ESTATE TAX

Estate Tax is a tax on the right of the deceased person to transmit

his/her estate to his/her lawful heirs and beneficiaries at the time of death
and on certain transfers, which are made by law as equivalent to
testamentary disposition. It is not a tax on property. It is a tax imposed on
the privilege of transmitting property upon the death of the owner. The
Estate Tax is based on the laws in force at the time of death notwithstanding
the postponement of the actual possession or enjoyment of the estate by the
beneficiary.

Documentary Requirements

1. Notice of Death duly received by the BIR, if gross estate exceeds P20,000
for deaths occurring on or after Jan. 1, 1998; or if the gross estate exceeds
P3,000 for deaths occurring prior to January 1, 1998

2. Certified true copy of the Death Certificate

3. Deed of Extra-Judicial Settlement of the Estate, if the estate is settled

extra judicially

4. Court Orders/Decision, if the estate is settled judicially;

5. Affidavit of Self-Adjudication and Sworn Declaration of all properties of

the Estate

6. A certified true copy of the schedule of partition of the estate and the
order of the court approving the same, if applicable

7. For manually issued title (red title), a certified true copy of the Original
Certificate of Title (OCT), Transfer Certificate of Title, or Condominium
Certificate of Title (CCT) in case of a condo unit;

For electronically issued title (blue title), a photocopy of the Original

Certificate of Title, Transfer Certificate of Title, or Condominium Certificate of
Title (CCT) in case of a condo unit

8. Certified true copy of the latest Tax Declaration of real properties at the
time of death, if applicable

9. "Certificate of No Improvement" issued by the Assessor's Office declared

properties have no declared improvement or Sworn Declaration/Affidavit of
No Improvement by at least one (1) of the transferees
10. Certificate of Deposit/Investment/Indebtedness owned by the decedent
and the surviving spouse, if applicable

11. Photo copy of Certificate of Registration of vehicles and other proofs

showing the correct value of the same, if applicable

12. Photo copy of certificate of stocks, if applicable

13. Proof of valuation of shares of stocks at the time of death, if applicable

 For listed stocks - newspaper clippings or certification from the Stock

Exchange
 For unlisted stocks - Audited Financial Statements duly certified by an
independent certified public accountant with computation of fair
market value per share at the time of death

14. Proof of valuation of other types of personal property, if applicable

15. Proof of claimed tax credit, if applicable

16. CPA Statement on the itemized assets of the decedent, itemized

deductions from gross estate and the amount due if the gross value of the
estate exceeds two million pesos, if applicable

17. Certification of Barangay Captain for claimed Family Home

18. Duly notarized Promissory Note for "Claims against the Estate" arising
from Contract of Loan

19. Accounting of the proceeds of loan contracted within three (3) years
prior to death of the decedent

20. Proof of the claimed "Property Previously Taxed"

21. Proof of claimed "Transfer for Public Use"

22. Copy of Tax Debit Memo used as payment, if applicable

23. Special Power of Attorney (SPA) from the transacting party if the latter is
not one of the parties to the Deed of Transfer

Additional requirements may be requested for presentation during audit of

the tax case depending upon existing audit procedures.
Procedures

The heirs/authorized representative/administrator/executor shall file the

estate tax return (BIR Form 1801) and pay the corresponding estate tax
with the Authorized Agent Bank (AAB), Revenue Collection Officer (RCO) or
duly authorized Treasurer of the city or municipality in the Revenue District
Office having jurisdiction over the place of domicile of the decedent at the
time of his death, pursuant to Section 90(D) of the Tax Code, as amended.

In case of a non-resident decedent, with executor or administrator in the

Philippines, the estate tax return shall be filed with the AAB of the RDO
where such executor/administrator is registered or is domiciled, if not yet
registered with the BIR.

For non-resident decedent with no executor or administrator in the

Philippines, the estate tax return shall be filed with the AAB under the
jurisdiction of RDO No. 39 South Quezon City.

The heir/authorized representative/administrator/executor shall submit all

the applicable documentary requirements as prescribed in Annexes A-6 and
A-6.1 of Revenue Memorandum Order (RMO) No. 15-2003 and proof of
payment to the RDO having jurisdiction over the place of residence of the
decedent or the RDO where the executor or administrator is registered, or
RDO No. 39 – South, Quezon City, whichever is applicable. (part II, par.(4)of
RMC No. 34-2013)

Payment of Estate Tax by installment - In case the available cash of the

estate is not sufficient to pay its total estate tax liability, the estate may be
allowed to pay the tax by installment and a clearance shall be released only
with respect to the property, the corresponding/computed tax on which has
been paid. (Section 9(F) of RR 2-2003)

One-Time Transaction (ONETT) taxpayers who are classified as real estate

dealers/developers; those who are considered as habitually engaged in the
sale of real property and regular taxpayers already covered by eBlRForms.
Thus, taxpayers who are filing BIR Form No. 1706, 1707, 1800, 1801 and
2000-OT (for BIR Form No. 1706 only) are excluded in the mandatory
coverage from using the eBIRForms (Section 4 (3) of Revenue Regulation
No. 9-2016)

Please note that the time of payment will vary depending on the law
applicable at the time of the decedent’s death.

Deadlines
File the return within six (6) months from decedent's death. However, the
Commissioner may, in meritorious cases, grant extension not exceeding
thirty (30) days.

The Estate Tax imposed shall be paid at the time the return is filed by the
executor or administrator or the heirs. However, when the Commissioner
finds that payment on the due date of the Estate Tax or of any part thereof
would impose undue hardship upon the estate or any of the heirs, he may
extend the time for payment of such tax or any part thereof not to exceed
five (5) years, in case the estate is settled through the courts or two (2)
years in case the estate is settled extra-judicially.

In all cases of transfers subject to tax, or where, though exempt from tax,
the gross value of the estate exceeds Twenty Thousand Pesos (P 20,000),
Section 89 of the National Internal Revenue Code of 1997 (Tax Code), as
amended, provides that the executor, administrator or any of the legal heirs,
shall send a written notice of death to the Commissioner within two (2)
months after the decedent’s death or within a like period after an executor
or administrator qualify as such. (part II, par.(1)of RMC No. 34-2013)

Please note that the time of filing will vary depending on the law applicable
at the time of the decedent’s death.

Extension of Time of Filing:

When the Commissioner finds that the payment of the estate tax or of any
part thereof would imposed undue hardship upon the estate or any of the
heirs, he may extend the time for payment of such tax or any part thereof
not to exceed five (5) years in case the estate is settled through the courts,
or two (2) years in case it settled extra-judicially.

Where the request for extension is by reason of negligence, intentional

disregard of rules and regulations, or fraud on the part of the taxpayer, no
extension will be granted by the Commissioner.

If an extension is granted, the Commissioner or his duly authorized

representative may require the executor, or administrator, or beneficiary, as
the case may be, to furnish a bond in such amount, not exceeding double
the amount, not exceeding double the amount of tax and with such sureties
as the Commissioner deems necessary, conditioned upon the payment of the
said tax in accordance in the terms of extension.

The request for extension shall be filed with the Revenue District Officer
(RDO) where the estate is required to secure its TIN and file the estate tax
return. The application shall be approved by the Commissioner or his duly
authorized representative.

Frequently Asked Questions

1. Who are required to file the Estate Tax return?

a) The executor or administrator or any of the legal heirs of the decedent or

non-resident of the Philippines under any of the following situation:

- In all cases of transfer subject to Estate Tax;

- Where though exempt from Estate Tax, the gross value of the estate
exceeds two hundred thousand P 200,000.00; and

- Where regardless of the gross value, the estate consists of registered or

registrable property such as real property, motor vehicle, share of stocks or
other similar property for which a clearance from the Bureau of Internal
Revenue (BIR) is required as a prerequisite for the transfer of ownership
thereof in the name of the transferee. (part II par.(1.#3) of RMC No. 34-
2013)

b) Where there is no executor or administrator appointed, qualified and

acting within the Philippines, then any person in actual or constructive
possession of any property of the decedent must file the return.

c) The Estate Tax imposed under the Tax Code shall be paid by the executor
or administrator before the delivery of the distributive share in the
inheritance to any heir or beneficiary. Where there are two or more
executors or administrators, all of them are severally liable for the payment
of the tax. The estate tax clearance issued by the Commissioner or the
Revenue District Officer (RDO) having jurisdiction over the estate, will serve
as the authority to distribute the remaining/distributable properties/share in
the inheritance to the heir or beneficiary.

d) The executor or administrator of an estate has the primary obligation to

pay the estate tax but the heir or beneficiary has subsidiary liability for the
payment of that portion of the estate which his distributive share bears to
the value of the total net estate. The extent of his liability, however, shall in
no case exceed the value of his share in the inheritance.

2. 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

 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 such as:

- Franchise which must be exercised in the Philippines

- Shares, obligations or bonds issued by corporations organized or
constituted in the Philippines
- Shares, obligations or bonds issued by a foreign corporation 85% of the
business of which is located in the Philippines
- Shares, obligations or bonds issued by a foreign corporation if such shares,
obligations or bonds have acquired a business situs in the Philippines ( i. e.
they are used in the furtherance of its business in the Philippines)
- Shares, rights in any partnership, business or industry established in the
Philippines

3. 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
 Transfer by way of bona fide sales
 Transfer of property to the National Government or to any of its
political subdivisions
 Separate property of the surviving spouse
 Merger of usufruct in the owner of the naked title
 Properties held in trust by the decedent
 Acquisition and/or transfer expressly declared as not taxable

4. 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.
 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.

5. What are the allowable deductions for Estate Tax Purposes?

Applicable for deaths occurring after the effectivity of RA 8424 which is

January 1, 1998

For a citizen or resident alien

A. Expenses, losses, indebtedness and taxes

(1) Actual funeral expenses (whether paid or unpaid) up to the time of

interment, or an amount equal to five percent (5%) of the gross estate,
whichever is lower, but in no case to exceed P200,000.

(2) Judicial expenses of the testamentary or intestate proceedings.

(3) Claims against the estate.

(4) 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; and,

(5) Unpaid mortgages, taxes and casualty losses

B. Property previously taxed (Vanishing Deduction) (Section 86(2) of the

NIRC as amended by Republic Act No. 8424)

An amount equal to the value specified below of any property forming a part
of the gross estate situated in the Philippines of any person who died within
five (5) years prior to the death of the decedent, or transferred to the
decedent by gift within five (5) years prior to his death, where such property
can be identified as having been received by the decedent from the donor by
gift, or from such prior decedent by gift, bequest, devise or inheritance, or
which can be identified as having been acquired in exchange for property so
received:

One hundred percent (100%) of the value, if the prior decedent died within
one (1) year prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to his death;

Eighty percent (80%) of the value, if the prior decedent died more than one
(1) year but not more than two (2) years prior to the death of the decedent,
or if the property was transferred to him by gift within the same period prior
to his death;

Sixty percent (60%) of the value, if the prior decedent died more than two
(2) years but not more than three (3) years prior to the death of the
decedent, or if the property was transferred to him by gift within the same
period prior to his death;

Forty percent (40%) of the value, if the prior decedent died more than three
(3) years but not more than four (4) years prior to the death of the
decedent, or if the property was transferred to him by gift within the same
period prior to his death; and

Twenty percent (20%) of the value, if the prior decedent died more than
four (4) years but not more than five (5) years prior to the death of the
decedent, or if the property was transferred to him by gift within the same
period prior to his death;

These deductions shall be allowed only where a donor’s tax or estate tax
imposed was finally determined and paid by or on behalf of such donor, or
the estate of such prior decedent, as the case may be, and only in the
amount finally determined as the value of such property in determining the
value of the gift, or the gross estate of such prior decedent, and only to the
extent that the value of such property is included in the decedent’s gross
estate, and only if in determining the value of the estate of the prior
decedent, no Property Previously Taxed or Vanishing Deduction was
allowable in respect of the property or properties given in exchange therefor.
(Section 6 & 7 of RR 2-2003)

C. Transfers for public use

D. The family home - fair market value but not to exceed P1,000,000.00

The family home refers to the dwelling house, including the land on which it
is situated, where the husband and wife, or a head of the family, and
members of their family reside, as certified to by the Barangay Captain of
the locality. The family home is deemed constituted on the house and lot
from the time it is actually occupied as a family residence and is considered
as such for as long as any of its beneficiaries actually resides therein. (Arts.
152 and 153, Family Code)

E. Standard deduction – A deduction in the amount of One Million Pesos

(P1,000,000.00) shall be allowed as an additional deduction without need of
substantiation.

F. Medical expenses – All medical expenses (cost of medicines, hospital bills,

doctor’s fees, etc.) incurred (whether paid or unpaid) within one (1) year
before the death of the decedent shall be allowed as a deduction provided
that the same are duly substantiated with official receipts. For services
rendered by the decedent’s attending physicians, invoices, statements of
account duly certified by the hospital, and such other documents in support
thereof and provided, further, that the total amount thereof, whether paid or
unpaid, does not exceed Five Hundred Thousand Pesos (P500,000).

G. Amount received by heirs under Republic Act No. 4917-Any amount

received by the heirs from the decedent’s employer as a consequence of the
death of the decedent-employee in accordance with Republic Act No. 4917 is
allowed as a deduction provided that the amount of the separation benefit is
included as part of the gross estate of the decedent.

H. Net share of the surviving spouse in the conjugal partnership or

community property

For a non-resident alien

A. Expenses, losses, indebtedness and taxes

B. Property previously taxed

C. Transfers for public use

D. Net share of the surviving spouse in the conjugal partnership or

community property

No deduction shall be allowed in the case of a non-resident decedent not a

citizen of the Philippines, unless the executor, administrator, or anyone of
the heirs, as the case may be, includes in the return required to be filed in
the Section 90 of the Code the value at the time of the decedent’s death of
that part of his gross estate not situated in the Philippines.
Please note that the allowable deductions will vary depending on the law
applicable at the time of the decedent’s death.

6. What does the term "Funeral Expenses" include? (Sec 6 (A)(1) of RR 2-

2003)

The term "FUNERAL EXPENSES" is not confined to its ordinary or usual

meaning. They include:

(a) The mourning apparel of the surviving spouse and unmarried minor
children of the deceased bought and used on the occasion of the burial;

(b) Expenses for the deceased’s wake, including food and drinks;

(c) Publication charges for death notices;

(d) Telecommunication expenses incurred in informing relatives of the

deceased;

(e) Cost of burial plot, tombstones, monument or mausoleum but not their
upkeep. In case the deceased owns a family estate or several burial lots,
only the value corresponding to the plot where he is buried is deductible;

(f) Interment and/or cremation fees and charges; and

(g) All other expenses incurred for the performance of the rites and
ceremonies incident to interment.

Expenses incurred after the interment, such as for prayers, masses,

entertainment, or the like are not deductible. Any portion of the funeral and
burial expenses borne or defrayed by relatives and friends of the deceased
are not deductible. Actual funeral expenses shall mean those which are
actually incurred in connection with the interment or burial of the deceased.
The expenses must be duly supported by official receipts or invoices or other
evidence to show that they were actually incurred.

7. What does the term "Judicial Expenses" include? (Sec 6 (A)(2) of RR 2-

2003)

Expenses allowed as deduction under this category are those incurred in the
inventory-taking of a assets comprising the gross estate, their
administration, the payment of debts of the estate, as well as the
distribution of the estate among the heirs. In short, these deductible items
are expenses incurred during the settlement of the estate but not beyond
the last day prescribed by law, or the extension thereof, for the filing of the
estate tax return. Judicial expenses may include:

(a) Fees of executor or administrator;

(b) Attorney’s fees;

(c) Court fees;

(d) Accountant’s fees;

(e) Appraiser’s fees;

(f) Clerk hire;

(g) Costs of preserving and distributing the estate;

(h) Costs of storing or maintaining property of the estate; and

(i) Brokerage fees for selling property of the estate.

Any unpaid amount for the aforementioned cost and expenses claimed
under “Judicial Expenses” should be supported by a sworn statement of
account issued and signed by the creditor.

8. What are the requisites for deductibility of claims against the Estate? (Sec
6(A)(3) of RR 2-2003)

(a) The liability represents a personal obligation of the deceased existing at

the time of his death except unpaid obligations incurred incident to his death
such as unpaid funeral expenses (i.e., expenses incurred up to the time of
interment) and unpaid medical expenses which are classified under a
different category of deductions pursuant to these Regulations;

(b) The liability was contracted in good faith and for adequate and full
consideration in money or money’s worth;

(c) The claim must be a debt or claim which is valid in law and enforceable
in court;

(d) The indebtedness must not have been condoned by the creditor or the
action to collect from the decedent must not have prescribed.

9. How do we determine the fair market value of the unlisted stocks? (RR
NO. 6-2013) (Annex U)
In determining the value of the shares, the Adjusted Net Asset Method shall
be used whereby all assets and liabilities are adjusted to fair market values.
The net of adjusted asset minus the adjusted liability value is the indicated
value of the equity.

For purposes of this item, the appraised value of real property at the time of
sale shall be the highest among the following:

(a) The fair market value as determined by the Commissioner, or

(b) The fair market value as shown in the schedule of values fixed by the
Provincial and City Assessors, or

(c) The fair market value as determined by Independent Appraiser.

DONOR’S TAX

Donor’s Tax is a tax on a donation or gift, and is imposed on the gratuitous

transfer of property between two or more persons who are living at the time
of the transfer. It shall apply whether the transfer is in trust or otherwise,
whether the gift is direct or indirect and whether the property is real or
personal, tangible or intangible.

Documentary Requirements

The following requirements must be submitted upon field or office audit of

the tax case before the Tax Clearance Certificate/Certificate Authorizing
Registration can be released:

1. Deed of Donation

2. Sworn Statement of the relationship of the donor to the donee

3. Proof of tax credit, if applicable

4. For manually issued title (red title), a certified true copy of the Original
Certificate of Title (OCT), Transfer Ceritificate of Title (TCT), or Condominium
Certificate of Title (CCT) in case of a condo unit

For electronically issued title (blue title), photocopy of the Original Certificate
of Title (OCT), Transfer Ceritificate of Title (TCT), or Condominium Certificate
of Title (CCT) in case of a condo unit
5. Certified true copy(ies) of the latest Tax Declaration (front and back
pages) of lot and/or improvement, if applicable

6. “Certificate of No Improvement” issued by the Assessor’s office where the

properties have no declared improvement, if applicable

7. Proof of valuation of shares of stocks at the time of donation, if applicable


 For listed stocks - newspaper clippings or certification issued by
the Stock Exchange as to the par value per share
 For unlisted stocks - Audited Financial Statements duly certified
by an independent certified public accountant with computation
of fair market value per share at the time of donation.

8. Proof of valuation of other types of personal properties, if applicable

9. Proof of claimed deductions, if applicable

10. Copy of Tax Debit Memo used as payment, if applicable

11. Special Power of Attorney (SPA) from the transacting party if the latter is
not one of the parties to the Deed of Transfer

Additional requirements may be requested for presentation during audit of

the tax case depending upon existing audit procedures.

Procedures

File the return in triplicate (two copies for the BIR and one copy for the
taxpayer) with any Authorized Agent Bank (AAB) of the RDO having
jurisdiction over the place of the domicile of the donor at the time of the
transfer. In places where there are no AAB, the return will be filed directly
with the Revenue Collection Officer or duly Authorized City or Municipal
Treasurer where the donor was domiciled at the time of the transfer, or if
there is no legal residence in the Philippines, with Revenue District No. 39 -
South Quezon City.

In the case of gifts made by a non-resident alien, the return may be filed
with Revenue District No. 39 - South Quezon City, or with the Philippine
Embassy or Consulate in the country where donor is domiciled at the time of
the transfer.
Submit all documentary requirements and proof of payment to the Revenue
District Office having jurisdiction over the place of residence of the donor.

One-Time Transaction (ONETT) taxpayers who are classified as real estate

dealers/developers; those who are considered as habitually engaged in the
sale of real property and regular taxpayers already covered by eBlRForms.
Thus, taxpayers who are filing BIR Form No. 1706, 1707, 1800, 1801 and
2000-OT (for BIR Form No. 1706 only) are excluded in the mandatory
coverage from using the eBIRForms (Section 4 (3) of Revenue Regulation
No. 9-2016)

Please note that the time of filing and payment will vary depending on the
law applicable at the time of gift.

Deadlines

Within thirty days (30) after the date the gift (donation) is made. A separate
return will be filed for each gift (donation) made on the different dates
during the year reflecting therein any previous net gifts made during the
same calendar year.

If the gift (donation) involves conjugal/community/property, each spouse

will file separate returns corresponding to his/ her respective share in the
conjugal/community property. This rule will also apply in the case of co-
ownership over the property.

Frequently Asked Questions

1. Who are required to file the Donor’s Tax Return?

Every person, whether natural or juridical, resident or non-resident, who

transfers or causes to transfer property by gift, whether in trust or
otherwise, whether the gift is direct or indirect and whether the property is
real or personal, tangible or intangible.

2. What donations are tax exempt?

A. In the Case of Gifts made by a Resident (Sec. 101 (A), NIRC as amended)


 Dowries or donations made on account of marriage before its
celebration or within one year thereafter, by parents to each of
 their legitimate, recognized natural, or adopted children to the
extent of the first P10,000
 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
 Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution, accredited non-
government organization, trust or philantrophic organization or
research institution or organization, provided not more than 30%
of said gifts will be used by such donee for administration
purposes

B. In the Case of Gifts Made by a Nonresident not a Citizen of the

Philippines (Sec. 101 (B), NIRC as amended)


 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
 Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution, accredited non-
government organization, trust or philantrophic organization or
research institution or organization, provided not more than 30%
of said gifts will be used by such donee for administration
purposes

C. Tax Credit for Donor's Taxes Paid to a Foreign Country (Sec. 101 (C),
NIRC as amended)


 In General. - The tax imposed by this Title upon a donor who
was a citizen or a resident at the time of donation shall be
credited with the amount of any donor's tax of any character and
description imposed by the authority of a foreign country.
 Limitations on Credit. - The amount of the credit taken under
this Section shall be subject to each of the following limitations:

- The amount of the credit in respect to the tax paid to any country shall not
exceed the same proportion of the tax against which such credit is taken,
which the net gifts situated within such country taxable under this Title
bears to his entire net gifts; and
- The total amount of the credit shall not exceed the same proportion of the
tax against which such credit is taken, which the donor's net gifts situated
outside the Philippines taxable under this title bears to his entire net gifts.
3. What are the bases in the valuation of property?

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

4. For purposes of Donor’s Tax, what does the term “Net Gift” mean?

For purposes of the donor’s tax, “NET GIFT” shall mean the net economic
benefit from the transfer that accrues to the donee. 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. (sec. 11, RR No. 2-2003)

5. Under R.A. No. 7166, any contribution in cash or in kind to any candidate
or political party or coalition of parties for campaign purposes shall not be
subject to the payment of any gift tax. What instance will it be subject to
Donor’s Tax?

Those contributions in cash or in kind NOT duly reported to the Commission

on Elections (COMELEC) shall not be subject to donor’s tax.

Section 99 (C) of the Tax Code, as amended, provides that any contribution
in cash or in kind for campaign purposes shall be governed by R.A. No. 7166
or the Election Code.

Section 13 of the R.A. No. 7166 specifically states that any provision of law
to the contrary notwithstanding any contribution in cash or kind to any
candidate or political party or coalition of parties for campaign purposes,
duly reported to the Commission shall not be subject to the payment of any
gift tax (donor’s tax). Accordingly, the BIR can impose donor’s tax on
contributions of this nature. (Q-14, RMC No. 63-2009)

6. For purposes of Donor’s Tax, is a legally adopted child considered

stranger?
A legally adopted child is entitled to all the rights and obligations provided by
law to legitimate children, and therefore, donation to him shall not be
considered as donation made to stranger. (sec. 10, RR No. 2-2003)

7. For purposes of Donor’s Tax, are donations between businesses

considered donations made between strangers?

Donation made between business organizations and those made between an

individual and a business organization shall be considered as donation made
to a stranger. (sec. 10, RR No. 2-2003)

8. Are gratuitous donations to Homeowners’ Associations subject to Donor’s

Tax?

Gifts, donations, and other contributions received by the Homeowners’

Associations (Associations) are subject to the payment of donor’s tax
pursuant to Section 98 and 99 of the Tax Code, as amended. Endowment or
gifts received by such associations are not exempt from donor’s tax
considering that gifts to Associations are not qualified for exemption under
Section 101(A)(3) of the Tax Code. (II, RMC No. 53-2013)

9. Is an onerous donation or donation in exchange for goods, services or use

or lease of properties to Homeowners’ Association subject to Donor’s Tax?

Pursuant to RMC No. 9-2013, Associations are subject to the corresponding

internal revenue taxes imposed under the Tax Code of 1997 on their income
of whatever kind and character. In this regard, contributions to associations
in exchange for goods, services and use of properties constitute as other
assessments/charges from activity in exchange for the performance of a
service, use of properties or delivery of an object. As such, these fees are
income on the part of the associations that are subject to income tax under
Section 27 of the Tax Code, as amended. (III, RMC No. 53-2013)

10. What is the proper treatment for transactions involving transfer of

property other than real property referred to in Section 24 (D) for less than
adequate and full consideration?

Where property, other than real property referred to in Section 24 (D) of the
NIRC, as amended, is transferred for less than adequate and full
consideration in money or money’s worth, then the amount by which the fair
market value of the property exceeded the value of the consideration shall,
for the purpose of Donor’s Tax, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year. (Sec. 100,
NIRC, as amended)
11. What entities are considered exempted from Donor’s Tax under special
laws?

The list below consists of entities considered Donor’s Tax exempt under
special laws including, but not limited to the following:


 Rural Farm School (Sec. 14, R.A. No. 10618)
 People’s Television Network, Incorporated (Sec. 15, R.A. No.
10390)
 People’s Survival Fund (Sec. 13, R.A. No. 10174)
 Aurora Pacific Economic Zone and Freeport Authority (Sec. 7,
R.A. No. 10083)
 Girl Scouts of the Philippines (Sec. 11, R.A. No. 10073)
 Philippine Red Cross (Sec. 5, R.A. No. 10072)
 Tubbataha Reefs Natural Park (Sec. 17, R.A. No. 10067)
 National Commission for Culture and the Arts (Sec. 35, R.A. No.
10066)
 Philippine Normal University (Sec. 7, R.A. No. 9647)
 University of the Philippines (Sec. 25, R.A. No. 9500)
 National Water Quality Management Fund (Sec. 9, R.A. No.
9275)
 Philippine Investors Commission (Sec. 9, R.A. No. 3850)
 Ramon Magsaysay Award Foundation (Sec. 2, R.A. 3676)
 Philippine-American Cultural Foundation (Sec. 4, P.D. 3062)
 International Rice Research Institute (Art. 5(2), PD 1620)
 Task Force on Human Settlements (Sec. 3(b)(8), E.O. 419)
 National Social Action Council (Sec. 4, P.D. 294)
 Aquaculture Department of the Southeast Asian Fisheries
Development Center (Sec. 2, P.D. 292)
 Development Academy of the Philippines (Sec. 12, PD 205)
 Integrated Bar of the Philippines (Sec. 3, PD 181)

12. How do we determine the fair market value of the unlisted stocks?

In determining the value of the shares, the Adjusted Net Asset Method shall
be used whereby all assets and liabilities are adjusted to fair market values.
The net of adjusted asset minus the adjusted liability value is the indicated
value of the equity.

For purposes of this item, the appraised value of real property at the time of
sale shall be the highest among the following:

(a) The fair market value as determined by the Commissioner, or

(b) The fair market value as shown in the schedule of values fixed by
the Provincial and City Assessors, or

(c) The fair market value as determined by Independent Appraiser. (RR NO.
6-2013) (Annex U)