Composition of Gross Estate:

1. Decedents Interest
2. Transfer in Contemplation of Death
3. Revocable Transfer
4. Property Passing Under General Power of Appointment
5. Proceeds of life Insurance
6. Prior Interests
7. Transfers for Insufficient Consideration
8. Claims against insolvent person
9. Unpaid mortgages
10. Property previously tax or vanishing deduction
11. Family home
12. Amounts Received under RA 4917
ALLOWED DEDUCTIONS
1.
2.
3.
4.
5.
6.
7.

Expenses, Losses, Indebtedness, and Taxes (ELIT)

Property previously Taxed or Vanishing Deduction
Transfer for Public Use
The Family Home
Standard Deduction
Medical Expenses
Amount Received by Heirs Under RA 4917

FUNERAL EXPENSES: they include:

1. The mourning apparel of the surviving spouse and unmarried minor children of the
deceased brought and used on the occasion of the burial;
2. Expenses for the deceaseds wake, including food and drinks;
3. Publication charges for death notices;
4. Telecommunication expenses incurred in informing relatives of the deceased;
5. Cost of burial plot, tombstones, monument or mausoleum but not their upkeep. In
case the deceased owns a family estate or several burial lots, only the value
corresponding to the plot where he is buried is deductible;
6. Interment and/or cremation fees and charges; and
7. All other expenses incurred for the performance of the rites and ceremonies incident
to interment
JUDICIAL EXPENSES may include:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Fees of executor or administrator;

Attorneys fees
Courts fees
Accountants fees
Appraisers fees
Clerk hire
Costs of preserving and distributing the estate
Costs of storing or maintaining property of the estate
Brokerage fees for selling property of the estate.

Requisites for Deductibility of Claims against the Estate:

1. The liability represents a personal obligation of the deceased existing at the time of
his death except:
a. Unpaid obligations incurred incident to his death such as unpaid funeral
expenses
b. Unpaid medical expenses which are classified under a different category of
deductions
2. The liability was contracted in good faith and for adequate and full consideration in
money or moneys worth
3. The claim must be a debt or claim which is valid in law and enforceable in court and
4. The indebtedness must not have been condoned by the creditor or the action to
collect from the decedent must not have prescribed.
Requisites of Vanishing Deductions
1. The property situated in the Philippines must be part of the gross estate of the
present decedent.
2. The present decedent must have died within five years prior to the death of the prior
decedent or the property was transferred by donation to the present decedent within
5 years prior to his death.
3. The estate or donors tax must have been paid on the property transferred to the
present decedent
4. Such property can be identified as having been received by the present 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.
DONORS TAX
Exceptions (subject to donors tax)
1. Transfer with insufficient consideration
2. Condonation or remission of the debt, not due to rendition of service
3. Renunciation of inheritance in favor of identified heirs to the exclusion of other coheirs
Exemption of Certain gifts
1. Dowries or gifts made on accounts of marriage and before its celebration or within
one year thereafter by parents to each of their legitimate, recognized natural, or
adopted children to the extent of the first P10,000.
2. Gift made to or for the use of the National Government or any entity created by any
of its agencies which is not conducted for profit or to any political subdivision of the
said government.
3. Gifts in favor of educational, charitable, religious, cultural, social welfare corporation,
institution, accredited nongovernment organization or trust or philanthropic
organization or research institution or organization
4. Mortgage assumed by the donee
5. Diminutions specifically provided by the donor.
Requisites:
1. The entity or institution must either or any of those mentioned above

2. Not more than 30% of said gifts shall be used by such done for administration
purposes;
3. Incorporated as a nonstick entity, paying no dividends, governed by trustees who
receives no compensation, and devoting all its income, whether students fees or
gifts, donation, subsidies or other forms of philanthropy, to the accomplishment
and promotion of the purposes enumerated in the Articles of Incorporation
VAT
ZERO RATED VAT
(a) Export Sales. - The term 'export sales' means:

(1) The sale and actual shipment of goods from the Philippines to a foreign country,
irrespective of any shipping arrangement that may be agreed upon which may
influence or determine the transfer of ownership of the goods so exported and paid
for in acceptable foreign currency or its equivalent in goods or services, and
accounted for in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);
(2) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a
resident local export-oriented enterprise to be used in manufacturing, processing,
packing or repacking in the Philippines of the said buyer's goods and paid for in
acceptable foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
(3) Sale of raw materials or packaging materials to export-oriented enterprise whose
export sales exceed seventy percent (70%) of total annual production;
(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and
(5) Those considered export sales under Executive Order NO. 226, otherwise known as
the Omnibus Investment Code of 1987, and other special laws.

(b) Foreign Currency Denominated Sale. - The phrase 'foreign currency denominated sale'
means sale to a nonresident of goods, except those mentioned in Sections 149 and 150,
assembled or manufactured in the Philippines for delivery to a resident in the Philippines,
paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP).

(c) Sales to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects such sales to zero
rate.

Transactions deemed sale:

1. Transfer, use or consumption not in the course of business of goods or properties
originally intended for sale or for use in the course of business
2. Distribution or transfer to shareholder or invertors as share in the profits of VATregistered persons or creditor in payment of debt;
3. Consignment of goods if actual sake is not made within 60 days following the date
such goods were consigned and
4. Retirement from or cessation of business, with respect to inventories of taxable
goods existing as of such retirement or cessation

Imposition:
1. VAT on sale of goods or properties
2. Sale by VAT-registered person subject to zero percent rate:
a. Export sale
b. Foreign currency denominated sale
c. By special laws or international agreements
d. Transaction subject to zero percent rate
3. Transaction deemed sale
4. VAT on importation of goods
5. Transfer of goods by tax-exempt person
6. VAT on sale of services and use or lease of properties
7. Franchise grantees under section 119
PERSONS LIABLE:
1. Any person who, in the course of trade or business, sells, barters, exchanges, leases
goods or properties renders services
2. Any person who imports goods shall be subject to the VAT
3. If a person who is not a VAT-registered person issues an invoice or receipt showing his
TIN followed by the word VAT
4. If a VAT registered person issues a VAT invoice or VAT official receipt for a VAT-exempt
transaction, but fails to display prominently on the invoice or receipt the term VATexempt Sale, the issuer shall be liable to account for the tax imposed in SEC 106 to
108 as if sec 109 did not apply.
To be liable to VAT the following must concur:
1.
2.
3.
4.

Person liable under Sec 105

The amount of annual gross sales or receipts exceeds the threshold P1919,500
It is not one of the exempt transactions under sec 109
Regardless of annual gross sales or receipts if the taxpayers opted to be a VAT
registered person
5. An importer whether engage in the course of trade or business

Transitional input tax credit

It is an input tax credit allowed to person who becomes liable to value-added tax or any
person who elects to be a VAT-registered person. The allowed input tax shall be whichever is
higher between:
1. 2% of the value of the taxpayers beginning inventory of goods, materials and supplies; or
2. The actual value-added tax paid on such goods.
Presumptive input tax credit
It is an input tax credit allowed to persons or firms engaged in the processing of sardines,
mackerel and milk or manufacturing of refined sugar, cooking oil and packed noodle based
instant meals shall be allowed input tax shall be equivalent to four percent (4%) of the gross
value in money of their purchases of primary agricultural products which are used as inputs
to their production.