ESTATES AND TRUSTS

ESTATE
-

Refers to the mass of properties left by a deceased person.

The status of the estate is determined by the status of the decedent at the time of his
death; so an estate, as an income taxpayer can be citizen or an alien.
The taxable estate entity is one under administration or judicial settlement. If not under
judicial, testamentary or intestate proceedings, it is not a taxable entity. The income
thereof is taxable directly to the heir or beneficiary.

RULES ON TAXABILITY OF ESTATE:

When a person who owns property dies, the following taxes are payable under the
provisions of the income tax law:
1. Income tax for individuals under Sec. 24 and 25 of the NIRC (to cover the period
beginning January to the time of death); and
2. Estate income tax under Sec. 60 of the NIRC if the estate is under judicial
settlement or administration.

A. ESTATE UNDER JUDICIAL SETTLEMENT

1. During the pendency of the settlement

ESTATE UNDER JUDICIAL

SETTLEMENT (PENDING

TAX BASE:
Income derived
during a taxable
year from all
sources, within
and without the
Philippines.

Amount of Net
Taxable
Income
Over

Tax Rates:
Taxable Net
Income subject to
graduated rate of
5%-32%.

Exceptions:
a.

Entitlement to personal
exemption is limited only to
P20,000.00
1st view: RA 9504 amended the NIRC
increasing the basic personal
exemption amounting to P50,000.00
for each individual taxpayer. Estates
and trusts are considered in the NIRC
as individual taxpayers and therefore
the exemption allowed to them
should also be increased from
P20,000.00 to P50,000.00.

Rate

But Not
Over

2nd view: Tax exemptions are strictly

construed. Sec. 62 of the NIRC
explicitly provides that the exemption
allowed to estates and trusts is
P20,000.00.

P10,00
5%
0
P10,00
0

P30,00 P500 + 10% of the Excess

0
over P10,000

b.

No additional exemption allowed;

and

P30,00
0

P70,00 P2,500 + 15% of the

0
Excess over P30,000

c.

P70,00
0

P140,0 P8,500 + 20% of the

00
Excess over P70,000

Distribution to the heirs during

the taxable year of estate income
is deductible from the taxable
income of the estate.

P140,0
00

P250,0 P22,500 + 25% of the

00
Excess over P140,000

P250,0
00

P500,0 P50,000 + 30% of the

00
Excess over P250,000

P500,0

P125,000 + 32% of the

Where no such distribution to the

heirs is made during the taxable
year when the income is earned,
and such income is subjected to
income tax payment by the
estate, the subsequent
distribution thereof is no
longertaxable on the part of the
recipient.

2. Termination of Judicial Settlement (where the heirs still have not divided the property)

ESTATE UNDER JUDICIAL SETTLEMENT

(TERMINATION OF JUDICIAL

HEIRS
CONTRIBUTE TO
THE ESTATE
MONEY,
PROPERTY OR
INDUSTRY:
An unregistered
partnership is
created and the
estate becomes
liable for the
payment of:
CORPORATE
INCOME TAX

HEIRS DID NOT

CONTRIBUTE TO
THE ESTATE
MONEY,
PROPERTY OR
INDUSTRY,
SIMPLY DIVIDE
THE FRUITS:
A co-ownership is
created and the
heirs shall be
liable for the
payment of:
INDIVIDUAL
INCOME TAX

B. ESTATE NOT UNDER JUDICIAL SETTLEMENT

Pending the extrajudicial settlement, the income tax liability depends on WON the unregistered
partnership or co-ownership is created.

------bebe zan, in general na po ito for

estates
Final Withholding Tax on Passive Incomes
subject to Final Tax
ESTATES

Interest Income

LIQUIDATIN
G
DIVIDENDS
Liquidating
gain is
subject to:
Graduated
Rates of 5%-

Royalties

A. Yield from
Deposit
Substitutes,
Turst, Frunds &
Other similar
arrangments:
20%
B. Net Income
From Expanded
Foreign
Currency
Deposit System:
7.5%

Prizes &
Winnings

A. Use and
exhaustion of
property such as
earnings from
copyrights,
patents,
trademarks,
formulas and
natural
resources under
B. Royalties
from books,
literary works
and musical
compositions:
10%

C. Interest
Income from
Local Bank
Deposits:
20%

NOTES:
1. It covers both
payments made:
- Under license; and
- Under Compensation
which a person would
be obliged to pay for
fraudulently copying
or infringing the right.
2. Royalties must be
derived from sources
within the Philippines
to be considered as
passive income.
3. If it is derived from
sources outside the
Philippines, the

Dividends

A. Prizes (except
P10,000 or less)
& Winnings
(regardless of
the amount):
20%
XPN: PCSO and
lotto winnings
are not subject
NOTES:
1. Prizes amounting to
P10,000 or less,
although exempt from
final tax, are to be
included in gross
income and subject to
the graduated rates.
2. Prizes and
Winnings from
sources without the
PH are included in the
Gross Income of a
Resident Citizen.

CAPITAL GAINS TAX

RULES ON CAPITAL GAINS AND LOSSES
of an ESTATE

CASH &
PROPERTY
DIVIDENDS
1. On:
a. Cash &/or
Property
Dividends
from
domestic
corporation
or from a
joint stock
company,
etc.
b. Share in
the
distributable
net income
after tax of a
taxable or
business
partnership;
and
c. Share in
the net
income after
tax of an
association, a
joint account,
or a joint
venture or
consortium
taxable as a
corporation
of w/c he is a
member or
co-venturer:
10%
2. On cash
and/or
property

STOCK
DIVIDENDS

GR: A stock
dividend
representing the
transfer of
surplus to
capital account
shall not be
taxable. (Sec 73,
B, NIRC)
Exceptions:
1. It gives the
shareholder an
interest
different from
that which his
former stock
represented;
2. Different
classes of stocks
were issued;
3. Stock
dividend is table
to Usufructuary;
4. When there is
redemption or
cancellation
essentially
equivalent to
the distribution
of taxable
dividends;
5. The recipient
is either than
the shareholder;
and
6. Dividends

CAPITAL ASSETS

ORDINARY ASSETS
1. Stocks in Trade of the
taxpayer or other properties of a
kind which would properly be
included in the inventory of the
taxpayer if on hand at the close
of the taxable year.

All properties not classified as

ordinary asset.
-SUBJECT TO CGTA.

2. Property held by the taxpayer

primarily for sale to customers in
the ORDINARY COURSE OF
BUSINESS.
3. Personal Property used in
trade or business subject to
depreciation.

Sales of shares of stock of a

domestic corporation not
listed and not traded
through stock exchange by
a non-dealer securities:

B.

4. Real property used in trade or

business.

1st P100,000.00 5%
In excess of
P100,000.00 10%
Sale or Other Disposition of
Real Property subject to
CGT:
6% on the gross selling
price or zonal values of
the provincial and city
assessors, whichever is
the highest

Note: The above-mentioned

list is
exclusive.
Tax
Treatment:
1.

Ordinary Gains
included in the gross
income.

2.

Ordinary Losses
deductible from gross
income.

OTHER CAPITAL ASSETS NOT

SUBJECT TO CGT
Involves sale or exchange or one
considered as equivalent to a
sale or exchange of property
classified as capital asset
except:
1.

Unlisted shares of stock

of a domestic
corporation; and

2.

Real property in the

Philippines held as
capital asset.
Tax Treatment and Rate:
Included in the gross income
subject to the regular income tax
rates.
Tax Base:
Net Capital Gains

Tax Base:
Net Capital Gains on a per
transaction basis.
XPNS:
- Sale of Principal Residence
- Buyer is the Government or
any of its political
subdivisions
- Sale subject to right of
redemption
-NOT SUBJECT TO CGT

Regular Income Tax

Rates
Rules to be followed in
the determination of the
gross income:

Holding Period
(NIRC, Sec 29 B)
Loss Limitation Rule
(NIRC, Sec 29 C)
NELCO (NIRC, Sec 29
D)

Notes: The rules on capital

Gross Income of An Estate subject to

Income Tax
All

income derived from whatever source, including but not

PARTNERS
SHARE IN THE
NET INCOME OF
THE GENERAL
PROFESSIONAL

RENT
S
COMPENSATI

GAINS FROM
DEALINGS IN
PROPERTY

ANNUITI
ES

GROSS

ROYALTI
ES

PENSIO

DIVIDEN
DS
INTERES
TS

GROSS INCOME
FROM
PROFESSION,
TRADE OR

PRIZES AND
WINNINGS

The following are

likewise included in
the taxpayers gross
income:
1. Treasure found or
punitive damages
representing profits lost;
2. Amount received by
mistake;

Meaning of the Phrase Gross Income from whatever

Derived
-

Indicates a legislative policy to include all

not expressly
exempted within the class of taxable income
our laws.
(CIR vs. AIR India, G.R. No. 72443, January 29,

3. Cancellation of the
taxpayers indebtedness
on account of service
rendered;
4. Payment of usurious
interest;

Source

5. Illegal gains;

income

6. Tax refunds and bad

debts recovered;

under

7. Subsidy; and

1988)

8. Unutilized or excess of
the campaign funds,
which is in excess of
campaign contributions
over the candidates

EXCLUSIONS FROM GROSS INCOME OF ESTATES

Income received or earned but is not included in the determination of gross income
and thus not taxable either because:
1. They are not income, gain or profit.
2. They represent return of capital.

3. They are subject to another kind of internal revenue tax.

4. They are income, gain or profits which are expressly exempt from income tax under the
Constitution, tax treaty, NIRC or general or special law.
EXCLUSION VS. EXEMPTION
EXCLUSION

EXEMPTION

Refers to the
removal
of
otherwise
taxable
items
from the reach
of taxation

Refers
to
an
immunity
or
privilege,
freedom
from
charge
or
burden to which
other
persons
are subject to
tax
(PLDT v Laguna, G.R. No. 151899, August 16, 2005)
1. PROCEEDS OF LIFE INSURANCE
CONDITION: The life insurance proceeds must be paid to the heirs or beneficiaries by reason of
death of the insured, whether in a single sum or installment.
2. RETURN OF INSURANCE PREMIUM

ITEMS OF
EXCLUSI
ONS

CONDITION: The amounts must be received as a return of premiums paid by him under life
insurance, endowment or annuity contracts.
3. GIFT, BEQUEST, DEVISE OR DESCENT
CONDITION: Only donated property is excluded from gross income.

4. COMPENSATION FOR INJURIES OR SICKNESS

CONDITION: The term injury includes death, even if there is no injury. If the person dies, the
compensation received on account of his death is also excluded from the gross income.
5. RETIREMENT BENEFITS, PENSIONS AND GRATUITIES
CONDITION: It does not matter whether the retirement is voluntary. As long as requirements are
met, the retirement proceeds are excluded from gross income.
6. INCOME EXEMPT UNDER TREATY
CONDITION: Income of any kind to the extent required by any treaty obligation binding upon the
Government of the Philippines may be excluded from the gross income.
7. MISCELLANEOUS ITEMS
- PASSIVE INCOME
- INCOME DERIVED BY THE PHILIPPINE GOVERNMENT OR ITS POLITICAL SUBDIVISION
- PRIZES AND AWARDS
- PRIZES AND AWARDS GRANTED TO ATHLETES IN SPORTS COMPETITIONS LOCALLY OR ABROAD AND
SANCTIONED BY THEIR NATIONAL SPORTS ASSOCIATION
- 13TH MONTH PAY AND OTHER BENEFITS UP TO P30,000.00
- GSIS, SSS, MEDICARE (NOW PHILHEALTH) AND PAG-IBIG CONTRIBUTIONS AND UNION DUES OF
INDIVIDUALS
- GAINS DERIVED FROM SALE OR EXCHANGE OF BONDS, DEBENTURES, OR OTHER CERTIFICATE OF
INDEBTEDNESS WITH A MATURITY OF MORE THAN 5 YEARS
- GAINS FROM REDEMPTION OF SHARES IN MUTUAL FUNDS

DEDUCTIONS FROM GROSS INCOME OF AN ESTATES

ALLOWABLE DEDUCTIONS
FOR ESTATES

ITEMIZED
DEDUCTION

PERSONAL
OPTIONAL
EXEMPTIONS STANDARD
DEDUCTIONS

PREMIUM
PAYMENTS ON
HEALTH AND/OR
HOSPITALIZATION
INSURANCE

Illustrative Case
Facts:
In 1945, Atanasio Pineda died, survived by his wife and 15 children, the eldest of whom is Manuel B. Pineda, a
lawyer. The estate was divided among and awarded to the heirs. Manuel Pineda received a share amounted to about
P2,500.00.
After the estate proceedings were closed, the BIR investigated the income tax liability of the estate for the years
1945-1948 and it found that the corresponding income tax returns were not filed. Manuel, contested the same alleging
that he was appealing only that proportionate part or portion pertaining to him as one of the heirs.
The Commissioner of Internal Revenue appealed and proposed to hold Manuel B. Pineda liable for the payment
of all taxes found by the Tax Court to be due from the estate in the total amount of P760.28 instead of only for the amount
of taxes corresponding to his share in the estate.

Issue:
Whether or not Manuel Pineda is liable to pay all the taxes as found by the tax court.

Ruling:
No. Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the
estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to the share he received from
the inheritance. The reason is that the Government has a lien on the P2,500.00 received by him from the estate as his
share in the inheritance, for unpaid income taxes for which said estate is liable, pursuant to the last paragraph of Section
315 of the Tax Code. (CIR vs Manuel B. Pineda, GR No. L-22734, September 15, 1967)

trusts
a legal arrangement whereby the owner of the property(trustor) transfers ownership to a person (trustee)
who is to hold and control the property belonging to the owners instructions, for the benefit of a
designated person(s) (beneficiaries).
A right to the property, whether real or personal, held by one person for the benefit of another.
(Gayondato vs. Treasurer of P.I., G.R. No. L-24597, October 18, 1988)

The status of a trust depends upon the status of the grantor or creator of the trust. Hence, a trust can also
be a citizen or an alien.

EXCEPTIONS

WHEN IS IT TAXABLE?
1. Trust income is to be accumulated in
trust for the benefit of unborn or
unascertained person or persons with
contingent interest and income
accumulated or held for future distribution
under the terms of the will or trust;

1. Employees trust must be party of a

pension, stock bonus, or profit sharing plan
of the employer for the benefit of some or
all his employees;
2. Contributions are made to the trust by
such employer, or such employees, or both;

2. Trust income is to be distributed currently

by the fiduciary to the beneficiaries;

3. Such contributions are made for the

purpose of distributing to such employees
both the earnings and principal of the fund
accumulated by the trust; and

3. Income collected by a guardian of an

infant which is to be held or distributed as
the court may direct; or

4. The trust instrument makes it impossible

for any part of the trust corpus or income to
be used for or diverted to, purposes other
than the exclusive benefit of such
employees.

4. Trust in which the fiduciary may, at its

discretion, either distribute or accumulate
the income.

NOTE:
Any amount actually distributed to any
employee or distributee shall be
taxable to him in the year in which so
distributed to the extent that it
exceeds the amount contributed by
such employee or distributee.

EXCEPTIONS:
1.

In a revocable trust, the income of the trust

shall be included in computing the taxable
income of the grantor. (Sec. 63, NIRC)
REVOCABLE TRUST- where at any time
the power to revest in the grantor title
to any part of the corpus of the trust is
vested:

a.

b.

2.

In the grantor either alone or in conjunction

with any person not having a substantial
adverse interest in the disposition of such
part of the corpus or income therefrom, or
In any person not having a substantial
adverse interest in the disposition of such
part of the corpus or the income therefrom.

In a trust where the income is held for the

TAXABILITY OF THE INCOME

OF
TRUST
benefit of
the A
grantor,
the income of the

RULES:
1.

If income is distributed to beneficiaries, the

beneficiaries shall file the return and pay
the tax.

2.

If income is to be accumulated or held for

future distribution, the trustee or
beneficiary shall file the return and pay the
tax.

3.

trust becomes income to the grantor. (Sec.

63, NIRC)
In a trust administered in a foreign country,
the income of the trust, undiminished by
any amount distributed to the beneficiaries
shall be taxed to the trustee. (Sec. 61(c)
NIRC)
IRREVOCABLE TRUST
Irrevocable both as to corpus and as to income.
The trust itself, through the trustee or fiduciary, is
liable for the payment of income tax.
It is taxed exactly in the same way as estates
under judicial settlements and its status as an
individual is that of the trustor.
It is entitled to the minimum personal exemption
(P20,000) and distribution of trust income during
the taxable year to the beneficiaries is deductible
from the trusts taxable income.

SUMMARY
INCOME IS

TAXPAYER

For the benefit of the

grantor
Retained by the trust
Distributed to
beneficiary

Grantor
Fiduciary
Beneficiary

CONSOLIDATION OF INCOME OF TWO OR MORE TRUSTS

Where two or more trusts are created by the same grantor, the beneficiary in each instance is the
same person, the fiduciaries shall file a separate return for, and pay the income tax of, each trust, but the
CIR shall cause the income tax to be computed on the consolidated income of the several trusts, allowing
one exemption (P20,000). (Sec. 60(c) NIRC)
The income tax computed on the consolidated taxable income shall be allocated between the
several trusts in proportion to their respective taxable income.

------bebe zan, in general na po ito for

trusts
Final Withholding Tax on Passive Incomes
subject to Final Tax
TRUSTS

Royalties

Interest Income

LIQUIDATIN
G
DIVIDENDS
Liquidating
gain is
subject to:
Graduated
Rates of 5%-

Prizes &
Winnings

A. Use and
exhaustion of
property such as
earnings from
copyrights,
patents,
trademarks,
formulas and
natural
resources under

A. Yield from
Deposit
Substitutes,
Turst, Frunds &
Other similar
arrangments:
20%
B. Net Income
From Expanded
Foreign
Currency
Deposit System:

B. Royalties
from books,
literary works
and musical
compositions:

7.5%

10%
NOTES:
1. It covers both
payments made:
- Under license; and
- Under Compensation
which a person would
be obliged to pay for
fraudulently copying
or infringing the right.
2. Royalties must be
derived from sources
within the Philippines
to be considered as
passive income.
3. If it is derived from
sources outside the
Philippines, the

C. Interest
Income from
Local Bank
Deposits:
20%

Dividends

A. Prizes (except
P10,000 or less)
& Winnings
(regardless of
the amount):
20%
XPN: PCSO and
lotto winnings
are not subject
NOTES:
1. Prizes amounting to
P10,000 or less,
although exempt from
final tax, are to be
included in gross
income and subject to
the graduated rates.
2. Prizes and
Winnings from
sources without the
PH are included in the
Gross Income of a
Resident Citizen.

CASH &
PROPERTY
DIVIDENDS
1. On:
a. Cash &/or
Property
Dividends
from
domestic
corporation
or from a
joint stock
company,
etc.
b. Share in
the
distributable
net income
after tax of a
taxable or
business
partnership;
and
c. Share in
the net
income after
tax of an
association, a
joint account,
or a joint
venture or
consortium
taxable as a
corporation
of w/c he is a
member or
co-venturer:
10%
2. On cash
and/or
property

CAPITAL ASSETS
All properties not classified as
ordinary asset.
-SUBJECT TO CGTA.

Sales of shares of stock of a

domestic corporation not
listed and not traded
through stock exchange by
a non-dealer securities:

B.

CAPITAL
RULES ON

ORDINARY ASSETS
1. Stocks in Trade of the
taxpayer or other properties of a
kind which would properly be
included in the inventory of the
taxpayer if on hand at the close
of the taxable year.
2. Property held by the taxpayer
primarily for sale to customers in
the ORDINARY COURSE OF
BUSINESS.
3. Personal Property used in
trade or business subject to
depreciation.
Tax Treatment:
4. Real property used in trade or
business.
1. Ordinary Gains
included in the gross
Note: The
above-mentioned
income.
list is exclusive.
2. Ordinary Losses
deductible from gross
income.

1st P100,000.00 5%
In excess of
P100,000.00 10%
Sale or Other Disposition of
Real Property subject to
CGT:

6% on the gross selling

price or zonal values of
CAPITAL
GAINS
AND
the provincial
and
city
assessors,
whichever is
of a TRUST
the highest

Tax Base:
Net Capital Gains on a per
transaction basis.
XPNS:
- Sale of Principal Residence
- Buyer is the Government or
any of its political
subdivisions
- Sale subject to right of
redemption
-NOT SUBJECT TO CGT

Regular Income Tax

Rates
Rules to be followed in
the determination of the
gross income:

Holding Period
(NIRC, Sec 29 B)
Loss Limitation Rule
(NIRC, Sec 29 C)
NELCO (NIRC, Sec 29
D)

GAINS TAX
LOSSES

OTHER CAPITAL ASSETS NOT

SUBJECT TO CGT
Involves sale or exchange or one
considered as equivalent to a
sale or exchange of property
classified as capital asset
except:
1.

Unlisted shares of stock

of a domestic
corporation; and

2.

Real property in the

Philippines held as
capital asset.
Tax Treatment and Rate:
Included in the gross income
subject to the regular income tax
rates.
Tax Base:
Net Capital Gains

STOCK
DIVIDENDS

GR: A stock
dividend
representing the
transfer of
surplus to
capital account
shall not be
taxable. (Sec 73,
B, NIRC)
Exceptions:
1. It gives the
shareholder an
interest
different from
that which his
former stock
represented;
2. Different
classes of stocks
were issued;
3. Stock
dividend is table
to Usufructuary;
4. When there is
redemption or
cancellation
essentially
equivalent to
the distribution
of taxable
dividends;
5. The recipient
is either than
the shareholder;
and
6. Dividends

Gross Income of A Trust subject to Income

Tax
All
limited to

income derived from whatever source, including but not

the following:
PARTNERS
SHARE IN THE
NET INCOME OF
THE GENERAL
PROFESSIONAL
PARTNERSHIP

RENT
S

COMPENSATI

GAINS FROM
DEALINGS IN
PROPERTY

GROSS

ANNUITI
ES

PENSIO

DIVIDEN
DS
INTERES
TS

ROYALTI
ES

GROSS INCOME
FROM
PROFESSION,
TRADE OR

PRIZES AND
WINNINGS

The following are

likewise included in
the taxpayers gross
income:
1. Treasure found or
punitive damages
representing profits lost;
2. Amount received by
mistake;

Meaning of the Phrase Gross Income from whatever

Derived
-

Indicates a legislative policy to include all

not expressly
exempted within the class of taxable income
our laws.
(CIR vs. AIR India, G.R. No. 72443, January 29,

3. Cancellation of the
taxpayers indebtedness
on account of service
rendered;
4. Payment of usurious
interest;

Source

5. Illegal gains;

income

6. Tax refunds and bad

debts recovered;

under

7. Subsidy; and

1988)

8. Unutilized or excess of
the campaign funds,
which is in excess of
campaign contributions
over the candidates

EXCLUSIONS FROM GROSS INCOME OF TRUSTS

Income received or earned but is not included in the determination of gross income
and thus not taxable either because:
1.
2.
3.
4.

They are not income, gain or profit.

They represent return of capital.
They are subject to another kind of internal revenue tax.
They are income, gain or profits which are expressly exempt from income tax under the
Constitution, tax treaty, NIRC or general or special law.

EXCLUSION VS. EXEMPTION

EXCLUSION
Refers

to

the

EXEMPTION
Refers

to

an

removal
of
otherwise
taxable
items
from the reach
of taxation

immunity
or
privilege,
freedom
from
charge
or
burden to which
other
persons
are subject to
tax
(PLDT v Laguna, G.R. No. 151899, August 16, 2005)
1. PROCEEDS OF LIFE INSURANCE
CONDITION: The life insurance proceeds must be paid to the heirs or beneficiaries by reason of
death of the insured, whether in a single sum or installment.
2. RETURN OF INSURANCE PREMIUM

ITEMS OF
EXCLUSI
ONS

CONDITION: The amounts must be received as a return of premiums paid by him under life
insurance, endowment or annuity contracts.
3. GIFT, BEQUEST, DEVISE OR DESCENT
CONDITION: Only donated property is excluded from gross income.

4. COMPENSATION FOR INJURIES OR SICKNESS

CONDITION: The term injury includes death, even if there is no injury. If the person dies, the
compensation received on account of his death is also excluded from the gross income.
5. RETIREMENT BENEFITS, PENSIONS AND GRATUITIES
CONDITION: It does not matter whether the retirement is voluntary. As long as requirements are
met, the retirement proceeds are excluded from gross income.
6. INCOME EXEMPT UNDER TREATY
CONDITION: Income of any kind to the extent required by any treaty obligation binding upon the
Government of the Philippines may be excluded from the gross income.
7. MISCELLANEOUS ITEMS
- PASSIVE INCOME
- INCOME DERIVED BY THE PHILIPPINE GOVERNMENT OR ITS POLITICAL SUBDIVISION
- PRIZES AND AWARDS
- PRIZES AND AWARDS GRANTED TO ATHLETES IN SPORTS COMPETITIONS LOCALLY OR ABROAD AND
SANCTIONED BY THEIR NATIONAL SPORTS ASSOCIATION
- 13TH MONTH PAY AND OTHER BENEFITS UP TO P30,000.00
- GSIS, SSS, MEDICARE (NOW PHILHEALTH) AND PAG-IBIG CONTRIBUTIONS AND UNION DUES OF
INDIVIDUALS
- GAINS DERIVED FROM SALE OR EXCHANGE OF BONDS, DEBENTURES, OR OTHER CERTIFICATE OF
INDEBTEDNESS WITH A MATURITY OF MORE THAN 5 YEARS
- GAINS FROM REDEMPTION OF SHARES IN MUTUAL FUNDS

DEDUCTIONS FROM GROSS INCOME OF A TRUST

ALLOWABLE DEDUCTIONS
FOR TRUSTS

ITEMIZED
DEDUCTION

PERSONAL
OPTIONAL
EXEMPTIONS STANDARD
DEDUCTIONS

PREMIUM
PAYMENTS ON
HEALTH AND/OR
HOSPITALIZATION
INSURANCE

TAXABLE ESTATES VS. TAXABLE TRUSTS

Taxable Estate

Taxable Trust

The taxable income

shall be determined in
the same way as that
of individuals, but with
a special deduction for
any amount of income
paid, credited or
distributed to the heirs.

The taxable income

shall be determined in
the same way as that
of individuals, but with:
1. Special deduction for
any amount of income
paid, credited or
distributed to the heirs.
2. A special deduction
for any amount of the
income applied for the
benefit of the grantor.
The exemption is
P20,000.00.
The income tax rates
for individuals apply.
There is a creditable
withholding tax on
payment to the heir of
15%. (RR No. 02-98,
Sec. 2.57.2|f|)
The income tax return
shall be filed if the
gross income is
P20,000.00 or more

1st view: P50,000.00

2nd view: P20,000.00
The income tax rates
for individuals apply.
There is a creditable
withholding tax on
payment to the heir of
15%. (RR No. 02-98,
Sec. 2.57.2|f|)
The income tax return
shall be filed if the
gross income is
P20,000.00 or more

and the tax is paid by

the executor or
administrator. (Sec. 65,
NIRC)

and the tax is paid by

the fiduciary. (Sec. 65,
NIRC)