in the property is still under
the name of its real owner it will still be
subject to the estate tax of the former.
 Because he is practically the owner of
that property, since he can do anything
to that property, anything under the sun.
4. foreign franchise exercised In the PH is
considered properties WITHIN ph
o FRANCHISE is a privilege. Isasama
yung presyo sa estate tax return.
NB pagdating sa intangible personal properties (bank
deposits, shares, obligations, bonds, franchises) hindi
automatic subject to estate tax. If namatay ay non-
resident decedent, pwede nila i-exploit—PRINCIPLE OF
RECIPROCITY===FOR NRA only.
Bakit to ginagamit? Kasi gusto humingi ng foereigner ng
discount sa tax niya. But the application of this principle
should not disturb our own standard. Di pwedeng mas
mababa yung sa foreigners kaysa sa tinatax sa mga
Pilipino.

Q: shares of stocks of foreign corps ---resident PRINCIPLE OF RECIPROCITY; REQUISITES:

decedent 1. foreigner should be able to proof existence of
==included in the gross estate. RC tax on all properties the similar kind of tax in his country
WHEREVER SITUATED. 2. Filipinos can also ask for the same discount in
the foreign country.
Q: NON-RESIDENT DECEDENT; Japanese came to
PH. Has in his possession a luggage containing ALLOWABLE DEDUCTIONS from the gross estate:
important papers like bank deposits. Are the foreign
certificates of shares that he brought with him here TAX CODE TRAIN LAW
subject to PH estate tax? (SSHOE-VAT) (died 2018 beyond)
GR: NO. foreign certificates owned by foreigners, 1. standard deduction = 1. standard deduction =
properties without. Thus not subject to estate tax even if 1M 5M/ 500k
found in PH. Kasi issuing corp is a foreign corp. But if
ang namatay RESIDENT DECEDENT, taxable in the 2. share of surviving
PH. 2. share of surviving spouse = ½ net estate
Xpns: when are foreign cert of stocks owned by spouse = ½ net estate
foreigners the certificates of which are found in Ph 3. family Home = 10M
subject to estate tax: 3. family Home = 1M
1. if the foreign shares have acquired business 4. Ordinary deductions
situs in PH 4. Ordinary deductions No funeral
a. Funeral expenses
o when documents have undergone a expenses No med
registration, it has acquired business b. Claims against expenses
situs in the PH (e.g niregister sa RD) the estate* No Expenses for
/Unpaid judicial
2. when foreign shares used in furtherance of profit indebtedness testamentary
in the PH c. Claims against proceedings
o ibebenta proceeds gagamitin pang insolvent No deductions
Negosyo persons under 4917
d. Unpaid
3. when the issuing foreign corp has atleast 85% of mortgage a. Funeral
its operation in the PH—shares considered indebtedness expenses
properties WITHIN ph e. Expenses for b. Claims
o issuing corp is a PEZA registered corp. judicial against the
nasa pilipinas lang pabrika niya. Wala testamentary estate* /Unpaid
na sa ibang bansa. proceedings indebtedness
f. Losses c. Claims
Zaira: Issuing corp is PEZA and g. Unpaid taxes against insolvent
operating in import-export processing persons
zone. Nandito yung parika sa Ph 5. medical expenses d. Unpaid
because these FC are taking advantage incurred by decedent 1 mortgage
in the soft tax programs as well as very yr prior to death = max indebtedness
cheap Filipino labor. 85% of the 500k pesos e. Expenses
business is in the PH. All shares are for judicial
issued in the PH. 6. vanishing deductions testamentary
proceedings
7. amounts received by f. Losses
heirs under RA 4917 g. Unpaid
taxes
8. estate taxes paid
abroad 5. vanishing deductions
6. estate taxes paid
9. transfers for public abroad
use 7. transfers for public use

RD NRD RD NRD
standard 500k
deduction =
5M
Estate tax is imposable Estate tax is imposable
when NE left behind is when NE left behind is 5m
200k and above and above
Tax Rate= 5-20% (6, 8, Tax Rate= 6%
11, 20)
Time of payment= 6mos Time of payment= 1 year
from death from death