Estate and Donor Taxation Explained

MODULE 6
Estate and
Donor’s Taxation

It is said that taxes and death are the
two (2) things certain in life.
Taxes are considered the lifeblood of the
government because without these
impositions, the government cannot
perform its various responsibilities or
obligations.
The government imposes different kinds of
taxes on different situations, one of which
is the transfer of property as a result of
death of an individual taxpayer.
Under the National Internal Revenue
Code (NIRC) of 1997, the tax that is
imposed upon the estate of the
decedent is the estate tax.

ESTATE TAX
It is a tax imposed on the transmission of
properties of the decedent upon his death
to his lawful heirs or beneficiaries and
certain transfer by the decedent during his
lifetime which are made by the law
equivalent to testamentary disposition.
It is levied upon the total net value of the
property of a deceased person.

It is not a direct tax on property,
Nor is it a capitation tax,
But on the right of the decedent to
transmit his estate. (51 Am.Jur.52).
Ergo, it is an excise or privilege tax.
The tax applies when the property
passes from the decedent to the estate
and is based on the fair market value of
the property being transferred.
It has nothing to do with the income
NATURE

Ø Redistribution of Wealth: To avoid the undue
accumulation or concentration of wealth in
society to which the receipt of inheritance is a
contributing factor.
Ø Benefit-Received: To raise revenue for the
support of the government in view of the
services rendered by the Govt in the
distribution of the estate.
Ø Privilege Theory: Estates have been
acquired only because of the protection of the
state.
Ø Ability to Pay: It conforms to the ability to pay
since the beneficiaries receive assets which
are in nature of unearned wealth or windfall.
PURPOSE

GOVERNING LAW
REVENUE REGULATIONS NO. 12-2018
SEC. 3 : THE LAW THAT GOVERNS THE IMPOSITION
OF ESTATE TAX.
It is a well-settled rule that estate taxation is governed by
the statute in force at the time of death of the decedent.
The estate tax accrues as of the death of the decedent and
the accrual of the tax is distinct from the obligation to pay
the same. Upon the death of the decedent, succession
takes place and the right of the State to tax the privilege to
transmit the estate vests instantly upon death.
Accordingly, the tax rates and procedures prescribed under
these Regulations shall govern the estate of decedent who
died on or after the effectivity date of the TRAIN Law.

GOVERNING LAW
SEC. 2: RATE OF ESTATE TAX.
The net estate of every decedent, whether resident or non-
resident of the Philippines, as determined in accordance with
the NIRC, shall be subject to an estate tax at the rate of six
percent (6%).
*Previously, a tax based on the value of the net estate of the
decedent, whether resident or nonresident of the Philippines,
was computed based on a tax schedule where an estate
worth P200,000 and over was taxed from 5% to 20%.

The properties comprising the gross estate shall be valued according to
their fair market value as of the time of decedent’s death.
If the property is a real property, the appraised value thereof as of the
time of death shall be, whichever is the higher of –
(1) The fair market value as determined by the Commissioner, or
(2) The fair market value as shown in the schedule of values fixed
by the provincial and city assessors, whichever is higher.
VALUATION OF THE GROSS ESTATE

GROSS ESTATE
The total value of all property, whether real or personal,
tangible or intangible (e.g., shares of stock) belonging to the
decedent at the time of his death.
Gross Estate of a resident
decedent or citizen
includes the total fair market value
of all properties, real or personal,
tangible or intangible at the time of
death, whether located in the
Philippines or abroad.
Gross Estate of non-resident
decedent
It shall only include only property
situated in the Philippines at the
time of death

PROPERTY INCLUDED IN THE GROSS ESTATE
DECEDENT'S INTEREST
GENERAL RULE:
All property owned by the decedent have to be included in the gross
estate, to the extent of the value of his interest in such property at the
time of his death.
ØThus, if the decedent fully owns a piece of property, the value of such
property, shall be included in the gross estate.
ØHowever, if he owns only a proportionate share in the property, or is entitled
only to its use, it is only the value of such share or such use that has to be
included.

INTER VIVOS TRANSFERS OF PROPERTY
TESTAMENTARY IN NATURE
Under the law, the gross estate of a decedent for purposes of the estate tax
may include the value of transfers or property or interest in property made by
the decedent during his lifetime when they partake of the nature of
testamentary disposition. (Sec. 85)
The purpose of the law is to reach such transfers (e.g. Transfers in
contemplation of death, transfers for insufficient consideration, transfers subject
to certain rights of the transferor).
To be free from estate tax, the transfer inter vivos must involve actual transfer
of ownership, i.e.,Transfer must be absolute with no strings attached by the
transferor or a bona fide transfer for an adequate and full consideration.

TRANSFER IN CONTEMPLATION OF DEATH
To the extent of any interest therein of which the decedent has at any time
made a transfer, by trust or otherwise, in contemplation of or intended to 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, under which he has retained for his
life or for any period which does not in fact end before his death:
(1) The possession or enjoyment of, or the right to the income from the
property, or;
(2) The right, either alone or in conjunction with any person, to designate the
person who shall possess or enjoy the property or the income therefrom;
except in case of a bonafide sale for an adequate and full consideration in
money or money's worth.

REVOCABLE TRANSFER
(1) To the extent of any interest 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
consideration in money or money's worth) by trust or otherwise, where the
enjoyment thereof was subject at the date of his death to any change through
the exercise of a power (in whatever capacity exercisable) by the decedent
alone or by the decedent in conjunction with any other person (without regard
to when or from what source the decedent acquired such power), t o alter,
amend, revoke, or terminate, or where any such power is relinquished in
contemplation of the decedent's death.

REVOCABLE TRANSFER
(2) To alter, amend or revoke shall be considered to exist on the date of the
decedent's death even though the exercise of the power is subject to a
precedent giving of notice or even though the alteration, amendment or
revocation takes effect only on the expiration of a stated period after the
exercise of the power, whether or not on or before the date of the decedent's
death notice has been given or the power has been exercised. In such cases,
proper adjustment shall be made representing the interests which would have
been excluded from the power if the decedent had lived, and for such purpose
if the notice has not been given or the power has not been exercised on or
before the date of his death, such notice shall be considered to have been
given, or the power exercised, on the date of his death.

Give the legal meaning of the term “revocable transfers”
for the purpose of determining the property
includable in the gross estate of the decedent.

It refers to the extent of any interest in property includable in the gross
estate of which the decedent has at any time made a transfer by trust or
otherwise:
1.)With reserved power to alter, etc.:
Where the enjoyment thereof was subject at the date of his death to any
change through the exercise of a power (in whatever capacity exercisable) by
the decedent alone or by the decedent in conjunction with any other person
(without regard to when or from what source the decedent acquired such
power), to alter, amend, revoke, or terminate; or
2.)With such power relinquished:
When any such power which would bring the property in the taxable estate,
is relinquished in contemplation of the decedent’s death.

Illustration
Juan transfers his property in trust with the income
payable to John and Mary for their joint lives, and in
the event of their death, the remainder to Maria, but
Juan retains the power to alter, amend, revoke or
terminate the income interest of John and/or Mary.
The transfer is also one with power to designate the
person who shall enjoy the income of the property.

Give the legal concept of “transfers with retention or
reservation of certain rights” for the purpose of determining
the property includable in the gross estate of the decedent.

It refers to the extent of any interest in property includable in the gross estate of
which the decedent has at any time made a transfer by trust or otherwise:
1. Without retention of interest, but effect postponed
Intended to take effect in possession or enjoyment at or after his death; or
2. With retention of interest to income or right to designate persons to enjoy
property or income.
Under which he has retained to his life or for any period not ascertainable without
reference to his death or for any period which does not in fact end before his death:
(a.) The possession or enjoyment of or the right to the income from the property; or
(b.) The right either alone or in conjunction with any person, to designate the persons who
shall possess or enjoy the property or the income therefrom. Incidentally, the transfer
under discussion grouped by the Tax Code under transfers in contemplation of death.

Illustration
1. “A” transfers shares of stock in trust for “B” on the condition
that “A”shall receive or enjoy the dividends during “A’s”
lifetime, thereafter to “B” or his estate.
2. “A” makes a transfer of property in trust, income payable to
himself for 5 years, thereafter to “B” or his estate. “A” dies
before 5 years. Here, “A’s” enjoyment of the income from the
property “did not in fact end before his death,” it ended on his
death.
3. “A” creates a trust to pay the income to “B” for life, remainder
to “B’s” estate but “A” retains the power to revoke the trust for
the benefit of “C”.

PROPERTY PASSING UNDER
GENERAL POWER OF APPOINTMENT
To the extent of any property passing under a general power of appointment
exercised by the decedent:
(1) by will
(2) by deed executed in contemplation of, or intended to take effect in possession
or enjoyment at, or after his death
(3) by deed under which he has retained for his life or any period not ascertainable without
reference to his death or for any period which does not in fact end before his death the
possession or enjoyment of, or the right to the income from, the property the right, either
alone or in conjunction with any person, to designate the persons who shall possess or
enjoy the property or the income therefrom; except in case of a bona fide sale for an
adequate and full consideration in money or money's worth

Give the reason for taxing property passing under a general
power of appointment.

Such property comes from the donor (prior decedent) and not the donee.
For purposes of estate taxation, the power to dispose of property at death
by the exercise of a power of appointment is the equivalent of ownership.
It is a potential source of wealth to the appointee and the disposition of
wealth effected by its exercise or relinquishment at death is one form of
the enjoyment of wealth.
For purposes of determining whether a property is one passing under a
general power of appointment, what is a power of appointment? When is
it general and when is it special?

1.) A power of appointment, as used in the Tax Code, refers to a right to
designate the person(s) who shall enjoy or possess certain property from
the estate of a prior decedent.
2.) A power is general when it authorizes the donee to appoint, any person
he pleases, including himself, his spouse, his estate, his executor or
administrator, and his creditor, thus having as full dominion over the
property as though he owned it.
3.)It is special when the donee can appoint only among a restricted or
designated class of persons other than himself.

Illustration
Charles transfers his property in trust for his son William for life and then
in trust for such children of William as William shall by will appoint. In a
sense, the power of appointment extends the personality of Charles
through the rest of his life
*The power of appointment given is SPECIAL.

PROCEEDS OF LIFE INSURANCE
To the extent of the amount receivable by the estate of the deceased, his
executor, or administrator, as insurance under policies taken out by the
decedent upon his own life, irrespective of whether or not the insured
retained the power of revocation, or to the extent of the amount receivable by
any beneficiary designated in the policy of insurance, except when it is
expressly stipulated that the designation of the beneficiary is irrevocable.
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 relinquishment of powers, as severally enumerated and
described therein, whether made, created, arising, existing, exercised or
relinquished before or after the effectivity of this Code.

TRANSFERS FOR INSUFFICIENT CONSIDERATION
If any one of the transfers, trusts, interests, rights or powers enumerated and
described in Subsections (B), (C) and (D) of this Section is made, 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 consideration in money or money's worth,
there shall be included in the gross estate only the excess of the fair market value,
at the time of death, of the property otherwise to be included on account of such
transaction, over the value of the consideration received therefor by the decedent.

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

IF THE PERIOD FROM RECEIPT TO
DECEDENT’S DEATH IS:
RATE %
Within one year 100
Beyond one year to 2 years 80
Beyond 2 years to 3 years 60

DEATH
– the present decedent died within 5 years from the
date of death of the prior decedent or date of gift.
IDENTITY OF PROPERTY
– the property with respect to which deduction is
sought can be identified as the one received from
the prior decedent, or from the donor, or as the
property acquired in exchange for the original
property so received.
LOCATED IN THE PHILIPPINES
– the property on which vanishing deduction is
being claimed must be located in the Philippines.
REQUISITES OF
VANISHING
DEDUCTIONS

INCLUSION OF THE PROPERTY
– the property must have formed part of the gross
estate situated in the Philippines of the prior
decedent or have been included in the total amount
of the gifts of the donor made within 5 years prior to
the present decedent’s death
PREVIOUS TAXATION OF THE PROPERTY
– the estate tax on the prior succession, or the
donor’s tax on the gift must have been finally
determined and paid by the prior decedent or by the
donor as the case maybe and
NO PREVIOUS VANISHING DEDUCTION
ON THE PROPERTY
– no such deduction on the property, or the property
given in exchange therefor, was allowed in
determining the value of the net estate of the prior
decedent.
REQUISITES OF
VANISHING
DEDUCTIONS

COMPUTATION OF THE VANISHING DEDUCTIONS
Procedure in computing the vanishing deductions:
a) Determine the initial value of the property previously taxed;
Rule - Value of "Property previously Taxed“(PPT) in computing the estate tax or
donor's tax of the prior transfer or that of the present decedent's estate,
whichever is lower.
b) Deduct any mortgage or lien on the "Property Previously Taxed" (PPT) paid by
the present decedent prior to his death, where such mortgage or lien was a
deduction from the gross estate of the prior decedent or gift of the donor. This is
the "Initial Basis".

c) The "Initial Basis" in Step (b) shall be further reduced by the following ratio of
the expenses, losses, indebtedness, taxes or transfer for public purposes:
Initial Basis
------------- X Expenses, losses, indebtedness
Gross estate taxes, transfer for public use

d.) Compute the final basis of PPT:
Initial Basis (Step (b) x x x
Less: Limitation (Step (c ) x x x
Final Basis (Amount subject to vanishing deduction) x x x
e.) Determine the year interval between the date of death of the prior and present decedent
or date of gift and death of present decedent to find the applicable percentage
deduction:
0 - 1 year - 100%
1 - 2 " - 80%
2 - 3 " - 60%
3 - 4 " - 40%
4 - 5 " - 20%
5 over - 0%
The final basis (Step (d) multiplied by the percentage deduction
(Step (e) will be the vanishing deduction allowable.)

vThe merger of usufruct in the naked title.
vThe transmission or delivery of the inheritance or legacy
by the fiduciary heir or legatee to the fideicomissary.
vThe transmission from the first heir, legatee or donee in
favor of another beneficiary, in accordance with the desire
of the predecessor.
vAll bequests, devises, legacies or transfer to social
welfare, cultural and charitable institution, no part of the
net income of which inures to the benefit of any individual,
provided that not more that 30% of the said bequests,
devises, legacies or transfers shall be used by such,
institution for administrative purposes.
EXEMPTIONS
FROM THE TAX

FOR SINGLE DECEDENT
Gross Estate -------------- XXXXX
Less: Allowable Deductions -------------- XXXXX
Taxable Net Estate -------------- XXXXX
Multiply by 6% tax rate -------------- XXXXX
Estate Tax Due -------------- XXXXX
C O M P U T A T I O N :

FOR MARRIED DECEDENT
Gross Estate:
Exclusive estate ----------- XXXX
Conjugal estate ----------- XXXX
Total gross estate ----------- XXXX
Less: Exclusive estate ----------- XXXX
Conjugal Estate ----------- XXXX
Less: Conjugal deductions ------------- XXXX
Net Conjugal estate ----------- XXXX
Less: Share of surviving spouse XXXX
Net estate ----------- XXXX
Add: Exclusive estate ----------- XXXX
Less: Allowable Deductions ----------- XXXX
Net Taxable Estate ----------- XXXX
Multiply by 6% tax rate ----------- XXXX
Estate Tax Due ----------- XXXX
C O M P U T A T I O N :

Proper Presentation Of Family Home And Standard
Deduction As Deductions From The Gross Estate.

Illustrative examples to properly present the manner of deducting
family home, standard deduction, and other allowable deduction from
the gross estate in accordance with the provisions of the NIRC.

Illustrative examples to properly present the manner of deducting family home,
standard deduction, and other allowable deduction from the gross estate in
accordance with the provisions of the NIRC.

NO LONGER MANDATED
under the TRAIN law.
Section 24 of the TRAIN law repeals Section 89
of the Tax Code which states: “Where the value
of the gross estate exceeds 20,000 the executor,
administrator or any of the legal heirs, must file the
notice of death with the BIR within two months from
the decedent’s death, or within two months after
election of a qualified executor or administrator”
NOTICE OF DEATH

BANK ACCOUNT
OF THE
‘LIVING’ DEAD
An excerpt from The Philippine Star
November 2, 2014

BANK ACCOUNT OF THE
‘LIVING’ DEAD
November 2, 2014
Mario’s father wanted to make things convenient. He opened a joint bank
account with his junior as co-depositor. So that when he dies, Junior can
simply withdraw the money from their joint account.
The day came. Medical and funeral expenses needed to be paid. Junior
could really use the rest of the money as well.
Doting relatives published an obituary of Mario’s death. The bank manager
read this in the papers.
At the bank counter, Junior learned the account was frozen, until he could
present an estate tax clearance from the BIR.

BANK ACCOUNT OF THE
‘LIVING’ DEAD
November 2, 2014
Junior could not get his hands on the account he co-maintained with his now
dead father. He thought that the worst bank account is a joint bank account
between the living and the dead. He is not alone in his predicament.
Banks are not interested in keeping this money.
The culprit is Section 97 of the Tax Code, which requires that a BIR certificate
that estate taxes have been paid be presented. Only then can banks allow
withdrawal from the deceased depositor’s bank accounts, including joint
accounts.

Section 27 of TRAIN Law amends Section 97 of the Tax
Code, which concerns allowable withdrawals from the deceased
person’s account.
Under the old Tax Rule, only withdrawals up to P20,000 are
allowed. The administrator of the estate or any one of the heirs,
when authorized by the commissioner, may withdraw an amount
not exceeding P20,000.
However, the Train Law has increased allowable withdrawals
from the deceased person’s account to any amount, subject
to a 6% final withholding tax.
AMENDMENT ON WITHDRAWALS
FROM DECEASED BANK ACCOUNTS

CONDITIONS
FOR THE GRANT OF
EXTENSION
The taxpayer is not guilty of negligence,
intentional disregard or rules and regulations,
or fraud;
The executor, administrator, or beneficiary may
be required to furnish a performance bond in an
amount not to exceed double the amount of the
tax due.
Surcharge
ØFor late filing of estate tax return and failure
to pay the estate tax on time- 25%
ØFor filing of false or fraudulent return- 50%
ØInterest at the double the legal rate for loans
or forbearance of money, for failure to pay the
tax on time, computed from due date to the
date of actual payment of tax.

ESTATE
TAX RETURN
BIR FORM NO.1801

ESTATE TAX AMNESTY
COVERAGE
RA 11213 (Tax Amnesty Act) had provided that for
deaths registered on or before Dec. 31, 2017, the
government shall collect only 6% of the decedent’s
total net estate at the time of death.

ESTATE TAX AMNESTY
The estate tax amnesty shall not cover the following:
• Delinquent estate tax liabilities which have become final and
executory and which are covered by Tax Amnesty of
Delinquencies; and
• Properties involved in cases pending appropriate courts as
enumerated in the regulation, viz:
• Those falling under the jurisdiction of the Presidential
Commission on Good Government (PCGG);
• Unexplained or unlawfully acquired wealth under the Anti-Graft
and Corrupt Practices Act and Plunder Act;
• Violation of the Anti-Money Laundering Act;
• Tax evasion and other criminal offenses under Chapter II of Title
X of the Tax Code;
• Felonies of fraud, illegal exactions and transactions,
malversation of public funds and property.

ESTATE TAX AMNESTY
PROPOSED EXTENSION
The House of Representatives on Tuesday, September 15, approved a bill
that seeks to extend the estate tax amnesty period by two years, or until
December 31, 2022.
The bill’s objective is to provide economic relief to Filipinos who have
been unable to deal with their taxes due to the coronavirus pandemic.
House Bill (HB) No. 7068 was approved on 3rd and final reading with a
vote of 209-0-0.
The current deadline is until December 31, 2020. If this bill becomes a
law, the deadline would be extended to December 31, 2022.

ESTATE TAX AMNESTY RETURN
B .I.R . F OR M 2118 -E A

CERTIFICATE OF
AVAILMENT
OF THE ESTATE TAX
AMNESTY

ESTATE TAX AMNESTY
WHO SHALL FILE
This return shall be filed in triplicate by the
executor/administrator/authorized representative
of estates availing of the Estate Tax Amnesty
under Republic Act (R.A.) No. 11213.

ESTATE TAX AMNESTY
WHEN AND WHERE TO FILE AND PAY
This return together with complete documentary requirements, shall be
filed within two (2) years from the effectivity of the Implementing Rules
and Regulations (IRR) of Estate Tax Amnesty under the Tax Amnesty
Act to the Revenue District Office (RDO) having jurisdiction over the
last residence of the decedent at the time of his death.
In case of a non-resident decedent with executor or administrator in the
Philippines, the return shall be filed with the RDO where such
executor/administrator is registered or if not yet registered with the BIR,
at the executor/administrator’s legal residence. If the decedent has no
legal residence in the Philippines, the return shall be filed with RDO No.
39, South Quezon City.
The tax amnesty due shall be paid using the Estate Tax Acceptance
Payment Form (BIR Form No. 0621-EA) to the Authorized Agent Bank
(AAB) or Revenue Collection Officer (RCO) of the RDO.

ESTATE TAX AMNESTY
MANDATORY REQUIREMENTS
[Original copy and two (2) photocopies of each document]
ü 1. Certified true copy of the Death Certificate (DC)
ü 2. Taxpayer Identification Number (TIN) of decedent and heir/s
ü 3. Estate Tax Amnesty Return (ETAR)
ü 4. Estate Tax Acceptance Payment Form (APF), Revenue Official Receipt
(ROR), if paid to RCO
ü 5. Affidavit of Self Adjudication or Deed of Extra-Judicial Settlement (EJS) of
the Estate of the decedent; or Court decision/judgement if the estate has been
settled judicially or if there is a last will and testament
ü 6. Certification of the Barangay Captain for the last residence of the decedent
and claimed Family Home, if any
ü 7. For "Claims Against the Estate" arising from Contract of Loan,
Notarized Promissory Note, if applicable
ü 8. Proof of the claimed "Property Previously Taxed", if any
ü 9. Proof of the claimed "Transfer for Public Use", if any
ü 10. At least one (1) valid government ID of the executor/administrator of the
estate, or if there is no executor or administrator appointed, the heirs,
transferees, beneficiaries or authorized representative

ESTATE TAX AMNESTY
For Real Property/ies, if any:
ü 11. Certified true copy/ies of the Transfer/Original/Condominium Certificate/s
of Title of real property/ies
ü 12. Certified true copy of the Tax Declaration of real property/ies, including the
improvements at the time of death or the succeeding available tax declaration
issued nearest to the time of death of the decedent, if none is available at the
time of death
ü 13. Where declared property/ies has/have no improvement, Certificate of No
Improvement issued by the Assessor's Office at the time of death of the
decedent

ESTATE TAX AMNESTY
For Personal Property/ies, if any:
ü 14. Certificate of Deposit/Investment/Indebtedness owned by the decedent alone, or
decedent and the surviving spouse, or decedent jointly with others
ü 15. Certificate of Registration of vehicle/s and other proofs showing the correct
value of the same
ü 16. Certificate of stocks
ü 17. Proof of valuation of shares of stock at the time of death:
a. For shares of stock listed/traded – The price at the time of death or the
arithmetic mean between the highest and lowest quotation at a date nearest the
date of death, if none is available on the date of death itself.
b. For shares of stock not listed/not traded – The book value for common
shares and par value for preferred shares as shown in the audited financial
statement of the issuing corporation nearest to the date of death of the
decedent with computation of the book value per share
c. For proprietary shares – Bid price on the date of death or nearest to the date
of death, if none is available on the date of death itself, as published in the
newspaper of general circulation.
ü 18. Proof of valuation of other types of personal property

ESTATE TAX AMNESTY
Other Requirements, if applicable:
ü If the person transacting/processing the transfer is the authorized
representative, duly Notarized Original Special Power of Attorney
(SPA) and/or, if one of the heirs is designated as executor/
administrator, Sworn Statement
ü If document is executed abroad, Certification from the Philippine
Consulate
ü If zonal value cannot be readily determined from the documents
submitted, Location Plan/Vicinity map

ESTATE TAX AMNESTY FAQs
Q1: If the estate involves several stages of succession
and the succeeding decedents, during their lifetime,
owned separate properties other than the properties
emanating from the first decedent, where will the Estate
Tax Amnesty Return (ETAR) be filed?
A1: Since there are properties which are not common
to all decedents, the ETAR shall be individually filed
at the Revenue District Office (RDO) having
jurisdiction over the last residence of each decedent.
The option to file at only one (1) RDO is not available
in this instance.

Q2: The heirs want to avail of estate tax amnesty, but they
do not want to adjudicate the respective share of each heir
as they will form an estate/trust. Are they required to submit
an EJS?
A2: Yes, an EJS is required in the availment of estate
tax amnesty.

Q3: If an estate tax return had been filed prior to 2018 for
which a tax clearance was issued but the Certificate
Authorizing Registration was not released, can the heirs
avail of the estate tax amnesty and can the estate tax
payment be credited?
A3: If there is no more tax due and what is left is merely
the issuance of CAR, the heirs should instead request
for issuance and release of CAR subject to presentation
of proof of payment and previously submitted
documentary requirements.

Q4: An Electronic Certificate Authorizing Registration
(eCAR) has been issued for a regular estate tax transaction.
However, upon review of estate tax computation, deficiency
tax was noted by the Assessment Division. Upon
notification, can the filer avail of the estate tax amnesty
based on review findings? Is there a need to issue another
eCAR or Certificate of Availment (CA)?
A4: Yes, the filer can avail of the estate tax amnesty as
long as the deficiency estate tax is not yet a delinquent
account and the decedent died on or before
December 31, 2017. Issuance of CA is sufficient.

Q5: Can the filer avail of the estate tax amnesty if the
owner’s copy of the Transfer Certificate of Title (TCT) was
lost?
A5: Yes, provided that the filer shall submit a certified
true copy of the OCT/TCT/CCT of the subject property
which is issued by the Register of Deeds (RD)/Land
Registration Authority (LRA).

Q6: Can the filer avail of the estate tax amnesty if the RD’s copy of
the OCT/TCT/CCT was lost? Are there any alternative documents
to be submitted?
A6: Yes, the Owner’s Copy of the OCT/TCT/CCT together with Certificate
of Loss issued by RD shall be submitted for purposes of estate tax
amnesty availment. However, only the Certificate of Availment (CA) shall
be issued while the eCAR shall be issued only when the certified true
copy of the reconstituted title is submitted.
The CA will contain the list of properties subject of estate tax amnesty. It
shall also reflect a statement that, “In case there are properties covered
under Section 3 of RR No. 6-2019 which are included in the application
for estate tax amnesty, the application pertaining to such properties
shall be considered null and void.”

Q7: In case there is a pending case filed in court regarding the
heirship of the properties of the estate which was previously
filed/settled extrajudicially and a CAR had been issued thereof, can
the judicial expenses for the pending court case be claimed as
deduction from gross estate for the undeclared properties?
A7: No, the judicial expenses pertaining to issue of heirship is
not an allowable expense against the estate. Further, in
conformity with Q&A No. 15 under RMC No. 68-2019, no further
deductions shall be allowed for undeclared properties since
deductions are deemed to have been claimed in the previous
estate tax return filed, except for the share of the surviving
spouse on the undeclared conjugal property.

Q8: In case the decedent has many heirs, can one of the heirs
adjudicate his share only?
A8: No. Self-adjudication is allowed if there is only one (1) heir.
In this case, an EJS signed by all the heirs is required.

DONOR’S TAX
A tax imposed on the transfer of property by way of
gift inter vivos. (Lladoc vs. C.I.R.,L-19201, June 16,
1965; 14 SCRA, 292). It is not a property tax.
The donor’s tax shall not apply unless and until there
is a completed gift. The transfer of property by gift is
perfected from the moment the donor knows of the
acceptance by the donee; it is completed by the
delivery, either actually or constructively, of the
donated property to the donee.
Thus, the law in force at the time of the perfection
/completion of the donation shall govern the
imposition of the donor’s tax.

DONOR’S TAX
Ø In order that the donation of an immovable may be valid, it must
be made in a public document specifying therein the property
donated. The acceptance may be made in the same Deed of
Donation or in a separate public document, but it shall not take
effect unless it is done during the lifetime of the donor.
Ø If the acceptance is made in a separate instrument, the donor
shall be notified thereof in an authentic form, and this step shall
be noted in both instruments.

DONOR’S TAX
Ø A gift that is incomplete because of reserved
powers, becomes complete when either:
(1) the donor renounces the power; or
(2) his right to exercise the reserved power ceases
because of the happening of some event or
contingency or the fulfilment of some condition,
other than because of the donor’s death.

DONOR’S TAX
Ø Renunciation by the surviving spouse of his/her share in the
conjugal partnership or absolute community after the dissolution
of the marriage in favor of the heirs of the deceased spouse or
any other person/s is subject to donor’s tax.
Ø Whereas general renunciation by an heir, including the surviving
spouse, of his/her share in the hereditary estate left by the
decedent is not subject to donor’s tax, unless specifically and
categorically done in favor of identified heir/s to the exclusion or
disadvantage of the other co-heirs in the hereditary estate.

DONOR’S TAX
Ø The law in force at the time of the completion of the donation
shall govern the imposition of donor’s tax.
Ø For purposes of the donor’s tax, “NET GIFT” shall mean the net
economic benefit from the transfer that accrues to the donee.
Ø Accordingly, if a mortgaged property is transferred as a gift, but
imposing upon the donee the obligation to pay the mortgage
liability, then the net gift is measured by deducting from the fair
market value of the property the amount of mortgage assumed.

GOVERNING LAW
SEC. 14. COMPUTATION OF THE DONOR’S TAX. –
Donations shall be subject to donor’s tax applicable when the
donations are made.
WHEN DONATIONS ARE MADE APPLICABLE TAX RATE
Donations made before
January 1, 1998
Section 92 of the National Internal
Revenue Code of 1977
(R.A. No. 7499).
Donations made on or after
January 1, 1998 until
December 31, 2017
Section 99 of the National Internal
Revenue Code of 1997 (R.A. No.
8424) implemented by RR No. 2-
2003, as amended.
Donations made on or after
January 1, 2018 TRAIN Law

In the previous law,
Donor’s tax goes up to 15% if the donor
and the donee are related.
If they are not related, it goes up to 30%.
Now, the donor’s tax is only at 6% rate regardless
of the relationship of the donor and donee.

1.Age and state of health of the decedent at
the time of gift, especially where he was aware
of a serious illness;
2.Length of time between the gift and the
date of death (Dison vs. Posadas, 57 Phil.465)
A short interval suggests the conclusion that the
thought of death was in the decedent’s mind,
and a long interval suggests the opposite
(Estate of Mary Aushman, 40 BTA 948);
3.Concurrent making of a will or making a
will within a short time after the transfer
(Roces v. Posadas, 58 Phil.108)
CIRCUMSTANCES
TAKEN INTO
ACCOUNT
INCLUDE:

1.To relieve the donor from the burden of
management;
2.To save income or property taxes;
3.To settle family litigated and unlitigated disputes;
4.To provide independent income for dependents;
5.To see the children enjoy the property while the
donor is alive;
6.To protect family from hazards of business
operations; and
7.To reward services rendered.
Motives associated with
life that precludes the
category of transfer in
contemplation of death
are:

1. Gifts made to or for the use of the National Government or any
entity created by any of its agencies which is not conducted for
profit, or to any political subdivision of the said Government; and
2. Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution, accredited non-
government organization, trust or philanthropic organization or
research institution or organization: Provided, however, that not
more than thirty percent (30%) of said gifts shall be used by such
donee for administration purposes.
GIFTS EXCEMPTED FROM DONOR’S TAX

If the gift is made in property, the fair market value at that time will be
considered the amount of gift.
In case of real property, the taxable base is the fair market value as
determined by the Commissioner of Internal Revenue (Zonal Value) or
fair market value as shown in the latest schedule of values fixed by the
provincial and city assessor (MV per Tax Declaration), whichever is
higher. (Sec. 88 and 102, NIRC as amended)
If there is no zonal value, the taxable base is the fair market value that
appears in the tax declaration at the time of the gift
VALUATION OF GIFTS
MADE IN PROPERTY

ILLUSTRATION OF DONOR’S TAX COMPUTATION
Mr.Dela Cruz made donations on January 30, 2018 at P2,000,000;
on March 30,2018 at P1,000,000; and August 15,2018 at P500,000.

The donor’s tax return shall be filed within thirty (30) days after the date the
gift is made or completed and the tax due thereon shall be paid at the same
time that the return is filed.
Unless the Commissioner otherwise permits, the return shall be filed and
the tax paid to an AAB, the Revenue District Officer and Revenue
Collection Officer having jurisdiction over the place where the donor is
domiciled at the time of the transfer, or if there be no legal residence in the
Philippines, with the Office of the Commissioner.
TIME AND PLACE OF FILING AND
PAYMENT OF DONOR’S TAX

In the case of gifts made by a non-resident, the return may be filed with the
Philippine Embassy or Consulate in the country where he is domiciled at the
time of the transfer, or directly with the Office of the Commissioner. For this
purpose, the term “OFFICE OF THE COMMISSIONER” shall refer to the
Revenue District Office (RDO) having jurisdiction over the BIR-National
Office Building which houses the Office of the Commissioner, or presently,
to the Revenue District Office No. 39-South Quezon City.
TIME AND PLACE OF FILING AND
PAYMENT OF DONOR’S TAX

DONOR’S
TAX RETURN
BIR FORM NO.1800

In computing the gross estate of a decedent :
a. If he was a non-resident, but citizen of the Philippines,
include the tangible and intangible properties, regardless of
location.
b. If he was a resident, who was not a citizen of the
Philippines, include the tangible and intangible properties,
regardless of location.
c. If he was a non-resident, who was not a citizen of the
Philippines, include the tangible and intangible personal
properties, regardless of location.
d. All of the above statements are correct.
ESTATE TAX QUESTION

Albert, Filipino Citizen died testate because of
Covid 19 on May 10, 2020. Among his gross estate
are properties inherited from his deceased father
who died on January 4, 2019. What percentage of
deduction will be used in computing the amount of
vanishing deduction?
a. 80% of the value taken as basis for vanishing deduction
b. 40% of the value taken as basis for vanishing deduction
c. 100% of the value taken as basis for vanishing deduction
d. 60% of the value taken as basis for vanishing deduction
ESTATE TAX QUESTION

Juanito, Filipino Citizen, died on January 2,2018, leaving
his spouse a gross estate of P18,000,000.00 net of
conjugal share. The funeral expenses and medical
expenses amounted to P1,700,000.00. He also left unpaid
mortgages worth 2,800,000. But he has no unpaid taxes.
Under the T.R.A.I.N. law, the standard deduction is now
increased to 5Million. How much is the net estate?
a.P11,900,000
b.P10,200,000
c.P18,000,000
d.P5,000,000
ESTATE TAX QUESTION

Pedro Santos died on November 1, 2019. Until when is his
family members required to file a notice of his death?
a. November 1,2020
b. May 1,2020
c. December 31,2020
d. Filing is no longer mandated
ESTATE TAX QUESTION

Harry is an only child and is getting married to his long
time girlfriend. His father, Hector decided to give him his
father’s exclusive property - house and lot in Makati - as a
wedding gift. The father executed a Deed of Donation. The
property has a market and zonal value of 11Million. Under
the T.R.A.I.N. Law, how much will be the Donor’s tax?
a) 645,000.00
b) 660,000.00
c) 1,650,000.00
d) 1,750,000.00
DONOR’S TAX QUESTION

Three out of the following are exempted or excluded from
the donor’s tax. Which is the exception?
a) 500,000 cash given by a non resident alien spouses-donor
to their legitimate son who is getting married in the
Philippines to a Filipina.
b) 100,000 cash given by a Filipina aunt to his fil-am nephew
who is getting married in the Philippines
c) Donation of a condominium in Hongkong to a Filipina by a
British National not residing in the Philippines
d) 1,500,000 donation to a Philanthropic Organization.

Max donated a total amount of P500,000, ½ to the Quezon
City Hall and ½ to a charitable institution,Tahanang
Walang Hagdanan. Upon inquiry, it was verified that the
charitable institution’s total receipts from donation
amounted to P10M and its total administrative expenses
reached P4.0M. Max can claim a total
deduction/exemption of:
a. 250,000
b. 500,000
c. 200,000
d. None

For tax purposes, what is the value of a gift made in
contemplation of death:
a. At fair market value as of the date of death
b. At fair market value as of the date of gift
c. At fair market value as of the date of acceptance of the gift by the donee
d. At an arbitrary value given by the donor

SUGGESTED READINGS
v Happier Heirs by Edgar V. Mendoza; Centralbooks;2013
v National Internal Revenue Code of the Philippines
v Civil Code of the Philippines
v The Family Code of the Philippines
v Living Trusts for Everyone: Why a Will is Not the Way to Avoid Probate, Protect Heirs, and Settle
Estates by Ronald Farrington Sharp;2010
v Your Living Trust & Estate Plan: How to Maximize Your Family's Assets and Protect Your Loved
Ones, by Harvey J. Platt;2013
v Probate Wars of the Rich and Famous: An Insider's Guide to Estate Planning and Probate Litigation
by Russell J. Fishkind; 2011
v Taxation of Financial Institutions in the Philippines by Benedicta Du-Baladad;2006
v Wills and Estate Planning: Oregon Handbook by Rees C. Johnson; 2003
v Beyond the Grave revised edition by Gerald M.Condon and Jeffery L. Condon;2001

SUGGESTED READINGS
v The Everything Executor and Trustee Book: A Step-by-Step Guide to Estate and Trust Administration
by Douglas D. Wilson; 2014
v Plan Your Estate by Denis Clifford Attorney;2012
v Reviewer on Taxation by Victorino Mamalateo;2004
v Comments and jurisprudence on succession by Desiderio P. Jurado;19
BROOKE ASTOR
v Donovan, Karen. “Bonus Editio: Behind the Astor News.” Jan.2,2008, www.printhis.clickability.com
v Dunne, Dominick. “Saving Mrs.Astor” Vanity Fair,October 2006, www.vanityfair.com
v Eligon, John. “The Astor Trial Revisited.” NYSBA Trust and Estates Law Section Newsletter 43, No.1
(Spring 2010)
v Eligon, John. “No windfall for Astor Son,Lawyer says” New York Times, June 18,2009,
http://cityroom/blogs.nytimes.com
v Gordon,Meryl. Mrs.Astor Regrets; The hidden betrayals of a family beyond reproach.New York ; First
Mariner Books,2008

SUGGESTED READINGS
v Gordon,Meryl. “The Family Astor.” New York Magazine ,Nov.27,2009,
http://nymag.com/news/features/18860/index1.html.
v Kaplan,Justin. When the Astors owned New York: Blue Bloods and Grand Hotels in a Gilded
Age.New York:Plume 2006.
v Kiernan,Frances. The Last Mrs.Astor; A New York Story.New York: W.W. Norton & Company,Inc.2007
v Kovaleski,Serge F. “Brooke Astor’s Last Will and Testament.” New York Times, July 23,2009,
http;//cityrooms.blogs.nytimes.com
MICHAEL JACKSON
v Asian News International (ANI). “MJ Estate,Ex-wife’s lawyer row over legal services bill.” Mar.21,2010
v Associated Press. “Mother loses control of Michael Jackson’s Estate- Judge upholds 2002 will
request, grants control to long time Jackson Attorney John McClain-Pop Legend’s Memorial to be
Star Studded Affair; Stevie Wonder, Mariah Carey, Kobe Bryant among attendees.’
http://cbs5.com/national/Michael.jackson.john.2.1072898

SUGGESTED READINGS
v CBS.com. ‘Mother loses control over Michael Jackson’s Estate-Judge Upholds 2002 will request,
grants control to long time Jackson Attorney John McClain.” July 23,2009 http://cbs5.com/national
/Michael.jackson.john.2.1073898.html.
v Celizic, Mike. “What will happen to Michael Jackson’s kids? will the King of Pop’s three children
become pawns in a custody battle” June 26,2009 www.msnbc.msn.com/id/31564994/
v EURPublisher 01.”Michael Jackson Estate Explains Financial Turnaround.’Newstex Web Blogs,
September 23,2010
v Fleeman, Mike. “Jackson’s will names Diana Ross as back up guardian.” People, July 1,2009
www.people.com/people/package/article/0,,20287787_20288896,0html
v Last Will of Michael Joseph Jackson. July 1,2009,
www.thesmokinggun.com/archive/years/2009/0701091mjwill.htm

SUGGESTED READINGS
ANNA NICOLE SMITH
v Barone,Michael. “More than Anna Nicole Smith’s husband: The Oil-soaked life of J.Howard Marshall.”
US News, Nov.2,2009, www.usnews.com/blogs/barone/2009/03/02/more-than-anna-nicole-smiths-
husband…
v Brooks,John T. “Understanding Anna’s case.”
www.printthis.clickability.com/pt/cpt?expire=&title=Understanding+Anna%27s+Case&urID=22454
v Ginsburg,Ruth Bader.”Marshall,Vickie vs. Marshall,E.Pierce On the Docket.” May 1,2006
v Heather, Alexander,Houston Chronicle, “In last ditch attempt, Anna Nicole Smith's daughter may still
inherit millions” http://www.chron.com/news/houston-texas/texas/article/In-last-ditch-attempt-Anna-
Nicole-Smith-s-5374554.php
v Jeffrey,Brenda Sapino. “Estate of Anna Nicole Smith Loses inheritance fight at 9th circuit: April
20,2010 http://texas lawyer/2010/03/estate-of-anna-nicole-smith

SUGGESTED READINGS
NINA WANG
v Associated Press. The. “Feng Shui Master Denied Billionaire Businesswoman Nina Wang’s fortune in
Hong Kong.” New York Daily News, www.nydailynews.com/news/world/2010-02-10
v BBC News.“HK richest lady wins will battle” http://news.bbc.co.uk/2/hi/asia-pacific/4251594.stm 16
September 2005
v China Daily “Hong Kong's richest woman loses appeal”
http://www.chinadaily.com.cn/english/doc/2004-06/29/content_343729.htm 2004-06-29
v Coonan,Clifford.”Goodbye Little Sweetie:Nina Wang Leaves a Fortune and un Unsolved Murder
Mystery.” www.independent.co.uk/news/world/asia/goodbye-little-sweetie
v Coonan,Clifford. “Fortune-teller gets billionaire's legacy” http://www.irishtimes.com/news/fortune-
teller-gets-billionaire-s-legacy-1.1202822
v Economist,The. “The enigma of Little Sweetie”Nina Wang, A Property tycoon said to be asia’s richest
woman leaves many unanswered questions.” http://www.economist.com/node/9033434

EDGAR V. MENDOZA
M A N A G I N G P A R T N E R
L A W Y E R - C P A
Units 205,304,501,& 605 Amberland Plaza Bldg. Julia Vargas Avenue
and Jade Drive, Ortigas Center, Pasig City, PH 1605
(02) 8635-55-59 or (02) 8638-15-97
0917-857-6478
evm@mplawofc.com or mplaw.evm.ph@gmail.com
https://www.mplawph.com/
THANK YOU!!!

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