IC C T

COLLEGES

BUSINESS TAX
AND

TRANSFER
TAXATION
ERVIC VICENTE, LPT
ESTATE TAX

R.A. 8424 (TAX REFORM ACT)

IS A TAX IMPOSED ON THE PRIVELEGE

THAT A PERSON IS GIVEN IN
CONTROLIING TO A CERTAIN EXTENT,
THE DISPOSITION OF HIS PROPERTY TO
TAKE EFFECT UPON HIS DEATH.
• E st ate Tax. T he usual tax associat ed wi th death i s the est ate tax.
I t i s the tax on the fortune lef t by a deceased befor e t his is
distr ibuted to the heirs which i s levied, assessed, collected and
paid upon the transfer of the net est ate. T he pr esent t ax rate is
6% , which is imposed on the val ue of t he net est ate.
 JUSTIFICATION FOR THE
IMPOSITION OF ESTATE TAX
• BENEFIT RECEIVED THEORY
The law considers the service rendered by the government in
the distribution of the estate of the decedent, either by law or
in accordance with his wishes.

• PRIVELEGED or STATE PARTNERSHIP THEORY

Inh eritance is n ot a rig ht b ut a priveleg ed g ranted by the STATE
and legatees hav e b een acquired on ly with th e p ro tection o f state.
 JUSTIFICATION FOR THE
IMPOSITION OF ESTATE TAX
• ABILITY TO PAY THEORY
Receipt of i nher itance which i s in t he nat ur e of unearned wealth or
windf al l, are pl ace assets i nt o the hands of the heirs and
benef i ciari es

• REDISTRIBUTION THEORY
The receip t of inherit ance i s a contributing factor to the
in equali ti es i n wealt h and incomes.
 CLASSIFICATION OF TAXPAYERS AND COMPOSITION OF
GROSS ESTATE

COMPOSITION OF GROSS ESTATE

BASED ON CITIZENSHIP AND
RESIDENCY

DECEDENT GROSS ESTATE

CITIZEN 1. PROPERTY (REAL OR PERSONAL) PROPERTY WHEREVER SITUATED

RESIDENT ALIEN 2. INTANGIBLE PERSONAL PROPERTY WHEREVER SITUATED

1. REAL PROPERTY SITUATED IN THE PHILIPPINES

2. TANGIBLE PERSONAL PROPERTY SITUATED IN THE PHILIPPINES
NON-RESIDENT ALIEN
3. INTANGIBLE PERSONAL PROPERTY WITH SITUS IN THE PHILIPPINES, UNLESS EXCLUDED ON
THE BASIS OF RECIPROCITY .
RECIPROCITY CLAUSE - THE TAX CODE EXCLUDES “INTANGIBLE”
PERSONAL PROPERTY WITH SITUS IN THE PHILIPPINES FROM THE
GROSS ESTATE OF A NON-RESIDENT ALIEN DECEDENT IF THERE IS
RECIPROCITY.

INTANGIBLE ASSETS

INTANGIBLLE ASSETS WITH SITUS “WITHIN” THE PHILIPPINES

1.FRANCHISE WHICH MUST BE EXERCISED IN THE PHILIPPINES

2.SHARES, OBLIGATION OR BONDS ISSUED BY ANY CORPORATION
OR SOCIEDAD ANONIMA ORGANIZED OR CONSTITUTED IN THE
PHILIPPINES IN ACCORDANCE WITH ITS LAW
3.SHARES, OBLIGATIONS OR BONDS ISSUED BY ANY FOREIGN
CORPORATION, 85% OF THE BUSINESS OF WHICH IS LOCATED IN
THE PHILIPPINES
4.SHARES, OBLIGATIONS OR BONDS ISSUED BY ANY FOREIGN
CORPORATION IF SUCH SHARES, OBLIGATIONS OR BONDS HAVE
ACQUIRED A BUSINESS SITUS IN THE PHILIPPINES
5.SHARES OR RIGHTS IN ANY PARTNERSHIP, BUSINES OR INDUSTRY
CAS

SITUS OF TANGIBLE AND INTANGIBLE PROPERTY

PROPERTY SITUS

REAL PROPERTY
LOCATION OF THE PROPERTY
TANGIBLE PERSONAL PROPERTY

WHERE THE INTANGIBLE IS

SHARES, FRANCHISE, COPYRIGHT, AND THE EXCERCISED REGARDLESS OF
LIKE WHERE THE CORRESPONDING
CERTIFICATE IS RESORED

RECEIVABLES RESIDENCE OF THE DEBTOR

LOCATION OF THE DEPOSITORY

BANK DEPOSITS
BANK
ILLUSTRATION:

A NON-RESIDENT ALIEN DECEDENT LEFT THE FOLLOWING ESTATE:

HO USE & LO T - HON KO NG , INH ERITED BEFO RE M ARRIA GE ______15,000,000

CAR, ACQ UIRED DU RING M ARRIAG E IN CEBU __________________1,500,000

SHARES OF STOCKS IS SUE D BY A FOREIGN CORP ORATION, 20%

OF ITS OPE RATION IS IN T HE PHILIP PINE S ________250,000

B AN K D E PO SIT W IT H PNB B R ANC H IN NE W YOR K, NE WYOR K

R E PR E SE N T ING IN C OM E E AR NE D DUR ING MAR R IAGE __ ___ _ _ _ 5 0 0 ,0 0 0

SHARES OF STOCKS ISSUED BY PLDT GROUP OF COMPANIES, A

CORPORATION ORGANIZED UNDER PHILIPPINE LAWS__________500,000

5 -Y E A R, 1 2 % PR O MIS SORY NOT E , R E C E VE D 2 YE ARS AGO, DU R IN G

MA R RIA GE . T HE D E B TOR IS A R E SIDE NT OF QC . __ __ __ __5 00 ,0 0 0
CASE A:

ASSUME THAT THERE IS NO RECIPROCITY, WHAT IS THE CORRECT VALUE OF THE

GROSS ESTATE?

CASE B: ASSUME THERE IS RECIPROCITY, WHAT IS THE CORRECT VALUE OF THE

GROSS ESTATE?
CASE A:

ASSUME THAT THERE IS NO RECIPROCITY, WHAT IS THE CORRECT VALUE OF THE

GROSS ESTATE?
CAR ACQUIRED DURING MARRIAGE IN CEBU _________1,500,000
SHARES OF STOCKS -PLDT ___________500,000
5 YEAR, 10% PROMISSORY NOTE _______500,000
INTEREST INCOME (P500,000 X 12% X 2) _____120, 000

GROSS ESTATE_________2,620,000

CASE B: ASSUME THERE IS RECIPROCITY, WHAT IS THE CORRECT VALUE OF THE

GROSS ESTATE?

1,500,000
THANKYOU!!!!