Gross Estate

Situs of Gross Estate

The decedents gross estate is determined

by taking inventory of the following:

GR: All properties, real or personal, tangible

or intangible, wherever located, in the case
of decedent FILIPINO CITIZENS and RESIDENT
ALIENS, shall be included as part of the gross
estate.

1. Properties owned. Properties that are

owned by the decedent at the time of his
death to the extent of his equity or interest
in such property, whether exclusive, conjugal
or communal, or common ownership.
2. Properties already transferred but still
owned. Still owned by the decedent at the
time of his death but were already
transferred during his lifetime by virtue of a
taxable transfer, such as:
a)
b)
c)
d)

Revocable transfers
Transfer in contemplation of death
Transfer for insufficient consideration
Property passing under general power
of appointment; and
e) Proceeds of life insurance policy
payable to a revocable beneficiary
Taxable transfers are real and/or personal
properties that are not physically available at
the time of death because they have been
conveyed or transferred subject to condition
and revocable by the decedent during his
lifetime.
Decedent remains to control and own them
until his death.
3. Decedents accrued interests. All interest,
earnings and remaining valuable rights
accruing to the decedent at the time of his
death even if received or collected after his
death, such as:
a) Accrued rent or interest income
b) Accrued profit in business and/or
partnerships
c) Declared dividend on or before death
not yet collected; and
d) Usufruct right transferrable to his
heirs.
Compositions and Classifications of the
Gross Estate
In general, gross estate shall include of all
property
(real,
personal,
tangible
or
intangible) owned by the decedent at the
time of his death. However, it does not
include the following:
a) Exclusive properties of the surviving
spouse
b) Properties, interests rights and all
income accruing after the death of the
decedent
c) Properties or transfers exempt by law
from estate tax

Non-resident aliens, only properties located

in the PH upon death are subject to
Philippine estate tax. When there is
reciprocity, intangible properties with PH
situs are excluded from gross estate.
Regardless of Residency. If the decedent is a
Filipino citizen, all of his properties within and
outside the PH are included in the gross
estate regardless of his residency.
Regardless of Citizenship. Resident alien, all
of his properties within and outside the PH
are also included in the gross estate
regardless of his citizenship.
Valuation of the Gross Estate
Appraised or valued at its fair market value
at the time of death.
Gross amount of properties shall not be
diminished by:
1. Encumbrances or mortgage loans
attached to the property
2. Portion of claims that are worthless
like bad debts
3. Taxes,
and
other
permissible
deductions
4. Share of the surviving spouse in the
conjugal or communal property
5. Any subsequent contingency affecting
the estate.
Usufruct Valuation
Usufruct is the legal right to use and enjoy
the benefits and profits of property belonging
to another.
There shall be taken into account the
probable life of the beneficiary in accordance
with the latest Basic Standard Mortality
Table.
Real Property Valuation
Real properties valued at its current FMV as
shown in the schedule of values fixed by the
Provincial/City Assessors (assessed value), or
the fair market value as determined by the
BIR Commissioner (zonal value), whichever is
higher.
Personal Property Valuation
1. Current Market Price
2. 2nd hand market price
1

3.
4.
5.
6.
7.

Grossed-up loan value

Fair value plus accrued interest
Discounted value
Face value
Converted Philippine peso value

Stocks, bonds
valuation

and

other

securities

1. if listed in the local stock exchange

a) Closing price on the date of death
b) Trading price at the date nearest to
the date of death, if none is available
on the date of death
2. if not listed in the local stock exchangeFMV of shares of stock not listed and traded
in the local stock exchanges is determined
by using the Adjusted Asset Method at the
date of death.
Adjusted Net Asset Method
All assets and liabilities are adjusted to FMV.
The FMV usually approximates the carrying
value (book value) of the current and
monetary assets.
1. FMV as determined by the Commissioner
2. The FMV as shown in the schedule of value
fixed by the Provincial and City Assessors
3. The FMV as determined by an Independent
Appraiser.
Additions to the gross estate
1. Taxable transfers
a)
b)
c)
d)

Revocable transfers
Transfer in contemplation of death
Transfer for insufficient consideration
Property passing under general power
of appointment; and
e) Proceeds of life insurance policy
payable to a revocable beneficiary
2. Others
a) Decedents interest accured at the
date of death
b) Usufruct right transferrable to the
decedents heirs
c) Calims against an insolvent person
d) Amount received by heirs under RA
No. 4917
Revocable transfer
Transfer of property with retention or
reservation of rights over the property by the
donor while he still lives.
1. by gift where the donor has reserved the
power to alter, amend, and revoke donation.

2. the donor retains the option to relinquish

such power in contemplation of death
3. conditional transfers where attached
conditions are not completed by the done
prior to the donors death.
As a general rule, if the enjoyment of
property transferred by decedent is subject
at the date of his death to any change
through the exercise of a power to revoke,
alter, amend, or terminate the transfer, the
transferred property is included in the
decedents estate.
Transfers in Contemplation of Death
Death must be contemplated, and the
thought of death as distinguished from
purposes associated with life, must be the
impelling cause of transfer.
1. Donation was made concurrently with
the execution of a will
2. Donation was made due to the
decedents age and/or the decedents
known serious illness at the time of
the gift
3. Time between the making of a gift and
the death of the donor was relatively
close
Purpose: to prevent evasion from estate tax
liability by the use of other forms of
conveyances rather than by succession or
transfer mortis causa.
There is transfer in contemplation of death
when the following instances are present:
1. while still alive, the decedent transferred
his property in favor of another person, but
the transfer was intended to take effect only
upon the formers death.
2. by gift intended to take effect at death, or
after death, or under which the donor
reserved the income or the right to designate
the person who should enjoy the same.
Property passing under GPA
Decedent
must
have
had
a power
exercisable in favor of himself, his estate, or
creditors of his estate.
Special Power of Appointment- if the
decedent appointed only among a restricted
or designated class of persons other than
himself, his estate, his creditors of his estate.
If the power released by the decedent is a
special power of appointment, the property
subject to such power shall be excluded from
the gross estate because the decedent had
2

already relinquished
property.

interest

over

the

Proceeds of life insurance are generally

subject to estate tax, except when:

General Power of Appointment- the property

subject to the power shall be included in the
gross estate because in substance, he owns
the property.

1. a third person is designated as irrevocable

beneficiary

Transfers for insufficient Consideration

A property other than real, is transferred for
insufficient consideration if sold or disposed
for less than its prevailing market value.
1. Nature of a bona fide sale for an adequate
and full consideration in money or moneys
worth, no value shall be included in the gross
estate.
2. The value to be included in the gross
estate shall be the excess of the fair market
value of the property at the time of the
decedents death over the consideration
received.
3. no consideration received on the transfer,
the value to be included in the gross estate
shall be the fair market value of the property
at the time of the decedents death.
4. Not shown to have been made in
contemplation of death or to take effect upon
the decedents demise, the transfer is
subject to donors tax.
Proceeds
of
Life
Insurance
Revocable Beneficiary

with

Proceeds of life insurance taken out by the

decedent on his life, when included in the
gross estate, shall be an exclusive property if
the premiums were paid out of exclusive
funds and shall be a conjugal or communal
property if the premiums were paid out of
conjugal funds.

The life insurance policies are not part of the

estate, the proceeds of life insurance policies
go directly to the named irrevocable
beneficiary.
2. the proceeds or benefits are from SSS and
GSIS
3. the proceeds are from a group insurance
taken by the employer because what the law
requires to be included refers to the
proceeds under policies taken out by the
decedent upon his own life.
Decedents Interest
Persons estate, the wealth that he would
have possessed, enjoyed and disposed, had
he lived.
Refers to the value of any interest in
property or rights accrued in favor of the
decedent on or before his death which have
been received only after his death.
As a rule, the interest must exist at the time
of the decedents death to be included as
part of the gross estate.
Claims against insolvent persons
These refer to receivables left by the
decedent but the court consequently finds
the related debtor insolvent.
A claim against an insolvent person must be
reported as part of the gross estate in the full
amount of the receivable.

1. Exclude from the gross estate if the

beneficiary is irrevocable

This should be reported as an exclusive or a

conjugal property depending on whether the
claim is derived from an exclusive or a
conjugal property.

2. Include in
beneficiary is:

Amount received by the heirs under RA

4917

the

gross

estate

if

the

Revocable
The decedents estate, his administrator or
his executor.
Where the insured transfers a life insurance
policy in contemplation of death, the amount
to be included in the gross estate is the face
value of the policy, not the cash surrender
value.
Estate Tax-Exempt
Insurance

Proceeds

of

Life

The amount received by heirs from the

decedents employer as a consequence of
the death of the decedent-employee shall be
included in the gross estate of the decedent.
It is also allowed as a deduction from the
decedents gross estate in full amount
Exclusions from Gross Estate
It refers to properties, rights, or transfers
that are specifically declared by the law as
free from the burden of estate tax.
3

GR: properties or transfers, which are exempt

by law from estate tax, are not considered in
the determination of the amount of the gross
estate
XPN: when required by law or tax regulations
Exclusions under the tax code
1. Capital of surviving spouse- property in
question is specifically identified and
belonging exclusively to either of the living
spouse.
2.
Excluded
properties
outside
the
Philippinesproperties,
whether
real,
personal are excluded from the gross estate
if the ff. conditions are met:
1. Decedent is a NRA; and
2. Properties are situated outside the PH
3. Excluded intangible personal properties:
1. Philippine situs
2. owned by a non0resident alien

Exempt transfers under the tax code

1. Merger of usufruct in the owner of naked
title
2. Transmission of legacy by the legatee
(fiduciary heir) to the fideicommissary
3. Second transfer as desired by the
predecessor- exempt from estate tax
because in substance, there is only one
transfer of the property from the testator.
4. Transfers to Social Welfare, Cultural and
Charitable Institutions
Donation is given to a duly accredited
institution
No part of the net income inures to the
benefit of any individual
Not more than 30% of the said bequests,
devises, legacies, or transfers shall be used
by such institutions for administration
purposes.
and

Exclusions

a) GSIS
b) Life insurance proceeds on life
insurance policy taken out by the
decedent himself, upon his own life,
where the beneficiary is a third person
and is irrevocably designated
c) Life insurance proceeds on group
insurance taken out by his employer
on the employees life, whoever the
beneficiary
maybe,
whether
the
designation as beneficiary is revocable
or irrevocable.
3. War benefits
a) USVA
b) Damages suffered during WWII
c) Payments from the PH of US govt to
the legal heirs of deceased of WWII
Veterans and deceased civilian for
supplies/services furnished to the US
and PH Army
4. Grants and donations

3. subject to reciprocity law

Exemptions
special laws

2. Insurance benefits

under

1. Death and retirement benefits

a) SSS or GSIS
b) Benefits received under RA 4917
(excluded from GI, likewise treated as
deduction from the gross estate of the
decedent, provided that the same was
included in the gross estate of the
deceased

a) Intramuros administration
b) Bequests to be used actually, directly,
and
exclusively
for
educational
purposes.
Other exemptions and exclusions
1. Properties held in trust by the decedent;
2. Transfer by way of bona fide sales
3. Portion paid under sales with inadequate
consideration
4. right of usufruct if non0transferable to the
heir
5. properties passing under the special
power of appointment
Deductions from gross estate
items which the law on estate tax allows to
be subtracted from the value of the gross
estate in order to arrive at the net taxable
estate.
Rules of deductions from gross estate
1. Valid deductions must be specifically
granted and within the limits as provided by
law.
Items of expenses or obligations which are
not allowed to be deducted directly could not
be deducted indirectly. Therefore, expenses
in excess of limit amount are not allowed to
be deducted as claims against the estate.
2. Substantiation- must be supported with
documentary evidences
4

3. Common deductions

and distribution of the estate among the

heirs.

4. Timing for allowable deductions

Unpaid obligations before death
Funeral expenses incurred on or before the
burial
Losses sustained on or before the settlement
date of the estate tax
5.
No
double
deductions
and
not
compensated. Deductions and losses that
have been deducted from gross income are
no longer allowed to be deducted from the
gross estate.
To be deductible, the amount of loss is not
compensated for by any insurance or extrajudicial settlement.
Deductions
of
Resident Alien

Filipino

Citizen

or

1. Ordinary deductions
2. Special deductions
3. Share of the surviving spouse
Ordinary deductions
Deductions that are comprised of expenses,
losses, indebtedness, taxes etc. (ELITE),
transfers fro public use and vanishing
deductions.
ELITE deductions actually reduce the taxable
estate as well as the amount of distributable
estate to the heirs. They consist of the
following:
a. funeral expenses
b. judicial expenses
c. casualty losses
d. claims against the estate
e. claims against the insolvent persons
f. unpaid taxes and mortgages
Funeral expenses

To be deductible, judicial expenses should be

incurred during the settlement of estate but
not beyond the last day prescribed by law or
the extension thereof, for the filing of the
estate tax return.
NOTE: it must be for the benefit of the estate
Losses
Those incurred during the settlement of the
estate
arising
from
robbery,
theft,
embezzlement, fire, shipwreck, storms
and/or other casualties.
Should have been incurred not later than the
last day for the payment of the estate tax as
long as:
1. the amount of loss is not compensated for
by any insurance or extra-judicial settlement
2. have not been claimed as deduction from
gross income for income tax purposes at the
time of the filing of the estate tax return.
Claims against insolvent person
To be deductible, the ff. must be observed:
1. the amount of said claims has been
initially included as part of the decedents
gross estate
2. the incapacity of the debtor to pay his
debt is proven not merely alleged.
Claims against the estate
Requisites
1. the liability represents a personal
obligation of the deceased existing at the
time of his death
2. liability was contracted in good faith and
for adequate and full consideration in money
or moneys worth
3. Debt or claim which is valid in law and
enforceable in court

1. Actual funeral expenses (paid or still

payable) up to the time of internment; or

4. Indebtedness must not have been

condoned by the creditor or the action to
collect from the decedent must not have
prescribed.

2. Amount equal to 5% of the gross estate

Substantiation requirements

3. Statutory limit of P200,000

Simple loan

Judicial expenses

1. debt instrument must be duly notarized at

the time the indebtedness was incurred

Lowest among the ff:

Incurred for the administration, inventory

taking of assets, and settlement of the estate

XPN: loans granted by financial institutions

where notarization is not part of the business
5

practice/policy of the financial institutionlender

said amount is used exclusively for public

purposes.

2. duly notarized certification from the

creditor as to the unpaid balance of the debt,
including interest as of the time of death.

Property previously
deduction)

3. Proof of financial capacity of the creditor

to lend the amount at the time the loan was
granted, as well as its latest audited balance
sheet with a detailed schedule of its
receivable showing the unpaid balance of the
decent-debtor
4. a statement under oath executed by the
administrator or executor of the estate
reflecting the disposition of the proceeds of
the loan if the said loan was contracted
within 3 years prior to the death of the
decedent.
Unpaid mortgages
Secured by a debtors property, contracted in
good faith and for an adequate and full
consideration in money or moneys worth.
To be deductible, the property mortgaged
must be part of the gross estate at FMV
gross of any unpaid mortgage.
Accommodation loan
If the loan is found to be merely an
accommodation loan where the loans
proceeds went to another person, the value
of the unpaid loan must be included as a
receivable of the estate.
Unpaid taxes
Taxes incurred prior to the date of the
decedents death and remained unpaid as of
the date of death are deductible.
Taxes should qualify as claims against the
estate. They must be enforceable obligations
of the decedent at the time of the latters
death.
The ff. taxes are deductible from gross
estate:
1. property taxes accrued prior to the
decedents death
2. unpaid taxes on income received by
the decedent before his death
3. gift taxes on lifetime gifts
Transfers for public use
The amount of all bequests, legacies,
devises, or transfers to or for the use of the
Govt of the Republic of the Philippines, or
any political subdivision thereof, shall be
deductible from gross estate as long as the

taxed

(vanishing

To lessen the heavy burden of paying estate

tax due to the short period of property
transfers by reason of early deaths, the
property previously subjected to estate or
donors tax may be allowed to be reduced by
a
certain
determined
amount
called
vanishing deduction.
If same property is included in the gross
estate of the present decedent, its value may
be deducted in computing the net taxable
estate, subject to the ff. conditions:
1. 5 year rule- present decedent died within
5 years from receipt of the property through
gratuitous transfer.
2. Philippine situs rule- must be located in
the PH
3. Previous transfer taxes rule- an estate or
donors tax must have been actually paid on
such property
4. No previous vanishing deduction rule
5. the same property rule
a) the one identified as the same
property received from the prior
decedent or from a donor
b) the one which can be identified as
having been acquired as exchange for
property so received.
Special Deductions
New deductions that are categorically
permitted by special laws to reduce the net
estate of:
1. Filipino decedents
2. Resident alien decedents
a. Standard deduction
deduction of P1,000,0000 is allowed as
special deduction from the net estate of a
citizen or resident decedent without the need
of substantiation.
b. family home
the dwelling house including the land on
which it is situated, where the husband and
wife, or a head of the family, and members
of their family reside.
To be deductible:

1, certified by the brgy. Captain of the

locality as the actual residential house of the
decedent and his family

3. vanishing deduction of property located in

the PH previously subjected to estate tax or
donors tax

2. included in gross estate of the decedent

4. share of surviving spouse in properties

located in the PH.

3. lower amount of the decedents interest in

the family home or P1,000,000
c. Medical expenses
Actually incurred with a maximum amount of
P500,000 is allowed as deduction from gross
estate
To be deductible:
medical expense should be incurred by the
decedent (Filipino or resident alien) within
one year prior to his death which shall be
duly substantiated with receipts.
d. Amounts received by the heirs under
RA 4917
1. Retirement benefits received by officials
and employees of private firms, whether
individual or corporate, in accordance with a
reasonable private benefit plan maintained
by the employer; provided that:
a. retiring official or employee has been in
the service of the same employer for at least
10 years and is not less than 50 years of age
at the time of his retirement.
b. availed of only once
2. benefits granted in case of separation of
official or employee from the service due to
causes beyond the control of said official or
employee.
Share of surviving spouse
The net share of the SS (50%) in the conjugal
or communal property, net of the obligations
properly chargeable therein, shall be
deducted from such amount to arrive at the
net estate.
Non-resident alien decedent
1. Prorated expenses, losses, indebtedness,
taxes etc. (ELITE)
Equivalent to the part of his gross estate
located in the PH at the time of his death.
2. Amount of transfers for public use of all
bequests, legacies devises or transfers to or
for the use of the PH govt, or any political
subdivision thereof, shall be deductible from
gross estate as long as the said amount is
used exclusively for public purposes.

Deductions not allowed to NRA

1. No deduction shall be allowed unless the
executor or administrator, or anyone of the
heirs, as the case may be, includes in the
estate tax return the value at the time of the
decedents death the properties not situated
in the PH.
2. Special deductions (Standard deduction,
family home, medical expenses, amounts
received under RA 4917)
Estate Tax (Mortis Causa)
An excise tax- it is imposed on the right of
the deceased person to transmit gratuitously
his/her properties to his/her lawful heirs and
beneficiaries at the time of death. It is
neither imposed on the decedents estate
nor on the heir receiving the property.
An ad valorem tax- the basis of valuation to
compute the estate tax is the FMV of
property transferred at the time of death.

Estate Tax of Citizens or Resident Alien

The gross estate of citizens (a resident or
nonresident) and resident aliens at the time
of death shall include all the property of the
decedent, real or personal, tangible or
intangible, wherever situated but does not
include the exclusive property of the
surviving spouse.
Estate Tax Credit
To avoid double taxation, the estate tax paid
related to estate located in foreign countries
by a Filipino citizen or resident alien
decedent is allowed to be credited against
the total Philippine estate tax due.
The amount of estate taxes paid to a foreign
country could be claimed as credit against
the PH estate tax subject to limit, if such
taxes pertain to properties which are
included in the gross estate for PH estate tax
computation.
Estate Tax of NRA
For estate tax computation, only the
properties of a Nonresident decedent
situated in the PH are subject to PH estate
tax. The deduction allowed shall be applied
proportionately in relation to PH gross estate.
7

If there is reciprocity, intangible assets are

excluded for estate tax purposes. Real and
tangible personal assets are to be included
only if situated in the PH.
Without reciprocity, all of the properties
situated in the PH are subject to PH estate
tax.
Administrative requirements
Value of Gross Estate
Require
ments

Notice of
death
(within 2
months)
Excise
tax
return
within 6
months
CPA
CERT.

Excee
ds
20,00
0
YES

Excee
ds
200,0
00
YES

Excee
ds
2,000,
000
YES

NO

YES

YES

NO

NO

YES

In cases where a registered taxpayer dies,

the administrator or executor shall register
the estate of the decedent and a new TIN
shall be supplied in accordance with the
provision of Sec. 90 of RA 8424.
In case of a NR decedent, the executor or
administrator of the estate shall register the
estate with the RDO where he is not
registered registration of the estate shall be
made with and the TIN supplied by the RDO
having jurisdiction over his legal residence.
Liability for Payment of Estate Tax
Primary obligation the estate, through the
executor or administrator shall have the
primary obligation to pay the estate tax.
The estate tax clearance issued by the BIR
Commissioner or the RDO having jurisdiction
over the estate will serve as the authority to
distribute the remaining distributable estate
to the heirs or beneficiaries.
Subsidiary obligation heirs or beneficiaries
have subsidiary liability to pay the estate
tax.
The extent of their liability however, shall in
no case exceed the value of his share in the
inheritance.
Notice of death
Required if:

1, Gross transfer is subject to estate tax

2. Gross estate exceeds P20,000
Shall be made within 2 months after the
decedents death.
Filing and Payment of Estate Tax
1. Return is to be filed if the gross estate
exceeds P200,000
2. Gross value exceeding 2,000,000 shall
be supported with a statement duly
certified by a CAPA
3. The estate tax return shall be filed
within 6 mos. From the decedents
death.
4. Reasonable extension may be given,
not exceeding 30 days shall be
granted by the BIR Commissioner or
any authorized RDO
5. GR: executor, administrator or the
heirs shall pay the estate tax imposed
under the Code at the time the return
is filed.
6. By
reason
of
undue
hardship,
extension for the time of payment
may be given not to exceed 5 years in
case of judicially settled estates or 2
years in case of extra judicially settled
estates.
7. Reason for extension is negligence,
intentional disregard of rules and
regulations, or fraud on the part of the
TP, the commissioner shall not grant
such extension
8. Any amount paid after the statutory
due date of the tax but within the
extension period shall be subject to
interest but not to surcharge.
9. Request for extension shall be filed
with the RDO where the estate is
required to secure its TIN and file the
estate tax return.
Surcharges, Interest and Penalties
25% surcharge
violations:

for

each

of

the

ff.

1. Failure to file any return and pay

the amount of tax or installment
due on or before the due date
2. Filing a return with a person or
office other than those with whom
it is required to be filed
3. Failure to pay the full or partial
amount of tax shown on the
return or the full amount of tax
due for which no return is
required to be filed on or before
the due date.
4. Failure to pay the deficiency tax
within the time prescribed for its
8

payment
in
assessment

the

notice

of

50% surcharge
1. willful neglect to file the return within the
period prescribed by the code or by rules and
regulations
2. return filed is false or fraudulent
Interest 20% per annum shall be imposed
on the basic unpaid amount of tax from the
date prescribed for the payment until the
amount is fully paid.
Payment of Estate tax by installment
1. Clearance shall be released only with
respect
to
property
the
corresponding/computed tax on which
has been paid
2. Any amount paid after the statutory
due date of the tax shall be imposed
the corresponding applicable penalty
thereto
3. If the commissioner or his duly
authorized representative approves
the payment of the tax after the due
date, the imposable penalty thereon
shall only be interest.
4. The commissioner may enforce action
against the estate after the due date
of the estate tax provided that all the
applicable
laws
and
required
procedures are observed

3. business organization
Valuation of donation
The value of the property/right donated shall
be the FMV existing at the time when the gift
was made.
Usufruct Donation
The value of donated usufruct is determined
by computing the annual value of usufruct to
the extent of its present value based on the
number of years of usufractuary right.
Real Property Donation
Assessed value or zonal value whichever is
higher.
1.
2.
3.
4.
5.
6.
7.
8.

Personal Property Donation

Current market price
Second hand market price
Grossed up loan value
Fair value plus accrued interest
Discounted value
Face value
Converted Philippine peso value

Stocks, bonds
donation

and

other

securities

1. If listed in the local stock exchange

Closing price on the date of donation

Trading price at the date nearest to
the date of donation

NDE represents the value of the net estate

which shall be inherited by the heirs or
beneficiaries.

2. Not listed- the FMV of shares of stock not

listed and traded in the local stock
exchanges is determined by using the
Adjusted Net Asset Method at the date of
donation.

Donors tax (Inter vivos)

Transfer for Inadequate Consideration

Not a property tax, but one which is imposed

on the transfer of property by way of gift
inter vivos.

A transaction may pass as a slae or

exchange but if there is a comparative
disparity in consideration, the difference is
deemed a gift.

NET DISTRIBUTABLE ESTATE

Donors Tax on Gifts to Relatives

1. Brother, sister, (whether by whole or half
blood),
spouse,
ancestor
and
lineal
descendant, legally adopted children;or
2. relative by consanguinity in the collateral
line within the 4th degree of relationship.
Donors tax on gift to stranger
30% of the net gift
1. those that do not belong to the
definition of relative for donors tax
purposes
2. relative by affinity or by virtue of
marriage

Property other than real is transferred for

inadequate consideration, the amount in
excess of the propertys fair market value or
the consideration shall be deemed a gift.
The excess shall be included in computing
the amount of the gifts made during the
calendar year, except in the sale of real
property classified as capital assed which
has been subjected to final tax.
If fictitious, the entire value of the property
transferred shall be subject to donors tax.
An apparent sale, if proven by the
circumstances to be really a donation, may
be treated as a taxable donation.
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Renunciation of Inheritance
General renunciationdonors tax

not

Deductions from gross gifts

subject

to

Specific and Categorical made in favor of

identified heirs or persons to the exclusion or
disadvantage of the other co-heirs in the
hereditary estate such is subject to donors
tax.
Conjugal Donation
Spouses who make donation out of conjugal
property shall be considered a separate
donor of his or her interest in the conjugal
property.
of the conjugal property shall be
considered donation of the husband and the
other half a donation of the wife. Unless the
wife expressly joins in making the donation,
it shall be deemed to have been made by the
husband alone.
Political Contributions
GR: any contributions given to candiddates,
political parties or coalition of parties are not
subject to donors tax as long as the ff
conditions are met.

1. Dowry Exemption
Reduced by 10,000 by ea. Parent
1. Gift is on account of marriage
2. Donee must be their legitimate,
recognized
natural,
or
adopted
children
3. Giving of the gift is made before the
celebration of marriage or within one
year thereafter.
2. Encumbrance Assumed by the Donee
The law allows an encumbrance as deduction
from gross gift if assumed by the done
because such obligation is onerous on the
part of the done; hence not part of the gift.
3. Diminution of gift provided by the
donor
The decrease in the value of property
donated as a result of a condition made by
the donor to the done to give a portion of the
donated property to another person.
Donations to the National Government

If not reported it is subject to donors tax

Gifts made 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 thereof shall be
exempt from donors tax.

Destroyed donations

Donation to Non-Profit Organizations

1. Contribution is for campaign purposes

2. Duly reported to the comelec

The donors tax accrues upon the completion

of a gift. If the donated property was
destroyed after the delivery, the donor is still
liable to pay the related donors tax.
Net taxable gift and donors tax

Imposed upon the net taxable gifts

Computation is on a cumulative basis
over a period of one calendar year

Gross gift
The value of property or right donated
subject to donors tax before any allowable
deduction is a gross gift.
Net gift
Net economic benefit from the transfer that
accrues to the done.
If a mortgaged property is transferred as a
gift but imposing upon the done the
obligation to pay the mortgage liability, the
net gift is measured by deducting the
amount of the mortgage assumed from the
FMV of the property.

1.
2.
3.
4.
5.
6.
7.
8.

Educational
Charitable
Religious
Cultural
Social welfare
Accredited NGO
Trust or philanthropic organizations
Research institutions

To be exempt the done organization:

1. Must be an accredited non-stock and
non-profit organization
2. Shall not use more than 30% of the
gifts
received
for
administrative
purposes
3. Governed
by
trustees
with
no
compensation
4. Does not pay dividends
5. Devotes all of its revenue to the
accomplishment and promotion for its
purposes enumerated in its Articles of
Incorporation
Donors tax credit
Donors tax paid by a Filipino citizen or
resident donor is creditable against the total
PH donors due using the ff tax treatment:
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1. Creditable in full amount, if the donors tax

was paid to the PH govt.
2. Creditable subject to limit, if paid to
foreign country.
Filing and Payment of Donors Tax
Any person who makes any transfer by gift,
except those who are exempted from donors
tax provided for in the Tax Code shall, for the
purpose of the said tax, make a return under
oath in duplicate.
1. Each gift made during the calendar
year which is to be included in
computing net gifts.
2. The deductions claimed and allowable
3. Any previous net gifts made during the
same calendar year
4. The name of the done
5. Such further information as may be
required by rules and regulations
made pursuant to the law.

Donee is not required to file any return

unless he acts as an agent of the donor.
Donors tax is payable upon the filing of
the return. Filing of returns for donors tax
is within 30 days after the date the gift is
made and the tax due thereon must be
paid on the date of filing.

Penalties
25% surcharge- it is imposable if no
return is filed within the prescribed time
except
that
when
the
return
is
subsequently filed by the taxpayer. No
such surcharge shall be imposed if:
1. The donors tax return if filed
voluntarily
2. Without notice from the BIR
Commissioner
3. It is shown that there was a
reasonable cause for failure to file
the return
4. The failure was not due to willful
neglect
50% surcharge is imposable under the ff.
instances:
1. Willful neglect to file the return
within the period prescribed by the
Code or by rules and regulations
2. The return filed is false or
fraudulent
Interest at the rate of 20% per annum
shall be imposed on the basic unpaid amount
of tax from the date prescribed for payment
until the amount is fully paid.

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