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The properties subject to Estate Tax shall be appraised based on its fair
market value at the time of the decedent's death.
If there is no zonal value, the taxable base is the fair market value that
appears in the latest tax declaration.
An amount equal to the value specified below of any property forming a part
of the gross estate situated in the Philippines of any person who died within
five (5) years prior to the death of the decedent, or transferred to the
decedent by gift within five (5) years prior to his death, where such property
can be identified as having been received by the decedent from the donor by
gift, or from such prior decedent by gift, bequest, devise or inheritance, or
which can be identified as having been acquired in exchange for property so
received:
One hundred percent (100%) of the value, if the prior decedent died within
one (1) year prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to his death;
Eighty percent (80%) of the value, if the prior decedent died more than one
(1) year but not more than two (2) years prior to the death of the decedent,
or if the property was transferred to him by gift within the same period prior
to his death;
Sixty percent (60%) of the value, if the prior decedent died more than two
(2) years but not more than three (3) years prior to the death of the
decedent, or if the property was transferred to him by gift within the same
period prior to his death;
Forty percent (40%) of the value, if the prior decedent died more than three
(3) years but not more than four (4) years prior to the death of the decedent,
or if the property was transferred to him by gift within the same period prior
to his death; and
Twenty percent (20%) of the value, if the prior decedent died more than four
(4) years but not more than five (5) years prior to the death of the decedent,
or if the property was transferred to him by gift within the same period prior
to his death;
These deductions shall be allowed only where a donors tax or estate tax
imposed was finally determined and paid by or on behalf of such donor, or
the estate of such prior decedent, as the case may be, and only in the
amount finally determined as the value of such property in determining the
value of the gift, or the gross estate of such prior decedent, and only to the
extent that the value of such property is included in the decedents gross
estate, and only if in determining the value of the estate of the prior
decedent, no Property Previously Taxed or Vanishing Deduction was allowable
7. What does the term "Judicial Expenses" include? (Sec 6 (A)(2) of RR 22003)
Expenses allowed as deduction under this category are those incurred in the
inventory-taking of a assets comprising the gross estate, their
administration, the payment of debts of the estate, as well as the distribution
of the estate among the heirs. In short, these deductible items are expenses
incurred during the settlement of the estate but not beyond the last day
prescribed by law, or the extension thereof, for the filing of the estate tax
return. Judicial expenses may include:
(a) Fees of executor or administrator;
(b) Attorneys fees;
(c) Court fees;
(d) Accountants fees;
(e) Appraisers fees;
(f) Clerk hire;
(g) Costs of preserving and distributing the estate;
(h) Costs of storing or maintaining property of the estate; and
(i) Brokerage fees for selling property of the estate.
Any unpaid amount for the aforementioned cost and expenses claimed
under Judicial Expenses should be supported by a sworn statement of
account issued and signed by the creditor.
8. What are the requisites for deductibility of claims against the Estate? (Sec
6(A)(3) of RR 2-2003)
(a) The liability represents a personal obligation of the deceased existing at
the time of his death except unpaid obligations incurred incident to his death
such as unpaid funeral expenses (i.e., expenses incurred up to the time of
interment) and unpaid medical expenses which are classified under a
different category of deductions pursuant to these Regulations;
(b) The liability was contracted in good faith and for adequate and full
consideration in money or moneys worth;
(c) The claim must be a debt or claim which is valid in law and enforceable in
court;
(d) The indebtedness must not have been condoned by the creditor or the
action to collect from the decedent must not have prescribed.
9. How do we determine the fair market value of the unlisted stocks? (RR
NO. 6-2013) (Annex U)
In determining the value of the shares, the Adjusted Net Asset Method shall
be used whereby all assets and liabilities are adjusted to fair market values.
The net of adjusted asset minus the adjusted liability value is the indicated
value of the equity.
For purposes of this item, the appraised value of real property at the time of
sale shall be the highest among the following:
(a) The fair market value as determined by the Commissioner, or
(b) The fair market value as shown in the schedule of values fixed by the
Provincial and City Assessors, or
(c) The fair market value as determined by Independent Appraiser.
DONORS TAX
1. Who are required to file the Donors Tax Return?
Every person, whether natural or juridical, resident or non-resident, who
transfers or causes to transfer property by gift, whether in trust or otherwise,
whether the gift is direct or indirect and whether the property is real or
personal, tangible or intangible.
2. What donations are tax exempt?
A. In the Case of Gifts made by a Resident (Sec. 101 (A), NIRC as amended)
C. Tax Credit for Donor's Taxes Paid to a Foreign Country (Sec. 101 (C), NIRC
as amended)
In General. - The tax imposed by this Title upon a donor who was
a citizen or a resident at the time of donation shall be credited
with the amount of any donor's tax of any character and
description imposed by the authority of a foreign country.
- The amount of the credit in respect to the tax paid to any country shall not
exceed the same proportion of the tax against which such credit is taken,
which the net gifts situated within such country taxable under this Title bears
to
his
entire
net
gifts;
and
- The total amount of the credit shall not exceed the same proportion of the
tax against which such credit is taken, which the donor's net gifts situated
outside the Philippines taxable under this title bears to his entire net gifts.
3. What are the bases in the valuation of property?
If the gift is made in property, the fair market value at that time will be
considered the amount of gift.
In case of real property, the taxable base is the fair market value as
determined by the Commissioner of Internal Revenue (Zonal Value) or fair
market value as shown in the latest schedule of values fixed by the provincial
and city assessor (MV per Tax Declaration), whichever is higher. (Sec. 88 and
102, NIRC as amended)
If there is no zonal value, the taxable base is the fair market value that
appears in the tax declaration at the time of the gift
4. For purposes of Donors Tax, what does the term Net Gift mean?
For purposes of the donors tax, NET GIFT shall mean the net economic
benefit from the transfer that accrues to the donee. Accordingly, if a
mortgaged property is transferred as a gift, but imposing upon the donee the
obligation to pay the mortgage liability, then the net gift is measured by
deducting from the fair market value of the property the amount of mortgage
assumed. (sec. 11, RR No. 2-2003)
5. Under R.A. No. 7166, any contribution in cash or in kind to any candidate
or political party or coalition of parties for campaign purposes shall not be
subject to the payment of any gift tax. What instance will it be subject to
Donors Tax?
Those contributions in cash or in kind NOT duly reported to the Commission
on Elections (COMELEC) shall not be subject to donors tax.
Section 99 (C) of the Tax Code, as amended, provides that any contribution
in cash or in kind for campaign purposes shall be governed by R.A. No. 7166
or the Election Code.
Section 13 of the R.A. No. 7166 specifically states that any provision of law to
the contrary notwithstanding any contribution in cash or kind to any
candidate or political party or coalition of parties for campaign purposes,
duly reported to the Commission shall not be subject to the payment of any
gift tax (donors tax). Accordingly, the BIR can impose donors tax on
contributions of this nature. (Q-14, RMC No. 63-2009)
6. For purposes of Donors Tax, is a legally adopted child considered
stranger?
A legally adopted child is entitled to all the rights and obligations provided by
law to legitimate children, and therefore, donation to him shall not be
considered as donation made to stranger. (sec. 10, RR No. 2-2003)
7. For purposes of Donors Tax, are donations between businesses considered
donations made between strangers?
Donation made between business organizations and those made between an
individual and a business organization shall be considered as donation made
to a stranger. (sec. 10, RR No. 2-2003)
8. Are gratuitous donations to Homeowners Associations subject to Donors
Tax?
Gifts, donations, and other contributions received by the Homeowners
Associations (Associations) are subject to the payment of donors tax
pursuant to Section 98 and 99 of the Tax Code, as amended. Endowment or
gifts received by such associations are not exempt from donors tax
considering that gifts to Associations are not qualified for exemption under
Section 101(A)(3) of the Tax Code. (II, RMC No. 53-2013)
9. Is an onerous donation or donation in exchange for goods, services or use
or lease of properties to Homeowners Association subject to Donors Tax?
Pursuant to RMC No. 9-2013, Associations are subject to the corresponding
internal revenue taxes imposed under the Tax Code of 1997 on their income
of whatever kind and character. In this regard, contributions to associations
in exchange for goods, services and use of properties constitute as other
assessments/charges from activity in exchange for the performance of a
service, use of properties or delivery of an object. As such, these fees are
income on the part of the associations that are subject to income tax under
Section 27 of the Tax Code, as amended. (III, RMC No. 53-2013)
10. What is the proper treatment for transactions involving transfer of
property other than real property referred to in Section 24 (D) for less than
adequate and full consideration?
Where property, other than real property referred to in Section 24 (D) of the
NIRC, as amended, is transferred for less than adequate and full
consideration in money or moneys worth, then the amount by which the fair
market value of the property exceeded the value of the consideration shall,
for the purpose of Donors Tax, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year. (Sec. 100,
NIRC, as amended)
11. What entities are considered exempted from Donors Tax under special
laws?
The list below consists of entities considered Donors Tax exempt under
special laws including, but not limited to the following:
National Commission for Culture and the Arts (Sec. 35, R.A. No.
10066)
Asian
Fisheries
12. How do we determine the fair market value of the unlisted stocks?
In determining the value of the shares, the Adjusted Net Asset Method shall
be used whereby all assets and liabilities are adjusted to fair market values.
The net of adjusted asset minus the adjusted liability value is the indicated
value of the equity.
For purposes of this item, the appraised value of real property at the time of
sale shall be the highest among the following:
(a) The fair market value as determined by the Commissioner, or
(b) The fair market value as shown in the schedule of values fixed by
the Provincial and City Assessors, or
(c) The fair market value as determined by Independent Appraiser. (RR NO.
6-2013) (Annex U)