Transfer & Business Taxation

Notes in Tax Credit and Administration

Edelyn P. Aterado

1. Tax Credit for Estate Taxes paid to a Foreign Country

The estate tax imposed by the authority of a foreign country is credited with the amounts of any estate tax imposed the Philippine government: Limitations on Credit a) The amount of the tax 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 decedents net estate situated within such country taxable under the Tax Code bears to his entire net estate; b) The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the decedents net estate situated outside the Philippines taxable under the Tax Code bears to his entire net estate.

2. Determination of the Value of the Estate a) Usufruct o To determine the value of the right of usufruct, use or habitation, as well as that of annuity, there shall be taken into account the probable life of the beneficiary in accordance with the latest Basic Standard Mortality Table, to be approved by the Secretary of Finance, upon recommendation of the Insurance Commissioner.

2. Determination of the Value of the Estate

(Continuation)

b) Properties o The estate shall be appraised at its fair market value as of the time of death. However, the appraised value of real property as of the time of death shall be, whichever is higher of (1)The fair market value is determined by the Commissioner, or (2)The fair market value as shown in the schedule of values fixed by the Provincial and City Assessors (FMV AS DETERMINED BY THE ASSESSOR OR FMV AS DETERMINED BY THE BIR WHICHEVER IS HIGHER)

3. 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 P20,000, the executor, administrator or any of the legal heirs, as the case may be, within 2 months after the decedents death, or within a like period after qualifying as such executor or administrator, shall give a written notice thereof to the Commissioner. Transfers that require notice of death: 1) Subject to tax 2) The gross value of the estate exceeds P20,000 (even though exempt)

4. Estate Tax Returns

In all cases of transfers subject to estate tax, or where, though exempt from tax, the gross value of the estate exceeds P200,000, or regardless of the gross value of the estate, where the said estate consists of registered or registrable 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, the executor, or the administrator, or any of the legal heirs, as the case may be, shall file a return under oath in duplicate. Transfers that require the filing of estate tax return: (a) subject to tax; (b) the gross value of the estate exceeds P200,000 (even though exempt); (3) regardless of value where the estate consists of registrable property.

4. Estate Tax Returns

(Continuation)

Estate tax returns showing a gross value exceeding P2,000,000 should be supported with a statement duly certified to by a Certified Public Accountant continuing 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) Allowed itemized deductions from gross estate. c) The amount of tax due whether paid or still due and outstanding

5. Time for filing & Extension of time for filing The estate tax return shall be filed within 6 months from the decedents death. The Commissioner shall have authority to grant, in meritorious cases, a reasonable extension not exceeding 30 days for filing the return.

6. Place of Filing
Except in cases where the Commissioner otherwise permits, the estate tax return shall be filed with an authorized agent bank, or Revenue District Officer, Collection Officer, or duly authorized Treasurer of the city or municipality in which the decedent was domiciled at the time of his death or if there be no legal residence in the Philippines, with the Office of the Commissioner.

TIME OF PAYMENT:
The estate tax shall be paid at the time the return is filed by the executor, administrator or the heirs. (PAY AS YOU FILE SYSTEM)

7. Extension of Time of Payment

When the Commissioner 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, he may extend the time for payment of such tax or any part thereof not to exceed 5 years, in case the estate is settled through the courts, or 2 years in case the estate is settled extrajudicially. In such case, the amount in respect of which the extension is granted shall be paid on or before the date of the expiration of the period of the extension, and the running of the Statute of Limitations for assessment shall be suspended for the period of any such extension. (5 YEARS IF JUDICIAL; 2 YEARS IF EXTRAJUDICIAL)

8. Liability for Payment

The estate tax shall be paid by the executor or administrator before delivery to any beneficiary of his distributive share of the estate. Such beneficiary shall to the extent of his distributive share of the estate, be subsidiarily liable for the payment of such portion of the estate tax as his distributive share bears to the value of the total net estate. The term executor or administrator means the executor or administrator of the decedent, or if 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.

9. 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 applications, or if the application is made before the return is filed within one (1) year after the return is filed, but not after the expiration of the period prescribed for the assessment of the tax shall 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.

10. Payment before Delivery by Executor or Administrator (Duty of a judge)

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.

11.Duties of Certain Officers and Debtors

REGISTRAR OF REGISTER OF DEEDS Registers of Deeds shall not register in the Registry of Property any document transferring real property or real rights therein in any chattel mortgage, by way of gifts inter vivos or mortis causa, legacy or inheritance, unless a certification from the Commissioner that the tax imposed and actually due thereon had been paid is shown, and they shall immediately notify the Commissioner, Regional Director, Revenue District Officer, or Revenue Collection Officer or Treasurer of the city or municipality where their offices are located, of the non payment of the tax discovered by them.

11.Duties of Certain Officers and Debtors

(Continuation)

LAWYER Any lawyer, notary public, or any government officer who, by reason of his official duties, intervenes in the preparation or acknowledgment of documents regarding partition or disposal of donation intervivos or mortis causa, legacy or inheritance, shall have the duty of furnishing the Commissioner, Regional Director, Revenue District Officer or Revenue Collection Officer of the place where he may have his principal office, with copies of such documents and any information whatsoever which may facilitate the collection of the aforementioned tax.

11.Duties of Certain Officers and Debtors

(Continuation)

DEBTOR Neither shall a debtor of the deceased pay his debts to the heirs, legatee, executor or administrator of his creditor, unless the certification of the Commissioner that the estate tax imposed had been paid is shown; but he may pay the executor or judicial administrator without said certification if the credit is included in the inventory of the estate of the deceased.

12. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights (Duties of a Secretary of Corporation and a Bank

SECRETARY OF CORPORATION No transfer shall be allowed 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 estate tax due thereon has been paid is shown.

12. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights (Duties of a Secretary of Corporation and a Bank (Continuation)

BANK 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 estate tax imposed thereon has been paid. 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.

13.Benefits exempt by special laws

a) Amounts received for war damages b) Amounts received from United States Veterans Administrative c) Benefits received from Government Service Insurance System (GSIS) d) Benefits received from Social Security System (SSS)

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