Mabini Colleges EXAMPLE

Daet, Camarines Norte Philippine Net Estate 3,000,000

USA Net Estate 1,000,000
TAXATION 2 Korea Net Estate 1,000,000
Estate tax Paid in USA 15,000
SUGGESTED HANDOUT #3 Estate tax paid in Korea 70,000

Who are entitled to foreign tax credit? ESTATE TAX DUE = 5,000,000x6%=300,000

1. Resident Citizens LIMIT A

2. Non-resident Citizens USA
3. Resident Alien 1,000,000/5,000,000 x 300,000 = 60,000 vs 15,000=15,000
KOREA
Tax credit is paid outside the Philippines that can be deducted to 1,000,000/5,000,000 x 300,000 = 60,000 vs 70,000=60,000
estate tax payable in the Philippines. TOTAL LIMIT A 75,000
There are limitations:
LIMIT B
Limit A
2,000,000/5,000,000x300,000 = 120,000 LIMIT B
NET ESTATE (per foreign county)ryPhilippine Estate Tax
ENTIRE NET STATE – world X ESTATE TAX DUE 300,000
LESS: ALLOWED (75,000)
EXAMPLE ESTATE TAX PAYABLE 225,000

Philippine Net Estate 3,000,000 Rules: 1. If only one foreign country, use LIMIT A only.
USA Net Estate 1,000,000 2. If there are two or more foreign country, use LIMIT A and
Estate tax Paid in USA 15,000 LIMIT B, then select whichever is lower.

ESTATE TAX DUE = 4,000,000 x 6% = 240,000 Notice of death is required if:

LIMIT A a. All cases of transfers subject to tax (net estate exceeds

200,000)
1,000,000/4,000,000 x 240,000 = 60,000
When to file: Within 2 months from the death.
ESTATE TAX DUE 240,000
LESS: ALLOWED (15,000) Under TRAIN LAW, notice of death is not necessary.
ESTATE TAX PAYABLE 225,000

Limit B

NET ESTATE all foreign country) X Philippine Estate Tax

ENTIRE NET STATE – world
DONOR’S TAXATION 1. Insufficient consideration:
a. Property must be CAPITAL assets, whether real or personal
Purposes: 1. To prevent avoidance of estate tax. b. Transfer is less than its full price
2. To compensate for the loss or decrease of income taxes c. Transfer is inter vivos
and estate taxes when large estates are split.
FMV of property donated xxx Consideration Rec xxx
The parties are: DONOR – one who gives gratuitously Less: Consideration Rec xxx Less: Cost xxx
DONEE – one who receives gratuitously Subject to Donor’s Tax xxx Subject to Income Tax xxx

ELEMENTS OF DONATION FMV = assessed or zonal value whichever is higher.

1. Consent
2. Object Example:
3. Cause Cost of Land 1,000,000
4. Formalities Zonal Value 1,200,000
Assessed value 800,000
Requisite for VALID Donation: Consideration Received 500,000
1. Capacity of donor to donate
2. Intention to donate Zonal Value 1,200,000 500,000
3. Delivery Con. Rece (500,000) (1,000,000)
4. Acceptance of the donee, including minors and unborn child Donor’s 700,000 0
provided it will be accepted by the parents.
If shares are donated:
When perfected? When the donor knows that the donee accepted the FMV shares will be:
donation.
Who can be donors? All persons provided not falling under the VOID a. If listed but sold outside stock exchange, FMV is:
donations. i. The closing price on the day the shares are sold
ii. The nearest closing price on the day the shares are sold
VOID DONATIONS: b. If not listed, the net adjusted value, which the assets and
liability will be adjusted to its FMV and the equity per
1. Between spouses, whether direct or indirect, during marriage, share will be computed.
except moderate gifts during family rejoicing. c. If real property, FMV is highest of ZONAL & ASSESSED VALUE.
2. Between persons living together without valid marriage.
3. Between persons guilty of concubinage or adultery. 2. Condonation or remission of debt
4. Between persons found guilty of the same criminal offense. a. Donor’s tax will be charged to creditor
5. To a public officer by reason of his public office.
Gross gift – refers to all donations given during a taxable year.
If donation is made orally, the delivery of the thing must be given
simultaneously. But if in writing, delivery is not yet required. Donor Real Property Tangible Property Intangible
If value of movables does not exceed 5,000, it may be oral or on Property
writing and acceptance must be alike also.
In Out In Out In Out
If the value of the movables exceeds 5,000, it must be in writing as
well as its acceptance otherwise donation is void.
Resident Yes Yes Yes Yes Yes Yes
If property is immovable, regardless of amount, it must be in writing,
Citizen
specifically public document as well as its acceptance. Also it must
be notarized and the DST must also be paid.

Transfer subject to Donor’s Tax

Non-Res. Yes Yes Yes Yes Yes Yes
Citizen
Deductions from Gross Gift:
Resident Alien Yes Yes Yes Yes Yes Yes
1. Dowry. Amount given to daughter/son in consideration of
Non-Res. Alien Yes No Yes No Yes No marriage. Requirements:
a. Must be given to legitimate, illegitimate, legally adopted
Again, Intangible Property is subject to reciprocity. child
b. In consideration of marriage, given before marriage
c. If given after marriage, it must be no greater than 1 year
Property Valuation after the celebration of marriage
d. Allowed amount is 10,000 only. If both spouses give, they
Usufruct, Use, Habitation, Annuity Based on probable life of are entitled to 10,000 each.
beneficiary approved by Basic
Standard Mortality Table

Real Property FMV, whichever is higher of zonal 2. Gifts made to Government.

or assessed value 3. Gifts made to NGO.
4. Mortgage assumed by the donee.
Personal Properties FMV @ time of death 5. Diminutions of Property
a. Part of gift will be given to a specific beneficiary
Stocks listed in PSE 1. Closing Price of share @
time of death Mr. A donated land to Mr. B worth 100,000. However, 20,000 worth of
2. Average of lowest and land will be given to Mr. C
highest quotes @ time of
death 6. Campaign Contributions
Stocks not listed For OS = book value a. Deductible only if reported with the COMELEC
For PS = par value 7. Donations for DUAL TRAINING SYSTEM

Notes, A/R Discounted Amounts Who can avail Deductions?

 RC, NRC, & RA = entitled to ALL deductions

If both spouses gave donations, the conjugal/community property given  NRA = entitled also except for dowry
will be divided into 2 plus their exclusive properties being donated
to compute for gross taxable gift. Again, if donation is made within the 4th degree of consanguinity, it
will be taxed using the tax table. If not, it will be considered as
Mr. A and Mrs A donated the following: stranger which will be taxed at 30% rate.
To their son, who will get married, worth 500,000 cash
To Mr. B, driver of Mrs. A, a land which is exclusive worth 100K Note: If there is donation given to stranger & relatives, it must be
To Ms. C, Secretary of Mr. A, a car exclusive worth 200,000 separated for easy reference. Also, it must be in cumulative basis.

Mrs. A Mr. A For initial gift: For subsequent Donation:

Common Exclusive Common Exclusive Gross gift xxx Gross gift-to date xxx
250,000 250,000 Less: Deductions (xx) Less: Deductions (x)
100,000 200,000 Net Gift – Initial XXX Net gift-to date xxx
Mul. Rate % Add: Prior net gift xxx
Again, rule of consanguinity and affinity will apply. Donor’s Tax Due xxx TOTAL NET GIFT xxx
Mul. Rate %
 TAX ON TOTAL GIFT xxx
Less: Prior tax paid (xx)
Donor’s Tax Due xxx Creditable Donor’s Tax:
For RC, NRC, and RA only
Example: Limit A
NET GIFT (per foreign country) x Philippine Donor’s Tax
2021 ENTIRE NET GIFT – world
January 1-Mr. A donated Land to Mr. B worth 500,000 Limit B
February 14-Mr. A donated car to Mr. C worth 300,000 NET GIFT all foreign country) x Philippine Donor’s Tax
December 25-Mr. A donated building to government worth 700,000 ENTIRE NET GIFT – world
Rules: 1. If only one foreign country, use LIMIT A only.
2. If there are two or more foreign country, use LIMIT A and
LIMIT B, then select whichever is lower.

January 1-Gross Gift 500,000

Less: Deductions 0 Example:
Net gift 500,000 Net gift Philippines 500,000
Less: Allowed (250,000) Net gift USA 300,000
Tax base 250,000 Donor’s tax paid-USA 15,000
X 6%
Tax due 15,000 Philippine Net gift 500,000
USA Net gift 300,000
February 14 Gross Gift Jan 500,000 TOTAL NET GIFT 800,000
Gross gift Feb 300,000 Less: Allowed (250,000)
TOTAL 800,000 X 6%
Less: Deductions 0 Tax due 33,000
Net Gift 800,000 Less: Tax credit (12,375)
Less: Allowed (250,000) Tax payable 20,625
Tax base 550,000
X 6% LIMIT A
Tax due 33,000 USA
Less: Payments (15,000) 300,000/800,000 x 33,000 = 12,375 vs 15,000 = 12,375 lower
Tax payable 18,000
December 25 Gross Gift Jan 500,000
Gross Gift Feb 300,000 Example
Gross Gift Dec 700,000 Example:
TOTAL GROSS GIFT 1,500,000 Net gift Philippines 500,000
Less: Deductions (700,000) Net gift USA 300,000
Net gift 800,000 Net gift China 200,000
Less: Allowed (250,000) Donor’s tax paid-USA 15,000
Tax base 550,000 Donor’s tax paid-China 8,000
X 6%
Tax due 33,000 Philippines 500,000
Less: Payments (15,000) China 200,000
Payments (18,000) USA 300,000
Tax Payable 0 TOTAL 1,000,000
Less: Allowed (250,000)
Tax base 750,000
X 6%
Tax due 45,000
Less: Tax Credit (21,500)
Tax payable 23,500

LIMIT A
USA
300,000/1,000,000 x 45,000 = 13,500 vs 15,000 = 13,500
CHINA
200,000/1,000,000 x 45,000 = 9,000 vs 8,000 = 8,000
TOTAL LIMIT A 21,500
LIMIT B
500,000/1,000,000 x 45,000 = 22,500

Timing of filing: Within 30 days after the acceptance of donation.

DONOR’S TAX TABLE

OVER BUT NOT OVER TAX SHALL PLUS EXCESS OF

BE

100,000 exempt

100,000 200,000 0 2% 100,000

200,000 500,000 2,000 4% 200,000

500,000 1,000,000 14,000 6% 500,000

1,000,000 3,000,000 44,000 8% 1,000,000

3,000,000 5,000,000 204,000 10% 3,000,000

5,000,000 10,000,000 404,000 12% 5,000,000

10,000,000 1,004,000 15% 10,000,000

UNDER THE NEW TAX REFORM AND INCLUSION BILL, FLAT RATE OF 6% WILL BE
APPLIED TO BOTH ESTATE AND DONORS TAX. FOR DONOR’S TAX, EXCEEDING
250,000 SHALL BE SUBJECT TO 6%. HOWEVER THE COMPUTATION AND PROVISION
IN ARRIVING AT NET ESTATE AND NET GIFT WILL STILL BE THE SAME.