Gruba Transfer Tax Notes PDF

GUIDE
NOTES and CASES ON TRANSFER TAXES (ESTATE TAX AND excess of the two hundred fifty thousand pesos (P250,000)
DONORS TAX) ( with amendments introduced by RA 10963 or the exempt gift made during the calendar year.
TRAIN Law.)
Q: How are transfer taxes distinguished from business taxes?
TRANSFER TAXES IN GENERAL
* Transfer taxes are taxes imposed on the privilege of
Q: What is a transfer tax? transferring properties, real or personal, without consideration.
On the other hand, business taxes are imposed upon a person,
* A transfer tax is a tax imposed on the privilege of transferring who is engaged in trade or business or in the exercise of
properties, real or personal, without consideration. profession, including but not limited to value-‐added tax, other
percentages taxes, excise taxes and documentary stamp tax.
Q: What is the nature of a transfer tax?
Take note of the remaining relevant provisions RR No. 02-‐03 dated
* A transfer tax is an excise tax or privilege tax that is imposed on 17 January 2003 which supposed to consolidates all RRs issued on
the act of passing ownership of property, and is not a tax on the estate tax and donor’s tax. But this will now be read together with
property transferred. the various amendments provided for in RA 10963 or the TRAIN Law.
Q: What are the kinds of transfer tax? ESTATE TAX
* These are estate tax and donor’s tax. Estate tax is a tax that is Sec. 84, Rates of Estate Tax
levied, assessed, collected, and paid upon the transfer of the net
estate of a decedent to his or her heirs. On the other hand, There shall be levied, assessed, collected and paid upon the
donor’s tax is an excise tax levied, collected, and paid upon the transfer of the net estate as determined in accordance with
privilege of transferring property gratuitously by way of gift inter Sections 85 and 86 of every decedent, whether resident or
vivos by any person, resident or non-‐resident. nonresident of the Philippines, a tax AT THE RATE OF SIX PERCENT
(6%) based on the value of such net estate
Q: Differentiate between estate tax and donor’s tax.
Q: What is an estate tax?
(1) Estate tax is a tax on the privilege to transfer property upon
one’s death (mortis causa); donor’s tax is a tax on the privilege to * Estate tax is a tax that is levied, assessed, collected, and paid
transfer property during one’s lifetime (inter vivos). upon the transfer of the net estate of a decedent to his or her
(2) The maximum tax rate of estate tax is 6% on net estates ; the heirs. The net estate is computed as follows:
maximum tax rate of donor’s tax is also 6 % on the total gifts. IN
Prof. L.K. Gruba SY2018-‐2019 1

Gross estate standard deductions, minus the share of the intangible personal property, the same is subject to the rule of
surviving spouse, minus special deductions equals the net reciprocity under Section 104 of the 1997 Tax Code.
taxable estate.
Q: Define real property and personal property.
Q: What are the factors considered in computing estate tax?
* Definition of real property follows that in Article 415 of the
* To determine estate tax, the following must first be Civil Code. Definition of personal property follows that
considered: (1) who the taxpayer is, based on nationality and/or provided in Article 417 also of the Civil Code.
domicile; (2) the nature and location of the assets; (3) the
computation and valuation of the assets, including deductions; Article 415 of the Civil Code considers the following as
and (4) the tax rates. immovable property:
Sec. 85, Gross Estate 1. Land, buildings, roads and constructions of all kinds adhered
to the soil;
The value of the gross estate of the decedent shall be determined 2. Trees, plants, and growing fruits, while they are attached to
by including the value at the time of his death of all property, real the land or form an integral part of an immovable;
or personal, tangible or intangible, wherever situated: Provided, 3. Everything attached to an immovable in a fixed manner, in
however, that in the case of a nonresident decedent who at the such a way that it cannot be separated therefrom without
time of his death was not a citizen of the Philippines, only that part breaking the material or deterioration if the object;
of the entire gross estate which is situated in the Philippines shall 4. Statues, reliefs, paintings or other objects for use or
be included in his taxable estate. ornamentation, placed in buildings or on lands by the owner of
the immovable in such a manner that it reveals the intention to
Q: What kind of assets, properties, and interest should be part of attach them permanently to the tenements;
the gross estate? 5. Machinery, receptacles, instruments or implements
intended by the owner of the tenement for an industry or
* Generally, gross estate includes: (1) real property; (2) works which may be carried on in a building or on a piece of
intangible personal property; and (3) tangible personal land, and which tend directly to meet the needs of the said
property. Specific rules are followed depending on who the industry or works;
taxpayer is, based on nationality and/or domicile. For residents 6. Animal houses, pigeon-‐houses, beehives, fish ponds or
and citizens: all assets, real or personal, tangible or intangible, breeding places of similar nature, in case their owner has
wherever located. For non-‐resident aliens: only properties placed them or preserves them with the intention to have
located in the Philippines, provided that in the case of them permanently attached to the land, and forming a

permanent part of it; the animals in these places are included; of the business of which is located in the Philippines;
7. Fertilizer actually used on a piece of land; 4. Shares, obligations or bonds issued by any foreign
8. Mines, quarries, and slag dumps, while the matter thereof corporation if such shares, obligations or bonds have acquired
forms part of the bed, and waters either running or stagnant; a business situs in the Philippines; and
9. Docks and structures which, though floating, are intended 5. Shares or rights in any partnership, business or industry
by their nature and object to remain at a fixed place on a river, established in the Philippines.
lake, or coast; and
10. Contracts for public works, and servitudes and other real Q: Explain the date-‐of-‐death rule.
rights over immovable property.
* Taxation is governed by the statute in force at the time of
Article 416 of the Civil Code considers the following as personal death of the decedent. The estate tax accrues as of the death
property: of the decedent and the accrual of the tax is distinct from the
obligation to pay the same. If death is the generating source
1. Those movables susceptible of appropriation which are not from which the power of the state to impose inheritance taxes
included in Article 415; takes its being and if, upon the death of the decedent,
2. Real property which by any special provision of law is succession takes place and the right of the state to tax vests
considered as personal property; instantly, the tax should be measured by the value of the
3. Forces of nature which are brought under control by estate as it stood at the time of the decedent’s death,
science; and regardless of any subsequent contingency affecting value of
4. In general, all things which can be transported from place to any subsequent increase or decrease in value.
place without impairment of the real property to which they
are fixed. The right of the state to a inheritance tax accrues at the
moment of death, and hence is ordinarily measured as to any
Intangible personal properties which are considered as situated beneficiary by the value at the time of such property passes to
in the Philippines under Section 104 of the 1997 Tax Code him. Subsequent appreciation or depreciation is immaterial.
include:
** The properties and rights are transferred to the successors
1. Franchise which must be exercised in the Philippines; at the time of death. [Article 777, Civil Code]
2. Shares, obligations or bonds issued by any corporation or
sociedad anonima organized and constituted in the Philippines *** However, the Register of Deeds shall not transfer the title
in accordance with its laws; to the properties without the Certificate Authorizing
3. Shares, obligations or bonds by any foreign corporation 85% Registration issued by relevant RDO evidencing filing of estate

tax return and payment of applicable estate tax. [RR No. 24-‐02] 85(B) Transfer in Contemplation of Death -‐ To the extent of any
interest therein of which the decedent has at any time made a
Q: How are properties valued for purposes of computing the gross transfer, by trust or otherwise, in contemplation of or intended to
estate? take effect in possession or enjoyment at or after death, or of
which he has at any time made a transfer, by trust or otherwise,
* Real property: fair market value, as determined by the CIR or under which he has retained for his life or for any period which
as shown in the schedule of values fixed by the provincial and does not in fact end before his death (1) the possession or
city assessors, whichever is higher. enjoyment of, or the right to the income from the property, or (2)
the right, either alone or in conjunction with any person, to
Shares of stock: if listed – arithmetic mean between the highest designate the person who shall possess or enjoy the property or
and the lowest quotation at the date nearest the date of the the income therefrom; except in case of a bonafide sale for an
death; if unlisted – book value for common shares, and par adequate and full consideration in money or money's worth.
value for preferred shares.
Q: What are the two kinds of transfer in contemplation of death?
Personal property: fair market value.
* These are:
Q: What are those interests which may be included as part of the
gross estate of the decedent? 1. Transfer is made by trust or otherwise, in contemplation of
or intended to take effect in possession or enjoyment at or
* These are: (1) decedent’s interest; (2) transfer in after death; and
contemplation of death; (3) revocable transfer; (4) property 2. Transfer is made by trust or otherwise, under which the
passing under general power of appointment; (5) proceeds of decedent has retained for his life or for any period which does
life insurance; (6) prior interests; (7) transfer for insufficient not in fact end before his death:
consideration; and (8) capital of the surviving spouse. a. The possession or enjoyment of, or the right to the income
from the property; or
85(A) Decedent’s Interest -‐ To the extent of the interest therein of
b. The right, either alone or in conjunction with any person, to
the decedent at the time of his death.
designate the person who shall possess or enjoy the property
or the income therefrom.
Q: What is covered by the decedent’s interest?
Q: Differentiate between a donation inter vivos (subject to donor’s
* The interests referred to in this provision are those interests
tax) and a donation mortis causa (or a transfer in contemplation of
which have already accrued to the decedent during his lifetime
death, subject to estate tax).
although not yet received at the time of death.

* In the case of Alejandro v. Geraldez, the Gavino Spouses clause is another indication that the donation is inter vivos.
owned a parcel of land which, in 1949, was the subject matter Donations mortis causa, being in the form of a will, are never
of a deed of donation. As a result of the execution of said deed, accepted by the donees during the donors' lifetime.
the parcel of land was divided into three equal parts: (1) 1/3 Acceptance is a requirement for donations inter vivos.”
was donated to their granddaughter, Andrea Diaz; (2) 1/3 was [Alejandro v. Geraldez, GR Nos. L-‐33849 & L-‐33968, 18 Aug.
given to their grandson, Angel Diaz; and (3) the last 1/3 was 1977.]
reserved and retained by the Gavino Spouses for their support.
In dispute was the nature of the deed of donation, i.e., whether ** In the case of Gestopa v. CA, Spouses Diego Danlag and
it was inter vivos or mortis causa. Catalina Danlag owned six parcels of land. With the consent of
his wife, Diego Danlag executed a deed of donation over said
[NOTE: See the text of the decision for an extensive parcels of land in favor of his illegitimate child, Mercedes
differentiation between donations inter vivos and mortis Danlag. Controversy arose as to whether the deed of donation
causa.] Relevant portion of the decision read: “If the donation was inter vivos or mortis causa. The Supreme Court held that it
is made in contemplation of the donor's death, meaning that was a donation inter vivos for the following reasons: (1) the
the full or naked ownership of the donated properties will pass granting clause of the deed showed that Diego donated the
to the donee only because of the donor's death, then it is at properties out of love and affection for Mercedes; (2) the
that time that the donation takes effect, and it is a donation reservation clause in respect of the lifetime usufruct indicated
mortis causa which should be embodied in a last will and that Diego intended to transfer the naked ownership over the
testament (Bonsato vs. Court of Appeals, 95 Phil. 481). properties; (3) Diego reserved sufficient properties for his
maintenance in accordance with his standing in society; and (4)
But if the donation takes effect during the donor's lifetime or Mercedes accepted the donation. [Gestopa v. CA, GR No.
independently of the donor's death, meaning that the full or 111904, 5 Oct. 2000]
naked ownership (nuda proprietas) of the donated properties
passes to the donee during the donor's lifetime, not by reason *** As a general rule, donations mortis causa are subject to
of his death but because of the deed of donation, then the estate tax while donations inter vivos are subject to donor’s
donation is inter vivos (Castro vs. Court of Appeals, L-‐ 20122, tax. However, donations inter vivos may be subject to estate
April 28, 1969, 27 SCRA 1076).” tax if the transferor’s control over the property subject of the
donation extends up to the death of the transferor, such as
The Supreme Court held that it was a donation inter vivos, transfers in contemplation of death or revocable transfers.
upon examination of the warranty, acceptance, and
reservation clauses of the deed. Particularly as regards the 85(C) Revocable Transfer. -‐ (1) To the extent of any interest
acceptance clause, the Supreme Court said: “The acceptance therein, of which the decedent has at any time made a transfer

(except in case of a bona fide sale for an adequate and full 85(D) Property Passing Under General Power of Appointment. -‐ To
consideration in money or money's worth) by trust or otherwise, the extent of any property passing under a general power of
where the enjoyment thereof was subject at the date of his death appointment exercised by the decedent: (1) by will, or (2) by deed
to any change through the exercise of a power (in whatever executed in contemplation of, or intended to take effect in
capacity exercisable) by the decedent alone or by the decedent in possession or enjoyment at, or after his death, or (3) by deed
conjunction with any other person (without regard to when or under which he has retained for his life or any period not
from what source the decedent acquired such power), t o alter, ascertainable without reference to his death or for any period
amend, revoke, or terminate, or where any such power is which does not in fact end before his death (a) the possession or
relinquished in contemplation of the decedent's death. (2) For the enjoyment of, or the right to the income from, the property, or (b)
purpose of this Subsection, the power to alter, amend or revoke the right, either alone or in conjunction with any person, to
shall be considered to exist on the date of the decedent's death designate the persons who shall possess or enjoy the property or
even though the exercise of the power is subject to a precedent the income therefrom; except in case of a bona fide sale for an
giving of notice or even though the alteration, amendment or adequate and full consideration in money or money's worth.
revocation takes effect only on the expiration of a stated period
after the exercise of the power, whether or not on or before the 85(E) Proceeds of Life Insurance. -‐ To the extent of the amount
date of the decedent's death notice has been given or the power receivable by the estate of the deceased, his executor, or
has been exercised. In such cases, proper adjustment shall be administrator, as insurance under policies taken out by the
made representing the interests which would have been excluded decedent upon his own life, irrespective of whether or not the
from the power if the decedent had lived, and for such purpose if insured retained the power of revocation, or to the extent of the
the notice has not been given or the power has not been exercised amount receivable by any beneficiary designated in the policy of
on or before the date of his death, such notice shall be considered insurance, except when it is expressly stipulated that the
to have been given, or the power exercised, on the date of his designation of the beneficiary is irrevocable.
death.
Q: When are life insurance proceeds included in the computation of
Q: What are considered as revocable transfers? gross estate?
* The fact that the exercise of the power to revoke was not * Life insurance proceeds are always excluded from gross
done during the life of the decedent is of no moment or income, whether the designation of the beneficiary is
immaterial. The revocable nature of the transfer remains. In revocable or irrevocable. However, the irrevocability of the
effect, the subject property is considered as part of the gross designation of the beneficiary is material in determining
estate. whether or not the proceeds will form part of the estate
because if the designation is irrevocable, it means therefore

that the decedent has not retained any interest which passed Sec. 86, Computation of Net Estate For the purpose of the tax
on after death. Being the case, the proceeds should be imposed in this Chapter, the value of the net estate shall be
excluded from the gross estate. determined:
Proceeds of life insurance under a policy: (1) taken out by the 86(A) Deductions Allowed to the Estate of a Citizen or a Resident -‐
decedent upon his own life; (2) where the beneficiary of which is In the case of a citizen or resident of the Philippines, by deducting
his estate; or (3) where the designation of the beneficiary is from the value of the gross estate -‐
revocable, are to be included in the gross estate. The source of
premium is also important in determining whether the proceeds )(1) STANDARD DEDUCTION. – AN AMOUNT EQUIVALENT TO FIVE
will be excluded or included in the gross estate. MILLION PESOS (P5,000,000.)
85(F) Prior Interests. -‐ Except as otherwise specifically provided

therein, Subsections (B), (C) and (E) of this Section shall apply to
the transfers, trusts, estates, interests, rights, powers and )(2) For claims against the estate: Provided, That at the time the
relinquishment of powers, as severally enumerated and described indebtedness was incurred the debt instrument was duly notarized
therein, whether made, created, arising, existing, exercised or and, if the loan was contracted within three (3) years before the
relinquished before or after the effectivity of this Code. death of the decedent, the administrator or executor shall submit
a statement showing the disposition of the proceeds of the loan;
85(G) Transfers of Insufficient Consideration. -‐ If any one of the
transfers, trusts, interests, rights or powers enumerated and Q: What are the requisites for deductibility of claims against the
described in Subsections (B), (C) and (D) of this Section is made, estate?
created, exercised or relinquished for a consideration in money or
money's worth, but is not a bona fide sale for an adequate and full * In general, claims against the estate may arise out of: (1)
consideration in money or money's worth, there shall be included contract; (2) tort; or (3) operation of law.
in the gross estate only the excess of the fair market value, at the
The requisites for deductibility of claims against the estate are:
time of death, of the property otherwise to be included on account
(1) liability represents a personal obligation of the deceased
of such transaction, over the value of the consideration received
existing at the time of his death; (2) liability was contracted in
therefor by the decedent.
good faith and for adequate and full consideration in money or
85(H) Capital of the Surviving Spouse. -‐ The capital of the surviving money’s worth; (3) claim must be a debt or claim which is valid
spouse of a decedent shall not, for the purpose of this Chapter, be in law and enforceable in court; and (4) the indebtedness must
deemed a part of his or her gross estate. not have been condoned by the creditor or the action to collect

from the decedent must not have prescribed. preceding section.] It was held that where the issue was
whether the brothers and sisters of the deceased were entitled
Q: What are the requirements to substantiate claims against the to share in her estate, or whether the surviving husband was
estate? entitled to all of it, “that question is not one of administration,
and any expense and attorney’s fees incurred by either party
* In case of a simple loan: (1) debt instrument must be duly for the settlement of that question is a personal matter to
notarized at the time the debt was incurred; (2) duly notarized them, and should not be allowed as claims against the estate.”
certification from the creditor as to the balance; (3) proof of [Johannes v. Imperial, GR No. L-‐19153, 30 June 1922.]
capacity of the lender or creditor to lend; and (4) proof of
disposition of proceeds of loan from the executor or ** In Domingo v. Garlitos, it was held that the ordinary
administrator if loan was contracted 3 years before the death. procedure by which to settle claims against the estate was for
the claimant to present a claim before the probate court so
If the unpaid obligation arose from a purchase of goods or that said court could order the payment thereof. [Domingo v.
services: (1) pertinent documents evidencing the purchase of Garlitos, GR No. L-‐18994, 29 June 1963.]
goods or services; (2) duly notarized certification from the
creditor as to balance; (3) certified true copy of the latest *** In the case of Philippine Deposit Insurance Corporation v.
audited balance sheet of the creditor with the detailed BIR, the Supreme Court had occasion to say that the settlement
schedule of its receivable showing unpaid balance of the of estate of deceased persons resembled a liquidation
decedent debtor. proceeding. “The two have a common purpose: the
determination of all the assets and the payment of all the debts
Q: What are claims against the estate? How are they filed? and liabilities of the insolvent corporation or the estate. The
Liquidator and the administrator or executor are both charged
* The case of Johannes v. Imperial pertained to the settlement with the assets for the benefit of the claimants. In both
of the estate of Carmen Johannes who at the time of her death instances, the liability of the corporation and the estate is not
was a resident of Singapore and a citizen of Great Britain. The disputed. The court's concern is with the declaration of
Supreme Court explained that claims against the estate should creditors and their rights and the determination of their order
only be for just debts, or expenses for administration of the of payment.” [Philippine Deposit Insurance Corporation v. BIR,
estate itself. GR No. 158261, 18 Dec. 2006.]
[NOTE: This case was decided in 1922. Under the 1997 Tax **** In the case of Gabin v. Melliza, Melliza, during his lifetime,
Code, expenses for administration of the estate may be entered into an agreement with Gabin whereby the former
claimed as “judicial expenses” under the immediately employed the latter to administer his haciendas for a period of

thirty years from said sate. As compensation for the personal “We express our agreement with the date-‐of-‐death valuation
services, Melliza agreed to pay Gabin 150 cavans of palay every rule, made pursuant to the ruling of the U.S. Supreme Court in
agricultural year. One year later, Melliza died. Gabin presented Ithaca Trust Co. v. United States. First. There is no law, nor do
to the probate court a claim against the estate of the deceased we discern any legislative intent in our tax laws, which
for the payment and implementation of the thirty-‐year disregards the date-‐of-‐ death valuation principle and
agreement. The Supreme Court denied Gabin’s claim, on the particularly provides that post-‐death developments must be
ground that: (1) Gabin’s claim arose after the death of the considered in determining the net value of the estate. It bears
decedent; and (2) her claim was not for money, debt, or emphasis that tax burdens are not to be imposed, nor
interest thereon but for 150 cavans of palay a year for 29 presumed to be imposed, beyond what the statute expressly
agricultural years (one agricultural year having elapsed before and clearly imports, tax statutes being construed strictissimi
the death of Melliza). [Gabin v. Melliza, GR No. L-‐1849, 25 Oct. juris against the government. Any doubt on whether a person,
1949.] article or activity is taxable is generally resolved against
taxation. Second. Such construction finds relevance and
***** The case of Vera v. Fernandez pertained to the consistency in our Rules on Special Proceedings wherein the
settlement of the estate of Luis Tongoy. The Supreme Court term "claims" required to be presented against a decedent's
stated that as a general rule, claims against the estate and estate is generally construed to mean debts or demands of a
claims for funeral expenses and expenses for the last sickness pecuniary nature which could have been enforced against the
of the decedent must be filed within a specified time. deceased in his lifetime, or liability contracted by the deceased
Otherwise, they are barred forever. As an exception, claims for before his death. Therefore, the claims existing at the time of
taxes against the estate “may be collected even after the death are significant to, and should be made the basis of, the
distribution of the decedent’s estate among his heirs who shall determination of allowable deductions.” [Dizon v. CTA, GR No.
be liable therefore in proportion of their share in the 140944, 30 Apr. 2008.]
inheritance.” [Vera v. Fernandez, GR No. L-‐31364, 30 Mar.
1979.] )((3)For claims of the deceased against insolvent persons where
the value of decedent's interest therein is included in the value of
****** In Dizon v. CTA, the issue was whether the actual claims the gross estate;
of the creditors might be fully allowed as deductions from the
gross estate of the decedent, despite the fact that said claims )(4)For unpaid mortgages upon, or any indebtedness in respect to,
were reduced or condoned through compromise agreements property where the value of decedent's interest therein,
entered into by the estate with its creditors. The Supreme undiminished by such mortgage or indebtedness, is included in the
Court ruled in this wise: value of the gross estate, but not including any income tax upon
income received after the death of the decedent, or property taxes

not accrued before his death, or any estate tax. The deduction death;
herein allowed in the case of claims against the estate, unpaid
mortgages or any indebtedness shall, when founded upon a Sixty percent (60%) of the value, if the prior decedent died more
promise or agreement, be limited to the extent that they were than two (2) years but not more than three (3) years prior to the
contracted bona fide and for an adequate and full consideration in death of the decedent, or if the property was transferred to him by
money or money's worth. There shall also be deducted losses gift within the same period prior to his death;
incurred during the settlement of the estate arising from fires,
storms, shipwreck, or other casualties, or from robbery, theft or Forty percent (40%) of the value, if the prior decedent died more
embezzlement, when such losses are not compensated for by than three (3) years but not more than four (4) years prior to the
insurance or otherwise, and if at the time of the filing of the return death of the decedent, or if the property was transferred to him by
such losses have not been claimed as a deduction for the income gift within the same period prior to his death; Twenty percent
tax purposes in an income tax return, and provided that such (20%) of the value, if the prior decedent died more than four (4)
losses were incurred not later than the last day for the payment of years but not more than five (5) years prior to the death of the
the estate tax as prescribed in Subsection (A) of Section 91. decedent, or if the property was transferred to him by gift within
the same period prior to his death;
(5) Property Previously Taxed. -‐ An amount equal to the value
specified below of any property forming a part of the gross estate These deductions shall be allowed only where a donor's tax or
situated in the Philippines of any person who died within five (5) estate tax imposed under this Title was finally determined and
years prior to the death of the decedent, or transferred to the paid by or on behalf of such donor, or the estate of such prior
decedent by gift within five (5) years prior to his death, where such decedent, as the case may be, and only in the amount finally
property can be identified as having been received by the decedent determined as the value of such property in determining the value
from the donor by gift, or from such prior decedent by gift, of the gift, or the gross estate of such prior decedent, and only to
bequest, devise or inheritance, or which can be identified as having the extent that the value of such property is included in the
been acquired in exchange for property so received: decedent's gross estate, and only if in determining the value of the
estate of the prior decedent, no deduction was allowable under
One hundred percent (100%) of the value, if the prior decedent paragraph (2) in respect of the property or properties given in
died within one (1) year prior to the death of the decedent, or if exchange therefor. Where a deduction was allowed of any
the property was transferred to him by gift within the same period mortgage or other lien in determining the donor's tax, or the
prior to his death; Eighty percent (80%) of the value, if the prior estate tax of the prior decedent, which was paid in whole or in
decedent died more than one (1) year but not more than two (2) part prior to the decedent's death, then the deduction allowable
years prior to the death of the decedent, or if the property was under said Subsection shall be reduced by the amount so paid.
transferred to him by gift within the same period prior to his Such deduction allowable shall be reduced by an amount which

bears the same ratio to the amounts allowed as deductions under death.
paragraphs (1) and (3) of this Subsection as the amount otherwise
deductible under said paragraph (2) bears to the value of the (6) Transfers for Public Use. -‐ The amount of all the bequests,
decedent's estate. Where the property referred to consists of two legacies, devises or transfers to or for the use of the Government
or more items, the aggregate value of such items shall be used for of the Republic of the Philippines, or any political subdivision
the purpose of computing the deduction. thereof, for exclusively public purposes.
Q: Explain the concept of vanishing deduction. )(7) The Family Home. -‐ An amount equivalent to the current fair
market value of the decedent's family home: Provided, however,
* It is a way of reducing the tax on property received from a That if the said current fair market value exceeds TEN MILLION
prior decedent where the deceased died within five years after PESOS (P10,000,000.00) the excess shall be subject to estate tax.
the death of the prior decedent, to wit: 100% of the value if the
prior decedent died within one year prior to the death of the Q: What is the limit for the family home?
decedent, or if the property was transferred to him by gift
within the same period prior to his death; * The deductible amount shall be the current fair market value
10,000,000.00 shall be subject to estate tax.
80% of the value if the prior decedent died more than one year
but not more than 2 years prior to the death of the decedent,
or if the property was transferred to him by gift within the
same period prior to his death; 60% of the value if the prior
decedent died more than 2 years but not more than 3 years
)(8) Amount Received by Heirs under RA No. 4917. -‐ Any amount
prior to the death of the decedent, or if the property was
received by the heirs from the decedent -‐ employee as a
transferred to him by gift within the same period prior to his
consequence of the death of the decedent-‐employee in accordance
death;
with Republic Act No. 4917: Provided, That such amount is
40% of the value if the prior decedent died more than 3 years included in the gross estate of the decedent.
but not more than 4 years prior to the death of the decedent,
86(B) Deductions Allowed to Nonresident Estates. -‐ In the case of a
or if the property was transferred to him by gift within the
nonresident not a citizen of the Philippines, by deducting from the
same period prior to his death 20% of the value if the prior
value of that part of his gross estate which at the time of his death
decedent died more than 4 years but not more than 5 years
is situated in the Philippines:
prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to his
(1)STANDARD DEDUCTION. – AN AMOUNT EQUIVALENT TO FIVE

HUNDRED THOUSAND PESOS (P500,000.) decedent, or if the property was transferred to him by gift within
the same period prior to his death; and
(2)THAT PROPORTION OF THE DEDUCTIONS SPECIFIED IN
PARAGRAPHS (2), (3), AND (4) OF THE SUBSECTION (A) OF THIS Twenty percent (20%) of the value, if the prior decedent died more
SECTION WHICH THE VALUE OF HIS ENTIRE GROSS ESTATE than four (4) years but not more than five (5) years prior to the
WHEREVER SITUATED; death of the decedent, or if the property was transferred to him by
gift within the same period prior to his death.
((3) Property Previously Taxed. -‐ An amount equal to the value
specified below of any property forming part of the gross estate These deductions shall be allowed only where a donor's tax, or
situated in the Philippines of any person who died within five (5) estate tax imposed under this Title is finally determined and paid
years prior to the death of the decedent, or transferred to the by or on behalf of such donor, or the estate of such prior decedent,
decedent by gift within five (5) years prior to his death, where such as the case may be, and only in the amount finally determined as
property can be identified as having been received by the decedent the value of such property in determining the value of the gift, or
from the donor by gift, or from such prior decedent by gift, the gross estate of such prior decedent, and only to the extent that
bequest, devise or inheritance, or which can be identified as having the value of such property is included in that part of the decedent's
been acquired in exchange for property so received: gross estate which at the time of his death is situated in the
Philippines; and only if, in determining the value of the net estate
One hundred percent (100%) of the value if the prior decedent died of the prior decedent, no deduction is allowable under paragraph
within one (1) year prior to the death of the decedent, or if the (2) of Subsection (B) of this Section, in respect of the property or
property was transferred to him by gift, within the same period properties given in exchange therefore. Where a deduction was
prior to his death; Eighty percent (80%) of the value, if the prior allowed of any mortgage or other lien in determining the donor's
decedent died more than one (1) year but not more than two (2) tax, or the estate tax of the prior decedent, which was paid in
years prior to the death of the decedent, or if the property was whole or in part prior to the decedent's death, then the deduction
transferred to him by gift within the same period prior to his allowable under said paragraph shall be reduced by the amount so
death; paid. Such deduction allowable shall be reduced by an amount
which bears the same ratio to the amounts allowed as deductions
Sixty percent (60%) of the value, if the prior decedent died more under paragraphs (1) and (3) of this Subsection as the amount
than two (2) years but not more than three (3) years prior to the otherwise deductible under paragraph (2) bears to the value of
death of the decedent, or if the property was transferred to him by that part of the decedent's gross estate which at the time of his
gift within the same period prior to his death; Forty percent (40%) death is situated in the Philippines. Where the property referred to
of the value, if the prior decedent died more than three (3) years consists of two (2) or more items, the aggregate value of such
but not more than four (4) years prior to the death of the items shall be used for the purpose of computing the deduction.

(4)Transfers for Public Use. -‐ The amount of all bequests, legacies, following shall not be taxed: 87(A) The merger of usufruct in the
devises or transfers to or for the use of the Government of the owner of the Naked Title:
Republic of the Philippines or any political subdivision thereof, for
exclusively public purposes. Q: What is the concept of usufruct?
* Article 562 of the Civil Code provides: “Usufruct gives a right
(C) Share in the Conjugal Property -‐ The net share of the surviving to enjoy the property of another with the obligation of
spouse in the conjugal partnership property as diminished by the preserving its form and substance, unless the title constituting
obligations properly chargeable to such property shall, for the it or the law otherwise provides.” Related terms are
purpose of this Section, be deducted from the net estate of the usufructuary (the person that enjoys the property) and naked
decedent. owner (the person that owns the property).
(D) Tax Credit for Estate Taxes Paid to a Foreign Country 87(B) The transmission or delivery of the inheritance or legacy by
the fiduciary heir or legatee to the fideicommissary;
(1) In General. -‐ The tax imposed by this Title shall be credited with
the amounts of any estate tax imposed by the authority of a 87(C) The transmission from the first heir, legatee or donee in
foreign country. (2) Limitations on Credit. -‐ The amount of the favor of another beneficiary, in accordance with the desire of the
credit taken under this Section shall be subject to each of the predecessor; and
following limitations:
87(D) All bequests, devises, legacies or transfers to social welfare,
(a) The amount of the credit in respect to the tax paid to any cultural and charitable institutions, no part of the net income of
country shall not exceed the same proportion of the tax against which insures to the benefit of any individual: Provided, however,
which such credit is taken, which the decedent's net estate That not more than thirty percent (30%) of the said bequests,
situated within such country taxable under this Title bears to his devises, legacies or transfers shall be used by such institutions for
entire net estate; and administration purposes.
(b) The total amount of the credit shall not exceed the same Q: What are the requisites for tax exemption of bequests, devises,
proportion of the tax against which such credit is taken, which the legacies, or transfers to charitable or similar institutions?
decedent's net estate situated outside the Philippines taxable
under this Title bears to his entire net estate. * Section 87(D) of the 1997 Tax Code mandates compliance
with the following conditions: (1) the bequest, devise, legacy,
Sec. 87, Exemption of Certain Acquisitions and Transmissions The or transfer must be given to a social welfare, cultural, or

charitable institution; (2) no part of the net income of such clearance from the Bureau of Internal Revenue is required as a
institution inures to the benefit of any individual; and (3) not condition precedent for the transfer of owenrship thereof in the
more than 30% of said bequest, devise, legacy, or transfer shall name of the transferee, the executor, or the admisntrator, or any
be used by such institution for administration purposes. of the legal heirs, as the case maybe shall file a return under oath
in duplicate, setting forth:
Sec. 88, Determination of the Value of the Estate
(1) The value of the gross estate of the decedent at the time of his
88(A) Usufruct. -‐ To determine the value of the right of usufruct, death, or in case of a nonresident, not a citizen of the Philippines,
use or habitation, as well as that of annuity, there shall be taken of that part of his gross estate situated in the Philippines; (2) The
into account the probable life of the beneficiary in accordance with deductions allowed from gross estate in determining the estate as
the latest Basic Standard Mortality Table, to be approved by the defined in Section 86; and (3) Such part of such information as may
Secretary of Finance, upon recommendation of the Insurance at the time be ascertainable and such supplemental data as may
Commissioner. be necessary to establish the correct taxes.
88(B) Properties. -‐ The estate shall be appraised at its fair market Provided, however, That estate tax returns showing a gross value
value as of the time of death. However, the appraised value of real exceeding Five million pesos (P5,000,000) shall be supported with
property as of the time of death shall be, whichever is higher of -‐ a statement duly certified to by a Certified Public Accountant
containing the following:
. (1) The fair market value as determined by the Commissioner,
or . (a) Itemized assets of the decedent with their corresponding
gross value at the time of his death, or in the case of a
. (2) The fair market value as shown in the schedule of values nonresident, not a citizen of the Philippines, of that part of
fixed by the Provincial and City Assessors. his gross estate situated in the Philippines;
Sec. 89, Notice of Death to be Filed (Repealed by TRAIN LAW) . (b) Itemized deductions from gross estate allowed in Section 86;
and
Sec. 90, Estate Tax Returns
. (c) The amount of tax
90(A) Requirements. -‐ In all cases of transfers subject to the tax
imposed herein, or where, though exempt from tax ,regardless of 90(B) Time for filing. -‐ For the purpose of determining the estate
gross value of the estate, where the said estate consists of tax provided for in Section 84 of this Code, the estate tax return
registered or registrable property such as real property, motor required under the preceding Subsection (A) shall be filed within
vehicle, shares of stock or other similar property for which a

one year from the decedent's death. Q: Where must estate tax returns filed?
90(C) Extension of Time. -‐ The Commissioner shall have authority * Except in cases where the CIR otherwise permits, the estate tax
to grant, in meritorious cases, a reasonable extension not return must be file in the city or municipality in which the
exceeding thirty (30) days for filing the return. decedent was domiciled at the time of his/her death, or if there
be no legal residence in the Philippines, with the CIR’s office.
90(D) Place of Filing. -‐ Except in cases where the Commissioner
otherwise permits, the return required under Subsection (A) shall For estate tax purposes, “residence” refers to the permanent
be filed with an authorized agent bank, or Revenue District Officer, home, the place to which whenever absent, for business or
Collection Officer, or duly authorized Treasurer of the city or pleasure, one intends to return, and depends on facts and
municipality in which the decedent was domiciled at the time of circumstances, in the sense that they disclose intent. [Corre v.
his death or if there be no legal residence in the Philippines, with Tan Corre, 100 Phil. 321, 1956]
the Office of the Commissioner.
Q: How are estate tax returns filed?
Q: When are estate tax returns filed?
* The case Elegado v. CTA pertained to the settlement of the
* For purposes of determining the estate tax, the estate tax estate of Warren Taylor Graham, an American national who
return shall be filed within one year from the decedent’s death. died in the United States but left certain shares of stock in the
The CIR or any revenue officer, in meritorious cases, can grant a Philippines. His son, through his lawyers, filed an estate tax
reasonable extension, not exceeding 30 days, for filing the return for said shares of stock with the Philippine Revenue
return. Representative in the United States. In February 1978 and on
the basis of said return, the CIR assessed the decedent’s estate
When the CIR finds that the payment of the estate tax or of any an estate tax. This first assessment became final and executory.
part thereof would impose undue hardship upon the estate or
any of the heirs, he may extend the time for payment of such tax Meanwhile, Elegado was appointed as ancillary administrator
or any part thereof not to exceed 5 years in case the estate is in the Philippines and in such capacity, filed a second tax return
settled through the courts, or 2 years in case the estate is settled in June 1980. On the basis of said return, the CIR issued a
extra-‐judicially. Estate tax can also be paid by installment. As a second assessment for estate tax. Subsequently, the second
general rule, the estate tax imposed under the Code shall be paid assessment was cancelled by the CIR.
at the time the return is filed by the executor, administrator or
the heirs. One of Elegado’s contentions was that the issuance of the
second assessment had the effect of cancelling the first

assessment, and the subsequent cancellation of the second objection against the assessment should have been pursued
assessment did not have the effect of automatically reviving following the avenue paved in Section 229 of the NIRC on
the first. Moreover, the first assessment was not binding on protests on assessments of internal revenue taxes.” (Emphasis
him because it was based on a return filed by foreign lawyers supplied.) [Marcos II v. CA, GR No. 120880, 5 June 1997.]
who had no knowledge of the Philippine tax laws or access to
the Philippine Court of Tax Appeals. Sec. 91, Payment of Tax
The Supreme Court struck down Elegado’s contentions and 91(A) Time of Payment. -‐ The estate tax imposed by Section 84
held that the first assessment had long become final and shall be paid at the time the return is filed by the executor,
executory and that the estate of the decedent was liable administrator or the heirs.
thereunder. [Elegado v. CTA, GR No. L-‐68385, 12 May 1989.]
91(B) Extension of Time. -‐ When the Commissioner finds that the
Q: What is the consequence for non-‐filing of an estate tax return? payment on the due date of the estate tax or of any part thereof
would impose undue hardship upon the estate or any of the heirs,
* The eldest son of former President Marcos initiated filing of he may extend the time for payment of such tax or any part
the case of Marcos II v. CA questioning the actuations of the thereof not to exceed five (5) years, in case the estate is settled
CIR in relation to the settlement of the estate of the late through the courts, or two (2) years in case the estate is settled
President. Here, it was found that the estate of the deceased extrajudicially. In such case, the amount in respect of which the
failed to file an estate tax return. On this point, the Supreme extension is granted shall be paid on or before the date of the
Court ruled thus: expiration of the period of the extension, and the running of the
Statute of Limitations for assessment as provided in Section 203 of
“The omission to file an estate tax return, and the subsequent this Code shall be suspended for the period of any such
failure to contest or appeal the assessment made by the BIR is extension. Where the taxes are assessed by reason of negligence,
fatal to the petitioner's cause, as under the above-‐cited intentional disregard of rules and regulations, or fraud on the part
provision, in case of failure to file a return, the tax may be of the taxpayer, no extension will be granted by the Commissioner.
assessed at any time within ten years after the omission, and
any tax so assessed may be collected by levy upon real If an extension is granted, the Commissioner may require the
property within three years following the assessment of the executor, or administrator, or beneficiary, as the case may be, to
tax. Since the estate tax assessment had become final and furnish a bond in such amount, not exceeding double the amount
unappealable by the petitioner's default as regards protesting of the tax and with such sureties as the Commissioner deems
the validity of the said assessment, there is now no reason why necessary, conditioned upon the payment of the said tax in
the BIR cannot continue with the collection of the said tax. Any accordance with the terms of the extension.

© PAYMENT BY INSTALLMENT – IN CASE THE AVAILABLE CASH OF devisee, etc., has in the property formerly held by decedent.
THE ESTATE IS INSUFFICIENT TO PAY THE TOTAL ESTATE TAX DUE, Further, under some statutes, it has been held that it is not a suit
PAY,MENT BY INSTALLMENT SHALL BE ALLOWED WITHIN TWO (2) or controversy between the parties, nor is it an adversary
YEARS FRON THE STATUTORY DATE FOR ITS PAYMENT WITHOUT proceeding between the state and the person who owes the tax
CIVIL PENALTY AND INTEREST. on the inheritance. However, under other statutes it has been
held that the hearing and determination of the cash value of the
91(C) Liability for Payment -‐ The estate tax imposed by Section 84 assets and the determination of the tax are adversary
shall be paid by the executor or administrator before delivery to proceedings. The proceeding has been held to be necessarily a
any beneficiary of his distributive share of the estate. Such proceeding in rem.” (Emphasis supplied.) [Marcos II v. CA, GR
beneficiary shall to the extent of his distributive share of the No. 120880, 5 June 1997.]
estate, be subsidiarily liable for the payment of such portion of the
estate tax as his distributive share bears to the value of the total Take note: Under the TRAIN Law, payment of estate tax is now
net estate. allowed in cases where the available cash of the estate is
insufficient to pay the total estate tax due, then payment by
For the purpose of this Chapter, the term 'executor' or installment shall be allowed within two (2) years from the statutory
'administrator' means the executor or administrator of the date for its poayment without civl penalty and interest.
decedent, or if there is no executor or administrator appointed,
qualified, and acting within the Philippines, then any person in Q: Section 91(D) of the 1997 Tax Code provides in part: “The estate
actual or constructive possession of any property of the decedent. tax imposed by Section 84 shall be paid by the executor or
administrator before delivery to any beneficiary of his distributive
Q: Describe the process of estate tax collection. share of the estate. Such beneficiary shall, to the extent of his
distributive share of the estate, be subsidiarily liable for the
* The case of Marcos II v. CA described the nature of the process payment of such portion of the estate tax as his distributive share
of estate tax collection as follows: “Strictly speaking, the bears to the value of the total net estate.” May estate tax be
assessment of an inheritance tax does not directly involve the collected even after distribution to the heirs?
administration of a decedent's estate, although it may be viewed
as an incident to the complete settlement of an estate, and, * The case of Vera v. Fernandez pertained to the settlement of
under some statutes, it is made the duty of the probate court to the estate of Luis Tongoy. The Supreme Court stated that as a
make the amount of the inheritance tax a part of the final decree general rule, claims against the estate and claims for funeral
of distribution of the estate. It is not against the property of expenses and expenses for the last sickness of the decedent
decedent, nor is it a claim against the estate as such, but it is must be filed within a specified time. Otherwise, they are barred
against the interest or property right which the heir, legatee, forever. As an exception, claims for taxes against the estate “may

be collected even after the distribution of the decedent’s estate assessment of the tax in Section 203 shall not notify the executor
among his heirs who shall be liable therefore in proportion of or administrator of the amount of the tax. The executor or
their share in the inheritance.” [Vera v. Fernandez, GR No. L-‐ administrator, upon payment of the amount of which he is
31364, 30 Mar. 1979.] notified, shall be discharged from personal liability for any
deficiency in the tax thereafter found to be due and shall be
** In another case, Pastor v. CA, the Supreme Court found that entitled to a receipt or writing showing such discharge.
the probate court committed grave abuse of discretion when it
ordered the payment of legacy prior to the liquidation of the Sec. 93, Definition of Deficiency
estate of the deceased and before payment of the estate
tax. [Pastor v. CA, GR No. L-‐56340, 24 June 1983.] As used in this Chapter, the term 'deficiency' means:
*** In summary, there are three important dates to remember (a) The amount by which the tax imposed by this Chapter exceeds
in the event of death of an individual, to wit: the amount shown as the tax by the executor, administrator or any
of the heirs upon his return; but the amounts so shown on the
1. Filing of the notice of death – within 60 days from date of return shall first be increased by the amounts previously assessed
death; ( no need under the TRAIN Law) (or collected without assessment) as a deficiency and decreased by
2. Filing of estate tax return -‐ within one year from date of the amount previously abated, refunded or otherwise repaid in
death [Section 90 of the 1997 Tax Code]; and respect of such tax; or
3. Payment of estate tax due – within 6 months from date of
death, unless extension is allowed as approved by the CIR (b) If no amount is shown as the tax by the executor, administrator
[Section 91(A) of the 1997 Tax Code.] or any of the heirs upon his return, or if no return is made by the
executor, administrator, or any heir, then the amount by which the
Sec. 92, Discharge of Executor or Administrator from Personal tax exceeds the amounts previously assessed (or collected without
Liability assessment) as a deficiency; but such amounts previously assessed
or collected without assessment shall first be decreased by the
If the executor or administrator makes a written application to the amounts previously abated, refunded or otherwise repaid in
Commissioner for determination of the amount of the estate tax respect of such tax.
and discharge from personal liability therefore, the Commissioner
(as soon as possible, and in any event within one (1) year after the Q: What is the consequence for delayed payment of deficiency
making of such application, or if the application is made before the estate tax?
return is filed, then within one (1) year after the return is filed, but
not after the expiration of the period prescribed for the * On this point, the case of San Agustin v. CIR held that: “The

delay in the payment of the deficiency tax within the time estate taxes have been paid. This provision disproves the
prescribed for its payment in the notice of assessment justifies petitioner's contention that it is the probate court which
the imposition of a 25% surcharge in consonance with Section approves the assessment and collection of the estate
248A(3) of the Tax Code. The basic deficiency tax in this case tax.” [Marcos II v. CA, GR No. 120880, 5 June 1997.]
being P538,509.50, the twenty-‐five percent thereof comes to
P134,627.37. Section 249 of the Tax Code states that any Sec. 95, Duties of Certain Officers and Debtors
deficiency in the tax due would be subject to interest at the rate
of twenty percent (20%) per annum, which interest shall be Registers of Deeds shall not register in the Registry of Property any
assessed and collected from the date prescribed for its payment document transferring real property or real rights therein or any
until full payment is made.” [San Agustin v. CIR, GR No. 138485, chattel mortgage, by way of gifts inter vivos or mortis causa,
10 Sept. 2001.] legacy or inheritance, unless a certification from the Commissioner
that the tax fixed in this Title and actually due thereon had been
Sec. 94, Payment before Delivery by Executor or Administrator paid is show, and they shall immediately notify the Commissioner,
Regional Director, Revenue District Officer, or Revenue Collection
No judge shall authorize the executor or judicial administrator to Officer or Treasurer of the city or municipality where their offices
deliver a distributive share to any party interested in the estate are located, of the non payment of the tax discovered by them.
unless a certification from the Commissioner that the estate tax Any lawyer, notary public, or any government officer who, by
has been paid is shown. reason of his official duties, intervenes in the preparation or
acknowledgment of documents regarding partition or disposal of
Q: Who has control over the collection of estate tax, the CIR or the donation intervivos or mortis causa, legacy or inheritance, shall
probate court? have the duty of furnishing the Commissioner, Regional Director,
Revenue District Officer or Revenue Collection Officer of the place
* The case of Marcos II v. CA answers this query, to wit: “There is where he may have his principal office, with copies of such
nothing in the Tax Code, and in the pertinent remedial laws that documents and any information whatsoever which may facilitate
implies the necessity of the probate or estate settlement court's the collection of the aforementioned tax. Neither shall a debtor of
approval of the state's claim for estate taxes, before the same the deceased pay his debts to the heirs, legatee, executor or
can be enforced and collected. On the contrary, under Section 87 administrator of his creditor, unless the certification of the
[now Section 94] of the NIRC, it is the probate or settlement Commissioner that the tax fixed in this Chapter had been paid is
court which is bidden not to authorize the executor or judicial shown; but he may pay the executor or judicial administrator
administrator of the decedent's estate to deliver any distributive without said certification if the credit is included in the inventory
share to any party interested in the estate, unless it is shown a of the estate of the deceased.
Certification by the Commissioner of Internal Revenue that the

Sec. 96, Restitution of Tax upon Satisfaction of Outstanding Jacinto Polido, Eugenia Polido tried to withdraw the joint savings
Obligations deposit they maintained at the Philippine National Bank, but
failed to do so because one Mariano Gasat, who claimed to be
If after the payment of the estate tax, new obligations of the the couple’s adopted child, objected thereto. Gasat invoked,
decedent shall appear, and the persons interested shall have among others, Section 97 of the 1997 Tax Code. This argument
satisfied them by order of the court, they shall have a right to the was upheld by the Supreme Court.
restitution of the proportional part of the tax paid.
The last paragraph of Section 97 of the 1997 Tax Code reads: “If
Sec. 97, Payment of Tax antecedent to the Transfer of Shares, a bank has knowledge of the death of a person, who maintained
Bonds, or Rights a bank deposit account alone, or jointly with another, it shall not
allow any withdrawal from the said deposit account unless the
There shall not be transferred to any new owner in the books of Commissioner had certified that the taxes imposed thereon by
any corporation, sociedad anonima, partnership, business, or this Title have been paid; Provided, however, That the
industry organized or established in the Philippines any share, administrator of the estate or any one (1) of the heirs of the
obligation, bond or right by way of gift inter vivos or mortis causa, decedent may, upon authorization by the Commissioner,
legacy or inheritance, unless a certification from the Commissioner withdraw an amount not exceeding Twenty thousand pesos
that the taxes fixed in this Title and due thereon have been paid is (P20,000) without the said certification. For this purpose, all
shown. withdrawal slips shall contain a statement to the effect that all of
the joint depositors are still living at the time of withdrawal by
If a bank has knowledge of the death of a person, who maintained any one of the joint depositors and such statement shall be
a bank deposit account alone, or jointly with another, it shall under oath by the said depositors.” [Polido v. CA, GR No. 170632,
ALLOW any withdrawal from the said deposit account, SUBJECT TO 10 July 2007.]
A FINAL WITHHOLDING TAX OF SIX PERCENT (6%) For this purpose,
all withdrawal slips shall contain a statement to the effect that all Read RR 12-‐2018.
of the joint depositors are still living at the time of withdrawal by
any one of the joint depositors and such statement shall be under DONOR’S TAX
oath by the said depositors. Read also RR 12-‐2018
Q: What is donor’s tax?
Q: What is the rule regarding withdrawals from bank deposit
accounts? * Donor’s tax is a tax imposed upon the right or privilege to
gratuitously transfer property, real or personal, tangible or
* In the case of Polido v. CA, after the death of her husband

intangible, between two or more persons who are living at the Relevant portion of the decision reads:
time of transfer.
“If the donation is made in contemplation of the donor's death,
** In the 1940s, Enrico Pirovano was President and General meaning that the full or naked ownership of the donated
Manager of de la Rama Steamship Co. The corporation insured properties will pass to the donee only because of the donor's
the life of Pirovano with various insurance companies death, then it is at that time that the donation takes effect, and
designating itself as the beneficiaries of said policies. Pirovano it is a donation mortis causa which should be embodied in a last
died. The corporation received a certain sum as proceeds of the will and testament (Bonsato vs. Court of Appeals, 95 Phil. 481).
life insurance policies. Such amount was later donated by the
corporation to Pirovano’s minor children. Ultimately, the issue But if the donation takes effect during the donor's lifetime or
was whether the sum was subject to donor’s tax. According to independently of the donor's death, meaning that the full or
Pirovano v. CIR, a donation made by a corporation to the heirs of naked ownership (nuda proprietas) of the donated properties
a deceased officer out of gratitude for his past services is subject passes to the donee during the donor's lifetime, not by reason of
to the donees’ gift tax. [Pirovano v. CIR, GR No. L-‐19865, 31 July his death but because of the deed of donation, then the
1965.] donation is inter vivos (Castro vs. Court of Appeals, L-‐20122, April
28, 1969, 27 SCRA 1076).”
Q: Differentiate between a donation inter vivos (subject to donor’s
tax) and a donation mortis causa (or a transfer in contemplation of The Supreme Court held that it was a donation inter vivos, upon
death, subject to estate tax). examination of the warranty, acceptance, and reservation
clauses of the deed. Particularly as regards the acceptance
* In the case of Alejandro v. Geraldez, the Gavino Spouses owned clause, the Supreme Court said:
a parcel of land which, in 1949, was the subject matter of a deed
of donation. As a result of the execution of said deed, the parcel “The acceptance clause is another indication that the donation is
of land was divided into three equal parts: (1) 1/3 was donated inter vivos. Donations mortis causa, being in the form of a will,
to their granddaughter, Andrea Diaz; (2) 1/3 was given to their are never accepted by the donees during the donors' lifetime.
grandson, Angel Diaz; and (3) the last 1/3 was reserved and Acceptance is a requirement for donations inter vivos.”
retained by the Gavino for their support. In dispute was the [Alejandro v. Geraldez, GR Nos. L-‐33849 & L-‐33968, 18 Aug.
nature of the deed of donation, i.e., whether it was inter vivos or 1977.]
mortis causa.
** In the case of Gestopa v. CA, Diego Danlag owned six parcels
[NOTE: See the text of the decision for an extensive of land. With the consent of his wife, he executed a deed of
differentiation between donations inter vivos and mortis causa.] donation over said parcels of land in favor of his illegitimate

child, Mercedes Danlag. Controversy arose as to whether the inter vivos, and stated that the prohibition to alienate in said
deed of donation was inter vivos or mortis causa. The Supreme Donation did not necessarily defeat the inter vivos character of
Court held that it was a donation inter vivos for the following the donation. [Austria-‐Magat v. CA, GR No. 106755, 1 Feb. 2002.]
reasons: (1) the granting clause of the deed showed that Diego
donated the properties out of love and affection for Mercedes; **** In del Rosario v. Ferrer, in August 1968, the Gonzales
(2) the reservation clause in respect of the lifetime usufruct Spouses executed a document entitled “Donation Mortis Causa”
indicated that Diego intended to transfer the naked ownership in favor of their 2 children, Asuncion and Emiliano, and 1
over the properties; (3) Diego reserved sufficient properties for granddaughter, Jarabini covering a property. The deed
his maintenance in accordance with his standing in society; and specifically stated that the donation was irrevocable and
(4) Mercedes accepted the donation. [Gestopa v. CA, GR No. contained an acceptance clause. In September 1968, the wife
111904, 5 Oct. 2000.] died. In December 1968, the husband executed a deed of
assignment of his rights and interests in the subject property to
*** The case of Austria-‐Magat v. CA differentiated between a their daughter Asuncion. The husband died in June 1972.
donation inter vivos and donation mortis causa. Sometime in
1975, Basilisa Comerciante, mother of 5, executed a document The Supreme Court ruled that although the deed was
entitled “Donation” in favor of her 4 living children. The issue lies denominated as “Donation Mortis Causa,” “irrevocability” is a
on the characterization of the Donation. Citing jurisprudence, quality absolutely incompatible with the idea of conveyances
the Supreme Court laid out the characteristics of a donation mortis causa, where “revocability” is precisely the essence of the
mortis causa, to wit: act. “Given that the donation in this case was irrevocable or one
(1) It conveys no title or ownership to the transferee before the given inter vivos, the husband’s subsequent assignment of his
death of the transferor; or, what amounts to the same thing, rights and interests in the property to Asuncion should be
that the transferor should retain the ownership (full or naked) regarded as void for, by then, he had no more rights to assign.
and control of the property while alive; He could not give what he no longer had. Nemo dat quod non
(2) That before his death, the transfer should be revocable by habet.” [del Rosario v. Ferrer, GR No. 187056, 20 Sept. 2010.]
the transferor at will, ad nutum; but revocability may be
provided for indirectly by means of a reserved power in the ****** In Puig v. Peñaflorida, Doña Carmen Ubalde expressly
donor to dispose of the properties conveyed; and and consistently declared her conveyance to be one of donation
(3) That the transfer should be void if the transferor should mortis causa and further forbade the registration of the deed
survive the transferee. until after her death. The Supreme Court held that “[a]all these
features concordantly indicated that the conveyance was not
Essentially ruling that all the above characteristics were not intended to produce any definitive effects, nor to finally pass any
present, the Supreme Court categorized the Donation as one

interest to the grantee, except from and after the death of the (ii) His right to exercise ceased because of the happening of
grantor.” [Puig v. Peñaflorida, GR No. L-‐15939, 31 Jan, 1966.] some event or contingency or the fulfillment of some
condition, other than the death of the donor. [RR No. 02-‐03]
******* BIR Ruling No. 089-‐2011 addressed the issue of whether
a general renunciation made by the sole heir of the decedent, Q: What transfer may be considered as donations?
which made the four grandchildren the heirs next in line as the
direct heirs, created a taxable event for which donor’s tax should * The following transfers may be treated as donations:
be paid. The BIR ruled that in the transaction above, there was (a) debt condoned or remitted (in which case the amount of
no donation to speak of. Hence, no donor’s tax could be the debt is a gift from the creditor to the debtor and need not
assessed on the transaction. [BIR Ruling No. 089-‐2011, 21 Mar. be included in the latter’s gross income) [Sec. 50, RR No. 02-‐
2011.] 40];
(b) transfers made in trust for another person; and
******** BIR Ruling No. 109-‐2011 interpreted certain provisions (c) renunciation by the surviving spouse of his/her share in the
of the Special Purpose Vehicle Act of 2002 in relation to the 1997 conjugal partnership or absolute community after the
Tax Code. It ruled that the transfer of property from the dissolution of the marriage in favor of the heirs of the deceases
Philippine Distressed Asset Asia Pacific, Inc., pursuant to the SPV spouse or any other person.
Law, as amended, was not subject to donor’s tax. [BIR Ruling No.
109-‐2011, 7 Apr. 2011.] ** Further to item (c) above, note, however, that a general
renunciation by an heir, including the surviving spouse, of
Q: What is the law that governs the imposition of donor’s tax? his/her share in the hereditary estate left by the decedent is
not subject to donor’s tax, unless the renunciation is
* The gift is perfected from the moment of acceptance by the specifically and categorically done in favor of identified heir/s
donee, and it is completed at the time of delivery. The delivery to the exclusion or disadvantage of the other co-‐heirs in the
can either be constructive or actual. Hence, it is the law at the hereditary estate. [RR No. 02-‐03]
time of the perfection and/or completion that will govern the
imposition of the donor’s tax. Sec. 98, Imposition of Tax

** A gift that is incomplete because of reserved powers (A) There shall be levied, assessed, collected and paid upon the
becomes complete when either: transfer by any person, resident or nonresident, of the property by
(i) The donor renounces the power; or gift, a tax, computed as provided in Section 99.
(B) The tax shall apply whether the transfer is in trust or otherwise,
whether the gift is direct or indirect, and whether the property is

real or personal, tangible or intangible.
Q: Are political contributions considered gifts and therefore liable
Sec. 99, Rates of Tax Payable by Donor for donor’s tax?

. 99(A) In General -‐ The tax for each calendar year shall be SIX * In the case of Abello v. CIR, partners of the ACCRA law firm
PERCENT (6%) computed on the basis of the total net gifts contributed amounts to the 1987 senatorial campaign fund of
IN EXCESS OF TWO HUNDRED FIFTY THOUSAND PESOS Angara. The issue at bar was whether such political contributions
(P250,000.) EXEMPT GIFT made during the calendar year. were subject to donor’s tax. The Supreme Court found that all
the elements of donation were present, namely: (1) the
reduction of the patrimony of the donor; (2) the increase in the
Q: What are the factors that affect the determination/computation patrimony of the donee; and (3) the intent to do an act of
of gross gift? liberality or animus donandi. Hence, the political or electoral
contributions were subject to donor’s tax. [Abello v. CIR, GR No.
* These are: 120721, 23 Feb. 2005.]
(1) citizenship and residency of the donor at the time of
donation; and Sec. 100, Transfer for Less than Adequate and Full Consideration
(2) location of the property donated.
Where property, other than real property referred to in Section
Q: How does one arrive at the valuation of a donation? 24(D), is transferred for less than an adequate and full
consideration in money or money's worth, then the amount by
* The same rules apply as in valuation of a decedent’s gross which the fair market value of the property exceeded the value of
estate. the consideration shall, for the purpose of the tax imposed by this
Chapter, be deemed a gift, and shall be included in computing the
(1) Gross gifts is computed on a cumulative basis. amount of gifts made during the calendar year. PROVIDED,
(2) Donor’s tax is based on the net gifts. HOWEVER, THAT A SALE , EXCHANGE, OR OTHER TRANSFER OF
PROPERTY MADE IN THE ORDINARY COURSE OF BUSINESS ( A
Net gifts is computed as follows: gross gifts minus allowable TRANSACTION WHICH IS A BONA FIDE, AT ARM’S LENGTH, AND
deductions. FREE FROM ANY DONATIVE INTENT), WILL BE CONSIDERED AS
MADE FOR AN ADEQUATE AND FULL CONSIDERATION IN MONEY
99 (B) Political Contributions -‐ Any contribution in cash or in kind to OR MONEY’S WORTH.
any candidate, political party or coalition of parties for campaign
purposes shall be governed by the Election Code, as amended.

Q: Cite an example of a transfer for less than adequate and full International Airport Project in Misamis Oriental was not
consideration. included among those donations exempt from donor’s tax
under Section 101 of the 1997 Tax Code. [BIR Ruling No. 124-‐
* The case of CIR v. B.F. Goodrich Phils., Inc. dealt with the sale 2011, 12 Apr. 2011]
by B.F. Goodrich to Siltown Realty of a rubber plantation in
Basilan for a price less than its declared fair market value. The 101(A) In the Case of Gifts Made by a Resident
BIR wanted to assess BF Goodrich for deficiency donor’s tax
representing the difference between the fair market value and (1) Gifts made to or for the use of the National Government or any
the actual purchase price of the property. The BIR also entity created by any of its agencies which is not conducted for
contended that BF Goodrich filed a “false” income tax return. profit, or to any political subdivision of the said Government; and
The Supreme Court said that real property may be sold for less 2) Gifts in favor of an educational and/or charitable, religious,
than adequate consideration for a bona fide purpose and that cultural or social welfare corporation, institution, accredited
in such event, the sale remains an “arm’s length” transaction. nongovernment organization, trust or philanthropic organization
On the issue of falsity of the return filed, the Supreme Court or research institution or organization: Provided, however, That
ruled that although donor’s tax is different from capital gains not more than thirty percent (30%) of said gifts shall be used by
tax (as reported in the income tax return), the 1974 income tax such donee for administration purposes. For the purpose of the
return was sufficient compliance with the legal requirement to exemption, a 'non-‐profit educational and/or charitable
file a donor’s tax return. “In other words, the fact that the sale corporation, institution, accredited nongovernment organization,
transaction may have partly resulted in a donation does not trust or philanthropic organization and/or research institution or
change the fact that [BF Goodrich] already reported its income organization' is a school, college or university and/or charitable
for 1974 by filing an income tax return.” [CIR v. B.F. Goodrich corporation, accredited nongovernment organization, trust or
Phils., Inc., GR No. 104171, 24 Feb. 1999.] philanthropic organization and/or research institution or
organization, incorporated as a nonstock entity, paying no
Sec. 101, Exemption of Certain Gifts dividends, governed by trustees who receive no compensation, and
devoting all its income, whether students' fees or gifts, donation,
The following gifts or donations shall be exempt from the tax subsidies or other forms of philanthropy, to the accomplishment
provided for in this Chapter: and promotion of the purposes enumerated in its Articles of
Incorporation.
* BIR Ruling No. 124-‐2011 ruled that the donation of lots by
Diamond Cement and Industrial Corporation – Ayala Q: What are the tax implications of a donation in favor of an
Corporation (DCIC-‐AC) to relocatees of the Department of educational and/or charitable, religious, cultural or social welfare
Transportation and Communications’ Laguindingan corporation, institution, accredited nongovernment organization,

trust or philanthropic organization or research institution or and consequently to creditable expanded withholding tax
organization? under Section 2-‐98, as amended.

* (1) Such donation is exempt from payment of donor’s tax If the donee-‐institution donates the subject property to a non-‐
subject to the condition that not more than 30% of said exempt done, it shall be liable for donor’s tax pursuant to
donation shall be used by the done for administration Section 98 of the 1997 Tax Code. [BIR Ruling No. 128-‐2013, 4
purposes. In case of donation of real property, the Register of Apr. 2013.]
Deeds shall annotate this condition at the back of the TCT/OCT
because failure to comply with said condition shall be a ground Q: What is the benefit derived by a donor in case the donee is
for the revocation of the exemption from the payment of the accredited by the Philippine Council for NGO Certification (PCNC)?
donor’s tax.
* Gifts, donations, and other contributions made by residents to
(2) The deed of donation is likewise not subject to an educational institution or a foundation are exempt from
documentary stamp tax prescribed under Section 196 of the donor's tax, subject to the condition that not more than 30% of
1997 Tax Code (Stamp Tax on Deeds of Sale and Conveyances said gift shall be used for administration purposes. [Sec.
of Real Property), but only to the documentary stamp tax of 101(A)(3), 1997 Tax Code.]
PhP 15 imposed under Section 188 of the same code (Stamp
Tax on Certificates). Moreover, for income tax purposes, an accreditation of the
educational institution or foundation by accrediting entities,
(3) If the donor is a VAT-‐registered person and the donation is such as the PCNC, allows a donor to deduct the charitable
an ordinary asset, the donation is subject to VAT pursuant to contribution as a business expense. [RR No. 13-‐98 dated 8 Dec.
RR No. 16-‐2005, as amended, the same being considered a 1998; BIR Ruling No. 029-‐10, 12 Aug. 2010; BIR Ruling No. [NSNP-‐
transaction deemed sale. If the donor is not a VAT-‐registered (S30H-‐010)061-‐10], 5 July 2010; BIR Ruling No. 017-‐10, 1 July
person, the donation is exempt from VAT. 2010]

(4) If the same property acquired by donation is subsequently The PCNC is a private, voluntary, non-‐stock, non-‐profit
conveyed by way of sale or exchange, the sale will be subject to corporation established by six of the country's largest NGO
corporate income tax on the gain realized which is determined networks.
by deducting from the gross selling price the historical cost or
the adjusted basis thereof, as it would be in the hands of the "The PCNC, duly registered with the Securities and Exchange
donor, pursuant to Sections 27 and 101 of the 1997 Tax Code, Commission, shall be the government's partner in a system of
accreditation, to determine the qualification of domestic

corporations or associations or NGOs organized and operated
exclusively for religious, charitable, scientific, youth and sports
development, cultural or educational purposes, or for the
rehabilitation of veterans, or to NGOs for accreditation as donee
institutions." [EO No. 720, 11 Apr. 2008]
A PCNC accreditation endows an entity with a "donee institution

status" such that charitable contributions to these qualified
donee institutions are allowed as business deductions for income
tax purposes.
Q: What are the requirements for the above?
* A donor engaged in business shall give a Notice of Donation on
every donation worth at least PhP 50,000 to the Revenue District
Office which has jurisdiction over his place of business within 30
days after receipt of the qualified donee institution’s duly issued
Certificate of Donation, which shall be attached to said Notice of
Donation.
On the other hand, the Certificate of Donation states that not
more than 30% of the donation/gifts for the taxable year shall be
used by the qualified donee institution for administration
purposes.
** The Certificate of Donation must indicate/contain (1) donee

certification, and (2) donor’s certificate of values. (RMC No. 86-‐
14]

101(B) In the Case of Gifts Made by a Nonresident not Citizen OF Philippines taxable under this title bears to his entire net
THE PHILIPPINES gifts.

(1) Gifts made to or for the use of the National Government or any * The case of CIR v. Central Luzon Drug Corporation dealt with
entity created by any of its agencies which is not conducted for the 20% discount required by law to be given to senior citizens.
profit, or to any political subdivision of the said Government. The Supreme Court held that the 20% discount is a tax credit
(2) Gifts in favor of an educational and/or charitable, religious, for the establishment concerned. [NOTE: This was the old
cultural or social welfare corporation, institution, foundation, trust doctrine. Today, the 20% discount is a tax deduction from the
or philanthropic organization or research institution or gross income or gross sales of the establishment concerned.
organization: Provided, however, That not more than thirty However, the discussion on tax credit for donor’s taxes paid to
percent (30%) of said gifts shall be used by such donee for a foreign country remains instructive.] It stated:
administration purposes. “While a tax liability is essential to the availment or use of any
tax credit, prior tax payments are not. On the contrary, for the
101(C) Tax Credit for Donor’s Taxes Paid to a Foreign Country existence or grant solely of such credit, neither a tax liability
nor a prior tax payment is needed. The Tax Code is in fact
101(C)(1) In General. -‐ The tax imposed by this Title upon a donor replete with provisions granting or allowing tax credits, even
who was a citizen or a resident at the time of donation shall be though no taxes have been previously paid.
credited with the amount of any donor's tax of any character and For example, in computing the estate tax due, Section 86(E)
description imposed by the authority of a foreign country. allows a tax credit -‐-‐ subject to certain limitations -‐-‐ for estate
taxes paid to a foreign country. Also found in Section 101(C) is
101(C)(2) Limitations on Credit. -‐ The amount of the credit taken a similar provision for donor’s taxes -‐-‐ again when paid to a
under this Section shall be subject to each of the following foreign country -‐-‐ in computing for the donor’s tax due. The
limitations: tax credits in both instances allude to the prior payment of
taxes, even if not made to our government.” [CIR v. Central
(a) The amount of the credit in respect to the tax paid to Luzon Drug Corporation, GR No. 159647, 15 Apr. 2005.]
any country shall not exceed the same proportion of the
tax against which such credit is taken, which the net gifts Sec. 102, Valuation of Gifts Made in Property
situated within such country taxable under this Title bears
to his entire net gifts; and If the gift is made in property, the fair market value thereof at the
(b) The total amount of the credit shall not exceed the time of the gift shall be considered the amount of the gift. In case
same proportion of the tax against which such credit is of real property, the provisions of Section 88(B) shall apply to the
taken, which the donor's net gifts situated outside the valuation thereof.

Sec. 103, Filing of Return and Payment of Tax * The case of CIR v. B.F. Goodrich Phils., Inc. dealt with the sale
by B.F. Goodrich to Siltown Realty of a rubber plantation in
103(A) Requirements. -‐ Any individual who makes any transfer by Basilan for a price less than its declared fair market value. The
gift (except those which, under Section 101, are exempt from the BIR wanted to assess BF Goodrich for deficiency donor’s tax
tax provided for in this Chapter) shall, for the purpose of the said representing the difference between the fair market value and
tax, make a return under oath in duplicate. The return shall se the actual purchase price of the property. The BIR also
forth: contended that BF Goodrich filed a “false” income tax return.
. The Supreme Court said that real property may be sold for less
. (1) Each gift made during the calendar year which is to be than adequate consideration for a bona fide purpose and that
included in computing net gifts; in such event, the sale remains an “arm’s length” transaction.
(2) The deductions claimed and allowable; On the issue of falsity of the return filed, the Supreme Court
(3) Any previous net gifts made during the same calendar year; ruled that although donor’s tax is different from capital gains
(4) The name of the donee; and tax (as reported in the income tax return), the 1974 income tax
(5) Such further information as may be required by rules and return was sufficient compliance with the legal requirement to
regulations made pursuant to law. file a donor’s tax return. “In other words, the fact that the sale
transaction may have partly resulted in a donation does not
103(B) Time and Place of Filing and Payment. -‐ The return of the change the fact that [BF Goodrich] already reported its income
donor required in this Section shall be filed within thirty (30) days for 1974 by filing an income tax return.” [CIR v. B.F. Goodrich
after the date the gift is made and the tax due thereon shall be Phils., Inc., GR No. 104171, 24 Feb. 1999.]
paid at the time of filing. Except in cases where the Commissioner
otherwise permits, the return shall be filed and the tax paid to an ** The case of Sumipat v. Banga discussed the time and place
authorized agent bank, the Revenue District Officer, Revenue of filing and payment of donor’s tax. Sumipat, with the consent
Collection Officer or duly authorized Treasurer of the city or of his wife, executed a document entitled “Deed of Absolute
municipality where the donor was domiciled at the time of the Transfer and/or Quitclaim” over three parcels of land, in favor
transfer, or if there be no legal residence in the Philippines, with of his five illegitimate children with another woman. The
the Office of the Commissioner. In the case of gifts made by a Supreme Court found that the deed was actually a deed of
nonresident, the return may be filed with the Philippine Embassy donation, but that it was patently void for non-‐compliance with
or Consulate in the country where he is domiciled at the time of certain requirements. There was also no proof of filing of a
the transfer, or directly with the Office of the Commissioner. donor’s tax return and payment of the applicable donor’s
taxes, which the Supreme Court considered as “mandatory. In
Q: How and when are donor’s tax returns filed? fact, the registrar of deeds is mandated not to register in the

registry of property any document transferring real property by decedent or donor was a citizen and resident at the time of his
way of gifts inter vivos unless a certification that the taxes fixed death or donation allows a similar exemption from transfer or
and actually due on the transfer has been paid or that the death taxes of every character or description in respect of
transaction is tax exempt from the Commissioner of Internal intangible personal property owned by citizens of the Philippines
Revenue, in either case, is presented.” [Sumipat v. Banga, GR not residing in that foreign country.
No. 155810, 13 Aug. 2004.] The term 'deficiency' means: (a) the amount by which tax imposed
by this Chapter exceeds the amount shown as the tax by the donor
Sec. 104, Definitions -‐ For purposes of this Title, the terms 'gross upon his return; but the amount so shown on the return shall first
estate' and 'gifts' include real and personal property, whether be increased by the amount previously assessed (or Collected
tangible or intangible, or mixed, wherever situated: Provided, without assessment) as a deficiency, and decreased by the
however, That where the decedent or donor was a nonresident amounts previously abated, refunded or otherwise repaid in
alien at the time of his death or donation, as the case may be, his respect of such tax, or (b) if no amount is shown as the tax by the
real and personal property so transferred but which are situated donor, then the amount by which the tax exceeds the amounts
outside the Philippines shall not be included as part of his 'gross previously assessed, (or collected without assessment) as a
estate' or 'gross gift': Provided, further, That franchise which must deficiency, but such amounts previously assessed, or collected
be exercised in the Philippines; shares, obligations or bonds issued without assessment, shall first be decreased by the amount
by any corporation or sociedad anonima organized or constituted previously abated, refunded or otherwise repaid in respect of such
in the Philippines in accordance with its laws; shares, obligations tax.
or bonds by any foreign corporation eighty-‐five percent (85%) of
the business of which is located in the Philippines; shares,
obligations or bonds issued by any foreign corporation if such
shares, obligations or bonds have acquired a business situs in the
Philippines; shares or rights in any partnership, business or
industry established in the Philippines, shall be considered as
situated in the Philippines: Provided, still further, that no tax shall
be collected under this Title in respect of intangible personal
property: (a) if the decedent at the time of his death or the donor
at the time of the donation was a citizen and resident of a foreign
country which at the time of his death or donation 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

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GUIDE

Q: What are the kinds of transfer tax? ESTATE TAX

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85(F) Prior Interests. -­‐ Except as otherwise specifically provided

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A PCNC accreditation endows an entity with a "donee institution

Q: What are the requirements for the above?

** The Certificate of Donation must indicate/contain (1) donee

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85(F) Prior Interests. -‐ Except as otherwise specifically provided

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