CTT EXAMINATION REVIEWER (NOTES) PAGE A - 21

ESTATE TAXATION 4. To provide independent income for

dependents
ESTATE TAX is a tax levied on the privilege to 5. To see the children enjoy the property while
transfer property or estate of the decedent to his the donor is still alive.
lawful heirs or beneficiaries. 6. To protect the family from the hazards of
business operations.
Kinds of donation: d. Transfers under the general power of
1. Donation inter vivos –made between living appointment
persons and which is perfected from the moment
the donor knows of the acceptance of the Power of appointment – the decedent was given
donation by the donee; subject to donor’s tax. the authority to hold property during his lifetime and
to name the beneficiaries thereof when he dies.
2. Donation mortis causa – takes effect upon the
death of the donor. It partakes of the nature of a 1. General power of appointment– can be
testamentary succession and is equivalent to a exercised in favor of anybody.
transfer in contemplation of death; subject to 2. Special power of appointment – can be
estate tax and not donor’s tax. exercised only in favor of certain powers
designated by the prior decedent. The decedent
Estate tax (ET) vs. Donor’s tax (DT)
is only a trustee to the property and so it should
1. ET - donation mortis causa not be part of his estate.
DT - donation inter vivos
FORMULA IN COMPUTING ESTATE TAX
2. ET - ownership over the property is
transmitted upon death of the Gross Estate Pxx
decedent. - Residence & citizenship
DT- transmitted during the lifetime of the - Property relations (if married)
donor, subject to some exceptions. - Exclusions
Less: Deductions
3. ET - payable in 1 year; installment within 2 Ordinary deductions:
years CUCUL Pxx
DT - payable within 30 days Transfer for public purpose xx
Vanishing deduction x x ( x x)
4. ET- there is extension for payment
Special deductions:
DT- no extension for payment is allowed
Standard deduction ( 5M)
5. ET- payment of tax antecedent to transfer RA 4917 ( x x)
of shares, bonds or rights is allowed Family home ( x x)
DT- not allowed Net estate x x
Less Share of surviving spouse (if married)
6. ET- no exemption from net estate in
Gross conjugal/community x x
computing the tax
Conjugal/communal expenses ( x x)
DT- exempt up to P250,000 per year
Net conjugal/community xx
INTER VIVOS TRANSFERS SUBJECT TO Divide by 2 x x
ESTATE TAX Net taxable estate x x
Property may not be physically part of the estate x Rate of tax 6%
because they were transferred by the decedent Estate tax x x
during his lifetime (inter vivos). However, the
Gross Estate includes real and personal property,
property shall still be included in the gross estate if
whether tangible or intangible, or mixed, wherever
such transfers were made under any of the
situated.
following circumstances:
I. GROSS ESTATE: RESIDENCE AND
a. Revocable transfers – transfers where the
CITIZENSHIP
decedent reserves for himself the power to alter,
1. Properties included in the gross estate of
amend, revoke or even terminate such transfer.
resident or citizen
b. Transfers with retention or reservation of certain a. Real properties within and without
rights – the decedent retains for himself the b. Tangible personal properties within and
economic benefits of the property or the power without
to designate the persons who may exercise such c. Intangible personal properties within and
rights. without
c. Transfers in contemplation of death – the 2. Properties included in the gross estate of a
decedent was motivated by the thought of death. nonresident alien
a. Real properties within
Exceptions: Not in contemplation of death
b. Tangible personal properties within
1. To relieve the donor from the burden of
c. Intangible personal properties within,
management.
2. To save on income or property taxes. unless there is a reciprocity
3. To settle family disputes.
CTT EXAMINATION REVIEWER (NOTES)
Reciprocity clause – Intangible personal properties
in the Philippines belonging to a nonresident, not
citizen of the Philippines are not includible in the
gross estate if the foreign country of which the
decedent was a citizen and resident at the time of
his death:
a. Does not impose transfer tax, or
b. Allows similar exemptions from transfer tax in
respect of intangible personal property owned by
the citizens of the Philippines not residing in that
foreign country.
INTANGIBLE PERSONAL PROPERTIES WITHIN
a. Franchise exercised in the Philippines.
b. Shares obligations or bonds issued by domestic
corporations.
c. Shares obligations or bonds issued by foreign
corporation if 85% of its business is located in
the Philippines.
d. Shares, obligations or bonds issued by foreign
corporation if they have acquired business situs
in the Philippines.
e. Shares or rights in a domestic partnership.
II. GROSS ESTATE of decedent
1. Married - Property relations
a. Absolute Community of Property Regime
b. Conjugal Partnership of Gains (Relative)
c. Complete Separation of Property
d. Other regimes
2. Regime of Union without Marriage
a. Qualified to marry each other
b. Disqualified to marry each other
c. Any other regime
A. ABSOLUTE COMMUNITY OF PROPERTY
Unless otherwise provided, the community property
shall consist of:
a. All the property owned by the spouses at the
time of the celebration of the marriage; or
b. Those acquired during the marriage
The following shall be excluded from the community
property:
1. Property acquired during the marriage by
gratuitous title by either spouse, and the fruits as
well as the income thereof, if any, unless it is
expressly provided by the donor, testator or
grantor that they shall form part of the
community property.
2. Property for personal or exclusive use of either
spouse. However, jewelry shall form part of the
community property.
3. Property acquired before the marriage by either
spouse who has legitimate descendants by a
former marriage, and the fruits as well as the
income, if any, of such spouse.
B. CONJUGAL PARTNERSHIP OF GAINS
Unless the contrary is proved, all property
acquired during the marriage, whether the
acquisition appears to have been made,
contracted or registered in the name of one or
both spouses, is presumed to be conjugal.
PAGE A - 22
The following are exclusive property of each
spouse:
a. That which is brought into the marriage as his
or her own;
b. That which is acquired during the marriage by
gratuitous title;
c. That which is acquired by right of redemption,
by barter or by exchange with property
belonging to only one of the spouses; and
d. That which is purchased with exclusive
money of the wife or of the husband.
C. COMPLETE SEPARATION OF PROPERTY
Maybe on:
1. All properties
To each spouse shall belong all earnings
from his or her profession, business or
industry and all fruits, natural, industrial or
civil, due or received during the marriage from
his or her separate property.
Both spouses shall bear the family expenses
in proportion to their income, or, in case of
insufficiency or default thereof, to the current
market value or their separate properties.
The liability of the spouses to creditors for
family expenses shall, however, be solidary.
2. All present properties only.
Properties acquired during the marriage shall
belong to the community property.
D. REGIME OF UNIONS WITHOUT MARRIAGE
1. CAPACITATED to marry each other – their
wages and salaries shall be owned by them in
equal shares; the property acquired by both of
them through their work or industry shall be
governed by the rules on co-ownership.
In the absence of proof to the contrary,
properties acquired shall be owned by them in
equal shares.
2. INCAPACITATED to marry each other – only the
property acquired by both of them through their
actual joint contribution of money, property or
industry shall be owned in common and in
proportion to their respective contributions.
In the absence of proof to the contrary, their
contributions and corresponding shares are
prima facie presumed to be equal.
The share of any party who is married to another
shall accrue to the absolute community or
conjugal partnership, as the case maybe, if
existing under the valid marriage.
GROSS ESTATE - Exclusions
1. Proceeds of irrevocable life insurance policy
payable to beneficiary that is not the estate of
the deceased, his executor or administrator.
2. Proceeds of life insurance under a group
insurance taken by employer (not taken out
upon his own life).
3. Insurance proceeds or other benefits from the
SSS or GSIS by reason of death.
4. The following benefits:
 CTT EXAMINATION REVIEWER (NOTES)
a. Payments to legal heirs of deceased war
veterans.
b. Amounts received from damages suffered
during World War II.
c. Benefits received from U.S. Veterans
Administration.
5. The following exempt transactions:
a. The merger of the usufruct in the owner of
the naked title.
b. The transmission or delivery of the
inheritance or legacy of the fiduciary heir or
legatee to the fideicommissary.
c. The transmission from the first heir, legatee
or donee in favor of another beneficiary in
accordance with the desire of the
predecessor.
6. All bequests, devisees, legacies or transfers to
social welfare, cultural and charitable
institutions, no part of the net income of which
inures to the benefit of any individual.
Provided, however, that not more than 30%
shall be used for administration purposes.
7. The exclusive property of the surviving
spouse.
RULES ON TRANSFER FOR LESS THAN
ADEQUATE CONSIDERATION
1. The rule applies on the following:
a. Transfer in contemplation of death
b. Revocable transfer
c. Property passing under general power of
appointment
2. The sale or exchange is exercised for an
inadequate consideration in money or money’s
worth.
3. The difference between the fair market value at
the time of death and the value of consideration
shall be included in the gross estate.
DEDUCTIONS FROM GROSS ESTATE
I. ORDINARY DEDUCTIONS -
A. CUCUL
If the decedent was a -
1. Resident or citizen - deduct all expenses
(CUCUL)
2. Nonresident alien – prorate expenses as
follows:
Phil gross estate x CUCUL
Total gross estate
1. Claims against the estate – debts or demands
of pecuniary nature which could have been
enforced against the deceased in his lifetime and
could have been reduced to simple money
judgments. Claims against the estate or
indebtedness in respect of property may arise out
of (1) contract, (2) tort, or (3) operation of law.
Requisites:
a. Personal obligation of the deceased existing
at the time of his death.
PAGE A - 23
b. Contracted in good faith and for an adequate
and full consideration in money or money’s
worth;
c. The debt or claim is valid in law and
enforceable in court.
d. The debt instrument was duly notarized.
e. Not condoned by the creditor or must not
have prescribed.
f. If the loan was contracted within 3 years prior
to the death of the decedent, the executor or
administrator shall submit a statement
showing the disposition of the proceeds of the
loan.
2. Unpaid mortgage – the property left by the
decedent which was encumbered by a mortgage
indebtedness still unpaid at the time of death.
Provided, that the gross value of the property
mortgaged, undiminished by the mortgage
indebtedness, must have been included in the
gross estate.
Rules:
a. The classification of the property mortgaged
(conjugal, community or separate) is NOT the
basis in the determination of the deduction
whether chargeable against the common
property or the exclusive property of the
decedent.
b. It is chargeable against common property if
the mortgage was contracted during the
marriage.
c. It is chargeable against exclusive property if
contracted prior to the marriage or by the
donor/prior decedent.
3. Claims against insolvent debtor –receivable of
the decedent which can no longer be collected
due to insolvency of the debtor.
Requisites:
a. The amount of claim has been included in the
gross estate.
b. The debtor’s incapacity is proven and not
merely alleged.
4. Unpaid taxes – those which have accrued and
unpaid as of decedent’s death. The following are
NOT deductible:
a. Income tax upon income received after death;
b. Property taxes not accrued before his death;
c. Estate tax due from the transmission of his
estate.
5. Losses – Requisites:
a. Must arise from fire, storm, shipwreck or
other casualties or from theft, robbery or
embezzlement AFTER the death of the
decedent.
b. Not compensated by insurance or otherwise.
c. Not claimed as deduction for income tax
purposes.
d. Incurred during the settlement of the estate
and not later than the last day for the
payment of the estate tax.
B. Transfers for public purposes. All bequests,
legacies or transfers to or for the use of the
CTT EXAMINATION REVIEWER (NOTES) PAGE A - 24

government or any political subdivision thereof 3. AMOUNT RECEIVED BY HEIRS UNDER RA

for exclusively public purpose. The transfer must 4917. Any amount received by the heirs from the
be testamentary in character. Oral transfers are decedent’s employer as a consequence of death
not deductible. of the decedent employee. Provided, that such
amount is included in the gross estate of the
C. Vanishing Deductions (Property previously decedent.
taxed)
d. NET SHARE OF THE SURVIVING SPOUSE in
PURPOSE: To minimize the effects of a double the conjugal / community property.
tax on the same property within a short period of
time.
DEDUCTIONS from GROSS ESTATE OF NRA
Requisites for vanishing deductions:
The deductible items are:
1. The property is situated in the Philippines. 1.To be pro-rated
2. Present decedent have acquired the property Formula: PGE/TGE x CUCUL
by inheritance or donation within five (5)
a. Claims against the estate
years prior to his death.
b. Unpaid taxes
3. The estate taxes on the prior transfer or the c. Claims against insolvent persons
gift taxes on the gift must have been finally d. Unpaid mortgages
determined and paid. e. Losses
4. The property subject to vanishing deduction 2. Standard deduction of P500,000.
must be identified as the one received from 2. Vanishing deduction
the prior decedent, or from the donor or 3. Transfer for public use
having been acquired in exchange for 4. Share in the conjugal/community property
property so received.
5. The estate of the prior decedent has not yet Problem
previously availed of the vanishing deduction Are the following items deductible from gross
Percentages of Vanishing Deduction estate?
Property Acquired for Resident/ NRA
More than Not More than Percentage Items of Deduction
citizen
x x 1 year 100%
1 year 2 years 80% 1. Funeral expenses No No
2 years 3 years 60%
2. Judicial expenses No No
3 years 4 years 40%
4 years 5 years 20% 3. Claims vs. estate Yes Yes
5 years x x 0%
4. Bad debts Yes Yes
II. SPECIAL DEDUCTIONS 5. Unpaid taxes Yes Yes
1. FAMILY HOME – the dwelling house where the
members of the family reside and the land on 6. Losses Yes Yes
which it is situated; the place to which, whenever 7. Unpaid mortgages Yes Yes
absent for business or pleasure, one still intends
to return. 8. Transfer for public use Yes Yes
a. Must be situated in the Philippines. 9. Vanishing deduction Yes Yes
b. Beneficiaries of family home are the spouses,
10. RA 4917 Yes No
their ascendants and descendants, including
legally adopted children, brothers and sisters, 11. Share of surviving spouse Yes Yes
whether the relationship be legitimate or
illegitimate, 12. Medical expenses No No
c. who are living in the family home and 13. Standard deduction Yes Yes
d. who depend upon the head of the family for
legal support. 14. Family home Yes No

Provided, that it must have been the decedent’s VALUATION OF GROSS ESTATE
family home as certified by the barangay captain 1. Valuation date – the property shall be appraised
of the locality. at its fair market value at the time of death.
Maximum amount deductible: P10 million 2. Valuation of real property–whichever is higher
2. STANDARD DEDUCTION. An amount between:
a. The FMV as determined by the Provincial or
equivalent to P5 million.
City Assessor, (assessor’s market value)
and
b. The FMV as determined by the CIR (zonal
value).
CTT EXAMINATION REVIEWER (NOTES)
3. Valuation of shares of stocks, bonds or other
securities –
a. Traded in the stock exchange – it shall be
based on the arithmetic mean between the
highest and lowest quoted selling prices of
the securities on the valuation date.
b.Not traded in the stock exchange
1. Preferred shares – par value
2. Common shares – book value
4. FMV of units of participation in any association,
recreation or amusement club (e.g. golf, polo or
similar clubs) – the bid price nearest the date of
death published in any newspaper or publication
of general circulation.
Tax credit for estate tax paid to foreign country
1. Who cannot claim? Non-resident aliens
2. Limitations on tax credit:
1st Limitation
Net estate (per foreign country) x Phil estate tax
Total net estate
2nd limitation
Net estate (all foreign countries) x Phil estate tax
Total net estate
ADMINISTRATIVE PROVISIONS
1. WHEN CPA CERTIFICATE IS NEEDED –
where the gross value of the estate exceeds
P5,000,000
2. Contents of the statement certified to by a CPA
a. Itemized assets of the decedent with their
corresponding gross value at the time of
death.
b. Itemized deductions from gross estate.
a. Amount of tax due whether paid or still due
and outstanding.
3. FILING AND PAYMENT – within one (1) year
from the decedent’s death.
a. In case of resident decedent. - With any
Authorized Agent Bank (AAB), Revenue
Collection Officer (RCO) or duly authorized
Treasurer of the city or municipality in which
the decedent was domiciled at the time of the
death.
b. In case of nonresident decedent - with the
Office of the Commissioner or if there is an
executor or administrator, with the RDO
having jurisdiction over the executor or
administrator’s legal residence.
SURCHARGES & INTEREST – If the return was
filed and/or the tax was paid after the due date, the
corresponding surcharges and interest on internal
revenue taxes shall be imposed.
a. Surcharges (ad valorem penalty)
50% False or fraudulent return is willfully filed.
Willful neglect to file the return on time.
25% Failure to file any return and pay the tax
due thereon.
PAGE A - 25
If the return is not filed with the proper
internal revenue officer.
Failure to pay on time the deficiency tax
shown in the notice of assessment.
Note: The failure to file any return and pay the
tax thereon are treated as one act or violation for
purposes of the imposition of penalties.
b. Interest for failure to pay tax per return on time
Rate– 12% per annum computed from the date
prescribed for payment until the amount is fully
paid.
4. WHEN IS FILING OF RETURN REQUIRED?
a. When the transfer is subject to tax.
b. Regardless of the gross value of the estate,
where said estate consists of registered or
registrable property such as real property,
motor vehicle, shares of stock or other similar
property for which a clearance from the BIR is
required as a condition precedent for the
transfer of ownership in the name of the
transferee.
5. EXTENSION FOR FILING – CIR in meritorious
cases may grant extension not exceeding 30
days.
The request for extension shall be filed with the
Revenue District Officer (RDO) where the estate
is required to secure its TIN and file the estate
tax return. The application shall be approved by
the Commissioner or his duly authorized
representative.
6. EXTENSION FOR PAYMENT–when payment
on due date would impose undue hardship, he
may extend the period not exceeding –
5 years – in case of judicial settlement
2 years – in case of extrajudicial settlement
Where the taxes are assessed by reason of
negligence, intentional disregard of rules and
regulations, or fraud on the part of the taxpayer,
no extension will be granted by the
Commissioner.
7. PAYMENT OF TAX BY INSTALLMENT–if the
available cash of the estate is not sufficient to
pay its total estate tax liability.
If any amount of the net taxable estate is not
paid within the statutory date, a corresponding
applicable penalty shall be imposed. If the
payment after the due date is approved by the
Commissioner or his authorized representative,
the imposable penalty shall only be the interest.
In case the available cash of the estate is
insufficient to pay the total estate tax due,
payment by installment shall be allowed within
two (2) years from the statutory date for its
payment without civil penalty and interest.
7. ATTACHMENTS TO THE RETURN
a. Certified true copy of the Death Certificate.
b. Deed of Extra-Judicial Settlement of the
Estate, if the estate is settled extra-judicially
CTT EXAMINATION REVIEWER (NOTES)
c. Court Orders/Decision, if the estate is settled
judicially;
d. Affidavit of Self-Adjudication and Sworn
Declaration of all properties of the Estate.
e. A certified true copy(ies) of the Transfer/
Original/Condominium Certificate of Title(s) of
real property(ies) (front and back pages), if
applicable.
f. Certified true copy of the latest Tax
Declaration of real properties at the time of
death, if applicable.
g. “Certificate of No Improvement” issued by the
Assessor’s Office declared properties have
no improvement or Sworn Declaration/
Affidavit of No Improvement by at least one
(1) of the transferees.
h. Certificate of Deposit / Investment/
Indebtedness owned by the decedent and the
surviving spouse, if applicable.
i. Photocopy of Certificate of Registration of
vehicles and other-proofs showing the correct
value of the same, if applicable.
j. Photocopy of certificate of stocks, if
applicable
k. Proof of valuation of shares of stocks at the
time of death, if applicable.
o For listed stocks – newspaper clippings or
certification from the Stock Exchange.
o For unlisted stocks – latest audited
Financial Statement of issuing corporation
with computation of book value per share
l. Proof of valuation of other types of personal
property, if applicable.
m.Proof of claimed tax credit, if applicable
n. CPA Statement on the itemized assets of the
decedent, itemized deductions from gross
estate and the amount due if the gross value
of the estate exceeds P5,000,000, if
applicable
o. Certification of Barangay Captain for claimed
Family Home
p. Duly notarized Promissory Note for “Claims
against the Estate” arising from Contract of
Loan.
q. Accounting of the proceeds of loan contracted
within three (3) years prior to death of the
decedent.
r. Proof of the claimed “Property Previously
Taxed”
s. Proof of claimed “Transfer for Public Use.”
8. WHO SHALL FILE THE RETURN?
a) The executor or administrator or any of the
legal heirs of the decedent or non-resident of
the Philippines
b) Where there is no executor or administrator
appointed, qualified and acting within the
Philippines, then any person in actual or
constructive possession of any property of the
decedent must file the return.
PAGE A - 26
c) The Estate Tax shall be paid by the executor
or administrator before the delivery of the
distributive share in the inheritance to any
heir or beneficiary.
Where there are two or more executors or
administrators, all of them are severally liable
for the payment of the tax.
The estate tax clearance issued by the
Commissioner or the Revenue District Officer
(RDO) having jurisdiction over the estate, will
serve as the authority to distribute the
remaining/ distributable properties/share in
the inheritance to the heir or beneficiary.
d) The executor or administrator of an estate has
the primary obligation to pay the estate tax
but the heir or beneficiary has subsidiary
liability for the payment of that portion of the
estate which his distributive share bears to
the value of the total net estate.
The extent of his liability, however, shall in no
case exceed the value of his share in the
inheritance.
9. Procedures
a. The heirs / authorized representative /
administrator /executor shall file the estate tax
return (BIR Form 1801) and pay the
corresponding estate tax.
b. In case of a non-resident decedent, with
executor or administrator in the Philippines,
the estate tax return shall be filed with the
AAB of the RDO where such
executor/administrator is registered or is
domiciled, if not yet registered with the BIR.
c. For non-resident decedent with no executor or
administrator in the Philippines, the estate tax
return shall be filed with the AAB under the
jurisdiction of RDO No. 39 South Quezon
City.
8. Payment of tax antecedent to the transfer of
shares, bonds or rights.
If a bank has knowledge of the death of a
person who maintained a bank deposit account
alone, or jointly with another, it shall allow any
withdrawal from the said deposit account,
subject to a final withholding tax of 6% (use BIR
Form 2306).
For this purpose, all withdrawal slips shall
contain a statement to the effect that all of the
joint depositors are still living at the time of
withdrawal by any one of the joint depositors
and such statement shall be under oath by the
said depositors.
DONOR’S TAXATION
Definition–DONATION is an act of liberality
whereby a person disposes gratuitously of a thing
or a right in favor of another who accepts it.
Donor’s tax is a tax on the privilege to transmit
property between two or more persons who are
CTT EXAMINATION REVIEWER (NOTES) PAGE A - 27

living at the time of the donation; tax shall apply d. devoting all income whether students’ fees
whether the transfer is in trust or otherwise, whether or gifts, donation subsidies or other forms of
the gift is direct or indirect. philanthropy, to the accomplish-ment of the
Formula in computing Donor’s Tax: purposes enumerated in its Articles of
Incorporation.
First donation during the year:
3. P250,000 per year
Gross Gift Pxx
Less: Deduction xx Exempt under special law – Donation to
Net gift xx 1. Rural Farm School
Less: Exemption 250,000 2. People’s Television Network, Inc.
Taxable xx 3. People’s Survival Fund
x Tax rate 6% 4. Aurora Pacific Economic Zone and Freeport
Donor’s tax due xx Authority
5. Girl Scouts of the Philippines
Succeeding donations during same year: 6. Philippine Red Cross
Gross Gift Pxx 7. Tubbataha Reefs Natural Park
Less: Deduction xx 8. National Commission for Culture and the Arts
Present net gift xx 9. Philippine Normal University
Add: Prior net gifts during the year xx 10. University of the Philippines
Total net gifts xx 11. National Water Quality Management Fund
Less: Exemption 250,000 12. Philippine Investors Commission
Taxable amount xx 13. Ramon Magsaysay Award Foundation
x Tax rate 6% 14. Philippine-American Cultural Foundation
Donor’s tax due xx 15. International Rice Research Institute
Less: Tax/es paid during the year xx 16. Task Force on Human Settlements
Donor’s tax payable xx 17. National Social Action Council
18. Aquaculture Department of the Southeast Asian
Composition of gross gifts (same with estate Fisheries Development Center
taxation) 19. Development Academy of the Philippines
20. Integrated Bar of the Philippines
Properties classified as intangibles within (same
with estate taxation) RATE OF TAX: 6% computed on the basis of total
gifts in excess of P250,000 exempt gift made during
Deductions from gross gifts the calendar year.
1. Mortgage on the property donated assumed by
the donee. Donations made by spouses
2. Amount specifically provided by the donor as In case of donation made by husband and wife out
diminution on the property donated. of conjugal or community funds:

Exemptions from gross gifts 1. Each is donor to the extent of 1/2 of the value of
1. Gifts made to the national government or any the donation.
entity created by any of its agencies which is not 2. If only one spouse signed the deed of donation,
conducted for profit, or any political subdivision. there is only one donor for donor’s tax purposes,
without prejudice to the right of the other spouse
2. Gifts in favor of the following non-profit to question the validity of the donation.
institutions:
a. Educational B. Donation to several donees
b. Charitable If the donor had made several donations to different
c. Religious persons on the same date, the total net gift shall be
d. Cultural computed together and contained in one donor’s
e. Social welfare tax return only.
f. Accredited NGO Transfer for less than adequate consideration
g. Trust or philanthropic organization Where property, other than real property (capital
h. Research institution asset) is transferred for less than adequate
Requisites: consideration in money or money’s worth, the
1. Provided, that not more than 30% of said gifts amount by which the fair market value exceeded
shall be used for administration purposes; the value of consideration shall be deemed a gift
subject to donor’s tax.
2. The non-profit institutions must be accredited
A sale, exchange, or other transfer of property
by the Philippine Council for NGO Certification
made in the ordinary course of business (a
(PCNC).
transaction which is bona fide, at arm’s length, and
A non-profit institution is one which is: free from any donative intent) will be considered as
a. organized as a non-stock entity; made for an adequate and full consideration in
b. paying no dividends; money or money’s worth).
c. governed by trustees who receive no
Valuation of property – at fair market value at the
compensation; and time of gift (see estate tax).
CTT EXAMINATION REVIEWER (NOTES) PAGE A - 28

OTHER MATTERS:
1. Donations between spouses - Every donation Surcharges (ad valorem penalty)
or grant of gratuitous advantage, direct or 50% False or fraudulent return is willfully filed.
indirect, between the spouses during the Willful neglect to file the return on time.
marriage shall be void, except moderate gifts 25% Failure to file any return and pay the tax due
which the spouses may give each other on the thereon.
occasion of any family rejoicing. If the return is not filed with the proper
internal revenue officer.
The prohibition shall also apply to persons living Failure to pay on time the deficiency tax
together as husband and wife without a valid shown in the notice of assessment.
marriage.
Interest for failure to pay tax per return on time
2. Other persons who cannot donate property to RATE – 12% per annum, or such higher rate as
each other (Void donations) may be prescribed by rules and regulations,
a. Those made between persons who were computed from the date prescribed for payment
guilty of adultery or concubinage at the time until the amount is fully paid.
of donation.
b. Those made between persons found guilty of Attachments
the same criminal offense in consideration 1. Proof of claimed tax credit, if applicable
thereof; and
2. Certified true copies of OCT/TCT/CCT (front and
c. Those made to a public officer or his wife,
back pages) of the donated property, if
descendants and ascendants, by reason of
applicable.
his office.
3. Certified true copies of the latest tax declaration
Tax credit for donor’s tax paid to a foreign
of lot and/or improvement, if applicable.
country.
4. “Certificate of No Improvement” issued by the
1. Who can claim? Only citizen or resident alien
Assessor’s Office where the donated real
donor.
property/ies have no declared improvements, if
2. Limitations on tax credit:
applicable.
1st limitation
5. Proof of valuation of shares of stocks at the time
Net gift per foreign country x Phil tax of donation, if applicable.
Total net gift
6. Proof of valuation of other types of personal
nd
2 limitation properties, if applicable.
Net gift all foreign countries x Phil tax 7. Proof of claimed deductions, if applicable.
Total net gift
8. Copy of tax debit memo used as payment, if
Filing and payment applicable.
1. Filing – within 30 days from date of gift
2. Payment – at the time the return is filed.
3. Place of filing – Authorized Agent Bank (AAB),
RDO, Collection Agent, or duly authorized
Treasurer of the City or Municipality where the
donor was domiciled at the time of gift.
If there is no legal residence in the Philippines,
with the Office of the Commissioner or with the
Philippine Embassy or Consulate in the country
where he is domiciled at the time of the transfer.
Returns filed with the Philippine Embassy or
consulate shall be paid thereat.
4. VALIDATION OF TAX RETURN – Where the
return was filed with an AAB, the lower portion of
the return must be duly machine validated and
stamped received by the AAB to serve as receipt
of payment.
The machine validation shall reflect the amount
paid, the date of payment and the transaction
code and the stamp mark shall also show the
name of the bank, branch code, teller’s code and
teller’s initial.
The AAB shall also issue an official receipt or
bank debit advice or credit document, whichever
is applicable, as additional proof of payment.