Transfer taxes
Modes of Acquiring Ownership
Occupation
Intellectual Creation
Donation
Succession
Prescription
What is succession?
SUCCESSION – a mode of acquisition by virtue of which the
property, rights and obligations to the extent of the value of
the inheritance, of a person are transmitted through his
death to another or others by his will or by operation of law.
The rights to the succession are transmitted from the
moment of death of the decedent.
Kinds of succession
1. Testamentary or testate – is that which results from the
designation of an heir, made in a will executed in the form
prescribed by law.
2. Legal or intestate – is that effected by operation of law
since the decedent did not executes a will.
3. Mixed – is that effected partly by will and partly by
operation of law.
elements of succession
1. Death of the decedent
2. Inheritance
3. Successors
4. Acceptance
Executor – is a person appointed by a testator to carry out the
directions and requests in his will, and to dispose of the
property according to his testamentary provisions after his
death.
Administrator – is a person appointed by the court to
administer the assets and liabilities of a decedent. He is
usually a relative of the decedent who has come forward and
applied for the position.
Testamentary succession
WILL – is an act whereby a person is permitted, with
the formalities prescribed by law, to control to a
certain degree the disposition of his estate to take
effect after his death. The making of a will is a strictly
personal act; it cannot be left in whole or in part to the
discretion of a third person, or accomplished through
the instrumentality of an agent or attorney.
Capacity and intent to make a will
• All persons who are not expressly prohibited by law
may make a will.
• Persons of either sex under eighteen years of age,
which is the age of majority, cannot make a will.
• In order to make a will, it is essential that the
testator be of sound mind at the time of its
execution.
Capacity and intent to make a will
• If someone who signs an instrument did not know
that the instrument said at the time of signing, the
instrument is not a will.
• A married woman may make a will without the
consent of her husband, and without the authority
of the court.
Capacity to Succeed by Will or by Intestacy
• Persons not incapacitated by law may succeed by will
or ab intestate. In order to be capacitated to inherit,
the heir, devisee or legatee must be living at the
moment the succession opens, except in case of
representation, when it is proper.
Capacity to Succeed by Will or by Intestacy
• A child already conceived at the time of the death of
the decedent is capable of succeeding provided it
born later.
• A testamentary disposition may be made to the
State, provinces, municipal corporations, private
corporations, organizations or associations for
religious, scientific, cultural, educational, or
charitable purposes.
WILLS
Every will must be in writing and executed in
a language or dialect known to the testator.
Every will, other than a holographic will, must
be subscribed by the testator.
It must be acknowledged before a notary
public by the testator and the witnesses.
WILLS
Holographic will is a will written entirely
by the testator with his own hand and
not witnessed or attested. A person may
execute a holographic will which must be
entirely written, dated, and signed by the
hand of the testator explicitly declare
that the will and the signature are in the
handwriting of the testator himself.
Estate taxation
Estate tax – is the tax on the right to transmit property
at death and on certain transfer which are made by
law the equivalent of testamentary dispositions. It is
not a tax on the property, transfer or transferee. It is
an excise tax or privilege tax and its object is to tax the
shifting of economic benefits of property from the
dead to the living.
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.
Succession takes place and the right of the State to
tax the privilege to transmit the estate vests instantly
upon death.
Rate of Estate Tax
The transfer of 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%).
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
What are included in gross estate?
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
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
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.
What will be used as basis in the valuation of
property?
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.
What are the allowable deductions for Estate Tax
Purposes?
For a citizen or resident alien
1. Standard deduction – A deduction in the amount of Five
Million Pesos (P5,000,000.00) shall be allowed as an
additional deduction without need of substantiation.
2. Claims against the estate.
3. Claims of the deceased against insolvent persons where
the value of the decedent’s interest therein is included in
the value of the gross estate
4. Unpaid mortgages, taxes and casualty losses
What are the allowable deductions for Estate Tax
Purposes?
For a citizen or resident alien
5. Property previously taxed
6. Transfers for public use
7. The family home - fair market value but not to exceed
P10,000,000.00
8. Amount received by heirs under Republic Act No. 4917
Net share of the surviving spouse in the conjugal partnership
or community property
What are the allowable deductions for Estate Tax
Purposes?
For a non-resident alien
1. Standard deduction – P500,000.00
2. Proportion of the following deductions
a. Claims against the estate.
b. Claims of the deceased against insolvent persons
where the value of the decedent’s interest
therein is included in the value of the gross
estate
What are the allowable deductions for Estate Tax
Purposes?
For a non-resident alien
c. Unpaid mortgages, taxes and casualty losses
3. Property previously taxed
4. Transfers for public use
Net share of the surviving spouse in the conjugal
partnership or community property
When to file and pay?
File estate tax return and pay tax within one (1) year
from date of death.
How about installment Payments?
If case the available cash of the estate is insufficient to
pay the total estate tax due, payment by installment shall
be allowed within to (2) years from the statutory date for
its payment without civil penalty and interest.
When is CPA Certification required?
If gross estate exceeds P5 million, attach to estate
tax return a certified statement of assets and
itemized deductions.
• Tax clearance is required before any transfer of
shares may be made in the name of new owners,
however,
• If a bank has knowledge of the death of a person,
who maintained a bank deposit account alone, or jointly
with another, it shall allow any withdrawal from the
said deposit account, subject to a final
withholding tax of six percent (6%), without such
certification from the CIR.
Situs of Property
As a general rule, the situs of real property is the place
or country where it is situated.
The situs of tangible personal property is the place or
country where such is actually located at the time of
the decedent’s death.
The situs of intangible personal property is the
domicile or residence of the owner.
Situs of Property
However, this rule may not control when the property
has, in fact, a situs elsewhere. In addition to the ones
already enumerated, the following tests of situs apply:
1. Accounts receivable – residence of the debtor
2. Bank deposit – location of depository bank
3. Copyright, trademark, patent & franchise – place or
country where the intangible is used or exercised.
