Pamantasan ng Lungsod ng Valenzuela

College of Business and Accountancy

Department of Accountancy

BUSINESS AND TRANSFER TAXATION (TAX2)

Estate Tax Credit and Distributable Estate

Estate Tax Credit refers to the taxpayer’s right to deduct from the tax due the amount of tax it has paid to a foreign country.

WHO CAN CLAIM?

 Only resident or citizen decedents can claim tax credit.

AMOUNT DEDUCTIBLE:
 The LOWER between the Actual estate tax paid abroad and the Limit.

LIMIT:
 If only one foreign country is involved

Net estate, foreign

x Philippine estate tax
Net estate, world

 If more than one foreign country is involved

LIMIT 1 or A (Per Foreign Country where there was estate tax paid):
Net estate, per foreign
x Philippine estate tax
Net estate, world

LIMIT 2 or B (Total of ALL Foreign Countries involved):

Net estate, all foreign countries

x Philippine estate tax
Net estate, world

Illustration 1
The administrator of a decedent (single) died with the following information:
Net estate before special deductions, Philippines P 12,000,000
Net estate, France 3,000,000
Estate tax paid, France 200,000

Required:
Determine the estate tax payable assuming:
a. The decedent was a resident citizen
b. The decedent was a nonresident alien

Illustration 2
A resident alien decedent died in 2023 leaving the following:
Net taxable estate, Philippines P 10,000,000
Net taxable estate, Singapore 5,000,000
Net taxable estate, China 3,000,000
Net taxable estate, Japan 2,000,000
Estate tax paid, Singapore 200,000
Estate tax paid, China -
Estate tax paid, Japan 100,000

Required:
Determine the estate tax payable.

Illustration 3
A Filipino decedent, residing in U.S. died in 2023 leaving the following:
Net taxable estate, Philippines P 10,000,000
Net taxable estate, Canada 8,000,000
Net taxable estate, USA 2,000,000
Estate tax paid, USA 90,000
Estate tax paid, Canada 520,000

Required:
Determine the estate tax payable.

1
Estate Tax Credit and Distributable Estate TAX2

NET DISTRIBUTABLE ESTATE

The amount arrived at from gross estate consisting all properties in the possession and control of the decedent at the time of death
and actual expenses, charges, and payments from the gross estate.

Comparative Schedule
Net Taxable Estate Distributable Estate
GROSS ESTATE
Real of immovable property Included Included
Tangible personal property Included Included
Intangible personal property Included Included
Transfers in contemplation of death Included Included
Revocable transfers Included Included
Transfers under the general power of appointment Included Included
Proceeds of life insurance Included Included
Exclusions such as SSS, GSIS, etc. Not Included Included

ALLOWABLE DEDUCTIONS
Funeral expenses* Non-Deductible Actual Expense
Judicial* Non-Deductible Actual Expense
Unpaid taxes Actual Actual
Claims against the estate Actual Actual
Claims against insolvent person Actual Actual
Losses Actual (settlement period) Actual
Transfer for public purpose Actual Actual
Vanishing deduction As computed Non-deductible
Standard deduction P5M Non-deductible
Family home With limit of P10M Non-deductible
Medical expenses* Non-Deductible Actual Expense
Amount received under RA 4917 Actual Actual
Share of surviving spouse ½ net conjugal ½ net conjugal
NET TAXABLE ESTATE XXX
ESTATE TAX DUE XXX (XXX)
DISTRIBUTABLE NET ESTATE XXX

 *No longer allowed as deductions from gross estate beginning January 1, 2018.

Illustration 4
A nonresident citizen (head of the family) from Quezon City died intestate on November 2, 2023. The following data were provided to
you:
House and lot, USA (family home) P 8,000,000
Investment in stock, Philippines 800,000
Parcel of land in Quezon City inherited from his father 2 ½ years ago 1,000,000
Investment in bonds of a foreign corporation (85% of its business is located in the Philippines 700,000
Cash in bank, USA 650,000
Cash in bank, Philippines 450,000
Accounts receivable from a debtor who resides in Quezon City (fully uncollectible) 200,000
Car, USA 2,000,000
Car, Philippines 800,000
Actual funeral expenses 480,000
Judicial expenses 300,000
Claim against the estate (indebtedness of the decedent in the Philippines during his lifetime) 940,000
Unpaid Philippine income tax for income in 2016 and 2017 320,000
Loss on December 31, 2023 due to theft (Q.C., Philippines) 180,000
Devise to Quezon City for children’s playground 1,400,000
Medical expenses incurred prior to death 500,000

Required:
Determine the following
a. Net Taxable Estate
b. Estate Tax due
c. Net Distributable Estate

- END OF COURSE FILE -

References
Tabag, E. D., & Garcia, E. J. (2022). Transfer & Business Taxation.