1

ii. Special
1. Family home
Family Home (maximum: P1,000,000)
It is 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. It is deemed
constituted on the house and lot from the time it is actually occupied as the family residence and considered as
such for as long as any of its beneficiaries actually resides therein. [Arts. 152 and 153, Family Code]
Temporary absence from the constituted family home due to travel or studies or work abroad, etc. does not
interrupt actual occupancy. The family home is generally characterized by permanency, that is, the place to
which, whenever absent for business or pleasure, one still intends to return. [Sec. 6(D), RR 2-2003]
It must be part of the ACP or CPG, or the exclusive properties of either spouse. It may also be constituted by an
unmarried head of a family on his or her own property. [Sec. 6(D), RR 2-2003 citing Art. 156, FC]
For purposes of availing this deduction, a person may constitute only one family home. [Sec. 6(D), RR 2-2003
citing Art. 161, FC]
Requisites for Deductibility
[Sec. 6(D)(b), RR 2-2003]
(1) The family home must be the actual residential home of the decedent and his family at the time of his death,
as certified by the barangay captain of the locality.
(2) The total value of the family home must be included as part of the gross estate of the decedent
(3) Allowable deduction must be in an amount equivalent to the current FMV of the family home as declared or
included in the gross estate, or the extent of the decedents interest (whether conjugal/community or exclusive
property), whichever is lower, but in no case shall the deduction exceed P1,000,000
(4) The decedent was married or if single, was a head of the family.
(5) Along with the decedent, any of the beneficiaries* must be dwelling in the family home.
(6) The family home as well as the land on which it stands must be owned by the decedent.
Therefore, the FMV of the family home should have been included in the computation of the decedents gross
estate.
Beneficiaries of a Family Home
(1) The husband and wife, or an unmarried person who is the head of a family; and
(2) Their parents, ascendants, descendants, brothers and sisters, whether the relationship be legitimate or
illegitimate, who are living in the family home and who depend upon the head of the family for legal support.

2. Standard deduction
(Maximum: P1,000,000) [Sec. 86(A)(5), NIRC; Sec. 6(E), RR 2-2003]
An amount equivalent to One million pesos (P1,000,000) shall be deducted from the gross estate without need of
substantiation.

3. Medical expenses
[Sec. 86(A)(6), NIRC; Sec. 6(F), RR 2-2003]
All medical expenses (cost of medicine, hospital bills, doctors fees, etc.) incurred (whether paid or unpaid)
Requisites for Deductibility
[Sec. 6(F), RR 2-2003]
(1) The expenses were incurred by the decedent within one (1) year prior to his death
(2) The expenses are duly substantiated with receipts and other documents in support thereof
PROVIDED, that in no case shall the deductible medical expenses exceed Five Hundred Thousand Pesos
(P500,000).
Note: Any amount of medical expenses incurred within one year from death in excess of P500,000 shall no longer
be allowed as a deduction under this subsection. Neither can any unpaid amount thereof in excess of the
P500,000 threshold nor any unpaid amount for medical expenses incurred prior to the one-year period from date
of death be allowed to be deducted from the gross estate under Claims against the estate. [RR 2-2003, Sec. 6-F]

4. Amount received by heirs under RA 4917

[Sec. 86 (A)(7), NIRC]
Any amount received by the heirs from the decedents employer as a consequence of the death of the decedentemployee in accordance with RA No. 4917 (this law provides that retirement benefits of private employees shall
not be subject to attachment, levy execution or any tax),PROVIDED that such amount is included in the gross
estate of the decedent.

2
14. Exclusions from Estate
a. Net share of the surviving spouse in the conjugal partnership or
community property
[Sec. 86(C), NIRC; Sec. 6(H), RR 2-2003]
The amount deductible is the net share of the surviving spouse in the conjugal partnership property. The net
share is equivalent to of 50% of the conjugal property after deducting the obligations chargeable to such
property. T the share of the surviving spouse must be removed to ensure that only the decedents interest in the
estate is taxed. Net share of the surviving spouse is neither an ordinary nor a special deduction.
b. Capital of the Surviving Spouse. (Sec. 85H)
The capital of the surviving spouse of a decedent shall not, for the purpose of this Chapter, be
deemed a part of his or her gross estate.
15. Tax Credit for Estate Taxes paid to a Foreign Country. (Sec. 86 (E))

(1) In General. - The tax imposed by this Title shall be credited with the amounts of any estate tax
imposed by the authority of a foreign country.
(2) Limitations on Credit. - The amount of the credit taken under this Section shall be subject to each
of the following limitations:
(a) 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 decedent's net
estate situated within such country taxable under this Title bears to his entire net estate; and
(b) The total amount of the credit shall not exceed the same proportion of the tax against
which such credit is taken, which the decedent's net estate situated outside the Philippines
taxable under this Title bears to his entire net estate.
TAX CREDIT
It is a remedy against international double taxation. To minimize the onerous effect of taxing the same property
twice, tax credit against Philippine estate tax is allowed for estate taxes paid to foreign countries.
WHO MAY AVAIL OF TAX CREDIT
Only the estate of a decedent who was a citizen or a resident of the Philippines at the time of his death can claim
tax credit for any estate tax paid to a foreign country.
16. Exemption of Certain Acquisitions and Transmissions. (SEC. 87)

Section 87. Exemption of Certain Acquisitions and Transmissions. - The following shall not be taxed:
(A) The merger of usufruct in the owner of the naked title;
(B) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
fideicommissary;
(C) The transmission from the first heir, legatee or donee in favor of another beneficiary, in accordance with
the desire of the predecessor; and
(D) All bequests, devises, legacies or transfers to social welfare, cultural and charitable institutions, no part
of the net income of which insures to the benefit of any individual: Provided, however, That not more than
thirty percent (30%) of the said bequests, devises, legacies or transfers shall be used by such institutions for
administration purposes.
a. Crisologo v. Singson GR L 13876, 28Feb62
FACTS: Action for partition commenced by the spouses Consolacion Florentino and Francisco Crisologo
against Manuel Singson in connection with a residential lot located a Plaridel St., Vigan, Ilocos Sur, with
an area of approximately 193 square meters, and the improvements existing thereon, covered by Tax No.
10765-C. Their complaint alleged that Singson owned one-half pro-indiviso of said property and that
Consolacion Florentino owned the other half by virtue of the provisions of the duly probated last will of
Da. Leona Singson, the original owner, and the project of partition submitted to, and approved by the
Court of First Instance of Ilocos Sur in special Proceeding No. 453; that plaintiffs had made demands for
the partition of said property, but defendant refused to accede thereto, thus compelling them to bring
action.

3
Defendant's defense was that Consolacion Florentino was a mere usufructuary of, and not owner of onehalf pro-indiviso of the property in question, and that, therefore, she was not entitled to demand partition
thereof.
It is admitted that Da. Leona Singson, who died single on January 13, 1948, was the owner of the
property in question at the time of her death. On July 31, 1951 she executed her last will which was
admitted to probate in Special Proceeding No. 453 of the lower court whose decision was affirmed by the
Court of Appeals in G.R. No. 3605-R. At the time of the execution of the will, her nearest living relatives
were her brothers Evaristo, Manuel and Dionisio Singson, her nieces Rosario, Emilia and Trinidad, and her
grandniece Consolation, all surnamed Florentino.
ISSUE: WON the petitioner is a co-owner
HELD: judgment affirmed.
It is clear that the particular testamentary clause under consideration provides for a substitution of the
heir named therein in this manner: that upon the death of Consolacion Florentino whether this occurs
before or after that of the testatrix the property bequeathed to her shall be delivered (" se dara") or
shall belong in equal parts to the testatrix's three brothers, Evaristo, Manuel and Dionisio, or their forced
heirs, should anyone of them die ahead of Consolacion Florentino. If this clause created what is known
as sustitucion vulgar, the necessary result would be that Consolacion Florentino, upon the death of the
testatrix, became the owner of one undivided half of the property, but if it provided for a sustitution
fideicomisaria, she would have acquired nothing more than usufructuary rights over the same half. In the
former case, she would undoubtedly be entitled to partition, but not in the latter. As Manresa says, if the
fiduciary did not acquire full ownership of the property bequeathed by will, but mere usufructuary rights
thereon until the time came for him to deliver said property to the fideicomisario, it is obvious that the
nude ownership over the property, upon the death of the testatrix, passed to and was acquired by another
person, and the person cannot be other than the fideicomisario (6 Manresa p. 145).
A careful perusal of the testamentary clause under consideration shows that the substitution of heirs
provided for therein is not expressly made of the fideicommissary kind, nor does it contain a clear
statement to the effect that appellee, during her lifetime, shall only enjoy usufructuary rights over the
property bequeathed to her, naked ownership thereof being vested in the brothers of the testatrix. As
already stated, it merely provides that upon appellee's death whether this happens before or after that
of the testatrix her share shall belong to the brothers of the testatrix.

17. Filing of Notice of Death (Sec. 89)

Section 89. Notice of Death to be Filed. - In all cases of transfers subject to tax, or where, though exempt from tax, the
gross value of the estate exceeds Twenty thousand pesos (P20,000), the executor, administrator or any of the legal heirs,
as the case may be, within two (2) months after the decedent's death, or within a like period after qualifying as such
executor or administrator, shall give a written notice thereof to the Commissioner.
18. Estate Tax Return (Sec. 9, RR 2-2003)
a. When required
a) When the estate is subject to estate tax, OR
b) When, though exempt from tax, the gross value of the estate exceeds Two hundred thousand pesos
(P200,000), OR
c) Regardless of the gross value of the estate, when the said estate consists of registered orr egistrable
property such as real property, motor vehicle, shares of stock or other similar property for which a
clearance from the Bureau of Internal Revenue is required as a condition precedent for the transfer of
ownership thereof in the name of the transferee.
b. Contents
[Sec. 90(A), NIRC]
The executor, or the administrator, or any of the legal heirs, as the case may be, shall file a return under oath in
duplicate, setting forth:
(1) The value of the gross estate of the decedent at the time of his death, or in case of a nonresident, not a citizen
of the Philippines, of that part of his gross estate situated in the Philippines;
(2) The deductions allowed from gross estate in determining the net taxable estate; and
(3) Such part of such information as may at the time be ascertainable and such supplemental data as may be
necessary to establish the correct taxes.
(4) For estate tax returns showing a gross value exceeding Two million pesos (P2,000,000) - there must be a
statement duly certified to by a Certified Public Accountant containing the following:
(a) Itemized assets of the decedent with their corresponding gross value at the time of his death,
or in the case of a nonresident, not a citizen of the Philippines, of that part of his gross estate situated in the
Philippines;
(b) Itemized deductions from gross estate allowed in Section 86; and
(c) The amount of tax due whether paid or still due and outstanding.

4
c. Time of Filing/ Extension to File
General Rule: Filed within six (6) months from the decedent's death. [Sec. 90(B), NIRC]
Exception: The Commissioner shall have authority to grant, in meritorious cases, a reasonable extension not
exceeding thirty (30) days for filing the return
[Sec. 90C]
d. Place of Filing
[Sec. 90(D), NIRC]
Except in cases where the Commissioner otherwise permits, the return shall be filed with:
(a) An authorized agent bank (AAB), or
(b) Revenue District Officer (RDO), or
(c) Collection Officer,
(d) Duly authorized Treasurer of the city or municipality in which the decedent was
domiciled at the time of his death, or
(e) If there be no legal residence in the Philippines, with the Office of the Commissioner.
e. Time of Payment/ Extension of Time to Play
At the time the return is filed by the executor, administrator or the heirs.
Note: Executor or administrator means the executor or administrator of the decedent, or if there is none
appointed, qualified, and acting within the Philippines, then any person in actual or constructive possession of
any property of the decedent. [Sec.91(C), NIRC] The estate tax shall be paid by the executor or administrator
before the delivery of the distributive share in the inheritance to any heir or beneficiary.
Extension of Payment
[Sec. 91(B), NIRC]
The Commissioner may allow an extension of payment, if he finds that the 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:
(a) Extension not to exceed five (5) years, in case the estate is settled judicially, or
(b) Two (2) years in case the estate is settled extrajudicially.
Where the taxes are assessed 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 extension granted, the Commissioner 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 of the tax and with such sureties
as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance with the
terms of the extension.
Effects of granting an extension
(a) Payment of the amount in respect of which the extension is granted on or before the date of the expiration of
the period of the extension
(b) Suspension of the running of statute of limitations for deficiency assessment for the period of any extension
(c) Any amount paid after the statutory due date of the tax, but within the extension period, shall be subject to
interest but not to surcharge.
Can estate tax be paid in installments?
YES. 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. [Sec. 9(F), RR 2-2003]
Who are liable for the payment of estate taxes
[Sec. 91(C), NIRC]
Primarily, the estate, through the executor or administrator.
(a) Payment shall be made before the delivery of the distributive share in the inheritance to any heir or
beneficiary.
(b) If there are two or more executors or administrators, all of them are severally liable for the payment of the tax.
(c) 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 properties/share in the inheritance to the
heir or beneficiary.
Subsidiarily, heirs or beneficiaries, 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.
Claims for taxes, whether assessed before or after the death of the deceased, can be collected from the heirs
even after the distribution of the properties of the decedent, xxx. The heirs shall be liable therefor, in proportion
to their share in the inheritance.(Marcos II v. Court of Appeals [1997])

5
f.

Who is liable to pay

i.

Estate of Vda de Gabriel v. CIR GR 155541, 27Jan2004

FACTS: During the lifetime of the decedent, Juliana Vda. De Gabriel, her business affairs were managed by
the Philippine Trust Company (Philtrust). The decedent died on April 3, 1979. Two days after her death,
Philtrust, through its Trust Officer, Atty. Antonio M. Nuyles, filed her Income Tax Return for 1978. The
return did not indicate that the decedent had died.

On January 26, 1981, the court a quo issued an Order relieving Mr. Diez of his appointment, and
appointed Antonio Lantin to take over as Special Administrator. Subsequently, on July 30, 1981, Mr.
Lantin was also relieved of his appointment, and Atty. Vicente Onosa was appointed in his stead.
In the meantime, the Bureau of Internal Revenue conducted an administrative investigation on the
decedents tax liability and found a deficiency income tax for the year 1977 in the amount of
P318,233.93. Thus, on November 18, 1982, the BIR sent by registered mail a demand letter and
Assessment Notice No. NARD-78-82-00501 addressed to the decedent c/o Philippine Trust Company,
Sta. Cruz, Manila which was the address stated in her 1978 Income Tax Return. No response was made
by Philtrust. The BIR was not informed that the decedent had actually passed away.
In an Order dated September 5, 1983, the court a quo appointed Antonio Ambrosio as the
Commissioner and Auditor Tax Consultant of the Estate of the decedent.
Petitioner Estate denies that Philtrust had any legal personality to represent the decedent after her
death. As such, petitioner argues that there was no proper notice of the assessment which,
therefore, never became final, executory and incontestable.[10] Petitioner further contends that
respondents failure to file its claim against the Estate within the proper period prescribed by the Rules of
Court is a fatal error, which forever bars its claim against the Estate
Respondent, on the other hand, claims that because Philtrust filed the decedents income tax return
subsequent to her death, Philtrust was the de factoadministrator of her Estate. Consequently, when the
Assessment Notice and demand letter dated November 18, 1982 were sent to Philtrust, there was proper
service on the Estate. Respondent further asserts that Philtrust had the legal obligation to inform
petitioner of the decedents death, which requirement is found in Section 104 of the NIRC of 1977. [ Since
Philtrust did not, respondent contends that petitioner Estate should not be allowed to profit from this
omission. Respondent further argues that Philtrusts failure to protest the aforementioned assessment
within the 30-day period provided in Section 319-A of the NIRC of 1977 meant that the assessment had
already become final, executory and incontestable.

ISSUE: WON Philtrust was served proper service of summons for the payment of deficiency taxes of the
estate of VDA DE Gabriel.
HELD: The first point to be considered is that the relationship between the decedent and Philtrust was one
of agency, which is a personal relationship between agent and principal. Under Article 1919 (3) of the
Civil Code, death of the agent or principal automatically terminates the agency. In this instance, the
death of the decedent on April 3, 1979 automatically severed the legal relationship between her and
Philtrust, and such could not be revived by the mere fact that Philtrust continued to act as her agent
when, on April 5, 1979, it filed her Income Tax Return for the year 1978.
Since the relationship between Philtrust and the decedent was automatically severed at the moment
of the Taxpayers death, none of Philtrusts acts or omissions could bind the estate of the
Taxpayer. Service on Philtrust of the demand letter and Assessment Notice No. NARD-78-82-00501 was
improperly done.
It must be noted that Philtrust was never appointed as the administrator of the Estate of the
decedent, and, indeed, that the court a quo twice rejected Philtrusts motion to be thus appointed. As of
November 18, 1982, the date of the demand letter and Assessment Notice, the legal relationship between
the decedent and Philtrust had already been non-existent for three years.
Although the administrator of the estate may have been remiss in his legal obligation to inform
respondent of the decedents death, the consequences thereof, as provided in Section 119 of the National
Internal Revenue Code of 1977, merely refer to the imposition of certain penal sanctions on the
administrator. These do not include the indefinite tolling of the prescriptive period for making deficiency
tax assessments, or the waiver of the notice requirement for such assessments.
In this case, the assessment was served not even on an heir of the Estate, but on a completely
disinterested third party. This improper service was clearly not binding on the petitioner.

6
The most crucial point to be remembered is that Philtrust had absolutely no legal relationship to the
deceased, or to her Estate. There was therefore no assessment served on the Estate as to the alleged
underpayment of tax. Absent this assessment, no proceedings could be initiated in court for the
collection of said tax, [21] and respondents claim for collection, filed with the probate court only on
November 22, 1984, was barred for having been made beyond the five-year prescriptive period set by
law.
Petition was granted.

g. Other Matters
1. Discharge of Exec/ Adm from Personal liability (Sec. 92)
Section 92. Discharge of Executor or Administrator from Personal Liability. - If the executor or administrator
makes a written application to the Commissioner for determination of the amount of the estate tax and discharge
from personal liability therefore, the Commissioner (as soon as possible, and in any event within one (1) year after
the making of such application, or if the application is made before the return is filed, then within one (1) year after
the return is filed, but not after the expiration of the period prescribed for the assessment of the tax in Section 203
shall not notify the executor or administrator of the amount of the tax. The executor or administrator, upon
payment of the amount of which he is notified, shall be discharged from personal liability for any deficiency in the
tax thereafter found to be due and shall be entitled to a receipt or writing showing such discharge.
2. Liability of Heirs
1. CIR V. PINEDA GR L- 22734, 15SEPT67
FACTS: On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children,
the eldest of whom is Manuel B. Pineda, a lawyer. Estate proceedings were had in the Court of First
Instance of Manila (Case No. 71129) wherein the surviving widow was appointed administratrix. The
estate was divided among and awarded to the heirs and the proceedings terminated on June 8, 1948.
Manuel B. Pineda's share amounted to about P2,500.00.
After the estate proceedings were closed, the Bureau of Internal Revenue investigated the income tax
liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income
tax returns were not filed.
Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed to the
Court of Tax Appeals alleging that he was appealing "only that proportionate part or portion pertaining to
him as one of the heirs."
The Commissioner of Internal Revenue has appealed to Us and has proposed to hold Manuel B. Pineda
liable for the payment of all the taxes found by the Tax Court to be due from the estate in the total
amount of P760.28 instead of only for the amount of taxes corresponding to his share in the
estate.1awphl.nt
Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax
due the estate only up to the extent of and in proportion to any share he received. He relies
on Government of the Philippine Islands v. Pamintuan2 where We held that "after the partition of an
estate, heirs and distributees are liable individually for the payment of all lawful outstanding claims
against the estate in proportion to the amount or value of the property they have respectively received
from the estate."
ISSUE: WON Manuel Pineda is liable for the payment of deficiency taxes o the estate of Atanasio Pineda
HELD: an heir and as a holder-transferee of property belonging to the estate/taxpayer. As an heir he is
individually answerable for the part of the tax proportionate to the share he received from the
inheritance. His liability, however, cannot exceed the amount of his share.
As a holder of property belonging to the estate, Pineda is liable for the tax up to the amount of the
property in his possession. The reason is that the Government has a lien on such property. After such
payment, Pineda will have a right of contribution from his co-heirs.
The Government has two ways of collecting the tax in question. One, by going after all the heirs and
collecting from each one of them the amount of the tax proportionate to the inheritance received. This
remedy was adopted in Government of the Philippine Islands v. Pamintuan, supra. In said case, the
Government filed an action against all the heirs for the collection of the tax. Another remedy, pursuant to
the lien created by Section 315 of the Tax Code upon all property and rights to property belonging to the
taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of an
heir or transferee to the payment of the tax due, the estate. This second remedy is the very avenue the
Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion to avail itself of the most expeditious way to

7
collect the tax as may be envisioned in the particular provision of the Tax Code above quoted, because
taxes are the lifeblood of government and their prompt and certain availability is an imperious need. And
as afore-stated in this case the suit seeks to achieve only one objective: payment of the tax. The
adjustment of the respective shares due to the heirs from the inheritance, as lessened by the tax, is left to
await the suit for contribution by the heir from whom the Government recovered said tax.
Hence, Pineda is liable to pay to the Commissioner of Internal Revenue the sum of P760.28 as deficiency
income tax for 1945 and 1946, and real estate dealer's fixed tax for the fourth quarter of 1946 and for the
whole year 1947, without prejudice to his right of contribution for his co-heirs.

3. Payment Before Delivery by Executor (Sec 94)

Section 94. Payment before Delivery by Executor or Administrator. - No judge shall authorize the executor or
judicial administrator to deliver a distributive share to any party interested in the estate unless a certification from
the Commissioner that the estate tax has been paid is shown.
1. MARCOS II v. CA GR 120880 05JUN97
"The approval of the court sitting in probate is not a mandatory requirement in the collection of
estate
taxes."
"In case of failure to file a return, the tax may be assessed at anytime within 10 years after the
omission."
FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant
CIR's petition to levy the properties of the late Pres. Marcos to cover the payment of his tax
delinquencies during the period of his exile in the US. The Marcos family was assessed by the
BIR after it failed to file estate tax returns. However the assessment were not protested
administratively by Mrs. Marcos and the heirs of the late president so that they became final
and unappealable after the period for filing of opposition has prescribed. Marcos contends that
the properties could not be levied to cover the tax dues because they are still pending probate
with the court, and settlement of tax deficiencies could not be had, unless there is an order by
the
probate
court
or
until
the
probate
proceedings
are
terminated.
Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of
Levy on the Marcos properties were issued beyond the allowed period, and are therefore null
and void.
ISSUE: Are the contentions of Bongbong Marcos correct?
HELD: No. The deficiency income tax assessments and estate tax assessment are already final
and unappealable -and-the subsequent levy of real properties is a tax remedy resorted to by
the government, sanctioned by Section 213 and 218 of the National Internal Revenue Code.
This summary tax remedy is distinct and separate from the other tax remedies (such as Judicial
Civil actions and Criminal actions), and is not affected or precluded by the pendency of any
other
tax
remedies
instituted
by
the
government.
The approval of the court, sitting in probate, or as a settlement tribunal over the deceased's
estate is not a mandatory requirement in the collection of estate taxes. On the contrary, under
Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize
the executor or judicial administrator of the decedent's estate to deliver any distributive share
to any party interested in the estate, unless it is shown a Certification by the Commissioner of
Internal Revenue that the estate taxes have been paid. This provision disproves the
petitioner's contention that it is the probate court which approves the assessment and
collection
of
the
estate
tax.
On the issue of prescription, the omission to file an estate tax return, and the
subsequent failure to contest or appeal the assessment made by the BIR is fatal to the
petitioner's cause, as under Sec.223 of the NIRC, in case of failure to file a return, the tax may
be assessed at anytime within 10 years after the omission, and any tax so assessed may be
collected by levy upon real property within 3 years (now 5 years) following the assessment of
the tax. Since the estate tax assessment had become final and unappealable by the petitioner's
default as regards protesting the validity of the said assessment, there is no reason why the
BIR
cannot
continue
with
the
collection
of
the
said
tax.
http://memoirsofthecolony.blogspot.com/2012/08/digested-cases-in-taxation-on.html

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2. Restitution of Tax Upon Satisfaction of Outstanding Obligations (sec. 96)
Section 96. Restitution of Tax Upon Satisfaction of Outstanding Obligations. - If after the payment of the estate
tax, new obligations of the decedent shall appear, and the persons interested shall have satisfied them by order of
the court, they shall have a right to the restitution of the proportional part of the tax paid.

3. (Sec. 97) Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights
Section 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights. - There shall not be
transferred to any new owner in the books of any corporation, sociedad anonima, partnership, business, or
industry organized or established in the Philippines any share, obligation, bond or right by way of gift inter vivos or
mortis causa, legacy or inheritance, unless a certification from the Commissioner that the taxes fixed in this Title
and due thereon have been paid is shown.
If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with
another, it shall not allow any withdrawal from the said deposit account, unless the Commissioner has certified
that the taxes imposed thereon by this Title have been paid: Provided, however, That the administrator of the
estate or any one (1) of the heirs of the decedent may, upon authorization by the Commissioner, withdraw an
amount not exceeding Twenty thousand pesos (P20,000) without the said certification. For this purpose, all
withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of
withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors.

II. DONORS TAX (IMPLEMENTTED BY RR 2-2003)

1. Definition
A donors tax is levied, assessed, collected and paid upon the transfer by any person, resident or nonresident, of the
property by gift. (Sec. 98(A), NIRC). 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. [Sec. 98(B), NIRC]
2. Nature
Donors tax is not a property tax but a tax imposed on the transfer of property by way of gift inter vivos.
[Sec 11, RR 2-2003 citing Lladoc v. CIR (1965)]
a. LLADOC v. CIR
FACTS: Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to
Rev. Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental, and predecessor of
herein petitioner, for the construction of a new Catholic Church in the locality. The total amount
was actually spent for the purpose intended.
On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of
April 29, 1960, the respondent Commissioner of Internal Revenue issued an assessment for
donee's gift tax against the Catholic Parish of Victorias, Negros Occidental, of which petitioner
was the priest. The tax amounted to P1,370.00 including surcharges, interests of 1% monthly
from May 15, 1958 to June 15, 1960, and the compromise for the late filing of the return.
Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The
protest and the motion for reconsideration presented to the Commissioner of Internal Revenue
were denied. The petitioner appealed to the Court of Tax Appeals on November 2, 1960. In the
petition for review, the Rev. Fr. Casimiro Lladoc claimed, among others, that at the time of the
donation, he was not the parish priest in Victorias; that there is no legal entity or juridical
person known as the "Catholic Parish Priest of Victorias," and, therefore, he should not be
liable for the donee's gift tax. It was also asserted that the assessment of the gift tax, even
against the Roman Catholic Church, would not be valid, for such would be a clear violation of
the provisions of the Constitution.
ISSUE: whether or not petitioner should be liable for the assessed donee's gift tax on the
P10,000.00 donated for the construction of the Victorias Parish Church.
HELD: In the present case, what the Collector assessed was a donee's gift tax; the assessment
was not on the properties themselves. It did not rest upon general ownership; it was an excise
upon the use made of the properties, upon the exercise of the privilege of receiving the

9
properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the
exempting provisions of the section just mentioned. A gift tax is not a property tax, but an
excise tax imposed on the transfer of property by way of giftinter vivos, the imposition of
which on property used exclusively for religious purposes, does not constitute an impairment
of the Constitution. As well observed by the learned respondent Court, the phrase "exempt
from taxation," as employed in the Constitution (supra) should not be interpreted to mean
exemption from all kinds of taxes. And there being no clear, positive or express grant of such
privilege by law, in favor of petitioner, the exemption herein must be denied.

b. PIROVANO v. CIR
Sec. 32[B] of the NIRC provides that Gifts, bequests and devises are excluded from gross
income liable to tax. Instead, such donations are subject to estate or gift taxes. However, if the
amount is received on account of services rendered, whether constituting a demandable debt
or not (such as remuneratory donations under Civil Law), the donation is considered taxable
income.
Facts: De la Rama Steamship Co. insured the life of Enrico Pirovano who was then its President
and General Manager. The company initially designated itself as the beneficiary of the policies
but, after Pirovanos death, it renounced all its rights, title and interest therein, in favor of
Pirovanos heirs.
The CIR subjected the donation to gift tax. Pirovanos heirs contended that the grant was not
subject to such donees tax because it was not a simple donation, as it was made for a full and
adequate compensation for the valuable services by the late Priovano (i.e. that it was
remuneratory).
Issue: WON the donation is remuneratory and therefore not subject to donees tax, but rather
taxable as part of gross income.
Held: No. the donation is not remuneratory. There is nothing on record to show that when the
late Enrico Pirovano rendered services as President and General Manager of the De la Rama
Steamship Co. and was largely responsible for the rapid and very successful development of
the activities of the company", he was not fully compensated for such services. The fact that
his services contributed in a large measure to the success of the company did not give rise to a
recoverable debt, and the conveyances made by the company to his heirs remain a gift or a
donation. The companys gratitude was the true consideration for the donation, and not the
services themselves. http://purplehorn.blogspot.com/2013/04/donors-tax.html
3. Purpose or Object
(a) To supplement estate tax;
(b) To prevent avoidance of income tax through the device of splitting income among numerous donees, who are usually
members of a family or into many trusts, with the donor thereby escaping the effect of the progressive rates of income tax.
4. Requisites for valid donation
(a) A donation is an act of liberality whereby a person (donor) disposes gratuitously of a thing or right in favor of another
(donee) who accepts it. [Art. 725, NCC]
(b) 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. 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. (Sec. 11, RR 22003)
The requisites of a valid donation are:
(1) The donor must have CAPACITY [Art 735, CC] at time of the making of donation [Art. 737, CC]
(2) There must be an INTENT TO DONATE
(3) The donee must ACCEPT the donation
A gift that is incomplete because of reserved powers; becomes complete when either:
(a) the donor renounces the power OR
(b) his right to exercise the reserved power ceases because of the happening of some event or contingency or the
fulfillment of some condition, other than because of the donors death. [Sec. 11, RR 2-2003]

10
Note: Renunciation by a surviving spouse of his/her share in the CPG or ACP after the dissolution of in favor of the heirs
or any other person is SUBJECT to donors tax. General renunciation by ANY heir is NOT subject to donors tax UNLESS
it is specifically and categorically done in favor of IDENTIFIED heirs to the exclusion of other co-heirs.
[Sec. 11, RR 2-2003]
a. Personal Property
b. Real property
5. Tax exempt net gift
6. Computation of donors tax (sec 99, NIRC; SEC 11 RR 2-2003)

Section 99. Rates of Tax Payable by Donor. (A) In General. - The tax for each calendar year shall be computed on the basis of the total net gifts made during
the calendar year in accordance with the following schedule:
If the net gift is:
Over

But Not Over

The Tax shall be

Plus

Of the Excess Over

P 100,000

Exempt

P 100,000

200,000

2%

P100,000

200,000

500,000

2,000

4%

200,000

500,000

1,000,000

14,000

6%

500,000

1,000,000

3,000,000

44,000

8%

1,000,000

3,000,000

5,000,000

204,000 10%

3,000,000

5,000,000

10,000,000

404,000 12%

5,000,000

1,004,000 15%

10,000,000

10,000,000

(B) Tax Payable by Donor if Donee is a Stranger. - When the donee or beneficiary is stranger, the tax payable by
the donor shall be thirty percent (30%) of the net gifts. For the purpose of this tax, a 'stranger,' is a person who is
not a:
(1) Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal descendant; or
(2) Relative by consanguinity in the collateral line within the fourth degree of relationship.
(C) Any contribution in cash or in kind to any candidate, political party or coalition of parties for campaign
purposes shall be governed by the Election Code, as amended.

7. TAX RATES (SEC 99)

a. Regular rates
i.

How to reduce donors tax on donation to relatives

b. Who is a stranger?

A 'stranger,' is a person who is not a:

(1) Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal descendant; or
(2) Relative by consanguinity in the collateral line within the fourth degree of relationship.

i.

GUERRERO v. RTC

FACTS: Filed by petitioner as an accion publicana 1 against private respondent, this case
assumed another dimension when it was dismissed by respondent Judge on the ground that

11
the parties being brother-in-law the complaint should have alleged that earnest efforts were
first exerted towards a compromise.
Admittedly, the complaint does not allege that the parties exerted earnest towards a
compromise and that the same failed. However, private respondent Pedro G. Hernando
apparently overlooked this alleged defect since he did not file any motion to dismiss nor attack
the complaint on this ground in his answer. It was only on 7 December 1992, at the pre-trial
conference, that the relationship of petitioner Gaudencio Guerrero and respondent Hernando
was noted by respondent Judge Luis B. Bello, Jr., they being married to half-sisters hence are
brothers-in-law, and on the basis thereof respondent Judge gave petitioner five (5) days "to
file his motion and amended complaint" to allege that the parties were very close relatives,
their respective wives being sisters, and that the complaint to be maintained should allege that
earnest efforts towards a compromise were exerted but failed. Apparently, respondent Judge
considered this deficiency a jurisdictional defect.
On 11 December 1992, Guerrero moved to reconsider the 7 December 1992 Order claiming that
since brothers by affinity are not members of the same family, he was not required to exert
efforts towards a compromise. Guerrero likewise argued that Hernando was precluded from
raising this issue since he did not file a motion to dismiss nor assert the same as an affirmative
defense in his answer.
ISSUE: whether brothers by affinity are considered members of the same family contemplated
in Art. 217, par. (4), and Art. 222 of the New Civil Code, as well as under Sec. 1, par. (j), Rule
16, of the Rules of Court requiring earnest efforts towards a compromise before a suit between
them may be instituted and maintained;
HELD: As early as two decades ago, we already ruled in Gayon v. Gayon 6 that the enumeration
of "brothers and sisters" as members of the same family does not comprehend "sisters-inlaw". In that case, then Chief Justice Concepcion emphasized that "sisters-in-law" (hence, also
"brothers-in-law") are not listed under Art. 217 of the New Civil Code as members of the same
family. Since Art. 150 of the Family Code repeats essentially the same enumeration of
"members of the family", we find no reason to alter existing jurisprudence on the matter.
Consequently, the court a quo erred in ruling that petitioner Guerrero, being a brother-in-law of
private respondent Hernando, was required to exert earnest efforts towards a compromise
before filing the present suit.
ii.

Applicable tax rates

c. Effect of waiver to inheritance

i.

When taxable

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 of any other person/s is subject to donor tax.
ii.

When not taxable

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 donors tax, unless specifically done in favor of an identified heir/s to the exclusion or
disadvantage of the other co-heirs in the hereditary estate
d. Treatment of donation made by the husband alone out of the conjugal partnership
i.

Tang ho v. board of tax appeals

FACTS: This is a petition for the review of the petition of the defunct Board of Tax Appeals
holding petitioner Li Seng Giap, et al. liable for gift taxes in accordance with the assessments
made by the respondent Collector of Internal Revenue.
Petitioners Li Seng Giap (who died during the pendency of this appeal) and his wife Tang Ho
and their thirteen children appear to be the stockholder of two close family corporations named
Li Seng Giap & Sons, Inc. and Li Seng Giap & Co. On or about May, 1951, examiners of the
Bureau of Internal Revenue, then detailed to the Allas Committee of the Congress of the
Philippines, made an examination of the books of the two corporation aforementioned and
found that each of Li Seng Giap's 13 children had a total investment therein of approximately
P63,195.00, in shares issued to them by their father Li Seng Giap (who was the manager and
controlling stockholder of the two corporations) in the years 1940, 1942, 1948, 1949, and
1950

12
The Collector of Internal Revenue regarded these transfers as undeclared gifts made in the
respective years, and assessed against Li Seng Giap and his children donor's and donee's taxes
in the total amount of P76,995.31, including penalties, surcharges, interests, and compromise
fee due to the delayed payment of the taxes. The petitioners paid the sum of P53,434.50,
representing the amount of the basic taxes, and put up a surety bond to guarantee payment of
the balance demanded. And on June 25, 1951, they requested the Collector of Internal Revenue
for a revision of their tax assessments, and submitted donor's and donee's gift tax returns
showing that each child received by way of gift inter vivos, every year from 1939 to 1950
(except in 1947 and 1948) P4,000 in cash; that each of the eight children who married during
the period aforesaid, were given an additional P20,000 as dowry or gift propter nuptias; that
the unmarried children received roughly equivalent amount in 1949, also by way of gifts inter
vivos, so that the total donations made to each and every child, as of 1950, stood at P63,190.
Appellants admit that these gifts were not reported; but contend that as the cash donated
came from the conjugal funds, they constituted individual donations by each of the spouses Li
Seng Giap and Tang Ho of one half of the amount received by the donees in each instance, up
to a total of P31,505 to each of the thirteen children from each parent. They further alleged
that the children's stockholding in the two family corporations were purchased by them with
savings from the aforesaid cash donations received from their parents.
Claiming the benefit of gift tax exemptions (under section 110 and 112 of the Internal Revenue
Code) at the rate of P2000 a year for each donation, plus P10,000 for each gift propter
nuptias made by either parent, and appellants' aggregate tax liability, according to their
returns, would only be P4,599.94 for the year 1949, and P228,28 for the year 1950, or a total
of P4,838.22
The Collector refused to revise his original assessments; and the petitioners appealed to the
then Board of Tax Appeals (created by Executive Order 401-A, in 1951) insisting that the
entries in the books of the corporation do not prove donations; that the true amount and date
of the donation were those appearing in their tax returns; and that the donees merely bought
stocks in the corporation out of savings made from the money received from their parents. The
Board of Tax Appeals upheld the decision of the respondent Collector of Internal Revenue;
hence, this petition for review.
ISSUE: Whether or not the donations made by petitioner Li Seng Giap to his children from the
conjugal property should be taxed against the husband alone, or against husband and wife
HELD: This Court has so ruled in Baello vs. Villanueva (54 Phil. 213, 214):
According to article 1413 of the Civil Code, any transfer or agreement upon conjugal
property made by the husband in contravention of its provisions, shall not prejudice his
wife or her heirs. As the conjugal property belongs equally to husband and wife, the
donation of this property made by the husband prejudices the wife in so far as it includes
a part or the whole of the wife's half, and is to that extent invalid. Hence article 1419, in
providing for the liquidation of the conjugal partnership, directs that all illegal donations
made by the husband be charged against his estates and deducted from his capital. But it
is only then, when the conjugal partnership is in the process of liquidation, that it can be
discovered whether or not an illegal donation made by the husband prejudices the wife.
And inasmuch as these gifts are only to be held invalid in so far as they prejudice the
wife, their nullity cannot be decided until after the liquidation of the conjugal partnership
and it is found that they encroach upon the wife's portion.
Appellants herein are therefore in error when they contend that it is enough that the property
donated should belong to the conjugal partnership in order that the donation be considered
and taxed as a donation of bothhusband and wife, even if the husband should appear as the
sole donor. There is no blinking the fact that, under the old Civil Code, to be a donation by both
spouses, taxable to both, the wife must expressly join the husband in making the gift; her
participation therein cannot be implied.
The consequence of the husband's legal power to donate community property is that, where
made by the husband alone, the donation is taxable as his own exclusive act. Hence, only one
exemption or deduction can be claimed for every such gift, and not two, as claimed by
appellants herein. In thus holding, the Board of Tax Appeals committed no error.
e. Treatment of campaign contributions (sec 10, RR 2-2003; SEC 1 RR 7-2011; SEC 13 & 14, RA 7166)
RR 2-2003
(C) Contribution for election campaign. - Any contribution in cash or in kind to any candidate, political party or
coalition of parties for campaign purposes, shall be governed by the Election Code, as amended.

13
RR 7-2011
SEC. 1. BACKGROUND xxxx
However, when these campaign contributions are not fully utilized by a candidate for campaign purposes, there
is need to clarify the treatment of these excess campaign fund, for tax purposes.
RA 7166
Sec. 13. Authorized Expenses of Candidates and Political Parties. - The agreement amount that a candidate or
registered political party may spend for election campaign shall be as follows:
1. For candidates. - Ten pesos (P10.00) for President and Vice-President; and for other candidates Three Pesos
(P3.00) for every voter currently registered in the constituency where he filed his certificate of candidacy:
Provided, That a candidate without any political party and without support from any political party may be allowed
to spend Five Pesos (P5.00) for every such voter; and
2. For political parties. - Five pesos (P5.00) for every voter currently registered in the constituency or constituencies
where it has official candidates.
Any provision of law to the contrary notwithstanding any contribution in cash or in 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.
Sec. 14. Statement of Contributions and Expenditures; Effect of Failure to File Statement. - Every candidate and
treasurer of the political party shall, within thirty (30) days after the day of the election, file in duplicate with the offices of
the Commission the full, true and itemized statement of all contributions and expenditures in connection with the election.
No person elected to any public offices shall enter upon the duties of his office until he has filed the statement of
contributions and expenditures herein required.
The same prohibition shall apply if the political party which nominated the winning candidate fails to file the statement
required herein within the period prescribed by this Act.
Except candidates for elective barangay office, failure to file the statements or reports in connection with electoral
contributions and expenditures are required herein shall constitute an administrative offense for which the offenders shall
be liable to pay an administrative fine ranging from One thousand pesos (P1,000.00) to Thirty thousand pesos
(P30,000.00), in the discretion of the Commission.
The fine shall be paid within thirty (30) days from receipt of notice of such failure; otherwise, it shall be enforceable by a
writ of execution issued by the Commission against the properties of the offender.
It shall be the duty of every city or municipal election registrar to advise in writing, by personal delivery or registered mail,
within five (5) days from the date of election all candidates residing in his jurisdiction to comply with their obligation to file
their statements of contributions and expenditures.
For the commission of a second or subsequent offense under this section, the administrative fine shall be from Two
thousand pesos (P2,000.00) to Sixty thousand pesos (P60,000.00), in the discretion of the Commission. In addition, the
offender shall be subject to perpetual disqualification to hold public office.
8. Transfers which may be constituted as donation
a. SALE/exchange/ transfer of property for insufficient consideration
Where property, other than real property that has been subjected to the final capital gains tax, is transferred for less than
an adequate and full consideration in money or moneys worth, then the amount by which the FMV of the property at the
time of the execution of the Contract of Sell or execution of the Deed of Sale which is not preceded by a Contract to Sell
exceeded the value of the agreed or actual consideration or selling price shall be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year. [Sec.11, RR 2-2003]
b. Condonation/ remission of debt
Where the debtor did not render service in favor of the creditor
(a) However, real property considered capital assets under the Tax Code are excepted from this rule. [ Sec. 100 in relation
to Sec. 24(d), NIRC]
Under Section 24(d), the fair market value itself, if higher than the gross selling price, is the base for computing the capital
gains tax imposed upon the sale of such capital assets.
(b) Thus, what the seller avoids in the payment of the donors tax, it pays for in the capital gains tax.
9. Transfer for less than adequate and full consideration (sec 100, NIRC)

14
Section 100. Transfer for Less Than Adequate and full Consideration. - Where property, other than real property referred
to in Section 24(D), is transferred for less than an 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 the
tax imposed by this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the
calendar year.
Where property, other than real property under Sec. 24(D), is transferred for less than an adequate and full consideration
in money or moneys worth, then the amount by which the fair market value of the property exceeded the value of the
consideration shall be deemed a gift, and shall be included in computing the amount of gifts made during the calendar
year. [Sec. 100, NIRC]
10. Classification of donors
a. Citizen/ RA
Taxable on ALL properties located not only within the Philippines but also in foreign countries.
b. NRA
Taxable on ALL real and tangible properties WITHIN the PHILIPPINES, and intangible personal property, unless there is
reciprocity, in which case intangible personal property is not taxable
11. Composition of gross gift (sec 98 & 104)

Section 98. Imposition of Tax. (A) There shall be levied, assessed, collected and paid upon the transfer by any person, resident or nonresident,
of the property by gift, a tax, computed as provided in Section 99.
(B) The tax 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.

Section 104. Definitions. - For purposes of this Title, the terms 'gross estate' and 'gifts' include real and personal property,
whether tangible or intangible, or mixed, wherever situated: Provided, however, That where the decedent or donor was a
nonresident alien at the time of his death or donation, as the case may be, his real and personal property so transferred
but which are situated outside the Philippines shall not be included as part of his 'gross estate' or 'gross gift': Provided,
further, That franchise which must be exercised in the Philippines; shares, obligations or bonds issued by any corporation
or sociedad anonima organized or constituted in the Philippines in accordance with its laws; shares, obligations or bonds
by any foreign corporation eighty-five percent (85%) of the business of which is located in the Philippines; shares,
obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs
in the Philippines; shares or rights in any partnership, business or industry established in the Philippines, shall be
considered as situated in the Philippines: Provided, still further, that no tax shall be collected under this Title in respect of
intangible personal property: (a) if the decedent at the time of his death or the donor at the time of the donation was a
citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of any
character, in respect of intangible personal property of citizens of the Philippines not residing in that foreign country, or (b)
if the laws of the foreign country of which the decedent or donor was a citizen and resident at the time of his death or
donation allows a similar exemption from transfer or death taxes of every character or description in respect of intangible
personal property owned by citizens of the Philippines not residing in that foreign country.
The term 'deficiency' means: (a) the amount by which tax imposed by this Chapter exceeds the amount shown as the tax
by the donor upon his return; but the amount so shown on the return shall first be increased by the amount previously
assessed (or Collected without assessment) as a deficiency, and decreased by the amounts previously abated, refunded
or otherwise repaid in respect of such tax, or (b) if no amount is shown as the tax by the donor, then the amount by which
the tax exceeds the amounts previously assessed, (or collected without assessment) as a deficiency, but such amounts
previously assessed, or collected without assessment, shall first be decreased by the amount previously abated, refunded
or otherwise repaid in respect of such tax.

a. CITIZENS/RA
b. NRA
i.

Reciprocity

Rule on Reciprocity (see discussion on Estate Tax) - This rule applies to the transmission by gift of intangible personal
property located or with a situs within the Philippines of a nonresident alien.
12. Determination of gross gift

15
(a) Gifts of real property and personal property wherever situated belonging to the donor who is either a resident or citizen
at the time of the donation; and
(b) Gifts of real and tangible personal property situated in the Philippines, and intangible personal property with a situs in
the Philippines unless exempted on the basis of reciprocity, belonging to the donor who is a non-resident alien at the time
of the donation
COMPOSITION OF GROSS GIFT
Gross gift shall pertain to all donations inter vivos:
(1) Whether the transfer is in trust or otherwise;
(2) Whether the gift is direct or indirect;
(3) Whether the property is real or personal, tangible or intangible. [Sec. 98(B), NIRC]
Resident or Citizen Non resident Alien
13. Valuation of gifts made in property (sec 102)

Section 102. Valuation of Gifts Made in Property. - If the gift is made in property, the fair market value thereof at the time
of the gift shall be considered the amount of the gift. In case of real property, the provisions of Section 88(B) shall apply to
the valuation thereof.
Amount of gift = FMV at TIME OF DONATION
REAL PROPERTY FMV as determined by the CIR
(Zonal Value) or FMV as shown in the latest schedule of values of the provincial and city assessor (Market Value per Tax
Declaration), whichever is HIGHER. If there is no zonal value, the taxable base is the FMV that appears in the latest tax
declaration. (Sec. 88(B), NIRC)
IMPROVEMENT - Value of improvement is the construction cost per building permit and/or occupancy permit plus 10%
per year after year of construction, or the FMV per latest tax declaration.
14. Tax credit for donors taxes paid in a foreign country (sec 101)
Section 101. Exemption of Certain Gifts. - The following gifts or donations shall be exempt from the tax provided for in this
Chapter:
(A) In the Case of Gifts Made by a Resident. (1) Dowries or gifts made on account of marriage and 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 Ten
thousand pesos (P10,000):
(2) 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
(3) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation,
institution, accredited nongovernment organization, trust or philanthrophic 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. For the purpose of the exemption, a 'non-profit
educational and/or charitable corporation, institution, accredited nongovernment organization, trust or
philanthrophic organization and/or research institution or organization' is a school, college or university
and/or charitable corporation, accredited nongovernment organization, trust or philanthrophic organization
and/or research institution or organization, incorporated as a nonstock entity, paying no dividends,
governed by trustees who receive no compensation, and devoting all its income, whether students' fees
or gifts, donation, subsidies or other forms of philanthrophy, to the accomplishment and promotion of the
purposes enumerated in its Articles of Incorporation.
(B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. (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.
(2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation,
institution, foundation, trust or philanthrophic 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.
(C) Tax Credit for Donor's Taxes Paid to a Foreign Country. (1) 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.

16
(2) Limitations on Credit. - The amount of the credit taken under this Section shall be subject to each of
the following limitations:
(a) 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
(b) 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.
(a) A situation may arise when the property given as a gift is located in a foreign country and the donor may be subject to
donors tax twice on the same property: first, by the Philippine government and second, by the foreign government where
the property is situated.
(b) The remedy of claiming a tax credit is, therefore, aimed at minimizing the burdensome effect of double taxation by
allowing the taxpayer to deduct his foreign tax from his Philippine tax, subject to the limitations provided by law.
WHO MAY CLAIM TAX CREDIT
Only a resident citizen, non-resident citizen and resident alien.
15. Exemptions of gifts from donors tax (sec. 101)
a. CITIZENS/RA
In the case of gifts made by a RESIDENT (Sec. 101(A),NIRC):
(1) Dowries or donations made: (maximum:P10,000)
(a) On account of marriage
(b) Before its celebration OR within one year thereafter
(c) By parents to each of their legitimate, recognized, natural, or adopted children
(d) To the extent of the first P10,000.
(e) However, this exemption may not be availed of by a non-resident who is not a citizen of the
Philippines.
b. NRA
In the case of gifts made by a NONRESIDENT (Sec.
101(B), NIRC):
(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
(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 not more
than 30% of said gifts will be used by such donee for administration purposes
Note:Donations made to entities exempted under special laws, e.g.:
(a) Aquaculture Department of the Southeast Asian Fisheries Development Center of the Philippines
(b) Development Academy of the Philippines
(c) Integrated Bar of the Philippines
(d) International Rice Research Institute
(e) National Museum
(f) National Library
(g) National Social Action Council
(h) Ramon Magsaysay Foundation
(i) Philippine Inventors Commission
(j) Philippine American Cultural Foundation
(k) Task Force on Human Settlement on the donation of equipment, materials and services
c. CORPORATIONS
Incorporated as a non-stock entity;
Pays no dividends;
Governed by trustee who received no compensation; and
Devotes all its income whether students fees or gifts, donations, subsidies or other forms of philanthropy
to the accomplishment and promotion of the purposes enumerated in its articles of incorporation
16. Filing and payment of returns
a. WHO IS LIABLE TO PAY?
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. (Sec. 98, NIRC)

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b. REQUIREMENTS
Contents of the Donors Tax Return, which shall be made under oath, in duplicate [Sec. 103(A), NIRC]:
(1) Each gift made during the calendar year which is to be included in computing net gifts;
(2) The deductions claimed and allowable;
(3) Any previous net gifts made during the same calendar year;
(4) The name of the donee;
(5) Relationship of the donor to the donee;
(6) Such further information as the Commissioner may require.
c. TIME AND PLACE OF FILING
When Filed [Sec. 103(B), NIRC]
(a) Filed within thirty (30) days after the date the gift is made or completed.
(b) The tax due thereon shall be paid at the same time that the return is filed.
Where Filed and Paid (Sec. 103(B), NIRC)
Unless the Commissioner otherwise permits, it shall be filed and the tax paid to:
(a) An authorized agent bank
(b) The Revenue District Officer
(c) Revenue Collection Officer or
(d) Duly authorized Treasurer of the city or municipality where the donor was domiciled at the time of the transfer, or
(e) If there be no legal residence in the Philippines, with the Office of the Commissioner.
In the case of gifts made by a non-resident, the return may be filed with:
(a) The Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer, or
(b) Directly with the Office of the Commissioner.
d. NOTICE OF DONATION EXEMPTION FROM DONORS TAX
(Sec 13 RR No. 2-03)
In order to be exempt from donors tax and to claim full deduction of the donation given to qualified
donee institutions duly accredited by the Philippine Council for NGO Certification, Inc. (PCNC), the donor engaged in
business shall give a notice of donation on every donation worth at least Fifty Thousand Pesos (P50,000) to the Revenue
District Office (RDO) which has jurisdiction over his place of business within thirty (30) days after receipt of the qualified
donee institutions duly issued Certificate of Donation, which shall be attached to the said Notice of Donation, stating that
not more than thirty percent (30%) of the said donation/gifts for the taxable year shall be used by such accredited nonstock, non-profit corporation/NGO institution (qualified-donee institution) for administration purposes pursuant to the
provisions of Section 101(A)(3) and (B)(2) of the Code.