TOPICS:

O BIR form No. 1700 ANNUAL INCOME TAX

RETURN (ITR)

O DONORS TAX
BIR Form No. 18000 DONORS TAX RETURN

O ESTATE TAX
BIR Form No. 18000 DONORS TAX RETURN
INCOME TAX RETURN
PROBLEM:
AJ is an employee of a
Telecommunication Company. He
receives an annual salary of P200,000.
He is happily married and has three
children. His wife Lar is unemployed.
He paid a premium on health insurance
of P 2,000 within the year. He paid
excess of P 2, 000 the previous year to
be claimed as tax credit. Determine
the income tax that AJ should pay
ANSWER:
Gross Income: P 200,000.00
Basic Personal Exemption P
50,000.00
Additional Exemption P 75,000.00
PHHI P 2,000.00
(subtract all exemption
from Gross Income)

TAXABLE INCOME: P 73,000.00

From tax table:

P8,500 + 20% of the excess

P8500 + 600= P9,100.00 TAX DUE

Tax due tax credit (if any)

P 9,100- 2,000= P 7,100.00 TAX
LIABILITY
If Taxable Income is: Tax Due is:

Not over P 10K 5%

Over P 10K but not over P500 + 10% of the

P30K excess over P10K
Over P30K but not over P2500 + 15% of the
P70K excess over P30K
Over 70K but not over P8500 + 20% of the
P140K excess over P70K
Over P140K but not over P22500 + 25% of the
P250K excess over P140K
Over P250K but not over P50000 + 30% of the
P500K excess over P250K
Over P500K P125K + 32% of the
excess over P500K
 Transfer Tax
Definition: They are imposed upon the
privilege of disposing gratuitously
private properties. These are levied on
the transmission of properties from a
decedent to his heirs or from a donor
to a donee.
2 Types of Transfer Tax
O DONORS TAX- It is a tax imposed on
the privilege of transmitting property by
and from a living person to another by
way of donation.
O ESTATE TAX-It is an excise tax imposed
upon the privilege of transmitting
property at the time of death and on
the privilege that a person is given in
controlling to a certain extent the
disposition of his property to take effect
upon death.
 DONORS TAX
O Definition and Concept

1. Gift tax is an excise on the transfer by

a living person to another of money or
other property without consideration.

1. Donation is an act of liberality whereby

a person disposes gratuitously of a
thing or right in favor of another, who
accepts it.
Purpose of Donors Tax
1. Raise revenues;
2. Tax the wealthy and to reduce certain other
excise taxes;
3. Discourage inter vivos transfers of property
which could reduce mortis causa transfers on
which a higher tax (estate tax) can be
collected;
4. 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 taxation.
 Donors Tax
O For Gift Tax O Concept of
Purposes Consideration
1. Transfer of property is 1. Consideration must
without consideration. me measurable in
2. It also includes sales, money or moneys
exchanges and other worth. Mere legal
dispositions of property consideration is not
for a consideration to sufficient.
the extent that the 2. The consideration
value of the property
must flow to the
transferred exceeds the
donor, mere detriment
value in money or
moneys worth of the to the donee does not
consideration received. satisfy the purpose of
the statute.
Requisites for a gift to be
taxable
O Capacity of donor to donate;
O Donative intent;
O Acceptance by the donee; and
O Actual or constructive delivery of
gift.
O Donors Tax will apply: When there is a
complete gift.

O A gift occurs when: the donor surrenders

CONTROL over the property. If the donor
retains unlimited power to revoke the gift, it is
clear that no gift has occurred.

O Kinds of Donation:
a. Inter-vivos
b. Mortis Causa
Classification of Donor
O Taxable within and outside Philippines
a. Resident Citizen;
b. Non-resident citizen;
c. Resident alien;
d. Domestic Corporation.
O Taxable only within the Philippines
a. Non-resident aliens;
B. Foreign corporation
 Persons Subject to
Donors Tax
O Before September 1, 1969- Only
donation made by individual is
subject to donors tax.

O On or after September 1, 1969 (R.A

6110)- Donations made by all
person, whether natural or juridical,
is subject to donors tax.
 Gross Gifts
O Composition of Gross O Valuation of gifts
Gift:
A. Citizens/ Resident Donor made in property:
(governed by the law
wherever it is located on) - If donation is made
1. Real Property in property, the fair
2. Tangible Personal Property market value/ zonal
3. Intangible Personal Property
value, whichever is
B. Non Resident/ Foreign Donor higher, of such
(located in the Philippines property at the time
unless exempted by
Principle of reciprocity) of donation shall be
1. Real Property value of the gross
2. Tangible Personal Property
3. Intangible Personal Property
gift.
Deduction from the Gross
Gift
1. Dowries or gifts by parents to children on account of
marriage, before the celebration or within 1 year
thereafter to the extent of P 10K;
2. Gifts to the National Government or any of its
agencies;
3. Encumbrance on the property donated if assumed
by the donee in the deed of donation;
4. Gifts made in favor of an educational, and/ or
charitable, religious, cultural or social welfare
corporation, foundation, trust , or philantrophic
organization or research instittution or organization.
5. Those specifically provided by the donor as a
condition of the donation which will diminish the
value of the property received by the donee.
6. Exempt donation under special laws
 Rate of Donors Tax (gift to
relatives)
if Net Gift is:
Not over P100k
Over P100K but not over P200K
Over P200K but not over P500K
Over P500K but not over P 1M
Over P1M but not over P3M
Over P3M but not over P5M
Over P5M but not over P10M
Over P10M and above
Donors tax is:
Exempt
P 0 + 2% of the excess over P 100k
P 2K + 4% of the excess over P 200K
P 14K + 6% of the excess over P
500K
P 44K + 8% of the excess over P 1M
P 204K + 10% of the excess over P
3M
P 404K + 12% of the excess over P
5M
P 1,0004,000 + 15% of the excess
over P 10M
 Formula in Computing
Taxable Donation
O On the 1st donation O On Subsequent donation
during the year:
of the year: a.) Gross gift- Deductions
or exemptions= Net gift
Gross Gift- b.) Net gift + prior net
Deductions or gift= aggregate net gifts
exemption= Net c.) aggregate net gifts x
Applicable tax rate=
Gift x Tax Rate= Donors tax on
aggregate gift
Donors Tax d.) Donors tax on
(GG-D=NG x TR = aggregate gift- prior
donors tax paid=
DT) donors tax paid on this
date
Rate of Donors Tax (gift
to stranger)
O When the donee or benificiary is a
STRANGER the tax payable by the
donor SHALL BE 30% of the NET gifts
(Section 99-B,NIRC)

O Example of a donation to a
STRANGER:
a. Between business organizations;
b. Between individual and a business
organization
Form no. 1800-Donors
Tax Return
O This return is filed by any person,
natural, or juridical, resident or non-
resident.
O Who transfers or causes to transfer
property by gift, whether in trust or
otherwise.
O Whether the gift is direct or in direct;
and
O Whether the property is real or personal,
tangible or intangible.
O Date of Filing: Within 30 days after
the gift(donation) is made.

Note: A separate return is to be filed

for each gift made on the
dates during the year reflecting
therein any previous net gift
made in the same calendar year.
In case of donation to relatives,
however, only 1 return shall be filed
for several gifts by the donor to the
different donees on the same date.
O EXAMPLE:
Mr. Joseph Ramos, single made the following
donations:
a. January 15, 2000- to his brother, Jun,
P100K;
b. March 10, 2000- to Clara, his sister, P 250K;
c. September 8, 2000- to his girlfriend, Loi, a
brand new car worth P 600K;
d. October 25, 2000- to his father, Carlos, a
vacant lot worth P 1 M with FMV of P 800K
and zonal value of P 1.5M
e. November 12, 2000- to Luis, his brother in
law, P 200K
f. February 14, 2001- to his mother, Maria,
P300K
if Net Gift is:
Not over P100k
Over P100K but not over P200K
Over P200K but not over P500K
Over P500K but not over P 1M
Over P1M but not over P3M
Over P3M but not over P5M
Over P5M but not over P10M
Over P10M and above
Donors tax is:
Exempt
P 0 + 2% of the excess over P 100k
P 2K + 4% of the excess over P 200K
P 14K + 6% of the excess over P
500K
P 44K + 8% of the excess over P 1M
P 204K + 10% of the excess over P
3M
P 404K + 12% of the excess over P
5M
P 1,0004,000 + 15% of the excess
over P 10M
O ANSWER: (each tax due is to be filed separately
within the 30day period after the date of donation
is made)
DATE DONATIO AMOUNT TAX DUE
N
01-15-2000 Cash P100,000 EXEMPT
03-10-2000 Cash P250,000 P 8K
09-08-2000 Car(strang P600,000 P 180K
er)
10-25-2000 Lot P1,500,000 P 104K
11-12-2000 Cash(strang P200,000 P 60K
er)
02-14-2001 Cash P300,000 P 6K
 ESTATE TAX
O Concept and nature:
1. 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 transfer, which are made by law as
equivalent to testamentary disposition.
2. It is not a tax on property.
3. It is a tax imposed on the privilege of
transmitting property upon the death of the
owner.
4. Estate tax is based on the laws in force at the
time of death of the owner
Properties Includable In
Gross Estate
1. Citizen or resident decedent or donor:
a. Real or immovable property, wherever located.
b. Personal property,tangible
orintangible,whereverlocated.(PD1457,6/11/78)

2. Non-resident alien:
a. Real or immovable property located in the
Philippines.
b. Tangible personal property located in the
Philippines.
c. Intangible personalproperty with situsin
thePhilippinessubject tothe rule of reciprocity
exemption.

Composition of the Gross

Estate
1. Real and personal
property(tangible, intangible or
mixed);
2. Decedents interest in property;
3. Proceeds of life insurance;
4. Taxable transfers; and
5. Transfers for insufficient
consideration.
 Estate Tax
Proceeds of Life Taxable Transfer
Insurance
Transfer incontemplation of
1. Includable in gross 1.
death(3-year presumption repealed
estate: 2.
byPD 1705, 8/1/80)
Transfer with retention or reservation
ofcertain rights.
a. Revocablebeneficiar 3. Revocable transfer.
y 4. Transfers of property under general
power of appointment.
b. Appointed beneficiary a. Existence of general power of
appointment held by the decedent.
is the estate, b. Exercise of such power by the
decedent by will or by deed
executor or c.
intended to take effect upon death.
Passing of property byvirtue
administrator. 5.
ofsuch death.
Transfers for insufficient
2. Not includablein consideration.
a. Covers only the excess of the fair
grossestate: market value over the value ofthe
consideration.
Received from the b. Transfer was made in
contemplation of death, otherwise
GSIS and SSS. will be subject to donors tax.
 Kinds of Property
Valuation date
1. By Nature:
O Time of death of
a. Real or immovable
property death
b. Personal property,
tangible or
intangible O Basis of Valuation
2. By Ownership: a. Real properties
a. Exclusive capital b. Improvements
or property.
b. Conjugal or
community
property.
 Deduction from gross
estate
1. Expenses, Losses, 5. Standard
indebtedness, and
Taxes (e.g: Funeral Deduction
expenses, Judicial
expenses, claims 6. Medical Expenses
against the estate, 7. Amount Received
claims of the
deceased against by heirs under R.A
insolvent person, 4917
Unpaid mortgages,
etc.) 8. Share in the
2. Property Previously Conjugal Property
Taxed
3. Transfer for Public Use
4. Family Home
 Estate Tax Return is
required to be filed when:
1. The gross value of the estate exceeds
P200K;or
2. 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
aclearance from the BIR is requiredas a
condition precedent for the transfer or
ownership thereof in the name of the
transferee.
 When to file and pay

O Within six (6) months from the

decedents death;
O Unless an extension of time is requested
in cases where the payment of the tax
will result in undue hardship on the heirs
- Not to exceed 5 years in case the
estate is settled through the courts;
- Not to exceed 2 years in case the estate
is settled extra judicially
 Progressive Rates in
Computing Estate Tax
If Net Taxable Estate is: Estate Tax is:
Not over P 200 K 0%
Over P200K but not over P500K P0 + 5% of the excess over
P200K
Over P500K but not over P2M P15K + 8% of the excess over P
500K
Over P2M but not over P5M P135K + 110% of the excess over
P2M
Over P5M but not over P10M P465K + 15% of the excess over
P5M
Over P10M P1,215,000 + 20% of the excess over
P 10M
 Sample Problem:
On April 9, 2001, John R. Smith, died at the
age of 72.He is married and with surviving
spouse. He named Mary as the executor, his
lawyer. John Smith had the following assets
when he died:
a.Conjugal properties worth: P5 Million
b.Exclusive properties:
i. Family Home: P2,000,000.00
ii. Other exclusive property: P 2,500,000.00

GROSS ESTATE of P 9,500,000.00

the following are the deductions:
Ordinary Deduction:
Funeral Expenses: 200,000
Other Deductions: 1,300,000

Special Deduction:
Family Home: 1,000,000
Standard Deduction: 1,000,000
Medical Expenses: 500,000
Net Estate: 5,500,000
 EXCLUSIV CONJUGAL TOTAL
E
Real P P
Properties 5,000,000 5,000,000
Family P
Home 2,000,000
Other P P
Properties 2,500,000 4,500,000
Less:
Gross P P P
Ordinary
Estate: Deductions:
4,500,000 5,000,000 9,500,000
Conjugal Deductions
Funeral Expenses P 200,000
Other Deductions P 1,300,000
Total Conjugal Deductions: P
1,500,000
Net Conjugal Estate: P 3,500,000
Special Deductions:
Family Home P 1,000,000
Standard Deduction P
1,000,000
Medical ExpensesP 500,000
Total Special Deduction:
2,500,000
*** 1,500,000 (CD)
+2,500,00 (SD)
4,000,000 (total deduction)
Net Estate: P 5,500,000

Less: Share of S.S

Conjugal PropertyP 5,000,000
Conjugal Deduction P 1,500,000
Net Conjugal Estate P3,500,000
(3,500,000/ 2)= P1,750,000
P 1,750,000 (share of S.S.)
Net Taxable Estate P 3,750,000
Donors Tax Vs. Estate
Tax
O Nature of transfer
DT: During the lifetime of the donor.
ET: After death of decendent.

O Amount exempt
DT: 1OO,OOO.OO
ET: 200,000.00

O Rate of Tax
DT: 2-15%
ET: 5-20%
O Grant of exemption
DT: Sec. 101, NIRC
ET: Sec. 87, NIRC

O Notice requirement
DT: Notice of donation is not required
ET: Notice of death is required if the
transaction is subject to estate tax
and when it is exempt from
transaction from the estate but
exceeds 20K.
O Notice is filed
DT: None
ET: Within 2 months after the decedents death or after qualifying as
executor or administrator.

O Filing of return
DT: subject to donors tax
ET: subject to estate tax

O Contents of return
DT: 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. Such further information as may be required by rules and regulations
made pursuant to law
ET: 1. Value of the gross estate
2. Deductions under Sec. 86, NIRC
3. Other pertinent information
4. If Gross estate exceeds P2M, certified by a CPA as to assets,
deductions, tax due, whether paid or not
O Time of filing return
DT: within 30 days after donation was made.
ET: within 6 months from death of
decendent.

O Extension for filing return

DT: None
ET: 30 days in meritorious cases

O Payment of tax due

DT & ET: Pays as you file