Tax Midterms Reviewer.docx

NET TAXABLE ESTATE Gross Estate Less: Deductions Net Taxable Estate

4. Those purchased with exclusive money of life/husband Pxxx Pxxx Pxxx

PROCEEDS OF LIFE INSURANCE:

TAX RATES (PRE-TRAIN) 0 200,000 500,000 2,000,000 5,000,000 10,000,000

to to to to to to

200,000 500,000 2,000,000 5,000,000 10,000,000 above

= = = = = =

Exempt 0 15,000 135,000 465,000 1,215,000

+ + + + +

5% of the excess over 8% of the excess over 11% of the excess over 15% of the excess over 20% of the excess over

200,000 500,000 2,000,000 5,000,000 10,000,000

TAX RATES (TRAIN) Fixed 6% CONJUGAL PARTNERSHIP OF GAINS - shall govern marriages contracted before August 3, 1988 in the absence of marriage settlements or when the regime agreed upon is void. CONJUGAL PARTNERSHIP PROPERTIES: 1. 2. 3. 4.

Those acquired by onerous title during marriage at the expense of common fund Those obtained from labor, industry, work or profession of either or both of spouses The fruits due or received during marriage from common or exclusive property Share of either spouse in the hidden treasure which the law awards to finder/owner of property 5. Those acquired through occupation such as fishing or hunting 6. Livestock existing upon dissolution of partnership 7. Those acquired by chance, such as winnings from gambling or betting. However, losses shall be borne by loser-spouse EXCLUSIVE PROPERTIES OF EACH SPOUSE: 1. Those brought to the marriage as his or her own 2. Those acquired during marriage by gratuitous title 3. Those acquired by right of redemption, barter, or exchange with property belonging to only one of spouses

1. Before Marriage:  Premiums were fully paid by decedent spouse – exclusive (d)  Premiums were fully paid by surviving spouse – exclusive (s)  Premiums were paid partly with exclusive and conjugal funds – conjugal 2. During Marriage – conjugal PRO-FORMA COMPUTATION: Conjugal Properties Family Home Real Properties Exclusive Properties Gross Estate Less: Deductions Ordinary Deductions Conjugal Deductions Funeral Expenses Other Deductions Total Conjugal Deductions Net Conjugal Estate Exclusive Deductions Special Deductions Family Home Standard Deduction Medical Expenses Total Deductions Net Estate Less: ½ Share of Surviving Spouse Gross Conjugal Estate Conjugal Deductions Net Conjugal Estate Net Conjugal Estate / 2 Net Taxable Estate

Exclusive

Conjugal

Total

Pxxx Pxxx

Pxxx Pxxx Pxxx Pxxx

Pxxx Pxxx Pxxx

Pxxx Pxxx Pxxx Pxxx

Pxxx Pxxx Pxxx Pxxx Pxxx Pxxx Pxxx Pxxx Pxxx

Pxxx (xxx) Pxxx Pxxx Pxxx

ABSOLUTE COMMUNITY OF PROPERTY - shall govern marriages contracted on or after August 3, 1998 in the absence of marriage settlement or when regime agreed upon is void. COMMUNAL PROPERTIES: 1. Properties owned by spouses at the time of celebration of marriage or acquired thereafter 2. Properties acquired during the marriage, unless it is proved that it is one of those excluded thereon EXCLUSIVE PROPERTIES OF EACH SPOUSE: 1. Property acquired during marriage by gratuitous title and the fruits as well as the income thereof, unless expressly provided by donor, testator or grantor that they shall form part of communal property 2. Property for personal and exclusive use of either spouse; however, jewelry shall form part of communal property 3. Property acquired before marriage by either spouse who has legitimate descedants by former marriage and the fruits as well as the income, if any PROCEEDS OF LIFE INSURANCE: 1. Before Marriage:  Premiums were fully paid by decedent spouse – exclusive (d)  Premiums were fully paid by surviving spouse – exclusive (s)  Premiums were paid partly with exclusive and conjugal funds – conjugal 2. During Marriage – conjugal

PRO-FORMA COMPUTATION: Community Properties Family Home Real Properties Exclusive Properties Gross Estate Less: Deductions Ordinary Deductions Community Deductions Funeral Expenses Other Deductions Total Community Deductions Net Community Estate Exclusive Deductions Special Deductions Family Home Standard Deduction Medical Expenses Total Deductions Net Estate Less: ½ Share of Surviving Spouse Gross Community Estate Community Deductions Net Community Estate Net Community Estate / 2 Net Taxable Estate

Exclusive

Communal

Total

Pxxx Pxxx

Pxxx Pxxx Pxxx Pxxx

Pxxx Pxxx Pxxx

Pxxx Pxxx Pxxx

Pxxx Pxxx Pxxx

Pxxx Pxxx Pxxx Pxxx Pxxx Pxxx Pxxx Pxxx (xxx) Pxxx Pxxx Pxxx

TAX CREDIT FOR FOREIGN ESTATE TAX - refers to the taxpayer’s right to deduct from the tax due the amount of tax he/it was paid to a foreign country subject to limitations. Non-resident alien decedents are not entitled to tax credit. PHILIPPINE ESTATE TAX DUE Estate Tax Payable Less: TCFET or Tax Actually Paid (whichever is lower)

xxx xxx*

Phil. Estate Tax Due

xxx

NOTICE OF DEATH 

*LIMITATIONS ON CREDIT FOR FOREIGN ESTATE TAXES 1. For estate taxes paid to one foreign country

 

Entire Net Estate x Estate Tax Rate = Phil. Estate Tax

Executor/administrator/legal heirs shall send a written notice of death to the Commissioner within 2 months after decedent’s death or within the period after qualifying as executor/administrator Also applies to exempt transfers whenever the gross estate exceeds P20,000 TRAIN law repeals the notice of death

ESTATE TAX RETURNS Net Estate per Foreign Country Entire Net Estate

x

Phil. Estate Tax

=

Allowed Tax Credit



Tax Credit = whichever is lower between Allowed Tax Credit and Tax Actually Paid 2. For estate taxes paid to two or more foreign countries  Entire Net Estate x Estate Tax Rate = Phil. Estate Tax Limitation 1:  Net Estate per Foreign Country Entire Net Estate

x

Phil. Estate Tax

=

Allowed Tax Credit

Tax Credit = whichever is lower between Allowed Tax Credit and Tax Actually Paid

Return must be filed on the following cases: 1. In all cases of transfers subject to tax 2. Exempt transfers (value of GE exceeds P200k) 3. Transfers regardless of value of GE where the estate consists of registered/registrable property which a clearance form from BIR is required as a prerequisite for the transfer of ownership Return shall contain the following: 1. Value of GE at the time of death 2. Deductions allowed 3. Other information that may be necessary If return shows that the value of GE exceeds P2,000,000 (TRAIN: exceeds P5,000,000), a statement duly certified by CPA containing the ff. is required: 1. Itemized assets of decedent 2. Itemized deductions 3. Amount of tax due whether paid or still due and outstanding

TIME FOR FILING TAX RETURNS Limitation 2: Net Estate all Foreign Countries Entire Net Estate

  x

Phil. Estate Tax

=

Allowed Tax Credit

Tax Credit = whichever is lower between Allowed Tax Credit and Taxes Actually Paid Tax Credit = whichever is lower between Limitation 1 and Limitation 2 ADMINISTRATIVE PROVISIONS (ESTATE)

PRE-TRAIN: estate tax return shall be filed within 6 months from decedent’s death TRAIN: estate tax return shall be filed within 1 year from decedent’s death

EXTENSION OF TIME TO FILE ESTATE TAX RETURNS  

Not exceeding 30 days Application for extension must be filed with the RDO where the estate is required to secure its TIN and file tax returns of estate

PLACE OF FILING TGE RETURN AND PAYMENT OF TAX





Resident Citizen – heirs/administrator/executor shall register the estate where the decedent was domiciled at the time of death and shall file the estate tax return and pay the corresponding tax with the: 1. AAB 2. RCO 3. Treasurer of the City or Municipality Non-Resident Citizen 1. With an executor/administrator in PH – ETR shall be files where such executor/administrator is registered or is domiciled (if not yet registered) 2. With no executor/administrator in PH – ETR shall be filed under jurisdiction of RDO 39-South Quezon City

ELECTRONIC BUREAU OF INTERAL REVENUE FORMS (eBIRForms)  

Prescribed form in preparation and filing of all tax returns by non-electronic filing or payment system (non-eFPS) Non-eFPS filers may opt to submit tax returns manually using eBIRForms offline package at their respective RDO or electronically through the use of online eBIRForms systems

TIME FOR PAYMENT OF ESTATE TAX - shall be paid at the time the return is filed by executor/administrator/heirs

 

LIABILITY FOR PAYMENT   

 

Estate is settled through the courts: not to exceed 5 years Estate is settled extrajudicially: not to exceed 2 years Application for extension must be filed with the RDO where the estate is required to secure its TIN and file tax returns of estate, shall be approved by Commissioner Any amount paid after statutory due date of tax, but within the extension period, shall be subject to interest but not to surcharge No extension: request for extension by reason of negligence, intentional disregard of rules and regulations or fraud

PAYMENT OF ESTATE TAX BY INSTALLMENT  

Clearance (Certificated Authorizing Registration) shall be released only with respect to property the corresponding/computed tax on which has been paid Amount paid after statutory due date: penalty

Estate tax shall be paid by executor/administrator before delivery of distributive share in inheritance to any heir/beneficiary Where there are 2 or more executors, all of them are severally liable Executor/administrator – primary liable; Heir/beneficiary – subsidiary liable (but liability shall not exceed the value of his share)

RESPOSIBILITIES OF RDO AND DOCUMENT PROCESSING DIVISION (DPD) 

 

EXTENSION OF TIME TO PAY ESTATE TAX   

Payment after statutory due date is approved by Commissioner: interest only TRAIN: payment by installment shall be allowed within 2 years from statutory date for its payment without civil penalty or interest

Exempt estate tax returns – shall be received by RDO; estate tax returns with payment – shall be received by RCO; the RCO/RDO shall not receive those not properly accomplished Within 5 days of discovery of any missing/incomplete information for tax returns, the DPD head shall transmit a list of ETR with missing/incomplete information Within 5 days from receipt of list, RDO shall view and print the returns and shall notify the heir (and the likes) of such fact and require amendment of return within 5 days from receipt of written notice

DUTIES OF CERTAIN PERSONS 





No judge shall authorize executor/administrator to deliver distributive share to any party interested, unless a certification from Commissioner that the estate tax has been paid is shown. Register of Deeds shall not register in the Registry of Property any document transferring real property or real rights, unless a certification from Commissioner that the estate tax has been paid is shown. Any lawyer , notary public, or government officer who intervenes in the preparation or acknowledgement of documents regarding partition/disposal of donation, shall furnish Commissioner (and the like) of the place where he may have his principal office, with copies of documents



 

A debtor of deceased shall not pay his debts to heirs (and the like), unless a certification from Commissioner that the estate tax has been paid is shown, but he may pay his debt w/out certification if the credit is included in inventory of estate of deceased Any person shall not transfer to any new owner in the books of any corporation, unless a certification from Commissioner that the estate tax has been paid is shown A bank having knowledge of death of depositor who maintained a bank deposit shall not allow any withdrawal from said deposit, unless a certification from Commissioner that the estate tax has been paid is shown. However, in the absence of such certification and upon authorization by Commissioner, the administrator/executor/heir may withdraw an amount not exceeding P20,000.

BASIC CONCEPTS OF DONATION GIFT - intentional transfer of property from transferor out of generosity DONATION - act of liberality whereby a person (donor) disposes gratuitously of a thing or right in favor of another (done), who accepts it - does not include donation of personal service or donation of a right to use property DONATION INTER VIVOS vs. DONATION MORTIS CAUSA  

Donation Inter Vivos – made between living persons and which is perfected from the moment the donor knows of the acceptance of the done Donation Mortis Causa – take effect upon the death of donor or partake of nature of testamentary provision

ELEMENTS OF DONATION   

Consent – agreement between the parties. Object – present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct. Donations cannot comprehend future property. Cause – may also be on account of donee’s merits or services not constituting a demandable debt or burden which is less than value of thing given; donative intent is not essential at all



Formalities – donation of movable may be made orally or in writing (however, if it exceeds P5,000, it shall be made in writing); donation of immovable must be made in public instrument

DONOR’S TAX OR GIFT TAX - tax imposed on the gratuitous transfer of property between 2 or more persons who are living at the time of transfer; an excise (privilege) tax; imposed on the privilege of donor to make gift

GROSS GIFT RC, NRC, RA DONORS (wherever situated)  Real or immovable property  Tangible personal property  Intangible personal property  Personal property classified as capital asset (FMV > Value of consideration) Gift Gain FMV Pxxx Selling Price Pxxx Less: Consideration Pxxx Less: Cost Pxxx Deemed Gift Pxxx Gain Pxxx NRA DONORS (only his property located in Ph) NR FOREIGN CORPORATION DONORS (only his property located in Ph) VALUATION  

Personal Property – FMV at the time of gift Real Property – whichever is higher between FMV as determined by Commissioner and FMV as shown in the schedule of values fixed by Provincial or City Assessors

DEDUCTIONS FROM GROSS GIFT GIFTS MADE BY RESIDENT OR CITIZEN DONOR



   

Dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents to each of their legitimate or adopted children to the extent of first P10,000 (TRAIN: dowries are no longer exempt from donor’s tax) Gifts made to or for use of National Government or any entity which is not conducted for profit or any political subdivision of said Government Gifts in favor of educational/charitable organizations, provided that not more than 30% of said gifts shall be used by such done for administrative purposes Encumbrance on the property donated, if assumed by donee (e.g. mortgage) Those specifically provided by donor as diminution of property donated (e.g. donate)

GIFTS MADE BY NRA DONOR - may also deduct from his taxable gross gift all those enumerated above except dowries

RATE OF DONOR’S TAX (PRE-TRAIN)

 

to to to to to to to to

100,000 200,000 500,000 1,000,000 3,000,000 5,000,000 10,000,000 above

xxx xxx* xxx

*LIMITATIONS ON CREDIT FOR FOREIGN ESTATE TAXES 1. For donor’s taxes paid to one foreign country Entire Net Gift x Donor’s Tax Rate = Phil. Donor’s Tax Net Gift per Foreign Country Entire Net Gift

x

Phil. Donor’s Tax

=

Allowed Tax Credit

2. For donor’s taxes paid to two or more foreign countries

Donee is not a stranger

0 100,000 200,000 500,000 1,000,000 3,000,000 5,000,000 10,000,000

Donor’s Tax Payable Less: TCFDT or Tax Actually Paid (whichever is lower) Phil. Donor’s Tax Due

Tax Credit = whichever is lower between Allowed Tax Credit and Tax Actually Paid

NET GIFT AND DONOR’S TAX



PHILIPPINE DONOR’S TAX DUE

Entire Net Gift x Donor’s Tax Rate = Phil. Donor’s Tax = = = = = = = =

Exempt 0 2,000 14,000 44,000 204,000 404,000 1,004,000

+ + + + + + +

2% of the excess over 4% of the excess over 6% of the excess over 8% of the excess over 10% of the excess over 12% of the excess over 15% of the excess over

100,000 200,000 500,000 1,000,000 3,000,000 5,000,000 10,000,000

Donee is stranger – fixed 30% Any contribution in cash or in kind to any candidate, political party or coalition of parties for campaign purposes – not subject to donor’s tax

Limitation 1: Net Gift per Foreign Country Entire Net Gift

x

Phil. Donor’s Tax

=

Allowed Tax Credit

Tax Credit = whichever is lower between Allowed Tax Credit and Tax Actually Paid Limitation 2: Net Gift all Foreign Countries Entire Net Gift

x

Phil. Donor’s Tax

=

Allowed Tax Credit

RATE OF DONOR’S TAX (TRAIN) Donor’s tax rate is now at 6% uniform rate in excess of P250,000 exempt gift

Tax Credit = whichever is lower between Allowed Tax Credit and Taxes Actually Paid

FOREIGN DONOR’S TAX CREDIT. FILING AND PAYMENT OF DONOR’S TAX FOREIGN DONOR’S TAX CREDIT

Tax Credit = whichever is lower between Limitation 1 and Limitation 2

FILING AND PAYMENT OF DONOR’S TAX  

Same with the filing and payment of estate tax Notice of Donation by donor engaged in business In order to be exempt from donor’s tax and to claim full deduction of donation given to qualified-donee, the donor engaged in business shall give notice on every donation worth at least P50,000 to RDO within 30 days after receipt of Certificate of Donation, which shall be attached to the said Notice of Donation, stating that not more than 30% of said donation/gift shall be used for administrative purposes.