Taxation Law II Atty. Dr. Vicky C.

Fernandez

from the property, or (b) the right, either

Estate Tax alone or in conjunction with any person,
to designate the person who shall possess
or enjoy the property or the income
a. Basic Principles, Concepts, and definition therefrom; except in case of a bona fide
sale for an adequate and full
Estate Tax consideration in money or money’s
is a privilege tax on the right to transfer or worth;
transmit property upon the death of the decedent to the 3. Revocable transfer -made by trust or
latter’s heirs and beneficiaries. otherwise, where the enjoyment thereof
although it is levied on the taxable value of the was subject at the date of his death to any
net estate of the decedent before it is distributed, it is change through the exercise of a power
not a tax on property nor on the transferor or by the decedent alone or in conjunction
transferee. with any other person, to alter, amend,
 Its economic objective is to prevent undue revoke, or terminate, or where any such
concentration of wealth by “limiting fortunes by power is relinquished in contemplation of
taxation’’, and its imposition is justified on the ground decedent’s death; except in case of a bona
that it is closely conforms to the widely accepted fide sale for an adequate and full
principle of ability-to-pay and minimal sacrifice. consideration in money or money’s
worth.
Transfer Taxes 4. Property passing under general power of
those taxes imposed upon the privilege appointment – exercised by the decedent
granted by the state to the taxpayer so that he may (a) by will, or (b) by deed executed in
transfer properties, real or personal, without contemplation of, or intended to take
consideration. effect in possession or enjoyment at, or
are excise or privilege taxes that are after his death, or (c) by deed under
imposed on the act of passing ownership of property which he has retained for his life or any
and not taxes on the property transferred. (Estate, period not ascertainable without reference
Donor’s Tax) 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
b. Classification of Decedent the income from the property, or (d) the
1. The resident and non-resident Filipino right, either alone or in conjunction with a
Citizens, and resident alien decedent; y person, to designate the persons who
2. The non-resident alien decedent. shall possess or enjoy the property or the
c. Determination of gross and net estate (Sec. income thereform; except in case of a
85-86) bona fide sale for an adequate and full
consideration in money or money’s
Filipino citizens and resident alien decedent worth;
the value of his/her real or personal, tangible 5. Proceeds of life insurance – receivable by
or intangible, wherever situated shall form part of the estate of the deceased, his executor, or
his/her gross estate. administrator, as insurance under policies
taken out by the decedent upon his own
life, irrespective of whether or not the
Non-resident alien citizen insured retained the power of revocation,
only part of the entire gross estate which is
or to the extent of the amount receivable
situated in the Philippines shall be included in his
by any beneficiary designated in the
taxable estate.
policy of insurance, except when it is
expressly stipulated that the designation
Gross Estate shall include: of the beneficiary is irrevocable;
1. Decedent’s interest – in the property at 6. Prior interests - on any transfers made in
the time of his/her death. contemplation of death, revocable
2. Transfers made in contemplation of death transfers, or property passing under
– by trust or otherwise, intended to take general power of appointment, whether
effect in possession or enjoyment of, or made, created, arising, existing, exercised
for any period which does not in fact end or relinquished before or other the
before his death (a) the possession or effectivity of the NIRC.
enjoyment of, or the right to the income
Taxation Law II Atty. Dr. Vicky C. Fernandez

7. Transfers for insufficient consideration – d. Exemption of certain acquisitions and

in contemplation of death, revocable transmission (Sec. 87)
transfers, or property passing under 1. The merger of usufruct in the owner of
general power of appointment, when the naked title;
made, created, exercised or relinquished 2. The transmission or delivery of the
for a consideration in money or money’s inheritance or legacy by the fiduciary heir
worth, but is not a bona fide sale for an or legatee to the fideicommissary;
adequate and full consideration in 3. The transmission from the first heir,
money’s worth, there shall be included in legatee or done in favor of another
the gross estate only the excess of the fair beneficiary, in accordance with the desire
market value at the time of death, of the of the predecessor; and
transferred property, over the value of the 4. All bequests, devises, legacies or
consideration received therefor by the transfers to social welfare, cultural and
decedent. charitable institutions, (a) no part of the
net income of which inures to the benefit
How is the Net Estate of the decedent of any individual and (b) not more than
determined? 30% thereof shall use for administration
by deducting the allowable purposes.
deductions and exclusions from the gross
value of all the properties of the decedent.

Deduction and Exclusions from Estate e. Period for filing estate tax returns (Sec. 90b)
the estate tax return shall be filed within 1 year from the
decedent’s death, extendible for a period not exceeding 30 days in
The following are the allowable deduction from the meritorious cases as authorized by the CIR.
gross estate of a Filipino or a resident alien decedent.
1. Standard deduction
2. Claims against the estate Donor’s Tax
3. Claims against insolvent persons
4. Unpaid mortgages
5. Losses from fires, storms, shipwreck, or, a. Basic principles, concept, and definition
other casualties, or from robbery, theft, or b. Requisites of a valid donation
embezzlement
6. Property previously taxed: Vanishing
c. Transfers which may be constituted as
deduction donation
7. Transfers for public use i. Transfer of property for
8. Family Home insufficient consideration (Section
9. Amount received by the heirs under R.A 101)
No. 4917
ii. Condonation/Remission
The following are the allowable deduction from the iii. Bona fide arms-length transfers
gross estate of a Filipino or a nonresident alien (Sec. 101)
decedent. d. Determination of gross gift (Sec. 104)
1. Standard deduction e. Exemption of gifts from donor’s tax (Sec.
2. Claims against the estate, claim against 101)
the insolvent person, unpaid mortgages
3. Property previously taxed; Vanishing
deduction
4. Transfers for public use
5. Net share in the conjugal property
6. Tax credit for estate taxes paid to a
foreign country
Taxation Law II Atty. Dr. Vicky C. Fernandez
Taxation Law II Atty. Dr. Vicky C. Fernandez

Value Added Tax (VAT)

1. Concept and elements of VATable
transactions (Sec. 105)
2. Impact and incidence of tax
3. Destination Principle; Cross-Border Doctrine
4. Imposition of VAT on transfer of goods by
tax exempt persons (Sec. 107 b)
5. Transactions deemed sale subject to VAT
(Secs. 106-108)
6. Zero-rated and effectively zero-rated sales of
goods or properties.
7. VAT-exempt transactions (Sec. 109)
8. Input and output tax (Sec. 110)
9. Tax refund or tax credit (Sec. 112)
a. San Roque doctrine
b. Enhance VAT refund system
10. Filing of returns and payment (Sec. 114)