Capital Gains Tax

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Estate Tax

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Contents

• Tax Rates
• Documentary Requirements
• Procedures
• Deadlines
• Related Revenue Issuances
• Codal Reference
• Frequently Asked Questions

Effective January 1, 1998 up to Present

If the Net Estate is

Effective After July 28, 1992 up to December 31, 1997

If the Net Estate is

Effective September 15, 1950 to December 31, 1972

Estate and Inheritance Tax

BIR Form 1801 - Estate Tax Return

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Documentary Requirements

1.  Notice of Death duly received by the BIR, if gross estate exceeds P20,000 for deaths occurring on or after Jan. 1, 1998; or if the gross estate exceeds P3,000 for deaths occurring prior to January 1, 1998

2.  Certified true copy of the Death Certificate

3.  Deed of Extra-Judicial Settlement of the Estate, if the estate is settled extra judicially

4.  Court Orders/Decision, if the estate is settled judicially;

5.  Affidavit of Self-Adjudication and Sworn Declaration of all properties of the Estate

6.  A certified true copy of the schedule of partition of the estate and the order of the court approving the same, if applicable

7.  Certified true copy(ies) of the Transfer/Original/Condominium Certificate of Title(s) of real property(ies) (front and back pages), if applicable

8.  Certified true copy of the latest Tax Declaration of real properties at the time of death, if applicable

9.  "Certificate of No Improvement" issued by the Assessor's Office declared properties have no declared improvement or Sworn Declaration/Affidavit of No Improvement by at least one (1) of the transferees

10.  Certificate of Deposit/Investment/Indebtedness owned by the decedent and the surviving spouse, if applicable

11.  Photo copy of Certificate of Registration of vehicles and other proofs showing the correct value of the same, if applicable

12.  Photo copy of certificate of stocks, if applicable

13.  Proof of valuation of shares of stocks at the time of death, if applicable

• For listed stocks - newspaper clippings or certification from the Stock Exchange

• For unlisted stocks - latest audited Financial Statement of issuing corporation with computation of book value per share

14.  Proof of valuation of other types of personal property, if applicable

15.  Proof of claimed tax credit, if applicable

16.  CPA Statement on the itemized assets of the decedent, itemized deductions from gross estate and the amount due if the gross value of the estate exceeds two million pesos, if applicable

17.  Certification of Barangay Captain for claimed Family Home

18.  Duly notarized Promissory Note for "Claims against the Estate" arising from Contract of Loan

19.  Accounting of the proceeds of loan contracted within three (3) years prior to death of the decedent

20.  Proof of the claimed "Property Previously Taxed"

21.  Proof of claimed "Transfer for Public Use"

22.  Copy of Tax Debit Memo used as payment, if applicable

Additional requirements may be requested for presentation during audit of the tax case depending upon existing audit procedures.

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Procedures

The Estate Tax Return (BIR Form 1801) shall be filed and payment be made with an Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over the place of residence of the decedent at the time of his/her death.

If there is no AAB within the residence of the decedent, the Estate Tax Return must be filed and the payment made with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer of the RDO having jurisdiction over the place of residence of the decedent.

If the required filer has no legal residence in the Philippines, the Estate Tax return shall be filed and paid with:

(a)  The Office of the Revenue District Officer, Revenue District Office No.   39, South Quezon City; or

(b)  The Philippine Embassy or Consulate in the country where decedent is residing at the time of his/her death.

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Deadlines

File the return within six (6) months from decedent's death. However, the Commissioner may, in meritorious cases, grant extension not exceeding thirty (30) days.

The Estate Tax imposed shall be paid at the time the return is filed by the executor or administrator or the heirs. However, when the Commissioner finds that 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, he may extend the time for payment of such tax or any part thereof not to exceed five (5) years, in case the estate is settled through the courts or two (2) years in case the estate is settled extra-judicially.

Extension of Time of Filing:

When the Commissioner finds that the payment of the estate tax or of any part thereof would imposed undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five (5) years in case the estate is settled through the courts, or two (2) years in case it settled extra-judicially.

Where the request for extension is by reason of negligence, intentional disregard of rules and regulations, or fraud on the part of the taxpayer, no extension will be granted by the Commissioner.

If an extension is granted, the Commissioner or his duly authorized representative may require the executor, or administrator, or beneficiary, as the case may be, to furnish a bond in such amount, not exceeding double the amount, not exceeding double the amount of tax and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance in the terms of extension.

The request for extension shall be filed with the Revenue District Officer (RDO) where the estate is required to secure its TIN and file the estate tax return. The application shall be approved by the Commissioner or his duly authorized representative.

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Related Revenue Issuances

RR No. 2-2003, RMO No. 26-82, RMO No. 31-82, RMC No. 1-98,

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Codal Reference

Sec. 84 to Sec. 97 of the National Internal Revenue Code

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Frequently Asked Questions

1.   Who are required to file the Estate Tax return?

a)   The executor or administrator or any of the legal heirs of the decedent or non-resident of the Philippines under any of the following situation:

-  In all cases of transfer subject to Estate Tax;

-  Where though exempt from Estate Tax, the gross value of the estate exceeds two hundred thousand P 200,000.00; and

-  Where regardless of the gross value, the estate consists of registered or registrable property such as real property, motor vehicle, share of stocks or other similar property for which a clearance from the Bureau of Internal Revenue (BIR) is required as a condition precedent for the transfer of ownership thereof in the name of the transferee.

b)   Where there is no executor or administrator appointed, qualified and acting within the Philippines, then any person in actual or constructive possession of any property of the decedent must file the return.

c)   The Estate Tax imposed under the Tax Code shall be paid by the executor or administrator before the delivery of the distributive share in the inheritance to any heir or beneficiary. Where there are two or more executors or administrators, all of them are severally liable for the payment of the tax. The estate tax clearance issued by the Commissioner or the Revenue District Officer (RDO) having jurisdiction over the estate, will serve as the authority to distribute the remaining/distributable properties/share in the inheritance to the heir or beneficiary.

d)   The executor or administrator of an estate has the primary obligation to pay the estate tax but the heir or beneficiary has subsidiary liability for the payment of that portion of the estate which his distributive share bears to the value of the total net estate. The extent of his liability, however, shall in no case exceed the value of his share in the inheritance.

 

2.   What are the procedures in the filing of the Estate Tax Return and payment of the corresponding taxes?

a)   The Estate Tax Return (BIR Form 1801) shall be filed and payment made with an Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over the place of residence of the decedent at the time of his/her death.

b)   If there is no AAB within the residence of the decedent, the Estate Tax Return must be filed and the payment made with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer of the RDO having jurisdiction over the place of residence of the decedent.

c)   If the required filer has no legal residence in the Philippines, the Estate Tax return will be filed and payment be made with:

-  The Office of the Revenue District Officer, Revenue District Office No. 39, South Quezon City; or

-  The Philippine Embassy or Consulate in the country where decedent is residing at the time of his/her death.

d)   Submit all documentary requirements and proof of payment to the Revenue District Office having jurisdiction over the place of residence of the decedent.

e)   Payment of Estate tax by installment -In case the available cash of the estate is not sufficient to pay its total estate tax liability, the estate may be allowed to pay the tax by installment and a clearance shall be released only with respect to the property, the corresponding/computed tax on which has been paid.

 

3. What are included in gross estate?

•  For resident alien decedents/citizens:

a)   Real or immovable property, wherever located

b)   Tangible personal property, wherever located

c)   Intangible personal property, wherever located

• For non-resident decedent/non-citizens:

a)   Real or immovable property located in the Philippines

b)   Tangible personal property located in the Philippines

c)   Intangible personal property - with a situs in the Philippines such as:

-  Franchise which must be exercised in the Philippines

-  Shares, obligations or bonds issued by corporations organized or constituted in the Philippines

-  Shares, obligations or bonds issued by a foreign corporation 85% of the business of which is located in the Philippines

-  Shares, obligations or bonds issued by a foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines ( i. e. they are used in the furtherance of its business in the Philippines)

-  Shares, rights in any partnership, business or industry established in the Philippines

 

4.   What are excluded from gross estate?

• GSIS proceeds/ benefits
• Accruals from SSS
• Proceeds of life insurance where the beneficiary is irrevocably appointed
• Proceeds of life insurance under a group insurance taken by employer (not taken out upon his life)
• War damage payments
• Transfer by way of bona fide sales
• Transfer of property to the National Government or to any of its political subdivisions
• Separate property of the surviving spouse
• Merger of usufruct in the owner of the naked title
• Properties held in trust by the decedent
• Acquisition and/or transfer expressly declared as not taxable

 

5.   What will be used as basis in the valuation of property?

• The properties subject to Estate Tax shall be appraised based on its fair market value at the time of the decedent's death.
• The appraised value of the real estate shall be whichever is higher of the fair market value, as determined by the Commissioner (zonal value) or the fair market value, as shown in the schedule of values fixed by the Provincial or City Assessor.
• If there is no zonal value, the taxable base is the fair market value that appears in the latest tax declaration.
• If there is an improvement, the value of improvement is the construction cost per building permit or the fair market value per latest tax declaration.

 

6.   What are the allowable deductions for Estate Tax purposes?

     For Resident Decedent

•  Expenses, losses, indebtedness and taxes

a)    Funeral Expenses

i)    CA 466 - 5 % of gross estate (up to Dec. 31, 1972)

ii)    PD 69 - 5 % of gross estate but not exceeding P 50,000 (Jan. 1, 1973 to July 27, 1992)

iii)   RA 7499 - 5 % of gross estate but not exceeding P 100,000 (July 28, 1992 to December 3l, 1997)

iv)   RA 8424 - 5% of gross estate but not exceeding P 200,000 (Jan. 1,1998)

b)   Judicial expenses of the testamentary/intestate proceedings

c)   Valid claims against the estate

d)   Claims against insolvent person

e)   Unpaid mortgages/indebtedness

f)    Unpaid taxes

g)   Casualty losses

h)   Property previously taxed or vanishing deductions

      Requisites:

• Present decedent must have died within five (5) years from date of death of prior decedent or date of gift
• The property with respect to which the deduction is claimed must have formed part of the gross estate situated in the Philippines of the prior decedent or taxable gift of the donor
• The property must be identified as the same property received from prior decedent or donor or the one received in exchange therefore
• The estate taxes on the transmission of the prior estate or the donors tax on the gift must have been finally determined and paid
• No vanishing deduction on the property or the property given in exchange therefore was allowed to the prior estate

i)    Transfer for public purpose

j)    Share of surviving spouse

k)   Medical expenses - those incurred by the decedent within one (1) year prior to his/her death which shall be substantiated with receipts

(NOTE: Amount allowable as deduction depends on the law prevailing at the time of death of the decedent).

l)    Family Home - fair market value but not to exceed P1,000,000.00

m)  Standard Deduction - an amount equivalent to P1,000,000.00 (applicable only for death occurring after the effectivity of RA 8424 which is January 1, 1998.)

n)  Amount received by the heirs under Republic Act No. 4917 (applicable only for death occurring after the effectivity of RA 8424 which is January 1, 1998)

      For Non-Resident Decedent, not a citizen of the Philippines

• Expenses, losses, indebtedness, taxes
• Property previously taxed
• Transfer for public use
• Share in the conjugal property

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Tax Code

Tax Calendar

BIR Forms

Zonal Values

Taxpayer Bill of Rights

PSIC/PSOC