CHAPTER II ESTATE AND DONOR’S TAXES*
A. ESTATE TAX 1. Taxpayer and Tax Base The estate tax is imposed on the transfer of the decedent’s estate to his lawful heirs and beneficiaries based on the fair market value of the net estate at the time of the decedent’s death. It is not a tax on property. It is a tax imposed on the privilege of transmitting property upon the death of the owner. The Estate Tax is based on the laws in force at the time of death notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary. 2. Computation of Net Estate a. Gross estate The value of the gross estate of the decedent includes the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated.1 In the case of a nonresident decedent who at the time of his death was not a citizen of the Philippines, only that part of the entire gross estate situated in the Philippines is included in the taxable estate.2 Gross estate3 includes property falling under any of the following categories: (1) Decedent’s interest, to the extent of his interest therein at the time of his death;
(2) Transfers in contemplation of death;
* 1 2
Title III of the National Internal Revenue Code (NIRC) of 1997, as amended. Sec. 85, NIRC of 1997.
No estate tax shall be collected in respect of intangible personal property if (a) the decedent at the time of death was a citizen and resident of a foreign country which did not impose a transfer tax of any character, in respect of intangible personal property of citizens of the Philippines not residing in that foreign country; or (b) if the laws of the foreign country of which the decedent was a citizen or resident allows a similar exemption from transfer or death taxes of every character in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country. (Sec. 104, Ibid) 3
Sec. 85(a) to (g), supra.
(3) Revocable transfers; (4) Property passing under general power of appointment; (5) Proceeds of life insurance; (6) Prior interests; and (7) Transfer for insufficient consideration. The following are excluded from the gross estate:4 (1) (2) (3) GSIS proceeds/ benefits Accruals from SSS Proceeds of life insurance where the beneficiary is irrevocably appointed Proceeds of life insurance under a group insurance taken by employer (not taken out upon his life) War damage payments Transfer by way of bona fide sales Transfer of property to the National Government or to any of its political subdivisions Separate property of the surviving spouse Merger of usufruct in the owner of the naked title Properties held in trust by the decedent Acquisition and/or transfer expressly declared as not taxable
(5) (6) (7)
(8) (9) (10) (11)
(12) Personal Equity and Retirement Account (PERA) assets of the decedent-contributor.5 b. Net estate6 The net estate is determined by deducting from the value7 of gross estate the total amount of allowable deductions. 4 5
Source: (August 16, 2010).
Section 14, Republic Act No. 9505 or the “Personal Equity and Retirement Account (PERA) Act of 2008.” 6 7
Sec. 86, supra.
With the adoption of the zonal valuation scheme under PD 1994, the computation for estate tax purposes of real properties shall be based on the zonal values at the time of death. Where no zonal values are yet approved, the computation shall be based on the schedule of fair market values prepared by the Provincial or City Assessors, or where both values exist, on whichever is higher. See Sec. 88(b), Ibid.
c. Deductions (1) In the case of citizens or residents of the Philippines8 (a) Expenses, losses, indebtedness, and taxes consisting of; (i) Actual funeral expenses or five percent 5% of the gross estate, whichever is lower, but not exceeding Two Hundred Thousand Pesos (P200,000.00); (ii) Judicial expenses of the testamentary or intestate proceedings; (iii) Claims...
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