DEDUCTIONS FROM GROSS ESTATE
UNDER PHILIPPINES TAX RULES AND SINGAPORE TAX RULES
ADVENTIST UNIVERSITY OF PHILIPPINES
DEDUCTIONS FROM GROSS ESTATE
PHILIPPINES TAX RULES
For deaths occurring on or after January 1, 1998, the amount allowable as deduction shall be the lower amount between the actual funeral expenses (whether paid or unpaid) and five percent (5%) of the gross estate, but in no case to exceed two hundred thousand pesos (P200,000). Judicial Expenses
‘Judicial expenses of the testamentary or intestate proceedings’ are those incurred in the: •
inventory taking of assets comprising the gross estate
the payment of debts of the estate
distribution of the estate among the heirs
Claims against the Estate
A claim against the estate is an obligation contracted by the decedent when he was alive which he should have settled or paid during his lifetime. It may arise out of contract, tort, and operation of law. Claims against Insolvent Person
For claims of the deceased against insolvents persons to be deductible: 1.
the full amount of the claim must be included in the gross estate 2.
the incapacity of the debtors to pay their debts due to insolvency must be proven Unpaid Mortgages
For unpaid mortgage to be deductible:
the fair market value of the property mortgaged must be included in the gross estate in full 2.
the unpaid mortgage shall be to the extent that it was contracted bona fide and for an adequate and full consideration in money or money’s worth Unpaid Taxes
These are taxes which have accrued as of the death of the decedent but which were unpaid as of the time of death. Casualty Losses
There shall also be deducted losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualties, or robbery, theft or embezzlement; subject to the following conditions that such losses: 1.
are not compensated for by insurance or otherwise;
at the time of the filing of the return, have not been claimed as a deduction for income tax purposes in an income tax return; and 3.
were incurred not later than the last day for payment of the estate tax. Property Previously Taxed or Vanishing Deduction
Step-by-step computation of the vanishing deduction:
Value taken of PPT*)
Less: Mortgage debt or other lien paid,
if any (1st deduction)
Less: 2nd deduction
Multiply by percentage of deduction
*) The value of the property previously taxed or the aggregate value of such property if more than one item, as finally determined for the purpose of the prior estate tax or the value of such property in present decedent’s gross estate, whichever is lower. Period between two deaths
Percentage of deductions
1 year or less
More than 1 year months but not more than 2 years
More than 2 years but not more than 3 years
More than 3 years but not more than 4 years
More than 4 years but not more than 5 years
Transfers for Public Use
There shall be allowed as deduction from gross estate 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 exclusive public purposes. Family Home
The family home must be the actual residential home of the decedent and his family at the time of his death. 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, whichever is lower, but not exceeding P1,000,000. Standard Deduction
A deduction in the amount of P1,000,000 shall be allowed as an additional deduction without need of substantiation. Medical Expenses
Medical expenses incurred by the decedent, paid or unpaid, within 1 year prior to his death...
References: Ballada, S., & Ballada, W. (2007). Transfer and Business Taxation (8th ed.). Manila: DomDane Publishers.
Inland Revenue Authority of Singapore. (2008). How to calculate estate duty. Retrieved March 12, 2008, from http://www.iras.gov.sg/irasHome/page03.aspx?id=1186#Exemptions
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