BUSINESS TAX
(ESTATE TAX, GROSS ESTATE, DONOR TAX)
IDENTIFICATION
Sec. 84 of Republic Act No. 10963,- also know
Tax reform for acceleration and inclusion law
(TRAIN)
Train Law- there regulation are hereby issue to
consolidate the rules governing the imposition
and payment of estate tax and donors tax
incorporating train law
Tax- life and blood of the government
Privilege- Subject to tax
Business taxes - are those imposed upon
onerous transfers such a sale, barter, exchange
and Importation.
Transfer taxes- are excise taxes imposed upon
the privilege of gratuitously transmitting one’s
property to another.
Estate tax – a tax imposed upon the right of
transmitting property at the time of death and
the privilege of controlling the disposition of
one’s property to take effect upon death.
Net Taxable Estate- it is after the deduction in
gross estate. It is the one who subject to
withholding tax.
6%- The net estate of every decedent, whether
resident or non-resident of the Philippines, as
determined in accordance with the NIRC, shall
be subject to an estate tax at the rate of six
percent
At the time of death of the decedent- the law
that governs the imposition of estate tax. The
estate tax accrues as of the death of the
decedent and the accrual of the tax is distinct
from the obligation to pay the same. Upon the
death of the decedent, succession takes place
and the right of the State to tax the privilege to
transmit the estate vests instantly upon death.
At the time of his/her death- composition of
the gross estate. the gross estate of a decedent
shall be comprised of the following properties
and interest therein at the time of his/her
death, including revocable transfers and
transfers for insufficient consideration, etc.
Fair market value as of the time of decedent's
death- valuation of properties in the gross
estate
Real property- value thereof as of the time of
death shall be, whichever is the higher of: The
fair market value as determined by the
Commissioner, or The fair market value as
shown in the schedule of values fixed by the
provincial and city assessors, whichever is
higher.
Personal property – Fair market value at the
time of the decedent's death
Shares of stocks- market value shall depend on
whether the shares are listed or unlisted in the
stock exchanges.
Listed shares in the stock exchanges- the
arithmetic mean between the highest and
lowest quotation at date of death, or the date
nearest the date of death, if none is available on
the date of death itself.
Unlisted common share- book value
Unlisted preferred shares- par value.
Association, recreation or amusement club
(such as golf, polo, or similar clubs)- shall be the
bid price nearest the date of death published in
any newspaper or publication of general
circulation.
Right to usufruct - Probable life of the
beneficiary in accordance with the latest Basic
Standard Mortality Table, to be approve by the
Secretary of Finance upon recommendation of
the Insurance Commissioner
Residents and citizens - all properties, real or
personal, tangible or intangible, wherever
situated.
Non-resident aliens - only properties situated in
the Philippines provided, that, with respect to
intangible personal property, its inclusion in the
gross estate is subject to the rule of reciprocity
provided for under Section 104 of the NIRC.
5,000,000- standard deductoon for net estate
of a decedent who is either a citizen or resident
of the philippines
500,000- standard deduction for non resident
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.
Decedent – a person whose property is
transmitted through succession, whether or not
he left a will. If he left a will, he is also called the
testator.
Heir – a person called to the succession either
by the provision of a will or by operation of law.
Estate – refers to all the property, rights and
obligations of a person which are not
extinguished by his death.
Testamentary - a succession which results from
the designation of an heir, made in a will
executed in the form prescribed by law.
Legal or intestate - a transmission of properties
where there is no will or if there is a will, the
same is void or nobody succeeds in the will.
Mixed - a transmission of properties which is
effected party by will and party by operation of
law.
Devisee - a person to whom gifts of real
property are given by virtue of a will. The gift of
real property by will.
Legatee - a person to whom gifts of personal
property are given by virtue of a will. A gift of
personal property or money to a beneficiary
(legatee) of a will
Will- is an act whereby a person is permitted,
with the formalities prescribed by law, to
control to a certain degree the disposition of
this estate, to take effect after his death.
Codicil- is supplement or addition to a will,
made after the execution of a will and annexed
to be taken as a part thereof, by which
disposition made in the original will is
explained, added to, or altered.
Holographic will - a will entirely written, dated,
and signed by the hand of the testator himself.
It is subject to no other form, and may be made
in or out of the Philippines, and need not be
witnessed.
Non-holographic will — a will that is created for
the testator by a third party, usually his lawyer,
follows proper form, signed and dated in front
of the required number of witnesses and
acknowledged by the presence of a notary
public.
Probate of the last will and testament - special
proceeding to establish the validity of a will.
Probate is mandatory, which means that no will
passes either real or personal property unless it
is proved and allowed in a proper court.
Revocation of will - the testator may revoke his
last will and testament at any time before he
dies.
Executor - the person named in a will to
administer the estate.
Administrator - the person appointed by the
court to administer the estate of someone who
died without a will.
Compulsory or forced heir - a person to whom
the law reserves a part of his predecessor's
estate and who would inherit unless
disinherited for serious grounds mentioned in
the last will and testament.
Voluntary heir - an heir who inherits because of
a last will and testament, and who would not
have inherited without being mentioned in the
last will and testament.
Repudiation of the inheritance- An heir called to
an inheritance may accept or refuse the
inheritance. Refusal of an inheritance.The
repudiation must be made in a public or
authentic document, or by petition to the court
having jurisdiction over the testamentary or
intestate proceedings.
Legitime- is the portion of the decedent's estate
which the law reserves to compulsory heirs.
Free portion- is the portion of the decedent's
estate in excess of the legitimes. The free
portion may be given to anybody.
Donation- is an act of liberality whereby a
person disposes gratuitously of a thing or right
in favor of another, who accepts it.
Donation inter vivos - one made between living
persons, and which is perfected from the
moment the donor knows of the acceptance of
the donee. It is subject to donor's tax.
Donation mortis causa - one which is to take
effect upon the death of the donor and
therefore, partakes of the nature of
testamentary disposition. It is subject to estate
tax.
Bona fide- A bona fide refers to a legitimate and
genuine transaction where parties act honestly,
in good faith, and without any fraudulent intent.
It implies a sale that is conducted fairly and in
accordance with legal and ethical standards.
Decedent's interest- This shall include all
properties, rights and interest which the
decedent owns at the time of death. The estate
includes properties physically present at the
time of death, interests in property, and
transferred properties treated as testamentary
dispositions, such as insurance proceeds for
revocable beneficiaries.
Transfer in contemplation of death- Impelled by
the thought of death (i.e., the motivating factor
or controlling motive is the thought of death),
regardless of whether the transferor was near
the possibility of death or not.
Revocable transfer- Where the enjoyment of
the property transferred may be altered,
amended, revoked or terminated by the
decedent. The revocability is not affected by the
failure of the decedent to exercise the power to
revoke during his lifetime. If the notice has not
been given, the power to revoke has not been
exercised on or before the date of his death,
such notice shall be considered to have been
given, or the power exercised on the date of his
death.
Power of Apointment- is the right to designate
the person or persons who will succeed to the
property of the prior decedent. It may be
exercised by the decedent by will;by deed
executed in contemplation; by deed under
which he has retained for his life or any period
not ascertainable without
Transfer for insufficient consideration- When
the decedent's property is transferred in
contemplation of death, revocable transfers or
passed under a general power of appointment
for a consideration in money or money’s worth.
Proceeds of life insurance- under policies taken
out by the decedent upon his own life shall be
included in his gross estate if the beneficiary is
the estate of the deceased, his executor or
administrator, irrespective of whether or not
the insured retained the power of revocation.
Revocable (included sa gross estate)
Revocable & designated is administrator (incld)
Revocable & 3rd person (not included)
Beneficiary- is a person who will receive the
proceeds of the insurance when the insured
dies.
Power of appointment- is when it authorizes
the done to appoint any person he pleases,
including himself, his spouse, his estate, his
executor or administrator, and his creditor thus
having full dominion over the property as
though he owned it.
Limited power of appointment- is when the
done can appoint only among a restricted or
designated class or persons other than himself.
Fideicommissary- refers to a legal arrangement
where property is entrusted to one person with
the obligation to transfer it to another person in
the future, according to the wishes of the
original owner. It's often used in estate planning
to ensure assets are passed down according to
specific instructions.
Capital of the surviving spouse- of a decedent
shall not be deemed a part of his or her gross
estate. It also refers to the separate property of
the surviving spouse.
Capital- The exclusive property of the husband
Paraphernal- exclusive property of the wife
Share of the surviving spouse in the conjugal-
property shall be included in the computation
of the gross estate.
Claims against the Estate- The word "claims" is
generally construed to mean debts or demands
of a pecuniary nature which could have been
enforced against the deceased in his lifetime
and could have been reduced to simple money
judgements. Ari arian mo lang dapat nandon
Claims against insolvent persons- these shall be
deductible from the gross estate, provided that
the value of the decedent's interest in the claim
is included in the value of the gross estate.
Hindi na kasama marerecord yung pinautang
mo kung ano lang ang ang hawak mo ayon lang
ang subjected sa tax.
Casualty losses- incurred within one year from
the decedent's death, arising from events like
fires, storms, or theft, and not compensated for
by insurance, may be deductible from the gross
estate if not claimed as an income tax deduction
previously.
Unpaid mortgages- or any indebtedness in
respect to, property where the value of the
decedent's interest therein, undiminished by
such mortgage or indebtedness, is included in
the value of the gross estate. If the loan is found
to be merely an accommodation loan where the
loan proceeds went to another person, the
value of the unpaid loan must be included as a
receivable of the estate.
Unpaid Taxes- These are taxes which have
accrued as of the death of the decedent which
were unpaid as of the time of death.The
following are not deductible: Income tax upon
income received after death; Property taxes
that accrued after death; or Estate tax due from
the transmission of his estate.
Transfer for Public Use- The amount of all
bequests, legacies, devises or transfers to or for
the use of the Government of the Republic of
the Philippines or any political subdivision
thereof, for exclusively public purposes.
Vanishing deduction- also know property
previously taxed is a deduction allowed on the
property left behind by the decedent which he
had acquired previously by inheritance or
donation. To prevent double taxation within a
short period, 100% if the prior decedent died or
gifted the property within one year, 80% within
two years, 60% within three years, 40% within
four years, and 20% within five years before the
current decedent's death. These deductions are
applicable only if a donor's tax or estate tax has
been imposed.
Standard Deduction- deduction in the amount
of Five Million Pesos 5M for Resident and 500k
for non resident shall be allowed without need
of substantiation.
Family Home- The family home is the dwelling
house where a married couple or head of the
family and their family members reside,
certified by the Barangay Captain. It includes the
land it's on and is constituted once actually
occupied as a family residence. Temporary
absence due to travel or studies doesn't
interrupt its status. Only one family home can
be constituted for deduction purposes.
Amount received by heirs under Republic Act
No. 4917- Any amount received by the heirs
from the decedent's employer as a
consequence of the death of the decedent
employee in accordance with Republic Act No.
4917 is allowed as a deduction provided that
the amount of the separation benefit is
included as part of the gross.
Net Share Of The Surviving Spouse in Conjugal
Partnership- after deducting the allowable
deductions appertaining to the conjugal or
community properties included in edents in
estat i he hat of tax surviving spouse must be
removed to ensure that
Who Shall File The Estate Tax Return (BIR Form
1801)- The executor, or administrator, or any of
the legal heir/s of the decedent, whether
resident or non-resident of the Philippines
Time for filing Estate Tax Return- shall be filed
within one (1) year from the decedent's death.
In meritorious cases, the Commissioner shall
have the authority to grant a reasonable
extension not exceeding thirty (30) days for
filing the return.
When to Pay- Pay as you file
Where to File- The return shall be filed with any
Authorized Agent Bank (AAB) of the Revenue
District Office (RDO) having jurisdiction over the
place of domicile of the decedent at the time of
his death. If the decedent has no legal residence
in the Philippines, the return shall be filed with
the Office of the Commissioner (RDO No. 39,
South Quezon City).
Extension to File and Pay - When the
Commissioner of Internal Revenue finds that
the payment on the due date of the estate tax
or of any part thereof would impose undue
hardship upon the estate or any of the heirs, he
may extend the time for payment of such tax or
any part thereof not to exceed five (5) years, in
case the estate is settled through the courts, or
two (2) years in case the estate is settled extra-
judicially.
Request for Extension of Time, Installment
Payment and Partial Disposition of Estate- For
purposes of these Regulations, the request for
extension of time to file the return, extension of
time to pay estate tax and payment by
installment shall be filed with the Revenue
District Officer (RDO) where the estate is
required to secure its TIN and file the estate tax
return. This request shall be approved by the
Commissioner or his duly authorized
representative
Extra Judicially- refers to actions or processes
conducted outside of the formal legal system or
without the involvement of a court. This can
include negotiations, settlements, or
agreements made between parties without the
need for a formal court proceeding or judicial
intervention.
Executor/Administrator- 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.
Ad valorem tax – Imposed and based on selling
price or other specified value of the transaction
or property (e.g. Non-essential goods 20%
based on the wholesale price or the value of
importation; automobiles P600,000-P1,000,000
selling price, excise tax 10%).
Donor’s tax – a tax on the privilege of
transmitting one’s property to another during
his lifetime without adequate and full valuable
consideration.
Nature of Donor’s Tax- It is an excise tax on the
privilege of the donor to give or on the transfer
of property by way of gift inter vivos. It is not a
property tax.
Time of completion of the donation- governing
law for donors tax
6%- Rate of donor’s tax for each calendar year.
The computation is base of total gifts in excess
of 250k exempt gift made the calendar year
Election Code- Governing law for the
contribution for election campaigns
Sale/exchange/transfer of property for
insufficient consideration- Where a property is
transferred for less than adequate and full
consideration in money or money's worth, the
amount by which the FMV exceeds the
consideration shall be deemed a gift and be
included in computing the amount of gifts made
during the calendar year. It is as if the property
was donated but in order to avoid paying
donor's tax, the donor opted to transfer the
property for inadequate consideration.
Condonation or remission of debt- If the
creditor condones the indebtedness of the
debtor, the following rules apply On account of
debtor's services to the creditor the same is in
taxable income to the debtor; or
If no services were rendered but the creditor
simply condones the debt, it is taxable gift and
not a taxable income.
Renunciation of inheritance- Renunciation by
the surviving spouse of his/her share in the
conjugal partnership or absolute community
after the dissolution of the marriage in favor of
the heirs of thedeceased spouse or any other
person/s is subject to donor's tax. General
renunciation by an heir, including the surviving
spouse, of his/her share in the hereditary estate
left by the decedent is not subject to donor's
tax, unless specifically and categorically done in
favor of identified heir/s to the exclusion or
disadvantage of the other co-heirs in the
hereditary estate.
Transfer For Less Than Adequate And
Consideration- Where property, other than real
property is transferred for less than an
adequate and full consideration in money or
money's worth, then the amount by which the
fair market value of the property exceeded the
value of the consideration shall, for the purpose
of the tax imposed by this Chapter, be deemed
a gift, and shall be included in computing the
amount of gifts made during the calendar year
Donation of Property Between Spouses- Every
donation or grant of gratuitous advantage,
direct or indirect, between the spouses during
the marriage shall be void, except moderate
gifts which the spouses may give each other on
the occasion of any family rejoicing. The
prohibition shall also apply to persons living
together as husband and wife without a valid
marriage.
Donation of Conjugal or Community Property-
Husband and wife are considered as separate
and distinct taxpayer's for purposes of the
donor's tax. However, if what was donated is a
conjugal or community property and only the
husband signed the deed of donation, there is
only one donor for donor's tax purposes,
without prejudice to the right of the wife to
question the validity of the donation without TYPE OF ESTATE TAX
her consent pursuant to the pertinent • Revenue Tax
provisions of the Civil Code of the Philippines • Ad Valorem Tax
and the Family Code of the Philippines. • National Tax

30Days After the Gift is Made/Complete- filing PRIMARY LIABLE FOR ESTATE TAX:
of donors tax for resident • Executor
• Administrator
Same Time when the Return is Filed- donors tax
due shall be paid For resident SUBSIDIARY LIABLE FOR ESTATE TAX:
• Legal Heirs
RDO/RCO- Place of filing for resident • Beneficiary

Philippine Embassy/ Office of ELEMENTS OF SUCCESSION

Commissioner/RDO39- Place of filing for non • Decedent
resident • Heir
• Estate
Notice of Donation by a donor engaged in
Business- In order to be exempt from donor's
THINGS TRANSMISSIBLE IN SUCCESSION
tax and to claim full deduction of the donation
• Properties;
given to qualified-donee institutions duly
• Rights;
accredited, the donor engaged in business shall
• Obligations, to the extent of the value
give a notice of donation on every donation
of the inheritance.
worth at least Fifty Thousand Pesos (P50,000) to
the Revenue District Office (RDO)
KIND OF SUCCESSION
Excise Taxes- apply to goods manufactured or • Testamentary
produced in the Philippines for domestic sales • Legal or Intestate
or consumption or for any other disposition and • Mixed
to things imported as well as services
performed in the Philippines. KINDS OF SUCCESSORS IN A TESTAMENTARY
SUCCESSION:
B.ENUMERATION • Devisee
• Legatee
TWO TRANSFER TAXES IN THE NATIONAL
INTERNAL REVENUE CODE (NIRC): KINDS OF LAST WILL AND TESTAMENT:
• Estate tax • Holographic will
• Donor’s tax • Non-holographic will

REASONS JUSTIFYING THE IMPOSITION OF PERSONS AUTHORIZED TO MANAGE THE

ESTATE TAX: ESTATE:
• Benefit-received theory • Executor
• Privilege theory/State partnership • Administrator
theory
• Ability to pay theory KINDS OF HEIRS:
• Redistribution of wealth theory • Compulsory or forced heir
• Voluntary heir
COMPULSORY OR FORCED HEIR:
• Legitimate children and descendants,
with respect to their legitimate parents
or ascendants;
• In default of the foregoing, legitimate
parents or ascendants, with respect to
their legitimate children and
descendants;
• Widow or widower; and
• Illegitimate children
KINDS OF DONATIONS
• Donation inter vivos
• Donation mortis causa
THE FOLLOWING DONATIONS SHALL BE VOID:
• Those made between persons who
were guilty of adultery or concubinage
at the time of the donation;
• Those made between persons found
guilty of the same criminal offense, in
consideration thereof;
• Those made to a public officer or his
wife, descedants and ascendants, by
reason of his office.
THE PROPERTY RELATIONSHIP BETWEEN
HUSBAND AND WIFE SHALL BE GOVERNED IN
THE FOLLOWING ORDER:
• By marriage settlements executed
before the marriage;
• By the provisions of the Family Code;
and
• By the local custom.
KINDS OF DECEDENTS:
• Citizen or Resident
(Resident citizen, Non-resident citizen,
and Resident alien)
• Non-Resident Alien
(Engaged and Not engaged in trade or
business in the Philippines)
PROPERTIES INCLUDED IN GROSS ESTATE OF
CITIZEN/RESIDENT:
• Real property (e.g. land and building)
wherever locate
• Tangible personal property (e.g. car)
wherever located
• Intangible personal property (e.g.
receivable) werever located
PROPERTIES INCLUDED IN GROSS ESTATE OF
NON RESIDENT ALIEN:
• Real property located in the Philippines
• Tangible personal property located in
the Philippines
• Intangible personal property-with situs
in the ph such as;
• Franchis which must be exercised in the
ph
• Shares, obligations or bonds issued by
corporations organized or constituted in
the Philippines
INCLUDED IN THE GROSS ESTATE OF DECEDENT:
• Decedent's interest
• Transfer in contemplation of death
• Revocable transfer
• Property passing under general power
of appointment
• Transfer for insufficient consideration
• Proceeds of life insurance
AMOUNT TO BE INCLUDED IN THE GROSS
ESTATE:
• Transfer is a bona fide sale for adequate
and full consideration, no value shall be
included in the gross estate.
• Transfer is not a bona fide sale for an
adequate and full consideration, there
shall be included in the gross estate
only the excess of the fair market value
of the property at the time of death
over the value of the consideration
received by the decedent.
• If an inter vivos transfer of the decedent
is proven to be fictitious, total value of
the property at the time of death shall
be included in the gross estate.

EXEMPTION FROM THE ESTATE TAX
• Benefits received from GSIS
• Benefits received from SSS
• Benefits received from U.S Veterans
Administration
• Benefits given by the Philippine
government and U.S government due to
damages suffered during the war
• Proceeds of life insurance where the
beneficiary is irrevocably appointed
• Proceds of life insurance under group
insurance taken by employer (not taken
out upon his life)
• Transfer by way bona fide sales
• Retirement benefits of employees of
private firms from private pension plans
approved by the BIR
• Personal Equity and Retirement
Account (PERA) assets shall not be
considered assets of the Contributor for
purposes of estate taxes
• Bank deposit in the name of the
decedent on which the 6% estate tax
has been withheld and remitted by the
bank to the BIR upon withdrawal by the
heirs
EXEMPTION OF CERTAIN ACQUISITIONS AND
TRANSMISSIONS:
• The merger of usufruct in the owner of
the naked title (Dito bumalik lang sa
rightful owner yung property kaya di
sya matatax)
DEDUCTIONS FROM THE GROSS ESTATE:
Ordinary Deduction
• Claims, Losses, Unpaid mortgages,
Taxes
o Claims against the estate
o Claims against insolvent
persons
o Losses
o Unpaid mortgages
o Taxes
• Transfer for public use
• Vanishing deductions
Special deductions
• Standard deduction
• Family homes
• Amount received by heirs under
Republic Act No. 4917
• Net share of the surviving spouse in the
conjugal property
CLAIMS AGAINST THE ESTATE OF PROPERTY
MAY ARISE OUT OF:
• Contract
• Tort
• Operation of Law
TRANSFER FOR PUBLIC USE REQUISITE FOR
DEDUCTIBILITY:
• The disposition is in a last will and
testament;
• To take effect after death;
• In favor of the government of the
Philippines or any political subdivision
thereof;
• For exclusive public purpose; and
• The value of property given is included
in the gross estate
VANISHING DEDUCTIONS REQUISITE FOR
DEDUCTIBILITY:
• Death, The present decedent died
within five years from the receipt of the
property from a prior decedent or
donor;
• Identity of the property, The property
with respect to which deduction is
sought can be identified as the one
received from the prior decedent or the
donor, or as the property acquired in
exchange for the original property so
received;
• Location, The property on which
vanishing deduction is being claimed
must be located in the Philippines.
• Inclusion of the property, The property
must have formed part of the gross
estate situated in the Philippines of the
prior decedent, or the total amount of
the gifts of the
 • Previous taxation of the property,The
donor's tax on the gift or estate tax on
the prior succession was finally
determined and paid; and
• No vanishing deduction on the property
was allowed to the estate of the prior
decedent.
FAMILY HOMES REQUISITE FOR DEDUCTIBILITY:
• The family home must be the actual
residential home of the decedent and
his family at the time of his death, as
certified by the Barangay Captain of the
locality where the family home is
situated;
• The total value of the family home must
be included as part of the gross estate
of the decedent; and
• Allowable deduction must be in an
amount equivalent to the current fair
market value of the family home as
declared or included in the gross estate,
or the extent of the decedent's interest
(whether conjugal/community or
exclusive property), whichever is lower,
but not exceeding P10,000,000.
COMPUTATION FOR NET TAXABLE ESTATE:
Gross Estate
- Deductions______
Net Taxable Estate
HOW DONATION OF IMMOVABLE MAY BE
VALID:
• It must made in public document
• The acceptance may be made in the
same deed of donation or in separate
documents
IN ORDER TO BE EXEMPT FOR DONORS TAX:
• Donor shall give notice of donation in
every donation worth atleast 50k to
RDO within 30days
• Certificate of donation shall be attached
to the said notice of donation.
• Starting that not more than 30% of the
said donation for the taxable year shall
be used by non stock, non profit
corporation/ngo
EXEMPTIONS and /or DEDUCTIONS FROM
GROSS GIFTS CITIZEN/RESIDENT ALIEN:
• Mortgage or other encumbrances on
the property donated if assumed by the
donee in the deed of donation.
• Amount specifically provided by the
donor as diminution on the property
donated.
• Gifts made to or for the use of the
National Government or any entity
created by any of its agencies which is
not conducted for profit, or to any
political subdivision of the said
• Gifts in favor of an educational and/or
charitable, religious, cultural or social
welfare corporation, institution,
accredited non-government
organization, trust or philanthropic
organization or research institution or
organization:
PURPOSE OR OBJECT OF DONORS TAX:
• To supplement estate tax
• To prevent avoidance of income tax
through the device of splitting income
among numerous donees who are
usually members of a family or into
many trusts, with the donor thereby
escaping the effect of the progressive
rates of income taxation.
EXEMPTION DONOR’S TAX UNDER SPECIAL
LAWS:
• International Rice Research Institute
• Ramon Magsaysay Award Foundation
• Integrated Bar of the Philippines
• Development Academy of the
Philippines
• Philippine-American Cultural
Foundation
• Philippine Red Cross
• National Museum
• National Library
• Tubbataha Reefs Natural Park
 • National Commission for Culture and
the ArtS
• Philippine Normal University
• University of the Philippines
• Philippine Investors Commission
• Task Force on Human Settlements
EXEMPTION OF CERTAIN GIFTS:
• Gifts made to or for the use of the
National Government or any entity
created by any of its agencies which is
not conducted for profit, or to any
political subdivision of the said
Government; and
• Gifts in favor of an educational and/or
charitable, religious, cultural or social
welfare corporation, institution,
accredited nongovernment
organization, trust or philanthropic
organization or research institution or
organization:
REQUISITES OF A VALID DONATION:
• Capacity of donor to donate
The donor's capacity shall be
determined as of the time of the
making of the donation
• Donative Intent
Donative intent is necessary only in
cases of direct gift. If the gift is
indirectly taking place by way of sale,
exchange or other transfer of property
as contemplated in cases of transfers
for less than adequate and full
consideration, not always essential to
constitute a gift.
• Actual or Constructive delivery of gift
There is delivery if the subject matter is
within the domination and control of
the done.
• Acceptance by the Donee
Acceptance is necessary because
nobody is obliged to receive a gift
against his will
• Form prescribe by law
Real property must be in public
instruments
Personal property may be made oral
with delivery if values doesn’t exceed
5k, in writing if value exceed 5k
CLASSIFICATION OF DONOR:
• Resident
• Non- resident
RESIDENT TAX CLASSIFICATION:
• Resident Citizen (RC)
• Non-resident citizen (NRC)
• Resident alien (RA)
• Domestic corporation (DC)
NON- RESIDENT TAX CLASSIFICATION:
• Non-resident alien (NRA)
• Foreign corporation (FC)
INTANGIBLE PERSONAL PROPERTY WITH A SITUS IN
THE PHILIPPINES:
• Franchise which must be exercised in the
Philippines;
• Shares, obligations or bonds issued by
corporations organized or constituted in the
Philippines;
• Na Shares, obligations or bonds issued by a
foreign corporation 85% of the business of
which is located in the Philippines;
• Shares, obligations or bonds issued by a
foreign corporation if such shares,
obligations or bonds have acquired a
business situs in the Philippines (i.e. they
are used in the furtherance of its business in
the Philippines);
• Shares, rights in any partnership, business
or industry established in the Philippines.
TRANSFERS WHICH MAY BE CONSIDERED AS
DONATION:
• Sale/exchange/transfer of property for
insufficient consideration;
• Condonation/remission of debt; and
• Transfer for less than adequate and full
consideration.
EXEMPTION FOR SALE, EXCHANGE, TRANSFER: TWO CLASSIFICATIONS OF EXCISE TAX:
• Where the sale, exchange, or transfer is • Specific Tax
made in the ordinary course of business • Ad Valorem Tax
which is:
Bonafide, Made at arms length, Free from EXCISES TAX ARE IMPOSED ON:
any donative intent • Goods manufactured or produced
• Where property transferred is real property • Goods imported
located in the Philippines considered as • Certain services provided by TRAIN law,
capital asset, the transfer is not subject to specifically invasive costmetics procedures
donor's tax but to a capital gains tax, which
is a final income tax of 6% of the fair market ARTICLES SUBJECT TO EXCISE TAX:
value or gross selling price, whichever is • Alcohol, including wines, distilled spirits and
higher, and therefore, there can be no fermented liquor
instance where the seller can avoid any tax • Tobacco products
"By selling his capital assets below its FMV. • Automobile
• Petroleum products
VALUATION OF PROPERTY DONATED IN DONORS • Non-essential onods
TAX:
• Personal property: Fair market value at the
time of the gift shall be considered the
amount of the gift.
• Real property: Fair market value as
determined by the Commissioner of BIR
(zonal value) at the time of donation or the
fair market value as shown in the schedule
of values fixed by the Provincial and City
Assessors, whichever is higher.
• Shares of stock of domestic corporations
listed and traded in the local stock
exchange, the fair market value shall be the
arithmetic mean between the highest and
lowest quoted price on the date of
donation, and if there was no transaction
on that date, on the date nearest the date
of donation.

COMPUTATION FOR DONOR’S TAX:

• Before 1/1/1998 (old rates)
• After 1/1/1998-12/31/2017 (rate under RA
8424)
• After 1/1/2018 (Subject to Tax Rate under
TRAIN Law)
• Over a period of 1 calendar year
(Cummulative Basis)

MAJOR BUSINESS TAXES IN THE NATIONAL INTERNAL

REVENUE CODE:
• Excise taxes
• Value-added tax
• Other percentage taxes