TAX 2

TRANSFER TAX & BUSINESS TAXATION

CHAPTER 1
Introduction
Learning Objectives
 Understand the different modes of acquiring ownership and cite
concrete examples for each mode.

 Distinguish succession and donation as defined by the Philippine Civil

Code.

 Explain the application of transfer taxes and their necessity in the

government’s efforts to raise internal revenue.

 Identify current events, issues and news pertaining to transfer taxation

and the BIR, and express opinions on these matters.
What is a Property ?
 embraces everything which is or may be the subject of
ownership;

 includes not only ownership and possession but also the

right of use and enjoyment for lawful purposes;
 Definition

• Owner is the person in whom the ownership, dominion

or title of property is vested.

• Ownership is the exclusive right of possessing, enjoying

and disposing of a property.
Modes of Acquiring Ownership

Ownership may be acquired by:

1. Occupation,
2. Intellectual Creation,
3. Donation,
4. Succession, and
5. Prescription.
 Occupation

Things appropriable by nature
may be acquired by occupation.

When ownership is acquired by
occupation, the property seized
has no known owner.
1. Animals that are the object
of hunting and fishing;
2. Swarm of bees;
3. Domesticated animals; and
4. Pigeons and fishes.
Question: Can land be acquired by
occupation?
 Intellectual
Creation

 By intellectual creation, the composer owns

his musical, compositions while the author
owns his literary, legal, historical, scientific or
other work.
Donation

 is an act of liberality whereby a person disposes

gratuitously of a thing or right in favor of another,
who accepts it.
Succession

 is a mode of acquisition by virtue of the property,

rights and obligations to the extent of the value of
the inheritance, of a person are transmitted through
his death to another.
 Prescription
 one acquires ownership and other real
rights through the lapse of time in the
manner and under the conditions laid
down by law.
Definition
A transfer tax is any kind of tax that is levied on the transfer of ownership or title to
property from one entity to another. (Investopedia)

In a narrow sense, a transfer tax is essentially a transaction fee imposed on the
transfer of title to property. (Wikipedia)

Typically, imposed where there is legal requirement for registration of the transfer.
CONCEPT AND NATURE
OF TRANSFER TAXES


Transfer taxes are taxes imposed upon the gratuitous disposition of private
property.

* A transfer is said to be gratuitous when there is no consideration for the

transfer.

* It is onerous when a consideration is received such as sale, barter or

exchange are subject to business taxes.
CONCEPT AND NATURE OF TRANSFER
TAXES

Two of the five modes of acquiring ownership as enumerated in the

Civil Code are:

 Succession

 Donation
CONCEPT AND NATURE OF TRANSFER
TAXES
In succession, estate tax is levied on the transmission of
property from a prior decedent to his heirs.

Estate encompasses the totally of assets and liabilities a

decedent owns and owes at the time of his death.

In donation, donor’s tax is imposed as ownership of the

property passes from the donor to the donee.
 CONCEPT AND
NATURE OF
TRANSFER TAXES

 Estate and donor’s taxes are excise taxes.

 Both taxes are imposed upon the right of the person to

transfer his property that may effect during his lifetime or
upon his death.