TRANSFER TAXES

Transfer taxes, defined – a tax imposed upon the

privilege of passing property ownership gratuitously
without consideration.

Nature of transfer taxes. Transfer taxes are:

1. Excise or privilege taxes imposed on the privilege of
passing property ownership
2. and are not taxes on the property transferred.

Kinds of transfer taxes: 1. Estate taxes; 2. Donor’s taxes

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ESTATE TAX
Definition: A tax that is levied, assessed, collected and
paid upon the privilege of gratuitously transferring the net
estate of a decedent to his heirs.

Basis: Estate tax is a tax on the privilege to transfer

property upon one’s death.

Who pays the tax: Estate tax is paid by the estate

represented by the administrator or executor.
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ESTATE TAX
Relationship of the heirs to the decedent. The estate tax
makes no difference in treatment based on the relationship of
a decedent to his or her heirs.

Governing law: Estate taxes are presently governed and

imposed by the provisions of the NIRC of 1997.

Law that governs the imposition of the estate tax. Estate

taxation is governed by the statute in force at the time of the
death of the decedent. This is so because estate tax is a tax
on the privilege to transfer property mortis causa.
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NATURE OF ESTATE TAXES
Nature: Estate taxes are in nature of an excise tax on the
privilege to gratuitously pass on property ownership
mortis causa.

The nature of estate taxes:

1. It is not a tax on property.
2. It is a tax imposed on the privilege to transmit property
at death and is measured by the value of the property.

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CHARACTERISTICS OF THE ESTATE TAX
1. It is a transfer tax.
2. It is an excise tax.
3. It is a progressive tax.
4. It is a national tax.
5. It is a direct tax despite the fact that the heirs are
subsidiarilly liable if the executor or administrator fails to
pay the tax. This is so because whether it is the heirs,
the executor or administrator who pays the tax, the origin
of the money used to pay would still be the estate of the
decedent. The ultimate burden is upon the decedent not
upon the heirs.
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PURPOSES OR OBJECTS OF ESTATE TAXATION
1. To generate additional revenue for the government.
2. To reduce the concentration of wealth.
3. Provide for an equal distribution of wealth.
4. It is the most appropriate and effective method for taxing
the “privilege” which the decedent enjoys of controlling
the0 disposition at death, of property accumulated during
the lifetime of the decedent.
5. It is the only method of collecting the share which is
properly due to the State as a “partner” in the accumulation
of property which was made possible on account of the
protection given by the State.
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WHEN THE ESTATE TAX ACCRUES
The estate tax accrues as of the death of the decedent and the
accrual of the tax is distinct from the obligation to pay the same.

Upon the death of the decedent, succession takes place and the right
of the State to tax the privilege to transmit the estate vests instantly
upon death.

Rationale: Estate tax is a tax imposed on the privilege to transfer

properties mortis causa. As such, the transfer of ownership takes
place at the time of death, not at the time when the certificates of title
to real property are transferred from the decedent to the transferee.

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IMPLICATIONS THAT FLOW FROM THE CONCEPT
THAT THE TIME OF TRANSFER IS THE TIME OF DEATH
1. The composition of the gross estate. Only the
properties, real or personal, where the decedent has
an interest at the time of death constitutes the estate
that could be transferred mortis causa;
2. The value of the gross estate is also affected
because it should be the value at the time of death.
3. The nationality, residence or location of the property
at the time of death also is considered.
4. The accrual of the estate tax.
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CLASSIFICATION OF DECEDENT
1. Citizens and resident aliens; and
2. Non-resident aliens.

Kinds of estates of decedents for the purpose of imposing the

estate tax:
1. Estates of decedent Filipinos, whether residents or not,
and estates of decedent resident aliens;
2. Estates of decedent non-resident aliens.

Basis for the classification: Decedents and estates are

classified in accordance with the benefits protection theory.
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RESIDENT ALIENS FOR PURPOSES OF ESTATE
TAXATION

Revenue Regulations provide an interpretation of who

may be considered as resident aliens:

1. An alien actually present in the Philippines who is not

a mere transient or sojourner.

1. Whether he is a transient or not is determined by his

intentions with regard to the length and nature of his
stay.

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RESIDENT ALIENS FOR PURPOSES OF ESTATE
TAXATION
3. A mere floating intention indefinite as to time, to return
to another country is not sufficient to constitute such
alien as a transient. If he lives in the Philippines and
has no definite intention as to stay, he is a resident.

3. One who comes to the Philippines for a definite

purpose which in its nature may be promptly
accomplished is a transient. But if his purpose is of
such a nature that an extended stay may be
necessary
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RESIDENT ALIENS FOR PURPOSES OF ESTATE
TAXATION

for its accomplishment, and to that end the alien

makes his home temporarily in the Philippines, he
becomes a resident though it may be his intention at
all times to return to his domicile abroad when the
purpose for which he came has been consummated
or abandoned.

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GROSS ESTATE AND NET ESTATE

Gross Estate is the totality of all the properties in which

the decedent had an interest existing at the time of his
death.

Net Estate is what remains after subtracting from the

gross estate the allowable deductions.

The gross estate is not subject to tax while the net estate
is the basis for imposing the estate tax.

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RATES OF ESTATE TAX
TRAIN amendment. “There shall be levied, assessed,
collected and paid upon the transfer of the net estate as
determined in accordance with Sections 85 and 86 of
every decedent, whether resident or nonresident of the
Philippines, a tax at the rate of six percent (6%) based on
the value of such net estate.” (NIRC of 1997, Sec. 84 as
amended by the TRAIN)

The estate tax rate is fixed at 6% based on the value of

the net estate.
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STEPS IN THE DETERMINATION OF THE GROSS
ESTATE, NET ESTATE AND THE ESTATE TAX
1. Determine the nationality and residence of the decedent.
2. Determine the nature and location of the properties of the
decedent.
3. Determine the composition and value of the gross estate.
4. Determine the nature and value of the allowable deductions and
subtract from the gross estate in order to arrive at the net
estate.
5. Apply the rates of the estate tax that are applicable to the net
estate.
6. Determine the applicable penalties and surcharges, if any.

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GROSS ESTATE OF CITIZEN (WHETHER RESIDENT OR
NON-RESIDENT) OR RESIDENT ALIEN

The gross estate of a Filipino citizen or a resident alien

comprises all his real property, wherever situated; all his
personal property, tangible, intangible or mixed,
wherever situated, to the extent of his interest existing
therein at the time of his death.

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GROSS ESTATE OF CITIZEN (WHETHER RESIDENT OR
NON-RESIDENT) OR RESIDENT ALIEN
The composition of the gross estate, for estate taxation
under Philippine law, of a citizen or a resident alien. The
value of

1. at the time of his death

2. of all property, real or personal, tangible or
intangible,
3. wherever situated
4. to the extent of the interest therein of the
decedent existing at the time of his death.
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ILLUSTRATION OF THE PHRASE “TO THE EXTENT OF
THE INTEREST THEREIN OF THE DECEDENT
EXISTING AT THE TIME OF HIS DEATH”
Where the properties may not be owned anymore by
the decedent but still considered as part of the gross
estate because he has an interest existing at the time
of his death.
a. Where it was the decedent who took out the life
insurance on his own life and the designation of the
beneficiary was revocable at the instance of the
decedent.
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ILLUSTRATION OF THE PHRASE “TO THE EXTENT OF
THE INTEREST THEREIN OF THE DECEDENT
EXISTING AT THE TIME OF HIS DEATH”
b. Transfers in contemplation of death where the
decedent has retained some attributes of ownership
(such as possession or enjoyment of the fruits during his
lifetime) to pass only after his death, revocable transfers,
transfers under general powers of administration, etc.
c. The insufficiency of consideration in the instance
where a sale of property is made for less than an
adequate and full consideration.
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GROSS ESTATE OF A NON-RESIDENT ALIEN

The gross estate of a non-resident alien comprises all

his real property, situated in the Philippines; all his
personal property, tangible, intangible or mixed, situated
in the Philippines, to the extent of his interest existing
therein at the time of his death.

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The composition of the gross estate, for estate taxation under
Philippine law, of a non-resident alien. The value of

1. at the time of his death

2. only that part of the entire gross estate consisting of all
property
a. Real
b. Or personal,
1. tangible or intangible,
3. situated in the Philippines
4. to the extent of the interest therein of the decedent existing
at the time of his death.
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PROCEEDS OF LIFE INSURANCE
Includible in the gross estate of a decedent if:

a. The proceeds are receivable by the estate of the

decedent, his executor or administrator and the insurance
was under a policy taken out by the decedent upon his own
life, or

b. The proceeds are from an insurance under a policy

taken out by the decedent upon his own life and are
receivable by any beneficiary designated as a revocable
beneficiary in the policy of insurance.
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VALUATION OF ESTATE
Valuation of property subject to estate tax is the date-of-death
valuation rule.

The date-of-death valuation rule. 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 as determined by the Commissioner,

or
2. The fair market value as shown in the schedule of values
fixed by the Provincial and City Assessors.
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DEDUCTIONS ALLOWED FROM THE GROSS ESTATE
OF CITIZENS AND RESIDENT OF THE PHILS.

TRAIN amendment.
1. Standard deduction of Php5,000,000;
2. Claims against the estate;
3. Claims of the deceased against insolvent persons;
4. For unpaid mortgages upon, or any indebtedness in respect to,
property;
5. Deduction for losses;
6. Property previously taxed;
7. Transfers for public use;
8. The family home in the increased amount of Php10,000,000;
9. Amount received by heirs under RA No. 4917.
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DEDUCTION FOR CLAIMS AGAINST THE ESTATE

The following are the conditions for deductibility of claims

against the estate:

1. The liability represents a personal obligation of the

deceased existing at the time of his death except
unpaid obligations incurred incident to his death
such as unpaid funeral expenses and unpaid
medical expenses.
2. The liability was contracted in good faith and for
adequate and full consideration in money or money’s
worth.
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DEDUCTION FOR CLAIMS AGAINST THE ESTATE
3. The claim must be a debt or claim which is valid in law
and enforceable in court.
4. The indebtedness must not have been condoned by
the creditor or the action to collect from the decedent
must not have prescribed.
5. If the claim is for indebtedness, at the time the
indebtedness was incurred, the debt instrument was
duly notarized.
6. If the loan was contracted within three (3) years before
the decedent’s death, the executor or administrator
shall submit a statement showing the disposition of the
proceeds of the loan.
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DEDUCTION FOR LOSSES

1. Losses incurred during the settlement of the estate

2. Arising from fires, storms, shipwreck, or other casualties,
or from robbery, theft or embezzlement,
3. When such losses are not compensated for by insurance
or otherwise, and
4. If at the filing of the return such losses have not been
claimed as a deduction for income tax purposes in an
income tax return, and
5. Provided that such losses were incurred not later than the
last day for the payment of the estate tax as prescribed
by law.
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WHAT ARE VANISHING DEDUCTIONS IN
ESTATE TAXATION?
The deduction allowed from the gross estates of
deceased persons, whether citizens, resident aliens and
nonresident aliens, for properties which were previously
subject to donor’s or estate taxes.

The deduction is called a vanishing deduction because

the deduction allowed diminishes over a period of five (5)
years.

It is also known as a deduction for property previously taxed.

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PURPOSE OF THE VANISHING DEDUCTION OR
DEDUCTION FOR PROPERTY PREVIOUSLY TAXED

A scheme of “vanishing deduction” is provided, in

order to reduce the tax on property received from a prior
decedent where the deceased died within five (5) years
after the death of the prior decedent.

Vanishing deduction finds application only upon

properties previously taxed in this case if an estate tax
has been paid upon the estate of the prior decedent.

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PROPERTY PREVIOUSLY TAXED ALLOWED AS A
DEDUCTION FROM THE GROSS ESTATE OF A
FILIPINO CITIZEN, WHETHER RESIDENT OR NOT, OF A
RESIDENT ALIEN DECEDENT
1. An amount equal to the value specified below of
2. any property forming a part of the gross estate
situated in the Philippines
3. of any person who died within 5 years prior to the
death of the decedent, or transferred to the decedent
by gift within 5 years prior to his death
4. where such property can be identified as having
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 been received by the decedent from the donor by gift,
or from such prior decedent by gift, bequest, devise,
or inheritance, or
5. which can be identified as having been acquired in
exchange for property so received:

100% of the value if the prior decedent died within

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

60% of the value if the prior decedent died more than

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

20% of the value if the prior decedent died more than

4 years but not more than 5 years prior to the death
of the decedent, or if the property was transferred to
him by gift within the same period prior to his death;
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FORMULA FOR COMPUTING VANISHING DEDUCTION:
Value of Property Previously Taxed
LESS: Mortgage debt paid, if any (first deduction)
= First basis

Vlue of gross estate of present decedent

LESS: Expenses, etc. Transfers for public purposes etc.
= 2nd deduction

First basis
LESS: 2nd deduction
= 2nd basis
Multiplied by 80%, 60% etc.
= Vanishing deduction

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TRANSFERS FOR PUBLIC USE

The amount of

1. all bequest, legacies, devices, or transfers to or for the

use
2. of the Government of the Republic of the Philippines,
or any political subdivision thereof,
3. For exclusively public purposes.

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DEDUCTION FOR THE FAMILY HOME

An amount equivalent to the current fair market

value of the decedent’s family home: Provided,
however, That if the said current fair market value
exceeds Ten million pesos (Php10M), the excess shall
be subject to estate tax.

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FAMILY HOME, DEFINED FOR AVAILMENT OF THE
DEDUCTION FROM GROSS ESTATE
The dwelling house, including the land on which it is
situated, where the husband and wife, or a head of the family,
and members of their family reside, as certified to by the
Barangay Captain of the locality. The family home is deemed
constituted on the house and lot from the time it is actually
occupied as a family residence and is considered as such for as
long as any of its beneficiaries actuall resides therein.

For purposes of availing of a family home deduction to the

extent allowable, a person may constitute only one family home.

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CONDITIONS FOR THE ALLOWANCE OF FAMILY HOME
AS A DEDUCTION FROM GROSS ESTATE
a. The family home must be the actual residential home of
the decedent and his family at the time of his death.
b. The total value of the family home must be included as
part of the gross estate of the decedent.
c. Allowable deduction must be in an amount equivalent to
the current fair market value of the family home as
declared or included in the gross estate, or the extent of
the decedent’s interest (whether conjugal/community or
exclusive property), whichever is lower, but not exceeding
10M.
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DEDUCTION OF THE AMOUNT RECEIVED BY HEIRS
UNDER RA 4917

RA 4917 refers to tax-exempt retirement or separation.

1. any amount received by the heirs from the

decedent’s employer
2. as a consequence of the death of the decedent-
employee in accordance with RA 4917
3. is allowed as a deduction
4. provided that the amount of the separation benefit
is included as part of the gross estate of the decedent.

39
DEDUCTIONS ALLOWED FROM THE GROSS ESTATE
OF NON-RESIDENT ALIENS
TRAIN amendment. In the case of a non-resident alien, the
net estate is determined by deducting from the value of that
part of his gross estate which at the time of his death is
situated in the Philippines.

1. Standard deduction in the amount of Php500,000.

2. The proportion which claims against the estate, claims of the deceased
against insolvent persons, and for unpaid mortgages upon, or any
indebtedness in respect to, property bears to the total value of the entire
gross estate wherever situated.
3. Property previously taxed.
4. Transfers for public use.
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EXCLUSIONS FROM GROSS ESTATE

1. the “capital” of the surviving spouse (should be taken

to mean, “the separate property” of the surviving
spouse).
2. Exempt acquisitions and transmissions.
3. Reciprocity provision exempting from estate taxation
intangible personal property situated in the Philippines
owned by a nonresident alien decedent.

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EXEMPTION OF CERTAIN ACQUISITIONS AND
TRANSMISSIONS

The following shall not be taxed:

1. The merger of usufruct in the owner of the naked title.

2. The transmission or delivery of the inheritance or
legacy by the fiduciary heir or legatee to the
fideicommissary.
3. The transmission from the first heir, legatee, or donee
in favor of another beneficiary, in accordance with the
desire of the predecessor.
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EXEMPTION OF CERTAIN ACQUISITIONS AND
TRANSMISSIONS

4. All bequests, devises, legacies or transfers to social

welfare, cultural and charitable institutions, no part of the
net income of which inures to the benefit of any
individual; Provided however, That not more than 30% of
the said bequests, devises, legacies or transfers shall be
used by such institutions for administration purposes.

5. Exempt acquisitions and transmissions of intangible

personal property under the principle of reciprocity.
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FILING OF NOTICE OF DEATH

TRAIN amendment. The TRAIN has expressly

repealed NIRC, Sec. 89 Notice of Death to be filed.
Thus, the notice of death is not required anymore.

44
ESTATE TAX RETURN
WHEN ESTATE TAX RETURN REQUIRED TO BE
FILED.

TRAIN amendment. In all cases of transfers subject to the

tax imposed herein, 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 BIR is required as a condition
precedent for the transfer of ownership thereof in the
name of the transferee, the executor, or the administrator,
45
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 estate as defined in Section 86; and
3. Such part of such information as may at the time be
46
ascertainable and such supplemental data as may be necessary to
establish the correct taxes. Provided, however, That estate tax
returns showing a gross value exceeding Five million pesos shall be
supported with a statement duly certified to by a CPA 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.
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TIME FOR FILING THE ESTATE TAX RETURN

The estate tax return shall be filed within one (1)

year from the decedent’s death.

The Commissioner of Internal Revenue shall have

authority to grant, in meritorious cases, a reasonable
extension not exceeding thirty (30) days for filing the
return.

48
WHO ARE REQUIRED TO FILE THE ESTATE TAX
RETURN UNDER OATH

1. xxx the executor,

2. or the administrator,
3. or any of the legal heirs, as the case may be,
a. Shall file a return under oath in duplicate.

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PLACE OF FILING ESTATE TAX RETURN WHERE THE
DECEDENT IS A RESIDENT OF THE PHILIPPINES
In case of a resident decedent, the administrator or
executor shall register the estate of the decedent and
secure a new TIN therefore from the Revenue District
Office where the decedent was domiciled at the time
of his death and shall file the estate tax return and pay
the corresponding estate tax with the
1. Accredited Agent Bank (AAB),
2. Revenue District Officer,
3. Collection Officer or
4. duly authorized Treasurer of the city or
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PLACE OF FILING ESTATE TAX RETURN WHERE THE
DECEDENT IS A RESIDENT OF THE PHILIPPINES

municipality where the decedent was domiciled at

the time of his death, whichever is applicable,
following prevailing collection rules and
procedures.
5. In any other place where the Commissioner of
Internal Revenue permits the estate tax return to
be filed.

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PLACE OF FILING ESTATE TAX RETURN WHERE
THE DECEDENT HAS NO LEGAL RESIDENCE IN
THE PHILIPPINES
1. In case of a non-resident decedent, whether non-
resident citizen or non-resident alien, with executor
or administrator in the Philippines, the estate tax
return shall be filed with and the TIN for the estate
shall be secured from the RDO where such executor
or administrator is registered, provided, however,
that
2. In case the executor or administrator is not
52
 registered, the estate tax return shall be filed with and the
TIN of the estate shall be secured from the RDO having
jurisdiction over the executor or administrator’s legal
residence.
3. Nonetheless, in case the non-resident decedent does not
have an executor or administrator in the Philippines, the
estate tax return shall be filed with and the TIN for the
estate shall be secured from the Office of the
Commissioner through RDO No. 39-B South Quezon
City.
4. In any other place where the Commissioner of Internal
Revenue permits the estate tax return to be filed. 53
COLLECTION OF ESTATE TAX DOES NOT
REQUIRE COURT APPROVAL

There is nothing in the Tax Code, and in the pertinent

remedial laws that implies the necessity of the probate or estate
settlement court’s approval of the state’s claim for estate taxes
before the same can be enforced or collected. On the contrary,
under Sec. 87 of the NIRC (now Sec. 94, NIRC of 1997), 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 of the Commissioner of Internal Revenue
that the estate taxes have been paid.

54
WHO ARE PRIMARILY LIABLE FOR THE PAYMENT OF
THE ESTATE TAXES ASSESSED AGAINST THE
ESTATE OF A DECEASED PERSON?
1. Primary personal liability of the executor or administrator.
2. Subsidiary liability of the beneficiary.

Subsidiary liability of beneficiary. The beneficiary, to the extent

of his distributive share, shall be subsidiarily liable for the payment
of such portion of the estate as 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.
55
TIME FOR PAYMENT OF THE ESTATE TAX
As a general rule, estate tax imposed under the NIRC of 1997,
as amended by the TRAIN, shall be paid at the time the return is filed
by the executor, administrator or the heirs, which is within one (1)
year from the decedent’s death.

If the estate is suffering from liquidity problems because it does

not have sufficient cash to pay the estate taxes the executor or
administrator, upon approval of the Commissioner of Internal
Revenue may opt to do either of the following:
1. Pay the tax in installments; or
2. Apply for an extension of time within which to pay the tax.

56
PAYMENT BY INSTALLMENT OF ESTATE TAX SECTION
91 (C) [NEW]

In case the available cash of the estate is

insufficient to pay the total estate tax due, payment by
installment shall be allowed within two (2) years from
the statutory date of payment, without civil penalty
and interest.

57
TRAIN AMENDMENT

If a bank has knowledge of the death of a person,

who maintained a bank deposit account alone, or jointly
with another, it shall allow any withdrawal from the said
deposit account, subject to a final withholding tax of
6%. 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.

58
DONOR’S TAX

- It is a tax on the privilege to transfer property during one’s

lifetime (inter vivos).

- It is computed on the basis of the net gifts given during a

calendar year.

- The first P250,000.00 of the net gifts is exempt from

donor’s tax.

59
BASIS OF DONOR’S TAX

The donor’s tax is based on a pure act of liberality

without any or less than adequate consideration and
without any legal compulsion to give.

It applies
1. whether the transfer is in trust or otherwise,
2. whether the gift is direct or indirect, and
3. whether the property is real or personal,
tangible or intangible.
60
▪ The law in force at the time of the perfection/completion
of the donation shall govern the imposition of the donor’s
tax.

▪ The donor’s tax shall not apply unless and until there is a
completed gift. The transfer of property by gift is
perfected from the moment the donor knows of the
acceptance by the donee, it is completed by delivery,
either actually or constructively, of the donated property
to the donee.
61
DONATION MORTIS CAUSA DISTINGUISHED FROM
DONATION INTER VIVOS

DONATION INTER VIVOS DONATION MORTIS CAUSA

The act is immediately operative Nothing is conveyed to or
even if the actual execution may acquired by the donee until the
be deferred until the death of the death of the donor.
donor.
It is subject to donor’s tax. It is subject to estate tax.

62
 DONATION INTER VIVOS DONATION MORTIS CAUSA
It is subject to donor’s tax. It is subject to estate tax.

a. Inter vivos donations transfers title a. Characteristics of a mortis causa donation.

effectively upon acceptance in accordance
with all the formalities required by law. 1. Does not pass title or ownership to the
donee before the death of the donor, that the
donor retains ownership (full or naked) and
control of the property while alive.

2. That the donor reserves the right to

revoke the donation during his lifetime or that
he reserves the right to dispose of the property
donated.

3. That the donation shall be void if the

donor survives the donee.

63
CONCEPT AND DEFINITION

Donor’s tax is

1. an excise tax
2. imposed on the privilege transfer of property
a. by way of gift inter vivos
3. by any person, resident or non-resident
4. based on a pure act of liberality
a. without any or less than adequate
consideration
b. and without any legal compulsion to give.
64
NATURE OF DONOR’S TAX
1. It is not a tax on the property donated but on the privilege to
transfer property.
2. It is levied, assessed, collected and paid upon the transfer by any
person, resident or non-resident, of property by gift inter vivos.
3. It is a tax imposed on the privilege to gratuitously transmit
property while living and is measured by the value of the
property.
4. It applies
a. Whether the transfer is in trust or otherwise,
b. whether the gift is direct or indirect, and
c. whether the property is real or personal, tangible or
intangible.
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REQUISITES OF A VALID DONATION SUBJECT TO
DONOR’S TAX

1. Act of liberality on the part of the donor;

2. Inter vivos in its effect;
3. Gratuitous disposal of property; or for less than
adequate consideration;
4. In favor of another
5. Who accepts it
6. Without any legal compulsion to give.

66
TRANSFERS WHICH MAY BE CONSTITUTED AS
DONATION

1. Sale/exchange/transfer of property for insufficient

consideration
2. Condonation/remission of debt
3. Transfer for less than adequate and full
consideration

67
CLASSIFICATION OF DONORS

Taxable donors may be classified into:

1. Citizens, whether residents or not, donating properties

wherever situated.
2. Resident aliens, donating properties wherever
situated.
3. Non-resident aliens, donating properties situated in
the Philippines.

68
SITUS OF DONOR’S TAXATION

The situs of donor’s taxation is where the transfer

took place. Thus, only transfers that take place within the
Philippines are subject to donor’s taxes unless the donors
are Filipino citizens who are residents of a foreign
country.

69
DETERMINATION OF TAXABLE GIFT
The tax for each calendar year shall be computed on
the basis of the total net gifts made during the calendar
year.

Net gift for purposes of donor’s taxes. The net economic

benefit from the transfer that accrues to the donee.
Accordingly, if a mortgaged property is transferred as a gift,
but imposing upon the donee the obligation to pay the
mortgaged liability, then the net gift is measured by
deducting from the fair market value of the property the
amount of the mortgage assumed.
70
DETERMINATION OF NET GIFT FOR DONOR’S TAX
PURPOSES

1. The totality of the gifts (gross gifts) made during the

calendar year is determined.
2. There should be deducted from gross gifts any gifts
that are exempted from taxation.
3. The deduction would then result to the net gifts.

71
GENERAL RENUNCIATION OF HEREDITARY RIGHTS
NOT SUBJECT TO DONOR’S TAX

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 donor’s tax, unless
specifically and categorically done in favor of identified
heirs to the exclusion or disadvantage of the other co-
heirs in the hereditary estate.

72
COMPOSITION OF GROSS GIFT

The term “gross gifts”

1. Include real and personal property, whether tangible or

intangible, or mixed, wherever situated;
2. Provided, however, that where the decedent or donor was a non-
resident alien at the time of xxx donation, xxx, his real and
personal property so transferred but which are situated outside
the Philippines shall NOT be included as part of his xxx “gross
gift”;
3. Provided, further, that the following property of a non-resident
alien is deemed situated in the Philippines for purposes of
donor’s taxation:
73
COMPOSITION OF GROSS GIFT
a) franchise which must be exercised in the Philippines;
b) Shares, obligations or bonds issued by any corporation or
sociedad anonima organized or constituted in the Philippines
in accordance with its laws;
c) shares, obligations or bonds by any foreign corporation 85% of
the business of which is located in the Philippines;
d) shares, obligations or bonds issued by any foreign corporation
if such shares, obligations or bonds have acquired a business
situs in the Philippines;
e) shares or rights in any partnership, business or industry
establish in the Philippines.

74
4. Provided, still further, that no tax shall be collected xxx
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
75
 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.

76
VALUATION OF REAL PROPERTY FOR DONOR’S TAX
PURPOSES
For purposes of computing any internal revenue tax,
including the donor’s tax, the donation shall be appraised
at its fair market value as of the time of the donation.
However, the appraised value of real property as of the
time of the donation shall be, whichever is the higher of:

1. The fair market value as determined by the

Commissioner (the zonal valuation); or
2. The fair market value as shown in the schedule of
values of the Provincial and City Assessors.
77
VALUATION OF PROPERTY, OTHE THAN REAL
PROPERTY, FOR DONOR’S TAX PURPOSES

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.

78
TAX CREDIT FOR DONOR’S TAXES PAID TO A
FOREIGN COUNTRY

Requisites for allowing tax credit for donor’s taxes paid

to a foreign country:

1. Donor was a Filipino citizen or resident alien;

2. at the time of foreign donation;
3. donor’s taxes of any character and description;
4. are imposed and paid by the authority of a foreign
country.

79
DONATIONS EXEMPT FROM THE PAYMENT OF
DONOR’S TAX
1. Total gifts not in excess of Two hundred fifty
thousand pesos (Ᵽ250,000) exempt gift made during
the calendar year.
2. 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;
3. 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
80
DONATIONS EXEMPT FROM THE PAYMENT OF
DONOR’S TAX
political subdivision of the said Government.
4. Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution, accredited
nongovernment organization, trust or philanthropic 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.
5. Donations of intangibles subject to reciprocity;
6. Donations for athlete’s prizes and awards
7. Donations under special laws.
8. Donations under international agreements.
81
ARE CONTRIBUTIONS TO A CANDIDATE IN AN ELECTION
SUBJECT TO DONOR’S TAX? ON THE PART OF THE
CONTRIBUTOR, IS IT ALLOWED AS A DEDUCTION FROM
GROSS INCOME?
No, because the Election Code specifically exempts
it from donor’s taxes provided they are reported to the
COMELEC.

The contributor is not allowed to deduct such

contributions from gross income because they do not help
earn the income and are not among those which are
considered as charitable and other contributions, which
are allowable deductions. 82
 No corporation, domestic or foreign, shall give
donations in aid of any political party or candidate or for
purposes of partisan political activity. (Corporation Code,
Title IV)

83
PERSONS LIABLE FOR THE DONOR’S TAX

Any person, resident or non-resident, who transfers

property by gift, in trust or otherwise, whether the gift is
direct or indirect, and whether the property is real or
personal, tangible or intangible is liable for the donor’s
tax.

84
RATES OF TAX

TRAIN amendment. The donor’s tax is fixed at 6%

based on annual total gifts exceeding Ᵽ250,000 (exempt
gift) regardless of whether the donee is a stranger or not.

Rationale for the exemption. To allow donors to transfer

modest amounts of wealth without being subject to
donor’s taxes.

85
TIME OF FILING THE DONOR’S TAX RETURN AND
PAYMENT OF DONOR’S TAX

The donor’s tax return shall be filed within 30 days

after the date the gift is made or completed and the tax
due thereon shall be paid at the same time.

86
PROHIBITION ON TRANSFERS OF REAL PROPERTY
UNTIL ESTATE OR DONOR’S TAXES ARE PAID

Register of Deeds shall not register in the Registry

of Property any document transferring real property or
real rights therein or any chattel mortgage, by way of
gifts inter vivos or mortis causa, legacy or inheritance,
unless upon a certification from the Commissioner of
Internal Revenue that the estate or donor’s tax fixed and
actually due thereon has been paid.

87
VALUE-ADDED TAX (VAT)

It is a uniform tax levied on every importation of

goods, whether or not in the course of trade or
business, or imposed on each sale, barter, exchange
or lease of goods or properties or on each rendition of
service in the course of trade of business.

88
VAT DISTINGUISHED FROM WITHHOLDING TAXES
VAT
In indirect taxes, the incidence of
taxation falls on one person but
the burden thereof can be shifted
or passed on to another person,
such as when the tax is imposed
upon goods before reaching the
customer who ultimately pays for
it.
WITHHOLDING TAX
In case of withholding taxes, the
incidence and burden of taxation fall on
the same entity, the statutory taxpayer.
The burden of taxation is not shifted to
the withholding agent who merely
collects, by withholding the tax due
from income payments to entities
arising from certain transactions and
remits the same to the government.
89
Kinds of VAT:

1. VAT on sale of goods or properties

2. VAT on importation of goods.
3. VAT on sale of services and use or lease of properties

The characteristics of the VAT are the following:

1. It is an indirect tax.
2. It is a tax on consumption
3. It is a percentage tax
4. It is a regressive tax.
90
Indirect tax definition. An indirect tax is imposed upon
goods (before) reaching the consumer who ultimately pays
for it, not as a tax, but as a part of the purchase price.

Effect on exemptions from the payment of VAT which is

an indirect tax. If a special law merely exempts a party as a
seller from its direct liability for payment of the VAT, but
does not relieve the same party as a purchaser from its
indirect burden of the VAT shifted to it by its VAT-registered
suppliers, the purchase transaction is not exempt.

91
Illustration:
A VAT exempt seller sells to a non-VAT exempt
purchaser. The purchaser is subject to VAT because the
VAT is merely added as part of the purchase price and
not as a tax because the burden is merely shifted. The
seller is still exempt because it could pass on the burden
of paying the tax to the purchaser.

92
 Being a consumption tax is a key characteristic of
the VAT. No matter how many the taxable transactions
that precede the final purchase or sale, it is the end-
user, or the consumer, that ultimately shoulders the tax.

93
THE VARIOUS VAT METHODS AND SYSTEMS
1. Tax credit method
2. Cost deduction method
3. Mixture of “cost deduction method” and “tax credit
method”.

Tax credit method of imposing the VAT. This method

relies on invoices, an entity can credit against or subtract
from the VAT charged on its sales or outputs the VAT
paid on its purchases, inputs and imports.

94
BASIS USED UNDER THE VAT SYSTEM OF TAXATION
TO DETERMINE WHETHER VAT IS TO BE IMPOSED.
As a general rule, the VAT system uses the
destination principle as a basis for the jurisdictional
reach of the tax.

Definition of Destination Principle under the VAT system

of taxation.

1. Goods and services are taxed only in the country

where they are consumed. Thus, exports are zero-rated,
while imports are taxed.
95
2. According to the Destination Principle, goods and
services are taxed only in the country where these are
consumed, and in connection with the said principle, the
Cross Border Doctrine mandates that no VAT shall be
imposed to form part of the cost of goods destined for
consumption outside the territorial border of the taxing
authority. Sales to enterprises operating with the export
processing zones are export sales subject to 0% VAT.
(Atlas Consolidated Mining and Dev’t. Corp. v. CIR, 524
SCRA 73)
96
 The Philippine VAT system adheres to the Cross
Border Doctrine.

Exception to the destination principle. The law clearly

provides for an exception to the destination principle
(exports are zero-rated whereas imports are taxed), an
exception to this rule is the zero-rated sales or services
by VAT-registered persons. [CIR v. Burmeister and
Wain Scandinavian Contractor Mindanao, Inc. 512 SCRA
124 (2007)]
97
PERSONS SUBJECT TO VAT

1. Any person who, in the course of his trade or business,

a. sells, barters, exchanges or leases goods or

properties, or
b. renders services, and

2. any person who imports goods

3. shall be subject to the value-added tax imposed in
Sections 106 to 108 of this Code.

98
PERSONS REQUIRED TO REGISTER FOR VAT
Any person who, in the course of trade or business, sells,
barters or exchanges goods or properties, or engages in the sale or
exchange of services, shall be liable to register for VAT if:

a. His gross sales or receipts for the past 12 months, other

than those that are exempt under Sec. 109(A) to (BB), will exceed
Three Million Pesos (₱3,000,000).

b. There are reasonable grounds to believe that his gross sales

or receipts for the next 12 months, other than those that are exempt
under Sec. 109(A) to (BB), will exceed 3M.

99
Person taxed under Section 24 (A)(2) (b) and 24 (A)
(2) (c) (2) (a) of the NIRC who elected to pay the
eight percent (8%) tax on gross sales or receipts
NOT allowed optional VAT registration:

100
A) Rate of Tax on Income of Purely Self-employed individuals
and/or Professionals Whose Gross Sales or Gross Receipts
and Other Non-operating Income Does Not Exceed the VAT
Threshold as provided in Sec. 109(BB).

“Self-employed individuals and/or professionals shall have the

option to avail of an 8% tax on gross sales or gross receipts
and other non-operating income in excess of Ᵽ250,000 in lieu
of the graduated income tax rates under Subsection (A) (2) (a)
of this Section and the percentage tax under Sec. 116 of this
Code.” [NIRC of 1997, Sec. 24 (A)(2) (b), as inserted by the
TRAIN] 101
RATE OF TAX FOR MIXED INCOME EARNERS.
“Taxpayers earning both compensation income and income from
business or practice of profession shall be subject to the following
taxes:

(2) All Income from Business or Practice of Profession –

“(a) If Total Gross Sales and/or Gross Receipts and Other Non-
Operating Income Do Not Exceed the VAT Threshold as Provided in
Sec. 109 (BB) of this Code. - The rates prescribed under Subsection
(A)(2)(a) of this Section on taxable income, or 8% income tax based
on gross sales or gross receipts and other non-operating income in
lieu of the graduated income tax rates under Subsection (A)(2)(a) of
this Section and the percentage tax under Sec. 116 of this Code.
102
IMPOSITION OF VAT
a) VAT on sale of goods or properties

VAT is imposed and collected on every sale, barter,

or exchange, or transactions “deemed sale” of taxable
goods or properties at the rate of 12% of the gross selling
price or gross value in money of the goods or properties
sold, bartered, or exchanged, or deemed sold in the
Philippines.

Sales returns, allowances and sales discounts may

be deducted from the gross sales or receipts.
103
Sale of a company car to one of the company’s
executives is subject to VAT.

xxx Applying Sec. 105 of the 1997 Tax Code, as

amended, and the ruling in the case of CS Garments, the
sale of company cars of IZPI to its officers should be
subject to VAT, it being a transaction incident to the
pursuit of its commercial or economic activity.

104
VAT ON IMPORTATION OF GOODS
“There shall be levied, assessed and collected on
every importation of goods a VAT equivalent to 12%
based on the total value used by the Bureau of Customs
in determining tariff and customs duties, plus customs
duties, excise taxes, if any, and other charges, such tax
to be paid by the importer prior to the release of such
goods from customs custody: Provided, That where the
customs duties are determined on the basis of the
quantity or volume of the goods, the VAT shall be based
on the landed cost plus excise taxes, if any.”
105
TRANSFER OF GOODS BY TAX-EXEMPT PERSONS
“In the case of tax-free importation of goods into the
Philippines by persons, entities or agencies exempt from
tax where such goods are subsequently sold, transferred
or exchanged in the Philippines to non-exempt persons or
entities, the purchasers, transferees or recipients shall be
considered the importers thereof, who shall be liable for
any internal revenue tax on such importation. The tax due
on such importation shall constitute a lien on the goods
superior to all charges or liens on the goods, irrespective
of the possessor thereof.”
106
VAT ON SALE OF SERVICES

Rate and base of tax for the sale or exchange of

services, or use or lease of properties. “There shall be
levied, assessed and collected, a VAT equivalent to
12% of gross receipts derived from the sale or
exchange of services, including the use or lease of
properties.

107
VAT ON USE OR LEASE OF PROPERTIES

“Lease of properties shall be subject to the tax

herein imposed irrespective of the place where the
contract of lease or licensing agreement was executed if
the property is leased or used in the Philippines.”

108
TRANSACTIONS DEEMED SALE
1. Transfer, use or consumption not in the course of business of
goods or properties originally intended for sale or for use in
the course of business.
2. Distribution or transfer to: (a) Shareholder or investors as
share in the profits of the VAT-registered persons; or (b)
Creditors in payment of debt.
3. Consignment of goods if actual sale is not made within sixty
(60) days following the date such goods were consigned.
4. Retirement from or cessation of business, with respect to
inventories of taxable goods existing as of such retirement or
cessation.

109
CHANGE OR CESSATION OF STATUS AS VAT-
REGISTERED PERSON
a. Subject to VAT
1. Change of business activity from VAT taxable status to
VAT-exempt status
2. Approval of request for cancellation of a registration due
to reversion to exempt status
3. Approval of request for cancellation of registration due to
desire to revert to exempt status after lapse of 3 consecutive
years.
b. Not subject to VAT
1. Change of control of a corporation
2. Change in the trade or corporate name
3. Merger or consolidation of corporations
110
ZERO-RATED AND EFFECTIVELY ZERO RATED SALES
OF GOODS OR PROPERTIES

Concept of VAT zero-rating. Under a zero-rating

scheme, the sale or exchange of a particular service is
completely freed from the VAT, because the seller is
entitled to recover, by way of a refund or as an input tax
credit, the tax that is included in the cost of purchases
attributable to the sale or exchange.

111
The “Cross Border Doctrine” is also known as the
destination principle.

1. The tax rate is set at zero. When applied to the tax

base, such rate obviously results in no tax chargeable
against the purchaser. The seller of such transactions
charges no output tax, but can claim a refund or a tax
credit certificate for the VAT previously charged by
suppliers.

112
2. Export sales, or sales outside the Philippines, are
subject to VAT at 0% rate if made by a VAT-registered
person – the seller of such transactions charges no
output tax, but can claim a refund or tax credit certificate
for the VAT previously charged by suppliers.

113
ZERO-RATED SALE DISTINGUISHED FROM EXEMPT
TRANSACTIONS
ZERO-RATED SALE EXEMPT TRANSACTIONS

a. It is a taxable transaction but does It is not subject to the output tax.

not result in an output tax.
b. The input tax on the purchases of a
VAT registered person who has zero-
rated sales may be allowed as tax
credits or refunded.
The seller in an exempt transaction is
not entitled to any input tax on his
purchases despite the issuance of a
VAT invoice or receipt.

c. Persons engaged in transactions Registration is optional for VAT-

which are zero rated being subject to exempt persons.
VAT are required to register.

114
RATIONALE FOR ZERO-RATING OF EXPORTS.
Philippine VAT system adheres to the Cross Border
Doctrine, according to which, no VAT shall be imposed to
form part of the cost of goods destined for consumption
outside of the territorial border of the taxing authority.

Hence, actual or constructive export of goods and

services from the Philippines to a foreign country must be
zero-rated for VAT; while those destined for use or
consumption within the Philippines shall be imposed the
12% VAT.
115
ZERO-RATED SALES BY VAT-REGISTERED PERSONS

a. Export Sales
b. Sales to persons or entities whose exemption under
special laws or international agreements to which the
Philippines is a signatory effectively subjects such sales
to zero rate.

116
ZERO-RATED SALES BY VAT-REGISTERED PERSONS:
The following sales by VAT-registered persons shall be
subject to zero percent (0%) rate:

a. Export Sales. – The term “export sales” means:

1. The sale and actual shipment of goods from the

Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which
may influence or determine the transfer of ownership
of the goods so exported and paid for in acceptable
117
foreign currency or its equivalent in goods or services, and
accounted for in accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP).

3. Sale of raw materials or packaging materials to a

nonresident buyer for delivery to a resident local export-
oriented enterprise to be used in manufacturing, processing,
packing or repacking in the Philippines of the said buyer’s
goods and paid for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
118
4. Sale of raw materials or packaging materials to export-
oriented enterprise whose export sales exceed seventy
percent (70%) of total annual production;

5. Those considered export sales under Executive Order

No. 226, otherwise known as the Omnibus Investment
Code of 1987, and other special laws; and

119
6. The sale of goods, supplies, equipment and fuel to
persons engaged in international shipping or international
air transport operations: Provided, That the goods,
supplies, equipment and fuel shall be used for
international shipping or air transport operations.

Provided, That subparagraphs (3), (4), and (5)

hereof shall be subject to the 12% VAT and no longer be
considered export sales subject to zero percent (0%) VAT
rate upon satisfaction of the following conditions:
120
1. The successful establishment and implementation of
an enhanced VAT refund system that grants refunds
of creditable input tax within ninety (90) days from the
filing of the VAT refund application with the Bureau:
Provided That, to determine the effectivity of item no.
1, all applications filed from January 1, 2018 shall be
processed and must be decided within 90 days from
the filing of the VAT refund application; and
2. All pending VAT refund claims as of December 31,
2017 shall be fully paid in cash by December 31,
2019. 121
SALES TO ECOZONE, SUCH AS PEZA, CONSIDERED
EXPORT-SALE

Notably, while an ecozone is geographically within

the Philippines, it is deemed a separate customs
territory and is regarded in law as foreign soil. Sales by
suppliers from outside the borders of the ecozone to
this separate customs territory are deemed as exports
and treated as export sales. These sales are zero-rated
or subject to a tax rate of zero percent. (CIR vs. Sekisui
Jushi Phils., Inc., GR No. 149671, 7/21/06)

122
 Sale of goods, properties and services by a VAT-
registered supplier from the Customs Territory to an
ECOZONE enterprise shall be treated as export sales

while

Sales to an ECOZONE enterprise made by a non-

VAT or unregistered supplier would be only be exempt
from VAT and the supplier shall not be able to claim
credit/refund of its input VAT. [CIR vs. Toshiba Info.
Equipment (Phils.), Inc. GR No. 150154, 8/9/05]
123
MEANING OF THE TERM “EFFECTIVELY ZERO-RATED
SALE OF GOODS AND PROPERTIES

The term “effectively zero-rated sale of goods and

properties “shall refer to the local sale of goods and
properties by a VAT-registered person to a person or
entity who was granted indirect tax exemption under
special laws or international agreement.

124
 Under these Regulations, transactions which, although
not involving actual export, are considered as “constructive
export” shall be entitled to the benefit of zero-rating, such as
local sales of goods and properties to persons or entities
covered under paragraphs (a) no. (3) – (sales to export-
oriented enterprises), (a) no. (6) – (sale of goods, supplies,
equipment and fuel to persons engaged in international
shipping or international air transport operations), (b)
(Foreign Currency Denominated Sale) and (c) Sales to Tax-
Exempt Persons or Entities) of the preceding section.
125
ZERO-RATED SALE OF GOODS AND PROPERTIES
THAT REQUIRE BIR APPROVAL
Except for export sale under Sec. 4. 106-5 (a) and
Foreign Currency Denominated Sale under Sec. 4. 106-
5(b), other cases of zero-rated sales shall require prior
application with the appropriate BIR office for effective
zero-rating. Without an approval application for
effective zero-rating, the transaction otherwise
entitled to zero-rating shall be considered exempt.
The foregoing rule notwithstanding, the Commissioner
may prescribe such rules to effectively implement the
processing of applications for effective zero-rating.
126
Zero-rating for services other than “Processing, manufacturing or
repacking goods for other persons doing business outside the
Philippines which goods are subsequently exported, where the
services are paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP), “rendered to a person engaged in
business conducted outside the Philippines or to a non-resident
person not engaged in business who is outside of the Philippines
when the services are performed, the consideration for which is paid
for in acceptable foreign currency and accounted for in accordance
with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP).
127
REQUISITES FOR ZERO-RATING UNDER SEC. 108 (B)
(2)

1. The services be other than “processing,

manufacturing or repacking of goods”;
2. Payment for such services be in acceptable foreign
currency accounted for in accordance with BSP rules;
3. The recipient of such services is doing business
outside the Philippines.

128
VAT-EXEMPT TRANSACTIONS, DEFINITION
1. The sale of goods or properties and/or services and
the use or lease of properties that is
2. not subject to VAT (output tax) and
3. the seller is not allowed any tax credit on VAT (input
tax) purchases.

The person making the exempt sale of goods,

properties or services shall not bill any output tax to his
customers because the said transaction is not subject to
VAT.
129
TAX ON PERSONS EXEMPT FROM VAT

1. Any person,
2. Whose sales or receipts are exempt under Sec. 109
(BB) of this Code from the payment of VAT
a. And who is not a VAT registered person
3. Shall pay a tax equivalent to 3% of his gross monthly
sales or receipt;
4. Provided, that cooperatives shall be exempt from the
3% gross receipts tax herein imposed.

130
VAT-EXEMPT TRANSACTIONS DISTINGUISHED FROM
VAT-EXEMPT ENTITIES
VAT-EXEMPT TRANSACTIONS VAT-EXEMPT ENTITIES
An exempt transaction involves goods An exempt party is a person or entity
or services which, by their nature, are granted VAT exemption under the
specifically listed in and expressly Tax Code, a special law or an
exempted from the VAT under the Tax international agreement to which the
Code, without regard to the tax status – Philippines is a signatory, and by
VAT-exempt or not – of the party to the virtue of which its taxable
transaction. transactions become exempt from
VAT.
An exempt transaction shall not be the An exempt party being zero-rated is
subject of any billing for output VAT but allowed to claim input tax credits.
it shall not also be allowed any input tax
credits

131
EXEMPT TRANSACTIONS, ENUMERATED

Sale or lease of goods or properties or the

performance of services other than the transactions
mentioned in the preceding paragraphs, the gross annual
sales and/or receipts do not exceed the amount of 3M.

132
SUBJECT TO THE PROVISIONS ON OPTIONAL VAT
REGISTRATION, the following transactions shall be
exempt from VAT:

A. Sale or importation of agricultural and marine food

products in their original state, livestock, poultry of a
kind generally used as, or yielding, or producing
foods for human consumption, and breeding stock
and genetic materials therefor;

Products classified under this paragraph shall be

considered in their original state even if they have
133
SUBJECT TO THE PROVISIONS ON OPTIONAL VAT
REGISTRATION, the following transactions shall be
exempt from VAT:
undergone the simple processes of preparation or
preservation for the market, such as freezing, drying,
salting, broiling, roasting, smoking or stripping.
Polished and/or husked rice, corn grits, raw cane
sugar and molasses, ordinary salt and copra shall
be considered in their original state.

B. Sale or importation of fertilizers, seeds, seedlings

and fingerlings , fish, prawn, livestock and poultry
134
SUBJECT TO THE PROVISIONS ON OPTIONAL VAT
REGISTRATION, the following transactions shall be
exempt from VAT:
feeds, including ingredients, whether locally
produced or imported, used in the manufacture of
the finished feeds (except specialty feeds for race
horses, fighting cocks, aquarium fish, zoo animals
and other animals generally considered as pets);

C. Importation of personal and household effects

belonging to the residents of the Philippines
returning from abroad and non-resident citizens
135
SUBJECT TO THE PROVISIONS ON OPTIONAL VAT
REGISTRATION, the following transactions shall be
exempt from VAT:
coming to resettle in the Philippines: Provided, That
such goods are exempt from customs duties under
the Tariff and Customs Code of the Philippines (now
the Customs Modernization and Tariff Act (CMTA)]

D. Importation of professional instruments and

implements, tools of trade, occupation or
employment, wearing apparel, domestic animals,
and personal and household effects belonging to
136
SUBJECT TO THE PROVISIONS ON OPTIONAL VAT
REGISTRATION, the following transactions shall be
exempt from VAT:
persons coming to settle in the Philippines or
Filipinos or their families and descendants who are
now residents or citizens of other countries, such
parties hereinafter referred to as overseas Filipinos,
in quantities and of the class suitable to the
profession, rank or position of the persons importing
said items, for their own use and not for barter or
sale, accompanying such persons, or arriving within
a reasonable time; Provided, That the Bureau of
137
SUBJECT TO THE PROVISIONS ON OPTIONAL VAT
REGISTRATION, the following transactions shall be
exempt from VAT:
Customs may, upon the production of satisfactory
evidence that such persons are actually coming to
settle in the Philippines and that the goods are brought
from their former place of abode, exempt such goods
from payment of duties and taxes: Provided, further,
That vehicles, vessels, aircrafts, machineries and other
similar goods for use in manufacture, shall not fall
within its classification and shall therefore be subject to
duties, taxes and other charges.
138
E. Services subject to percentage tax;
F. Services by agricultural contract growers and milling
for others of palay into rice, corn into grits and sugar
cane into raw sugar;
G. Medical, dental, hospital and veterinary services
except those rendered by professionals;
H. Educational services rendered by private educational
institutions, duly accredited by the DepEd, the CHED,
TESDA and those rendered by government
educational institutions;
139
I. Services rendered by individuals pursuant to an
employer-employee relationship;
J. Services rendered by regional or area headquarters
established in the Philippines by multinational
corporations which act as supervisory,
communications and coordinating centers for their
affiliates, subsidiaries or branches in the Asia-Pacific
Region and do not earn or derive income from the
Philippines;
K. Transactions which are exempt under international
140
 agreements to which the Philippines is a signatory or
under special laws, except those under PD No. 529;
L. Sales by agricultural cooperatives duly registered with
the Cooperative Development Authority to their
members as well as sale of their produce, whether in
its original state or processed form, to non-members;
their importation of direct farm inputs, machineries and
equipment, including spare parts thereof, to be used
directly and exclusively in the production and/or
processing of their produce.
141
M. Gross receipts from lending activities by credit or
multi-purpose cooperatives duly registered with the
Cooperative Development Authority;
N. Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with the Cooperative
Development Authority: Provided, That the share
capital contribution of each member does not exceed
Fifteen thousand pesos (Ᵽ15,000) and regardless of
the aggregate capital and net surplus ratably
distributed among the members;
142
O. Export sales by persons who are not VAT-registered;
P. Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of
trade or business or real property utilized for low-cost
and socialized housing as defined by RA 7279,
otherwise known as the Urban Development and
Housing Act of 1992, and other related laws,
residential lot valued at One million five hundred
thousand pesos (Ᵽ1,500,000) and below, house and
lot, and other residential dwellings
143
valued at Two million five hundred thousand pesos
(Ᵽ2,500,000) and below. Provided, That beginning
January 1, 2021, the VAT exemption shall only apply to
sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of
trade or business, sale of real property utilized for
socialized housing as defined by RA No. 7279, sale of
house and lot, and other residential dwellings with selling
price of not more than Two million pesos (Ᵽ2,000,000):
Provided, further, That every three (3) years thereafter,
the 144
 amount herein stated shall be adjusted to its present
value using the Consumer Price Index, as published
by the Phil. Statistics Authority;
Q. Lease of residential unit with a monthly rental not
exceeding Fifteen thousand pesos (Ᵽ15,000);
R. Sale, importation, printing or publication of books and
any newspaper, magazine, review or bulletin which
appears at regular intervals with fixed prices or
subscription and sale and which is not devoted
principally to the publication of paid advertisements;
145
S. Transport of passengers by international carriers;
T. Sale, importation or lease of passenger or cargo
vessels and aircraft, including engine, equipment and
spare parts thereof for domestic or international
transport operations;
U. Importation of fuel, goods and supplies by persons
engaged in international shipping or air transport
operations: Provided, That the fuel, goods, and
supplies shall be used for international shipping or air
transport operations;
146
V. Services of bank, non-bank financial intermediaries
performing quasi-banking functions, and other non-
bank financial intermediaries;
W. Sale or lease of goods and services to senior citizens
and persons with disability;
X. Transfer of property pursuant to Sec. 40 (C) (2) of the
NIRC, as amended;
Y. Association dues, membership fees, and other
assessments and charges collected by homeowners
associations and condominium corporations;
147
Z. Sale of gold to the Bangko Sentral ng Pilipinas;
AA. Sale of drugs and medicines prescribed for diabetes,
high cholesterol, and hypertension beginning January
1, 2019; and
BB. Sale or lease of goods or properties or the
performance of services other than the transactions
mentioned in the preceding paragraphs, the gross
annual sales and/or receipts do not exceed the
amount of 3M pesos.

148
VAT EXEMPT SALES OF REAL PROPERTIES
1. Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of trade
or business,
2. Real property utilized for low-cost and socialized housing
as defined by RA No. 7279, otherwise known as the Urban
Development and Housing Act of 1992, and other related
laws,
3. Residential lot valued at One million five hundred thousand
pesos (P1,500,000) and below,
4. House and lot, and other residential dwellings valued at
Two million five hundred thousand pesos (P2,500,000)
and below:
149
Provided, That beginning January 1, 2021, the VAT
exemption shall only apply to sale of real properties not
primarily held for sale to customers or held for lease in the
ordinary course of trade or business, sale of real property
utilized for socialized housing as defined by RA No.7279,
sale of house and lot, and other residential dwellings with
selling price of not more than Two million pesos
(P2,000,000); Provided, further, That every three (3) years
thereafter, the amount herein stated shall be adjusted to its
present value using the Consumer Price Index, as published
by the PSA.
150
VAT EXEMPT LEASE OF RESIDENTIAL UNITS

Lease of residential unit with a monthly rental not

exceeding Fifteen thousand pesos (P15,000).

VAT EXEMPT SALES TO SENIOR CITIZENS AND PWD

Sale or lease of goods and services to senior citizens and

PWD, as provided under RA Nos. 9994 and 10754.

151
INPUT AND OUTPUT TAX
Output VAT – the value-added tax due on the sale or
lease or taxable goods, properties or services by any
VAT-registered person.

Input VAT – the value-added due from or paid by a VAT-

registered person in the course of his trade or business
on importation of goods or local purchase of goods or
services, including lease or use of property, from a VAT-
registered person. It shall include the transitional input
VAT as determined in accordance with Sec. 111 of NIRC.
152
2 TYPES OF INPUT VAT CREDITS
1. Credit/refund of input VAT attributable to zero-rated sales
under Sec. 112 (A) of the NIRC; and
2. credit/refund of input VAT on capital goods pursuant to Sec.
112 (B) of the NIRC.

The different kinds of creditable input tax:

1. The input tax evidenced by a VAT invoice or official receipt.
2. Input tax on domestic purchase or importation of goods or
properties.
3. Input tax of a VAT-registered person who is also engaged
in non-VAT transactions.
153
 For zero-rated or effectively zero-rated sales,
although the sellers in these transactions charge no
output tax, they can claim a refund of the VAT that their
suppliers charged them. (Applied Food Ingredients Co.
Inc. v. CIR, GR No. 184266, Nov. 11, 2013)

* Only VAT-registered entities can claim input VAT

credit/refund.

154
SOURCES OF INPUT TAX

1. Purchase or importation of goods

2. Purchase of real properties for which VAT has actually
been paid
3. Purchase of services for which VAT has been actually
paid
4. VAT from transactions deemed sale
5. Presumptive input from use of VAT exempt goods
6. Transitional VAT from inventory prior to VAT
registration
155
PERSONS WHO CAN AVAIL OF INPUT TAX CREDIT

The input tax on domestic purchase or importation of

goods or properties shall be creditable:

1. To the purchaser upon consummation of sale and on

importation of goods or properties; and
2. To the importer upon payment of the VAT prior to the
release of the goods from the custody of the Bureau of
Customs;

156
DETERMINATION OF OUTPUT/INPUT TAX; VAT
PAYABLE; EXCESS INPUT TAX CREDITS
In a sale of goods or properties, the output tax is
computed by multiplying the gross selling price by the regular
rate of VAT.

For sellers of services, the output tax is computed by

multiplying the gross receipts by the regular rate of the VAT.

There shall be allowed as a deduction from the output tax

the amount of input tax deductible to arrive at VAT payable on
the monthly VAT declaration and the quarterly VAT returns,
subject to the limitations set forth in Sec. 4. 110-7. 157
LIMITATION ON VAT PAYABLE (EXCESS OUTPUT) OR
EXCESS INPUT TAX
If at the end of any taxable quarter, the output tax exceeds
the input tax, the excess shall be paid by the VAT registered
person.

If the input tax inclusive of input tax carried over from the
previous quarter exceeds the output tax, the excess input tax shall
be carried over to the succeeding quarter or quarters; Provided,
however that any input tax attributable to zero-rated sales by a
VAT-registered person may at its option be refunded or applied for
a tax credit certificate which may be used in the payment of internal
revenue taxes, subject to the limitations as may be provided for by
law, as well as, other implementing rules. 158
SUBSTANTIATION OF INPUT TAX CREDITS

Substantiation requirement must be complied with in

order that a claim for refund or credit should prosper.

In a claim for tax refund or tax credit, the applicant

must prove not only entitlement to the grant of the claim
under substantive law. It must also show satisfaction of
all the documentary and evidentiary requirements for an
administrative claim for a refund or tax credit.

159
QUANTUM OF EVIDENCE TO PROVE CLAIM FOR
REFUND OR CREDIT

Only the preponderance of evidence

threshold as applied in ordinary civil cases is
needed to substantiate a claim for tax refund
proper.

160
WHO MAY CLAIM FOR REFUND/APPLY FOR ISSUANCE
OF TAX CREDITS/CERTIFICATES
1. Any VAT-registered person, whose sales are zero-rated
or effectively zero-rated may apply for the issuance of a
tax credit certificate or refund of creditable input tax due
or paid attributable to such sales, except transitional input
tax.
2. A person whose VAT registration has been cancelled due
to retirement from or cessation of business or due to
changes in or cessation of status as VAT-registered apply
for the issuance of a tax credit certificate for any unused
input tax which may be used in payment of his other
internal revenue taxes.
161
REQUISITES FOR ALLOWING A CLAIM FOR REFUND
OR TAX CREDIT FOR UNUTILIZED INPUT VAT:
1. The taxpayer is VAT-registered;
2. The taxpayer is engaged in zero-rated or effectively
zero-rated sales;
3. The input taxes are due or paid;
4. The input taxes are not transitional input taxes;
5. The input taxes have not been applied against output
taxes during and in the succeeding quarters;
6. The input taxes claimed are attributable to zero-rated
or effectively zero-rated sales;
162
7. For zero-rated sales under Sec. 106(A)(2)(1) and (2);
106(B); and 108(B) (1) (2), the acceptable foreign currency
exchange proceeds have been duly accounted for in
accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas;
8. Where there are both zero-rated or effectively zero-rated
sales and taxable or exempt sales, and the input taxes
cannot be directly and entirely attributable to any of these
sales, the input taxes shall be proportionately allocated on
the basis of sales volume; and
9. The claim is filed within two years after the close of the
taxable quarter when such sales were made. 163
PEZA-REGISTERED ENTERPRISE MAY REGISTER
UNDER VAT AND BE ENTITLED TO REFUND.
A PEZA-registered enterprise under Section 23 of RA No.
7916 had two options with respect to its tax burden.

1. It could avail of an income tax holiday pursuant to

provisions of EO No. 226, thus exempt it from income
taxes for a number of years but not from other internal
revenue taxes such as VAT; or
2. It could avail of the tax exemption on all taxes,
including VAT under PD No. 66 and pay only the
preferential tax rate of 5% under RA No. 7916.
164
COMPLIANCE WITH APPLICATION FOR REFUND OR
CREDIT REQUIRED

No refund or credit of input VAT shall be allowed

unless the VAT-registered taxpayer filed an application
for refund or credit with the Commissioner of Internal
Revenue within the two-year prescriptive period.

165
DETERMINATION OF PRESCRIPTIVE PERIOD

The Court summarized the rule on the determination of the

prescriptive period for filing a tax refund or credit of unutilized
input VAT as provided in Sec. 112 of the 1997 Tax Code, as
follows:

1. An administrative claim must be filed with the CIR within 2

years after the close of taxable quarter when the zero-rated or
effectively zero-rated sales were made; and
2. The CIR has 90 days from the date of the submission of the
complete documents in support of the adminstrative claim
within which to decide whether to grant a refund or issue a tax
credit certificate.
166
REFUNDS OR TAX CREDIT OF INPUT VAT
(TRAIN PROVISION )
In proper cases, the Commissioner shall grant a
refund for creditable input taxes within ninety (90) days
from the date of submission of the official receipts or
invoices and other documents in support of the
application filed in accordance with Subsections (A) and
(B) hereof: Provided, That should the Commissioner find
that the grant of refund is not proper, the Commissioner
must state in writing the legal and factual basis for
the denial.
167
REFUNDS OR TAX CREDIT OF INPUT VAT

In case of full or partial denial of the claim for tax

refund, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim, appeal
the decision with the CTA; Provided, however, That
failure on the part of any official, agent, or employee of
the BIR to act on the application within the 90 day period
shall be punishable under Section 269 of the Code.
(administrative fine and imprisonment)

168
MANNER OF GIVING REFUND

1. Refunds shall be made upon warrants drawn by

a. the Commissioner
b. or by his duly authorized representative
2. without the necessity of being countersigned by the
Chairman, Commission on Audit,
a. the provisions of the Administrative Code of 1987
to the contrary notwithstanding:
b. Provided, That refunds under this paragraph shall
be subject to post audit by COA.
169
INVOICING REQUIREMENTS
TRAIN AMENDMENTS

All persons subject to an internal revenue tax shall,

at the point of each sale and transfer of merchandise or
for services rendered valued at One hundred pesos
(Ᵽ100) or more, issue duly registered receipts or sale or
commercial invoices, showing the date of transaction,
quantity, unit cost and description of merchandise or
nature of service.

170
ADDITIONAL REQUIREMENT WHERE PURCHASER IS
A VAT-REGISTERED PERSON

1. Where the purchaser is a VAT-registered person,

2. In addition to the information herein required,
3. The invoice or receipt shall further show the
Taxpayer Identification Number (TIN) of the purchaser.

171
TAX ON PERSONS EXEMPT FROM VAT
Any person whose sales or receipts are exempt
under Section 109 (BB) of NIRC from the payment of
VAT and who is not a VAT-registered person shall pay a
tax equivalent to three percent (3%) of his gross quarterly
sales or receipts: Provided, That cooperatives, and
beginning January 1, 2019, self-employed and
professionals with total annual gross sales and/or gross
receipts not exceeding Five hundred thousand pesos
(Ᵽ500,000) shall be exempt from the 3% gross receipts
tax herein imposed.
172
INFORMATION CONTAINED IN THE VAT INVOICE
OR VAT OFFICIAL RECEIPT
1. A statement that the seller is a VAT-registered person,
followed by his TIN.
2. The total amount which the purchaser pays or is
obligated to pay to the seller with the indication tht such
amount includes the VAT: Provided, that:
a. The amount of the tax shall be shown as a separate
item in the invoice or receipt.
b. If the sale is exempt from VAT, the term “VAT-
exempt sale” shall be written or printed prominently on
the invoice or receipt.
173
INFORMATION CONTAINED IN THE VAT INVOICE
OR VAT OFFICIAL RECEIPT
c. If the sale is subject to zero percent (0%) VAT, the term “zero-
rated sale” shall be written or printed prominently on the invoice or
receipt.
d. If the sale involves goods, properties or services some of which
are subject to and some of which are VAT zero-rated or VAT-
exempt, the invoice or receipt shall clearly indicate the breakdown
of the sale price between its taxable, exempt and zero-rated
components, and the calculation of the VAT on each portion of the
sale shall be shown on the invoice or receipt; Provided, That the
seller may issue separate invoices or receipts for the taxable,
exempt, and zero-rated components of the sale.
174
3. The date of transaction, quantity, unit cost and
description of the goods or properties or nature of the
service.
4. In the case of sales in the amount of one thousand
pesos (Ᵽ1,000) or more where the sale or transfer is
made to a VAT-registered person, the name, business
style, if any, address and TIN of the purchaser, customer
or client.

175
SUSPENSION AND TEMPORARY CLOSURE OF A VAT-
REGISTERED PERSON
The Commissioner or his authorized representative is hereby
empowered to suspend the business operations and temporarily close
the business establishment of any person for any of the following
violations:
a. In the case of a VAT-registered person.
1. failure to issue receipts or invoices;
2. failure to file a VAT return as required under Sec.
114; or
3. understatement of taxable sales or receipts by 30%
or more of his correct taxable sales or receipts for the taxable quarter;
4. failure of any person to register as required under
Sec. 236.
176
AMOUNTS AS AMENDED BY THE TRAIN EFFECTIVE
JANUARY 1, 2018

A person is required to register under VAT if

a. His gross sales or receipts for the past 12 months,

other than those that are exempt under Section 109 (A) to
(BB), have exceeded Three million pesos (Ᵽ3,000,000); or

b. There are reasonable grounds to believe that his

gross sales or receipts for the next 12 months, other than
those that are exempt under Section 109 (A) to (BB), will
exceed Three million pesos (Ᵽ3,000,000).
177
FILING OF RETURN AND PAYMENT

Every person liable to pay the VAT imposed shall file

a quarterly return of the amount of his gross sales or
receipts within 25 days following the close of each
taxable quarter prescribed for each taxpayer; Provided,
however, That VAT-registered persons shall pay
the VAT on a monthly basis. Provided, finally, That
beginning January 1, 2023, the filing and payment
required shall be done within 25 days following the close
of each taxable quarter.
178
WITHHOLDING OF THE FINAL VAT ON SALES TO THE
GOVERNMENT
1. The government or any of its political subdivisions,
instrumentalities or agencies, including GOCCs
2. shall, before making payment on account of each
purchase of goods and services which are subject to the
VAT
3. deduct and withheld the VAT due at the rate of 5% of
the gross payment thereof:
4. Provided, That beginning January 1, 2021, the VAT
withholding system shall shift from final to a creditable
system:
179
WITHHOLDING OF THE FINAL VAT ON SALES TO THE
GOVERNMENT
5. Provided, further, That the payment for lease or use
of properties or property rights to nonresident owners
shall be subject to 12% withholding tax at the time of
payment: Provided, finally, That payments for purchases
of goods and services arising from projects funded by
Official Development Assistance (ODA) as defined
under RA No. 8182, otherwise known as the Official
Development Assistance Act of 1996, as amended, shall
not be subject to the final withholding tax system.
180
PERCENTAGE TAX

Definition: A tax imposed on a fixed ratio between the gross

sales or receipts and the burden imposed upon the taxpayer.

Nature of percentage tax:

1. It is a national tax collectible under the NIRC of 1997, as

amended.
2. It is generally computed and collected based on gross
receipts.
3. It is an indirect tax whose burden could be shifted to the
ultimate consumer.
181
EXCISE TAX

Definition: In general, it is a tax levied on the privilege to

manufacture, sell, or consume a commodity.

Specifically, it is the tax that applies for the privilege

to manufacture or produce in, or import into, the
Philippines for domestic sale or consumption or for any
othe disposition. It is imposed in addition to the VAT.

182
KINDS OF EXCISE TAXES

1. Specific tax, or
2. Ad valorem tax.

Another classification could be:

1. Excise tax on domestic goods, or

2. Excise tax on imported articles.

183
Specific tax. Excise taxes imposed and based on weight
or volume capacity or any other physical unit of
measurement.

Ad valorem tax. An excise tax imposed and based on

selling price or other specified value of the good.

184
ARTICLES UPON WHICH EXCISE TAX IS DUE
1. Alcohol products
2. Tobacco products
3. Petroleum products such as lubricating oils, greases, gasoline,
asphalt, etc.
4. Miscellaneous articles such as automobiles, non-essential goods
like jewelry, perfumes and toilette waters, yachts and other
vessels intended for pleasure or sports.
5. Mineral products such as minerals, mineral products and quarry
resources.
6. Invasive cosmetic procedures
7. Tax on sweetened beverages

185
DOCUMENTARY TAXES
Definition and concept of documentary tax. This is a tax
which is in the form of a stamp affixed, or imprinted through a
documentary stamp metering machine, on documents,
instruments, agreements, and other papers evidencing a
particular transaction involving a right, property or obligation.

The tax is “levied on the exercise by persons of certain

privileges conferred by law for the creation, revision, or
termination of specific legal relationships through the execution
of specific instruments.”

The law taxes the document because of the transaction.

186
WHAT IS THE EFFECT OF FAILURE TO AFFIX A
DOCUMENTARY STAMP ON A DOCUMENT REQUIRING
SUCH STAMP?

An instrument, document or paper which is

required by law to be stamped and which has been
signed, issued, accepted, or transferred without being
duly stamped, shall not be recorded, nor shall it or any
copy thereof or any record of transfer of the same be
admitted or used in evidence in any court until the
requisite stamp or stamps shall have been affixed
thereto and cancelled.
187
WHAT IS THE EFFECT OF FAILURE TO AFFIX A
DOCUMENTARY STAMP ON A DOCUMENT REQUIRING
SUCH STAMP?

No notary public or other officer authorized to

administer oaths shall add his jurat or
acknowledgment to any document subject to
documentary stamp tax unless the proper
documentary stamps are affixed thereto and
cancelled.

188
SUBSEQUENT AFFIXTURE OF THE DOCUMENTARY
STAMP CURES THE INFIRMITY OF INADMISSIBILITY

The requirement for the affixture of documentary

stamps is merely for revenue purposes and not to
invalidate documents.

189