Download - Capital Gain-estate Tax
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What is Capital Gains Tax on Real Estate
Taxes are indeed inescapable and the real estate industry is no exception I am sure a
lot of real estate investors are very much interested to know the taxes involved in
investing as they significantly impact the total cost of acquiring a property
What may seem like a good deal may turn out to be a bad one if all the taxes arefactored in So before you go ahead and plunge into the world of real estate investing Isuggest you take the time to study taxes or this post I will be discussing capitalgains tax on real estate Ill try to discuss capital gains tax on real estate in laymans terms based on what I havelearned for purposes of informationsharing disclaimer is in order of course$ Whilegreat effort has been taken to ensure the accuracy of the discussion here as of itswriting this is not intended to replace seeking professional services o read up on therelevant laws and regulations also
Capital Gains Tax vs Income TaxWhen there is a sale of real estate automatically people think that they have to payampapital ains Tax (ampT) This is not necessarily the case ampT is a tax on the gain fromthe sale of capital assets egular corporate income tax (ampIT) +for corporations andregular income tax +for individuals apply to the sale of ordinary assets while ampTapplies to the sale of capital assets
Thus we first have to determine whether the asset being sold is a capital or an ordinaryasset so as to know the proper tax rate to be used and the -I form to be used amongothers
Capital assets vs Ordinary assetsThe term capital assets is defined negatively in Section 01()(2) of the Tax ampode asfollows$
ldquo(1) Capital Assets ndash the term lsquocapital assetsrsquo means property held by the taxpayer
(whether or not connected with his trade or business) but does not include
stoc in trade o the taxpayer or other property o a ind which would properly be
included in the in$entory o the taxpayer i on hand at the close o the taxable year or
property held by the taxpayer primarily or sale to customers in the ordinary course o
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his trade or business or
property used in the trade or business o a character which is subect to the allowance
or depreciation pro$ided in ampubsection () o ampection
or real property used in trade or business o the taxpayer+
s applied to the real estate industry the terms capital assets and ordinary assetsare defined in Section 3(c) of evenue egulations () 4o 53660 dated ecember35 3663 Its essentially the same as the above definition
It has an additional provision though on real properties acquired by banks throughforeclosure sales 7 the same are considered as their ordinary assets but banks shall notbe considered as habitually engaged in the real estate business for purposes ofdetermining the applicable rate of expanded withholding tax
Since we are talking about the sale of real property here we need to know the definitionof real property Section 3(c) of 4o 53660 states that eal property shall havethe same meaning attributed to that term under rticle 829 of epublic ct 4o 0otherwise known as the ampivil ampode of the lthilippines rticle 829 of the ampivil ampodeprovides$
ldquoArt 1 -he ollowing are immo$able property
(1) and buildings roads and constructions o all inds adhered to the soil
(0) -rees plants and growing ruits while they are attached to the land or orm an
integral part o an immo$able
( ) $erything attached to an immo$able in a ixed manner in such a way that it cannot
be separated thererom without breaing the material or deterioration o the obect
( ) amptatues relies paintings or other obects or use or ornamentation placed in
buildings or on lands by the owner o the immo$able in such a manner that it re$eals
the intention to attach them permanently to the tenements
() 2achinery receptacles instruments or implements intended by the owner o the
tenement or an industry or wors which may be carried on in a building or on a piece o
land and which tend directly to meet the needs o the said industry or wors
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(3) Animal houses pigeon4houses beehi$es ish ponds or breeding places o similar
nature in case their owner has placed them or preser$es them with the intention to
ha$e them permanently attached to the land and orming a permanent part o it the
animals in these places are included
(5) ertili6er actually used on a piece o land
(7) 2ines 8uarries and slag dumps while the matter thereo orms part o the bed and
waters either running or stagnant
(9) ocs and structures which though loating are intended by their nature and obect
to remain at a ixed place on a ri$er lae or coast
(1) Contracts or public wors and ser$itudes and other real rights o$er immo$able
property+
Thus it appears that it is not only the sale of land and buildings or houses which weshould be focusing on but also the sale of the above
s 4o 53660 is a very important rule on real estate I have included the saidregulations in this post for your reference ead it in its entirety =ou may download acopy here nswers to frequently asked questions can be found in this document
In simple terms if the property is not ordinarily held for sale (as inventory) or used inbusiness and subgtect to depreciation then the property is a capital asset 4ow if aseller is engaged in the real estate business and the property is one he holds out forsale to the public then the property may be considered as an ordinary asset
lt=ote that there may be instances when a seller is engaged in the real estate businessbut the property is not held or sale or used in business or was idle or a long time ndash thisis one o the instances when the property may be considered a capital assetgt
amponversely if a seller is not engaged in the real estate business and the property is notused in business and subgtect to depreciation the property may be considered as acapital asset the sale of which is subgtect to ampT
Section 0 of 4o 53660 provides the uidelines in etermining Whether altarticular eal ltroperty is a ampapital sset or rdinary sset
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Tax Rate to be UsedWhen the real property which is a capital asset to the seller is sold the gross sellingprice or fair market value ( A) +Bonal value whichever is higher will be subgtect to CampT ltlease refer to the -I
website http$DDwwwbirgovphDBonalvaluesDBonalvalueshtm for the Bonal values
Technically its not really only the gain (selling price less cost) which is taxed becauseeven if the seller suffered a loss (that is the selling price is lower than the originalacquisition cost of the property) there will still be ampT because a gain is alwayspresumed
n the other hand if the seller is engaged in the real estate business and the realproperty sold is an ordinary asset the sale will be subgtect to ampIT +or minimumcorporate income tax (ampIT) when applicable if the taxpayer is a corporation andincome tax if the seller is an individual
The proceeds from the sale of the real property will be included in the sellers globalincome (meaning income from all sources 7 note that domestic corporations andresident citiBens are taxed on all sources of income whether from within or outside thecountry) and only the net income after allowable deductions such as depreciationlosses etc will be subgtected to ampIT ampIT or regular income tax whichever isapplicable
AETISEE4T
Fnder epublic ct 4o 1005 the ampIT is now 06C on net taxable income (beginningon Ganuary 2 3661 down from 09C) The regular income tax for individuals remains at03C
ltlease note that there is an exception to the application of the ampT and that is the saleof a principal residence (your own home) This deserves a separate discussion as Iintend to take advantage of this when we purchase our next residence
IR procedre ssuming that you are interested in buying a property from a seller who is an individualand who is not engaged in the real estate business the seller needs to pay ampT on thesale of his real property unless you have made an agreement that you as the buyer willshoulder this
The seller needs to file -I orm 4o 256 within thirty (06) days after each saleexchange transfer or other disposition of real property =ou can download -I orm4o 256 here
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ocmentary Reirements
1 ) ne original copy and one photocopy o the =otari6ed eed o ampale or xchange
0 ) hotocopy o the -ranser Certiicate o -itle riginal Certiicate o -itle or
Condominium Certiicate o -itle
) Certiied -rue Copy o the tax declaration on the lot and or impro$ement during
nearest time o sale
) ldquoCertiicate o =o Bmpro$ement+ issued by the Assessorrsquos oice where the property
has no declared impro$ement i applicable or ampworn eclaration Aida$it o =o
Bmpro$ement by at least one (1) o the transerees
) Copy o BD Duling or tax exemption conirmed by BD i applicable
3 ) uly appro$ed -ax ebit 2emo i applicable
5 ) ldquoampworn eclaration o Bnterest+ as prescribed under De$enue Degulations 1 499 i
the transaction is tax4exempt
7 ) ocuments supporting the exemption
dditional requirements may be requested for presentation during audit of the tax casedepending upon existing audit procedures
$o to ampile the Capital Gains Tax Retrn=ou gtust have to file the ampapital ains Tax return in triplicate (two copies for the -I andone copy for the taxpayer) with the uthoriBed gent -ank (-) in the evenue
istrict where the property is located along with the documentary requirements and thetax due
In places where there are no - the return will be filed directly with the evenueampollection fficer or uthoriBed ampity or unicipal Treasurer =ou can view the evenueistrict ffices () here$ http$DDwwwbirgovphDdirectoryDrdohtm amplick on theconcerned
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or example if you click on 8 7 West akati you will gettohttp$DDwwwbirgovphDdirectoryDrdoinnerhtmH8 The names of the evenue istrictfficer and ssistant evenue istrict fficer as well as their contact numbers and email addresses and the address of the evenue istrict ffice and the -s within thesaid may be found there
ample CGT comptation residential condominium in akati ampity with a floor area of 96sqm has a Selling ltrice(Slt) of 26 The existing Bonal value per square meter for that condo in akati iscurrently lthp96666Dsqm =ou have called the owner and found out that he is notengaged in the real estate business
e also told you that as part of the deal the buyer shall shoulder the ampT s the buyerhow much is the ampT which you will have to pay the seller on top of the selling priceJ
irst lets compute for the air market Aalue ( A)$
AKLonal Aalue x loor reaK96666 pesosDsqm x 96sqmK3966666 pesos
Since A is higher than Slt we shall use A to compute the ampT$
ampTKC x A
K66 x 3966666 pesosK296666 pesos
Therefore the buyer shall have to shell out an additional 296666 pesos
4ote that while technically the ampT is always the responsibility of the seller and that ifthe buyer shoulders the ampT it is in effect part of the selling price to be compared to
A for purposes of computing the C ampT I noted that the practice of banks is tocompute the ampT this way
4ow what if you called up the seller and told him that you are willing to buy the propertybut he should shoulder the capital gains tax as the seller then he counters your offerand says he is willing to shoulder the ampT up to his selling price and the buyer shallshoulder the ampT for the excess or the difference between the Slt and A how doyou compute for the ampTJ
irst lets compute for the excess or difference between the Slt and the A$
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ExcessK ASltK3966666pesos 7 2666666pesosK2966666 pesos
4ow lets compute for the ampT to be shouldered by the buyer$
ampT for the buyer KC x ExcessK66 x 2966666 pesosK16666 pesos
The ampT to be shouldered by the seller is as follows$
ampTKC x SltK66 x 2666666 pesosK6666 pesos
Take note that the total ampT is 16666 pesos M 6666 pesos K 296666 pesos which isconsistent with our first computation The ampT was gtust split between the buyer and theseller
s investors we should always try to negotiate for the best terms and in relation to thisparticular example always try to have the other party shoulder the ampT
The seller will still be the one to file the ampT and he shall have to file the return in an uthoriBed gent -ank within the evenue istrict where the property is located inakati within 06 days the deed of sale was executed
Creditable Withholding Tax In Real Estate Transactions
ampreditable withholding tax (ampWT) is the tax which is withheld by the buyerDwithholding
agent from his payment to the seller for the sale of the sellers ordinary assetDservices
and which tax is creditable against the income tax payable of the seller I know this
sounds confusing so let me tell you about the withholding tax system first
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices o
read up on the rele$ant laws and regulations also
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-ackground on the Withholding Tax System
We all know that the ordinary income of a personDcorporation is subgtect to regular
income tax Fnder the withholding tax system the government gives the buyer the
responsibility to withhold a certain percentage of his payment to the seller and remit thesame to the government Thus the amount remitted by the buyer to the seller is less
than the purchase price The buyer should provide the seller with -I orm 4o
3065 (ampertificate of ampreditable Taxes Withheld) which states the amount of the taxes he
withheld
The tax withheld is called the withholding tax and the buyer in this case is called a
withholding agent ltlease note that this only applies to the ordinary income of the seller
as opposed to his capital gain ltlease refer to my earlier post on the difference betweenordinary assets and capital assets
ldquoEhat is the rationale or this systemF+ you may ask
To put it simply the tax withheld by the buyer acts as the advanced payment of the
sellers taxes Since the seller will only pay income taxes on a quarterly basis and the
government spends all throughout the year it would be difficult for the government to
operate if it only gets income taxes quarterly lso since the buyer withholds only a
small percentage of the sellers gross receipts (lets say 3C) the government is alerted
that the seller realiBed income to the extent of the grossedup amount of the taxes
withheld
or example lt366666 which pertains to 3C withholding tax means that the seller sold
lt26666666 worth of assetsDservices for which he should pay income taxes When the
time comes for the payment by the seller of his income taxes and he doesnt declare
the income from which the buyer withheld taxes a discrepancy will arise and the
government will have a tip to investigate whether the seller is paying the correct taxes
Take note the -ureau of Internal evenue (-I) already has computer software in
place which determines discrepancies automatically
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n the part of the buyer he must withhold taxes otherwise he will not be able to
deduct his expense or example if his expense is lt26666666 and he is required to
withhold 3C of this or lt366666 and he does not withhold and remit this amount for
income tax computation purposes he may not deduct his lt266666 expense from his
taxable income
Thus if his gross income is lt36666666 and he may not deduct the lt26666666
expense (assuming there are no other deductible expenses of course) he will pay taxes
based on a net income of lt36666666 instead of lt26666666
n the part of the seller since the taxes withheld act as his advanced payment of his
income tax when the time comes for the quarterly payment of income taxes he will
subtract the tax withheld from his income tax payable or example if his income taxpayable is lt0366666 and the tax withheld from him is lt366666 then he will only pay
lt0666666 income tax
s proof of the taxes withheld he should attach the -I orm 4o 3065 (ampertificate of
ampreditable Taxes Withheld) provided by the buyer to his income tax return
ampreditable Withholding Taxes n eal Estate Transactions
s earlier noted this only applies to the sale of real estate which are ordinary assets of
the seller Thus when the real estate sold is a capital asset to the seller his income
from the sale of real estate will be subgtect to capital gains tax and no creditable
withholding tax shall be imposed on the transaction
ltlease refer to my earlier post about ordinary assets vs capital assets rom hereon we
will assume that we are talking about the sale of ordinary real estate assets
oing now to the creditable withholding tax base the withholding agentDbuyer isrequired to withhold a creditable withholding tax based on the higher of the following$
a) gross selling priceDtotal amount of consideration or
b) the fair market value determined in accordance with Section (E) of the ampode
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3456
96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3556
366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3656
8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
8152019 Capital Gain-estate Tax
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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his trade or business or
property used in the trade or business o a character which is subect to the allowance
or depreciation pro$ided in ampubsection () o ampection
or real property used in trade or business o the taxpayer+
s applied to the real estate industry the terms capital assets and ordinary assetsare defined in Section 3(c) of evenue egulations () 4o 53660 dated ecember35 3663 Its essentially the same as the above definition
It has an additional provision though on real properties acquired by banks throughforeclosure sales 7 the same are considered as their ordinary assets but banks shall notbe considered as habitually engaged in the real estate business for purposes ofdetermining the applicable rate of expanded withholding tax
Since we are talking about the sale of real property here we need to know the definitionof real property Section 3(c) of 4o 53660 states that eal property shall havethe same meaning attributed to that term under rticle 829 of epublic ct 4o 0otherwise known as the ampivil ampode of the lthilippines rticle 829 of the ampivil ampodeprovides$
ldquoArt 1 -he ollowing are immo$able property
(1) and buildings roads and constructions o all inds adhered to the soil
(0) -rees plants and growing ruits while they are attached to the land or orm an
integral part o an immo$able
( ) $erything attached to an immo$able in a ixed manner in such a way that it cannot
be separated thererom without breaing the material or deterioration o the obect
( ) amptatues relies paintings or other obects or use or ornamentation placed in
buildings or on lands by the owner o the immo$able in such a manner that it re$eals
the intention to attach them permanently to the tenements
() 2achinery receptacles instruments or implements intended by the owner o the
tenement or an industry or wors which may be carried on in a building or on a piece o
land and which tend directly to meet the needs o the said industry or wors
8152019 Capital Gain-estate Tax
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(3) Animal houses pigeon4houses beehi$es ish ponds or breeding places o similar
nature in case their owner has placed them or preser$es them with the intention to
ha$e them permanently attached to the land and orming a permanent part o it the
animals in these places are included
(5) ertili6er actually used on a piece o land
(7) 2ines 8uarries and slag dumps while the matter thereo orms part o the bed and
waters either running or stagnant
(9) ocs and structures which though loating are intended by their nature and obect
to remain at a ixed place on a ri$er lae or coast
(1) Contracts or public wors and ser$itudes and other real rights o$er immo$able
property+
Thus it appears that it is not only the sale of land and buildings or houses which weshould be focusing on but also the sale of the above
s 4o 53660 is a very important rule on real estate I have included the saidregulations in this post for your reference ead it in its entirety =ou may download acopy here nswers to frequently asked questions can be found in this document
In simple terms if the property is not ordinarily held for sale (as inventory) or used inbusiness and subgtect to depreciation then the property is a capital asset 4ow if aseller is engaged in the real estate business and the property is one he holds out forsale to the public then the property may be considered as an ordinary asset
lt=ote that there may be instances when a seller is engaged in the real estate businessbut the property is not held or sale or used in business or was idle or a long time ndash thisis one o the instances when the property may be considered a capital assetgt
amponversely if a seller is not engaged in the real estate business and the property is notused in business and subgtect to depreciation the property may be considered as acapital asset the sale of which is subgtect to ampT
Section 0 of 4o 53660 provides the uidelines in etermining Whether altarticular eal ltroperty is a ampapital sset or rdinary sset
8152019 Capital Gain-estate Tax
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Tax Rate to be UsedWhen the real property which is a capital asset to the seller is sold the gross sellingprice or fair market value ( A) +Bonal value whichever is higher will be subgtect to CampT ltlease refer to the -I
website http$DDwwwbirgovphDBonalvaluesDBonalvalueshtm for the Bonal values
Technically its not really only the gain (selling price less cost) which is taxed becauseeven if the seller suffered a loss (that is the selling price is lower than the originalacquisition cost of the property) there will still be ampT because a gain is alwayspresumed
n the other hand if the seller is engaged in the real estate business and the realproperty sold is an ordinary asset the sale will be subgtect to ampIT +or minimumcorporate income tax (ampIT) when applicable if the taxpayer is a corporation andincome tax if the seller is an individual
The proceeds from the sale of the real property will be included in the sellers globalincome (meaning income from all sources 7 note that domestic corporations andresident citiBens are taxed on all sources of income whether from within or outside thecountry) and only the net income after allowable deductions such as depreciationlosses etc will be subgtected to ampIT ampIT or regular income tax whichever isapplicable
AETISEE4T
Fnder epublic ct 4o 1005 the ampIT is now 06C on net taxable income (beginningon Ganuary 2 3661 down from 09C) The regular income tax for individuals remains at03C
ltlease note that there is an exception to the application of the ampT and that is the saleof a principal residence (your own home) This deserves a separate discussion as Iintend to take advantage of this when we purchase our next residence
IR procedre ssuming that you are interested in buying a property from a seller who is an individualand who is not engaged in the real estate business the seller needs to pay ampT on thesale of his real property unless you have made an agreement that you as the buyer willshoulder this
The seller needs to file -I orm 4o 256 within thirty (06) days after each saleexchange transfer or other disposition of real property =ou can download -I orm4o 256 here
8152019 Capital Gain-estate Tax
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ocmentary Reirements
1 ) ne original copy and one photocopy o the =otari6ed eed o ampale or xchange
0 ) hotocopy o the -ranser Certiicate o -itle riginal Certiicate o -itle or
Condominium Certiicate o -itle
) Certiied -rue Copy o the tax declaration on the lot and or impro$ement during
nearest time o sale
) ldquoCertiicate o =o Bmpro$ement+ issued by the Assessorrsquos oice where the property
has no declared impro$ement i applicable or ampworn eclaration Aida$it o =o
Bmpro$ement by at least one (1) o the transerees
) Copy o BD Duling or tax exemption conirmed by BD i applicable
3 ) uly appro$ed -ax ebit 2emo i applicable
5 ) ldquoampworn eclaration o Bnterest+ as prescribed under De$enue Degulations 1 499 i
the transaction is tax4exempt
7 ) ocuments supporting the exemption
dditional requirements may be requested for presentation during audit of the tax casedepending upon existing audit procedures
$o to ampile the Capital Gains Tax Retrn=ou gtust have to file the ampapital ains Tax return in triplicate (two copies for the -I andone copy for the taxpayer) with the uthoriBed gent -ank (-) in the evenue
istrict where the property is located along with the documentary requirements and thetax due
In places where there are no - the return will be filed directly with the evenueampollection fficer or uthoriBed ampity or unicipal Treasurer =ou can view the evenueistrict ffices () here$ http$DDwwwbirgovphDdirectoryDrdohtm amplick on theconcerned
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 656
or example if you click on 8 7 West akati you will gettohttp$DDwwwbirgovphDdirectoryDrdoinnerhtmH8 The names of the evenue istrictfficer and ssistant evenue istrict fficer as well as their contact numbers and email addresses and the address of the evenue istrict ffice and the -s within thesaid may be found there
ample CGT comptation residential condominium in akati ampity with a floor area of 96sqm has a Selling ltrice(Slt) of 26 The existing Bonal value per square meter for that condo in akati iscurrently lthp96666Dsqm =ou have called the owner and found out that he is notengaged in the real estate business
e also told you that as part of the deal the buyer shall shoulder the ampT s the buyerhow much is the ampT which you will have to pay the seller on top of the selling priceJ
irst lets compute for the air market Aalue ( A)$
AKLonal Aalue x loor reaK96666 pesosDsqm x 96sqmK3966666 pesos
Since A is higher than Slt we shall use A to compute the ampT$
ampTKC x A
K66 x 3966666 pesosK296666 pesos
Therefore the buyer shall have to shell out an additional 296666 pesos
4ote that while technically the ampT is always the responsibility of the seller and that ifthe buyer shoulders the ampT it is in effect part of the selling price to be compared to
A for purposes of computing the C ampT I noted that the practice of banks is tocompute the ampT this way
4ow what if you called up the seller and told him that you are willing to buy the propertybut he should shoulder the capital gains tax as the seller then he counters your offerand says he is willing to shoulder the ampT up to his selling price and the buyer shallshoulder the ampT for the excess or the difference between the Slt and A how doyou compute for the ampTJ
irst lets compute for the excess or difference between the Slt and the A$
8152019 Capital Gain-estate Tax
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ExcessK ASltK3966666pesos 7 2666666pesosK2966666 pesos
4ow lets compute for the ampT to be shouldered by the buyer$
ampT for the buyer KC x ExcessK66 x 2966666 pesosK16666 pesos
The ampT to be shouldered by the seller is as follows$
ampTKC x SltK66 x 2666666 pesosK6666 pesos
Take note that the total ampT is 16666 pesos M 6666 pesos K 296666 pesos which isconsistent with our first computation The ampT was gtust split between the buyer and theseller
s investors we should always try to negotiate for the best terms and in relation to thisparticular example always try to have the other party shoulder the ampT
The seller will still be the one to file the ampT and he shall have to file the return in an uthoriBed gent -ank within the evenue istrict where the property is located inakati within 06 days the deed of sale was executed
Creditable Withholding Tax In Real Estate Transactions
ampreditable withholding tax (ampWT) is the tax which is withheld by the buyerDwithholding
agent from his payment to the seller for the sale of the sellers ordinary assetDservices
and which tax is creditable against the income tax payable of the seller I know this
sounds confusing so let me tell you about the withholding tax system first
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices o
read up on the rele$ant laws and regulations also
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 856
-ackground on the Withholding Tax System
We all know that the ordinary income of a personDcorporation is subgtect to regular
income tax Fnder the withholding tax system the government gives the buyer the
responsibility to withhold a certain percentage of his payment to the seller and remit thesame to the government Thus the amount remitted by the buyer to the seller is less
than the purchase price The buyer should provide the seller with -I orm 4o
3065 (ampertificate of ampreditable Taxes Withheld) which states the amount of the taxes he
withheld
The tax withheld is called the withholding tax and the buyer in this case is called a
withholding agent ltlease note that this only applies to the ordinary income of the seller
as opposed to his capital gain ltlease refer to my earlier post on the difference betweenordinary assets and capital assets
ldquoEhat is the rationale or this systemF+ you may ask
To put it simply the tax withheld by the buyer acts as the advanced payment of the
sellers taxes Since the seller will only pay income taxes on a quarterly basis and the
government spends all throughout the year it would be difficult for the government to
operate if it only gets income taxes quarterly lso since the buyer withholds only a
small percentage of the sellers gross receipts (lets say 3C) the government is alerted
that the seller realiBed income to the extent of the grossedup amount of the taxes
withheld
or example lt366666 which pertains to 3C withholding tax means that the seller sold
lt26666666 worth of assetsDservices for which he should pay income taxes When the
time comes for the payment by the seller of his income taxes and he doesnt declare
the income from which the buyer withheld taxes a discrepancy will arise and the
government will have a tip to investigate whether the seller is paying the correct taxes
Take note the -ureau of Internal evenue (-I) already has computer software in
place which determines discrepancies automatically
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 956
n the part of the buyer he must withhold taxes otherwise he will not be able to
deduct his expense or example if his expense is lt26666666 and he is required to
withhold 3C of this or lt366666 and he does not withhold and remit this amount for
income tax computation purposes he may not deduct his lt266666 expense from his
taxable income
Thus if his gross income is lt36666666 and he may not deduct the lt26666666
expense (assuming there are no other deductible expenses of course) he will pay taxes
based on a net income of lt36666666 instead of lt26666666
n the part of the seller since the taxes withheld act as his advanced payment of his
income tax when the time comes for the quarterly payment of income taxes he will
subtract the tax withheld from his income tax payable or example if his income taxpayable is lt0366666 and the tax withheld from him is lt366666 then he will only pay
lt0666666 income tax
s proof of the taxes withheld he should attach the -I orm 4o 3065 (ampertificate of
ampreditable Taxes Withheld) provided by the buyer to his income tax return
ampreditable Withholding Taxes n eal Estate Transactions
s earlier noted this only applies to the sale of real estate which are ordinary assets of
the seller Thus when the real estate sold is a capital asset to the seller his income
from the sale of real estate will be subgtect to capital gains tax and no creditable
withholding tax shall be imposed on the transaction
ltlease refer to my earlier post about ordinary assets vs capital assets rom hereon we
will assume that we are talking about the sale of ordinary real estate assets
oing now to the creditable withholding tax base the withholding agentDbuyer isrequired to withhold a creditable withholding tax based on the higher of the following$
a) gross selling priceDtotal amount of consideration or
b) the fair market value determined in accordance with Section (E) of the ampode
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 1156
eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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httpslidepdfcomreaderfullcapital-gain-estate-tax 1456
lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 1556
2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
8152019 Capital Gain-estate Tax
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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(3) Animal houses pigeon4houses beehi$es ish ponds or breeding places o similar
nature in case their owner has placed them or preser$es them with the intention to
ha$e them permanently attached to the land and orming a permanent part o it the
animals in these places are included
(5) ertili6er actually used on a piece o land
(7) 2ines 8uarries and slag dumps while the matter thereo orms part o the bed and
waters either running or stagnant
(9) ocs and structures which though loating are intended by their nature and obect
to remain at a ixed place on a ri$er lae or coast
(1) Contracts or public wors and ser$itudes and other real rights o$er immo$able
property+
Thus it appears that it is not only the sale of land and buildings or houses which weshould be focusing on but also the sale of the above
s 4o 53660 is a very important rule on real estate I have included the saidregulations in this post for your reference ead it in its entirety =ou may download acopy here nswers to frequently asked questions can be found in this document
In simple terms if the property is not ordinarily held for sale (as inventory) or used inbusiness and subgtect to depreciation then the property is a capital asset 4ow if aseller is engaged in the real estate business and the property is one he holds out forsale to the public then the property may be considered as an ordinary asset
lt=ote that there may be instances when a seller is engaged in the real estate businessbut the property is not held or sale or used in business or was idle or a long time ndash thisis one o the instances when the property may be considered a capital assetgt
amponversely if a seller is not engaged in the real estate business and the property is notused in business and subgtect to depreciation the property may be considered as acapital asset the sale of which is subgtect to ampT
Section 0 of 4o 53660 provides the uidelines in etermining Whether altarticular eal ltroperty is a ampapital sset or rdinary sset
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Tax Rate to be UsedWhen the real property which is a capital asset to the seller is sold the gross sellingprice or fair market value ( A) +Bonal value whichever is higher will be subgtect to CampT ltlease refer to the -I
website http$DDwwwbirgovphDBonalvaluesDBonalvalueshtm for the Bonal values
Technically its not really only the gain (selling price less cost) which is taxed becauseeven if the seller suffered a loss (that is the selling price is lower than the originalacquisition cost of the property) there will still be ampT because a gain is alwayspresumed
n the other hand if the seller is engaged in the real estate business and the realproperty sold is an ordinary asset the sale will be subgtect to ampIT +or minimumcorporate income tax (ampIT) when applicable if the taxpayer is a corporation andincome tax if the seller is an individual
The proceeds from the sale of the real property will be included in the sellers globalincome (meaning income from all sources 7 note that domestic corporations andresident citiBens are taxed on all sources of income whether from within or outside thecountry) and only the net income after allowable deductions such as depreciationlosses etc will be subgtected to ampIT ampIT or regular income tax whichever isapplicable
AETISEE4T
Fnder epublic ct 4o 1005 the ampIT is now 06C on net taxable income (beginningon Ganuary 2 3661 down from 09C) The regular income tax for individuals remains at03C
ltlease note that there is an exception to the application of the ampT and that is the saleof a principal residence (your own home) This deserves a separate discussion as Iintend to take advantage of this when we purchase our next residence
IR procedre ssuming that you are interested in buying a property from a seller who is an individualand who is not engaged in the real estate business the seller needs to pay ampT on thesale of his real property unless you have made an agreement that you as the buyer willshoulder this
The seller needs to file -I orm 4o 256 within thirty (06) days after each saleexchange transfer or other disposition of real property =ou can download -I orm4o 256 here
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ocmentary Reirements
1 ) ne original copy and one photocopy o the =otari6ed eed o ampale or xchange
0 ) hotocopy o the -ranser Certiicate o -itle riginal Certiicate o -itle or
Condominium Certiicate o -itle
) Certiied -rue Copy o the tax declaration on the lot and or impro$ement during
nearest time o sale
) ldquoCertiicate o =o Bmpro$ement+ issued by the Assessorrsquos oice where the property
has no declared impro$ement i applicable or ampworn eclaration Aida$it o =o
Bmpro$ement by at least one (1) o the transerees
) Copy o BD Duling or tax exemption conirmed by BD i applicable
3 ) uly appro$ed -ax ebit 2emo i applicable
5 ) ldquoampworn eclaration o Bnterest+ as prescribed under De$enue Degulations 1 499 i
the transaction is tax4exempt
7 ) ocuments supporting the exemption
dditional requirements may be requested for presentation during audit of the tax casedepending upon existing audit procedures
$o to ampile the Capital Gains Tax Retrn=ou gtust have to file the ampapital ains Tax return in triplicate (two copies for the -I andone copy for the taxpayer) with the uthoriBed gent -ank (-) in the evenue
istrict where the property is located along with the documentary requirements and thetax due
In places where there are no - the return will be filed directly with the evenueampollection fficer or uthoriBed ampity or unicipal Treasurer =ou can view the evenueistrict ffices () here$ http$DDwwwbirgovphDdirectoryDrdohtm amplick on theconcerned
8152019 Capital Gain-estate Tax
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or example if you click on 8 7 West akati you will gettohttp$DDwwwbirgovphDdirectoryDrdoinnerhtmH8 The names of the evenue istrictfficer and ssistant evenue istrict fficer as well as their contact numbers and email addresses and the address of the evenue istrict ffice and the -s within thesaid may be found there
ample CGT comptation residential condominium in akati ampity with a floor area of 96sqm has a Selling ltrice(Slt) of 26 The existing Bonal value per square meter for that condo in akati iscurrently lthp96666Dsqm =ou have called the owner and found out that he is notengaged in the real estate business
e also told you that as part of the deal the buyer shall shoulder the ampT s the buyerhow much is the ampT which you will have to pay the seller on top of the selling priceJ
irst lets compute for the air market Aalue ( A)$
AKLonal Aalue x loor reaK96666 pesosDsqm x 96sqmK3966666 pesos
Since A is higher than Slt we shall use A to compute the ampT$
ampTKC x A
K66 x 3966666 pesosK296666 pesos
Therefore the buyer shall have to shell out an additional 296666 pesos
4ote that while technically the ampT is always the responsibility of the seller and that ifthe buyer shoulders the ampT it is in effect part of the selling price to be compared to
A for purposes of computing the C ampT I noted that the practice of banks is tocompute the ampT this way
4ow what if you called up the seller and told him that you are willing to buy the propertybut he should shoulder the capital gains tax as the seller then he counters your offerand says he is willing to shoulder the ampT up to his selling price and the buyer shallshoulder the ampT for the excess or the difference between the Slt and A how doyou compute for the ampTJ
irst lets compute for the excess or difference between the Slt and the A$
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ExcessK ASltK3966666pesos 7 2666666pesosK2966666 pesos
4ow lets compute for the ampT to be shouldered by the buyer$
ampT for the buyer KC x ExcessK66 x 2966666 pesosK16666 pesos
The ampT to be shouldered by the seller is as follows$
ampTKC x SltK66 x 2666666 pesosK6666 pesos
Take note that the total ampT is 16666 pesos M 6666 pesos K 296666 pesos which isconsistent with our first computation The ampT was gtust split between the buyer and theseller
s investors we should always try to negotiate for the best terms and in relation to thisparticular example always try to have the other party shoulder the ampT
The seller will still be the one to file the ampT and he shall have to file the return in an uthoriBed gent -ank within the evenue istrict where the property is located inakati within 06 days the deed of sale was executed
Creditable Withholding Tax In Real Estate Transactions
ampreditable withholding tax (ampWT) is the tax which is withheld by the buyerDwithholding
agent from his payment to the seller for the sale of the sellers ordinary assetDservices
and which tax is creditable against the income tax payable of the seller I know this
sounds confusing so let me tell you about the withholding tax system first
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices o
read up on the rele$ant laws and regulations also
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-ackground on the Withholding Tax System
We all know that the ordinary income of a personDcorporation is subgtect to regular
income tax Fnder the withholding tax system the government gives the buyer the
responsibility to withhold a certain percentage of his payment to the seller and remit thesame to the government Thus the amount remitted by the buyer to the seller is less
than the purchase price The buyer should provide the seller with -I orm 4o
3065 (ampertificate of ampreditable Taxes Withheld) which states the amount of the taxes he
withheld
The tax withheld is called the withholding tax and the buyer in this case is called a
withholding agent ltlease note that this only applies to the ordinary income of the seller
as opposed to his capital gain ltlease refer to my earlier post on the difference betweenordinary assets and capital assets
ldquoEhat is the rationale or this systemF+ you may ask
To put it simply the tax withheld by the buyer acts as the advanced payment of the
sellers taxes Since the seller will only pay income taxes on a quarterly basis and the
government spends all throughout the year it would be difficult for the government to
operate if it only gets income taxes quarterly lso since the buyer withholds only a
small percentage of the sellers gross receipts (lets say 3C) the government is alerted
that the seller realiBed income to the extent of the grossedup amount of the taxes
withheld
or example lt366666 which pertains to 3C withholding tax means that the seller sold
lt26666666 worth of assetsDservices for which he should pay income taxes When the
time comes for the payment by the seller of his income taxes and he doesnt declare
the income from which the buyer withheld taxes a discrepancy will arise and the
government will have a tip to investigate whether the seller is paying the correct taxes
Take note the -ureau of Internal evenue (-I) already has computer software in
place which determines discrepancies automatically
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n the part of the buyer he must withhold taxes otherwise he will not be able to
deduct his expense or example if his expense is lt26666666 and he is required to
withhold 3C of this or lt366666 and he does not withhold and remit this amount for
income tax computation purposes he may not deduct his lt266666 expense from his
taxable income
Thus if his gross income is lt36666666 and he may not deduct the lt26666666
expense (assuming there are no other deductible expenses of course) he will pay taxes
based on a net income of lt36666666 instead of lt26666666
n the part of the seller since the taxes withheld act as his advanced payment of his
income tax when the time comes for the quarterly payment of income taxes he will
subtract the tax withheld from his income tax payable or example if his income taxpayable is lt0366666 and the tax withheld from him is lt366666 then he will only pay
lt0666666 income tax
s proof of the taxes withheld he should attach the -I orm 4o 3065 (ampertificate of
ampreditable Taxes Withheld) provided by the buyer to his income tax return
ampreditable Withholding Taxes n eal Estate Transactions
s earlier noted this only applies to the sale of real estate which are ordinary assets of
the seller Thus when the real estate sold is a capital asset to the seller his income
from the sale of real estate will be subgtect to capital gains tax and no creditable
withholding tax shall be imposed on the transaction
ltlease refer to my earlier post about ordinary assets vs capital assets rom hereon we
will assume that we are talking about the sale of ordinary real estate assets
oing now to the creditable withholding tax base the withholding agentDbuyer isrequired to withhold a creditable withholding tax based on the higher of the following$
a) gross selling priceDtotal amount of consideration or
b) the fair market value determined in accordance with Section (E) of the ampode
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
8152019 Capital Gain-estate Tax
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
8152019 Capital Gain-estate Tax
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
8152019 Capital Gain-estate Tax
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
8152019 Capital Gain-estate Tax
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
8152019 Capital Gain-estate Tax
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
8152019 Capital Gain-estate Tax
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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Tax Rate to be UsedWhen the real property which is a capital asset to the seller is sold the gross sellingprice or fair market value ( A) +Bonal value whichever is higher will be subgtect to CampT ltlease refer to the -I
website http$DDwwwbirgovphDBonalvaluesDBonalvalueshtm for the Bonal values
Technically its not really only the gain (selling price less cost) which is taxed becauseeven if the seller suffered a loss (that is the selling price is lower than the originalacquisition cost of the property) there will still be ampT because a gain is alwayspresumed
n the other hand if the seller is engaged in the real estate business and the realproperty sold is an ordinary asset the sale will be subgtect to ampIT +or minimumcorporate income tax (ampIT) when applicable if the taxpayer is a corporation andincome tax if the seller is an individual
The proceeds from the sale of the real property will be included in the sellers globalincome (meaning income from all sources 7 note that domestic corporations andresident citiBens are taxed on all sources of income whether from within or outside thecountry) and only the net income after allowable deductions such as depreciationlosses etc will be subgtected to ampIT ampIT or regular income tax whichever isapplicable
AETISEE4T
Fnder epublic ct 4o 1005 the ampIT is now 06C on net taxable income (beginningon Ganuary 2 3661 down from 09C) The regular income tax for individuals remains at03C
ltlease note that there is an exception to the application of the ampT and that is the saleof a principal residence (your own home) This deserves a separate discussion as Iintend to take advantage of this when we purchase our next residence
IR procedre ssuming that you are interested in buying a property from a seller who is an individualand who is not engaged in the real estate business the seller needs to pay ampT on thesale of his real property unless you have made an agreement that you as the buyer willshoulder this
The seller needs to file -I orm 4o 256 within thirty (06) days after each saleexchange transfer or other disposition of real property =ou can download -I orm4o 256 here
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ocmentary Reirements
1 ) ne original copy and one photocopy o the =otari6ed eed o ampale or xchange
0 ) hotocopy o the -ranser Certiicate o -itle riginal Certiicate o -itle or
Condominium Certiicate o -itle
) Certiied -rue Copy o the tax declaration on the lot and or impro$ement during
nearest time o sale
) ldquoCertiicate o =o Bmpro$ement+ issued by the Assessorrsquos oice where the property
has no declared impro$ement i applicable or ampworn eclaration Aida$it o =o
Bmpro$ement by at least one (1) o the transerees
) Copy o BD Duling or tax exemption conirmed by BD i applicable
3 ) uly appro$ed -ax ebit 2emo i applicable
5 ) ldquoampworn eclaration o Bnterest+ as prescribed under De$enue Degulations 1 499 i
the transaction is tax4exempt
7 ) ocuments supporting the exemption
dditional requirements may be requested for presentation during audit of the tax casedepending upon existing audit procedures
$o to ampile the Capital Gains Tax Retrn=ou gtust have to file the ampapital ains Tax return in triplicate (two copies for the -I andone copy for the taxpayer) with the uthoriBed gent -ank (-) in the evenue
istrict where the property is located along with the documentary requirements and thetax due
In places where there are no - the return will be filed directly with the evenueampollection fficer or uthoriBed ampity or unicipal Treasurer =ou can view the evenueistrict ffices () here$ http$DDwwwbirgovphDdirectoryDrdohtm amplick on theconcerned
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or example if you click on 8 7 West akati you will gettohttp$DDwwwbirgovphDdirectoryDrdoinnerhtmH8 The names of the evenue istrictfficer and ssistant evenue istrict fficer as well as their contact numbers and email addresses and the address of the evenue istrict ffice and the -s within thesaid may be found there
ample CGT comptation residential condominium in akati ampity with a floor area of 96sqm has a Selling ltrice(Slt) of 26 The existing Bonal value per square meter for that condo in akati iscurrently lthp96666Dsqm =ou have called the owner and found out that he is notengaged in the real estate business
e also told you that as part of the deal the buyer shall shoulder the ampT s the buyerhow much is the ampT which you will have to pay the seller on top of the selling priceJ
irst lets compute for the air market Aalue ( A)$
AKLonal Aalue x loor reaK96666 pesosDsqm x 96sqmK3966666 pesos
Since A is higher than Slt we shall use A to compute the ampT$
ampTKC x A
K66 x 3966666 pesosK296666 pesos
Therefore the buyer shall have to shell out an additional 296666 pesos
4ote that while technically the ampT is always the responsibility of the seller and that ifthe buyer shoulders the ampT it is in effect part of the selling price to be compared to
A for purposes of computing the C ampT I noted that the practice of banks is tocompute the ampT this way
4ow what if you called up the seller and told him that you are willing to buy the propertybut he should shoulder the capital gains tax as the seller then he counters your offerand says he is willing to shoulder the ampT up to his selling price and the buyer shallshoulder the ampT for the excess or the difference between the Slt and A how doyou compute for the ampTJ
irst lets compute for the excess or difference between the Slt and the A$
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ExcessK ASltK3966666pesos 7 2666666pesosK2966666 pesos
4ow lets compute for the ampT to be shouldered by the buyer$
ampT for the buyer KC x ExcessK66 x 2966666 pesosK16666 pesos
The ampT to be shouldered by the seller is as follows$
ampTKC x SltK66 x 2666666 pesosK6666 pesos
Take note that the total ampT is 16666 pesos M 6666 pesos K 296666 pesos which isconsistent with our first computation The ampT was gtust split between the buyer and theseller
s investors we should always try to negotiate for the best terms and in relation to thisparticular example always try to have the other party shoulder the ampT
The seller will still be the one to file the ampT and he shall have to file the return in an uthoriBed gent -ank within the evenue istrict where the property is located inakati within 06 days the deed of sale was executed
Creditable Withholding Tax In Real Estate Transactions
ampreditable withholding tax (ampWT) is the tax which is withheld by the buyerDwithholding
agent from his payment to the seller for the sale of the sellers ordinary assetDservices
and which tax is creditable against the income tax payable of the seller I know this
sounds confusing so let me tell you about the withholding tax system first
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices o
read up on the rele$ant laws and regulations also
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 856
-ackground on the Withholding Tax System
We all know that the ordinary income of a personDcorporation is subgtect to regular
income tax Fnder the withholding tax system the government gives the buyer the
responsibility to withhold a certain percentage of his payment to the seller and remit thesame to the government Thus the amount remitted by the buyer to the seller is less
than the purchase price The buyer should provide the seller with -I orm 4o
3065 (ampertificate of ampreditable Taxes Withheld) which states the amount of the taxes he
withheld
The tax withheld is called the withholding tax and the buyer in this case is called a
withholding agent ltlease note that this only applies to the ordinary income of the seller
as opposed to his capital gain ltlease refer to my earlier post on the difference betweenordinary assets and capital assets
ldquoEhat is the rationale or this systemF+ you may ask
To put it simply the tax withheld by the buyer acts as the advanced payment of the
sellers taxes Since the seller will only pay income taxes on a quarterly basis and the
government spends all throughout the year it would be difficult for the government to
operate if it only gets income taxes quarterly lso since the buyer withholds only a
small percentage of the sellers gross receipts (lets say 3C) the government is alerted
that the seller realiBed income to the extent of the grossedup amount of the taxes
withheld
or example lt366666 which pertains to 3C withholding tax means that the seller sold
lt26666666 worth of assetsDservices for which he should pay income taxes When the
time comes for the payment by the seller of his income taxes and he doesnt declare
the income from which the buyer withheld taxes a discrepancy will arise and the
government will have a tip to investigate whether the seller is paying the correct taxes
Take note the -ureau of Internal evenue (-I) already has computer software in
place which determines discrepancies automatically
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 956
n the part of the buyer he must withhold taxes otherwise he will not be able to
deduct his expense or example if his expense is lt26666666 and he is required to
withhold 3C of this or lt366666 and he does not withhold and remit this amount for
income tax computation purposes he may not deduct his lt266666 expense from his
taxable income
Thus if his gross income is lt36666666 and he may not deduct the lt26666666
expense (assuming there are no other deductible expenses of course) he will pay taxes
based on a net income of lt36666666 instead of lt26666666
n the part of the seller since the taxes withheld act as his advanced payment of his
income tax when the time comes for the quarterly payment of income taxes he will
subtract the tax withheld from his income tax payable or example if his income taxpayable is lt0366666 and the tax withheld from him is lt366666 then he will only pay
lt0666666 income tax
s proof of the taxes withheld he should attach the -I orm 4o 3065 (ampertificate of
ampreditable Taxes Withheld) provided by the buyer to his income tax return
ampreditable Withholding Taxes n eal Estate Transactions
s earlier noted this only applies to the sale of real estate which are ordinary assets of
the seller Thus when the real estate sold is a capital asset to the seller his income
from the sale of real estate will be subgtect to capital gains tax and no creditable
withholding tax shall be imposed on the transaction
ltlease refer to my earlier post about ordinary assets vs capital assets rom hereon we
will assume that we are talking about the sale of ordinary real estate assets
oing now to the creditable withholding tax base the withholding agentDbuyer isrequired to withhold a creditable withholding tax based on the higher of the following$
a) gross selling priceDtotal amount of consideration or
b) the fair market value determined in accordance with Section (E) of the ampode
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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httpslidepdfcomreaderfullcapital-gain-estate-tax 2556
case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
8152019 Capital Gain-estate Tax
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
8152019 Capital Gain-estate Tax
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
8152019 Capital Gain-estate Tax
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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ocmentary Reirements
1 ) ne original copy and one photocopy o the =otari6ed eed o ampale or xchange
0 ) hotocopy o the -ranser Certiicate o -itle riginal Certiicate o -itle or
Condominium Certiicate o -itle
) Certiied -rue Copy o the tax declaration on the lot and or impro$ement during
nearest time o sale
) ldquoCertiicate o =o Bmpro$ement+ issued by the Assessorrsquos oice where the property
has no declared impro$ement i applicable or ampworn eclaration Aida$it o =o
Bmpro$ement by at least one (1) o the transerees
) Copy o BD Duling or tax exemption conirmed by BD i applicable
3 ) uly appro$ed -ax ebit 2emo i applicable
5 ) ldquoampworn eclaration o Bnterest+ as prescribed under De$enue Degulations 1 499 i
the transaction is tax4exempt
7 ) ocuments supporting the exemption
dditional requirements may be requested for presentation during audit of the tax casedepending upon existing audit procedures
$o to ampile the Capital Gains Tax Retrn=ou gtust have to file the ampapital ains Tax return in triplicate (two copies for the -I andone copy for the taxpayer) with the uthoriBed gent -ank (-) in the evenue
istrict where the property is located along with the documentary requirements and thetax due
In places where there are no - the return will be filed directly with the evenueampollection fficer or uthoriBed ampity or unicipal Treasurer =ou can view the evenueistrict ffices () here$ http$DDwwwbirgovphDdirectoryDrdohtm amplick on theconcerned
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or example if you click on 8 7 West akati you will gettohttp$DDwwwbirgovphDdirectoryDrdoinnerhtmH8 The names of the evenue istrictfficer and ssistant evenue istrict fficer as well as their contact numbers and email addresses and the address of the evenue istrict ffice and the -s within thesaid may be found there
ample CGT comptation residential condominium in akati ampity with a floor area of 96sqm has a Selling ltrice(Slt) of 26 The existing Bonal value per square meter for that condo in akati iscurrently lthp96666Dsqm =ou have called the owner and found out that he is notengaged in the real estate business
e also told you that as part of the deal the buyer shall shoulder the ampT s the buyerhow much is the ampT which you will have to pay the seller on top of the selling priceJ
irst lets compute for the air market Aalue ( A)$
AKLonal Aalue x loor reaK96666 pesosDsqm x 96sqmK3966666 pesos
Since A is higher than Slt we shall use A to compute the ampT$
ampTKC x A
K66 x 3966666 pesosK296666 pesos
Therefore the buyer shall have to shell out an additional 296666 pesos
4ote that while technically the ampT is always the responsibility of the seller and that ifthe buyer shoulders the ampT it is in effect part of the selling price to be compared to
A for purposes of computing the C ampT I noted that the practice of banks is tocompute the ampT this way
4ow what if you called up the seller and told him that you are willing to buy the propertybut he should shoulder the capital gains tax as the seller then he counters your offerand says he is willing to shoulder the ampT up to his selling price and the buyer shallshoulder the ampT for the excess or the difference between the Slt and A how doyou compute for the ampTJ
irst lets compute for the excess or difference between the Slt and the A$
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ExcessK ASltK3966666pesos 7 2666666pesosK2966666 pesos
4ow lets compute for the ampT to be shouldered by the buyer$
ampT for the buyer KC x ExcessK66 x 2966666 pesosK16666 pesos
The ampT to be shouldered by the seller is as follows$
ampTKC x SltK66 x 2666666 pesosK6666 pesos
Take note that the total ampT is 16666 pesos M 6666 pesos K 296666 pesos which isconsistent with our first computation The ampT was gtust split between the buyer and theseller
s investors we should always try to negotiate for the best terms and in relation to thisparticular example always try to have the other party shoulder the ampT
The seller will still be the one to file the ampT and he shall have to file the return in an uthoriBed gent -ank within the evenue istrict where the property is located inakati within 06 days the deed of sale was executed
Creditable Withholding Tax In Real Estate Transactions
ampreditable withholding tax (ampWT) is the tax which is withheld by the buyerDwithholding
agent from his payment to the seller for the sale of the sellers ordinary assetDservices
and which tax is creditable against the income tax payable of the seller I know this
sounds confusing so let me tell you about the withholding tax system first
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices o
read up on the rele$ant laws and regulations also
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-ackground on the Withholding Tax System
We all know that the ordinary income of a personDcorporation is subgtect to regular
income tax Fnder the withholding tax system the government gives the buyer the
responsibility to withhold a certain percentage of his payment to the seller and remit thesame to the government Thus the amount remitted by the buyer to the seller is less
than the purchase price The buyer should provide the seller with -I orm 4o
3065 (ampertificate of ampreditable Taxes Withheld) which states the amount of the taxes he
withheld
The tax withheld is called the withholding tax and the buyer in this case is called a
withholding agent ltlease note that this only applies to the ordinary income of the seller
as opposed to his capital gain ltlease refer to my earlier post on the difference betweenordinary assets and capital assets
ldquoEhat is the rationale or this systemF+ you may ask
To put it simply the tax withheld by the buyer acts as the advanced payment of the
sellers taxes Since the seller will only pay income taxes on a quarterly basis and the
government spends all throughout the year it would be difficult for the government to
operate if it only gets income taxes quarterly lso since the buyer withholds only a
small percentage of the sellers gross receipts (lets say 3C) the government is alerted
that the seller realiBed income to the extent of the grossedup amount of the taxes
withheld
or example lt366666 which pertains to 3C withholding tax means that the seller sold
lt26666666 worth of assetsDservices for which he should pay income taxes When the
time comes for the payment by the seller of his income taxes and he doesnt declare
the income from which the buyer withheld taxes a discrepancy will arise and the
government will have a tip to investigate whether the seller is paying the correct taxes
Take note the -ureau of Internal evenue (-I) already has computer software in
place which determines discrepancies automatically
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n the part of the buyer he must withhold taxes otherwise he will not be able to
deduct his expense or example if his expense is lt26666666 and he is required to
withhold 3C of this or lt366666 and he does not withhold and remit this amount for
income tax computation purposes he may not deduct his lt266666 expense from his
taxable income
Thus if his gross income is lt36666666 and he may not deduct the lt26666666
expense (assuming there are no other deductible expenses of course) he will pay taxes
based on a net income of lt36666666 instead of lt26666666
n the part of the seller since the taxes withheld act as his advanced payment of his
income tax when the time comes for the quarterly payment of income taxes he will
subtract the tax withheld from his income tax payable or example if his income taxpayable is lt0366666 and the tax withheld from him is lt366666 then he will only pay
lt0666666 income tax
s proof of the taxes withheld he should attach the -I orm 4o 3065 (ampertificate of
ampreditable Taxes Withheld) provided by the buyer to his income tax return
ampreditable Withholding Taxes n eal Estate Transactions
s earlier noted this only applies to the sale of real estate which are ordinary assets of
the seller Thus when the real estate sold is a capital asset to the seller his income
from the sale of real estate will be subgtect to capital gains tax and no creditable
withholding tax shall be imposed on the transaction
ltlease refer to my earlier post about ordinary assets vs capital assets rom hereon we
will assume that we are talking about the sale of ordinary real estate assets
oing now to the creditable withholding tax base the withholding agentDbuyer isrequired to withhold a creditable withholding tax based on the higher of the following$
a) gross selling priceDtotal amount of consideration or
b) the fair market value determined in accordance with Section (E) of the ampode
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 2856
espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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httpslidepdfcomreaderfullcapital-gain-estate-tax 2956
ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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or example if you click on 8 7 West akati you will gettohttp$DDwwwbirgovphDdirectoryDrdoinnerhtmH8 The names of the evenue istrictfficer and ssistant evenue istrict fficer as well as their contact numbers and email addresses and the address of the evenue istrict ffice and the -s within thesaid may be found there
ample CGT comptation residential condominium in akati ampity with a floor area of 96sqm has a Selling ltrice(Slt) of 26 The existing Bonal value per square meter for that condo in akati iscurrently lthp96666Dsqm =ou have called the owner and found out that he is notengaged in the real estate business
e also told you that as part of the deal the buyer shall shoulder the ampT s the buyerhow much is the ampT which you will have to pay the seller on top of the selling priceJ
irst lets compute for the air market Aalue ( A)$
AKLonal Aalue x loor reaK96666 pesosDsqm x 96sqmK3966666 pesos
Since A is higher than Slt we shall use A to compute the ampT$
ampTKC x A
K66 x 3966666 pesosK296666 pesos
Therefore the buyer shall have to shell out an additional 296666 pesos
4ote that while technically the ampT is always the responsibility of the seller and that ifthe buyer shoulders the ampT it is in effect part of the selling price to be compared to
A for purposes of computing the C ampT I noted that the practice of banks is tocompute the ampT this way
4ow what if you called up the seller and told him that you are willing to buy the propertybut he should shoulder the capital gains tax as the seller then he counters your offerand says he is willing to shoulder the ampT up to his selling price and the buyer shallshoulder the ampT for the excess or the difference between the Slt and A how doyou compute for the ampTJ
irst lets compute for the excess or difference between the Slt and the A$
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ExcessK ASltK3966666pesos 7 2666666pesosK2966666 pesos
4ow lets compute for the ampT to be shouldered by the buyer$
ampT for the buyer KC x ExcessK66 x 2966666 pesosK16666 pesos
The ampT to be shouldered by the seller is as follows$
ampTKC x SltK66 x 2666666 pesosK6666 pesos
Take note that the total ampT is 16666 pesos M 6666 pesos K 296666 pesos which isconsistent with our first computation The ampT was gtust split between the buyer and theseller
s investors we should always try to negotiate for the best terms and in relation to thisparticular example always try to have the other party shoulder the ampT
The seller will still be the one to file the ampT and he shall have to file the return in an uthoriBed gent -ank within the evenue istrict where the property is located inakati within 06 days the deed of sale was executed
Creditable Withholding Tax In Real Estate Transactions
ampreditable withholding tax (ampWT) is the tax which is withheld by the buyerDwithholding
agent from his payment to the seller for the sale of the sellers ordinary assetDservices
and which tax is creditable against the income tax payable of the seller I know this
sounds confusing so let me tell you about the withholding tax system first
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices o
read up on the rele$ant laws and regulations also
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-ackground on the Withholding Tax System
We all know that the ordinary income of a personDcorporation is subgtect to regular
income tax Fnder the withholding tax system the government gives the buyer the
responsibility to withhold a certain percentage of his payment to the seller and remit thesame to the government Thus the amount remitted by the buyer to the seller is less
than the purchase price The buyer should provide the seller with -I orm 4o
3065 (ampertificate of ampreditable Taxes Withheld) which states the amount of the taxes he
withheld
The tax withheld is called the withholding tax and the buyer in this case is called a
withholding agent ltlease note that this only applies to the ordinary income of the seller
as opposed to his capital gain ltlease refer to my earlier post on the difference betweenordinary assets and capital assets
ldquoEhat is the rationale or this systemF+ you may ask
To put it simply the tax withheld by the buyer acts as the advanced payment of the
sellers taxes Since the seller will only pay income taxes on a quarterly basis and the
government spends all throughout the year it would be difficult for the government to
operate if it only gets income taxes quarterly lso since the buyer withholds only a
small percentage of the sellers gross receipts (lets say 3C) the government is alerted
that the seller realiBed income to the extent of the grossedup amount of the taxes
withheld
or example lt366666 which pertains to 3C withholding tax means that the seller sold
lt26666666 worth of assetsDservices for which he should pay income taxes When the
time comes for the payment by the seller of his income taxes and he doesnt declare
the income from which the buyer withheld taxes a discrepancy will arise and the
government will have a tip to investigate whether the seller is paying the correct taxes
Take note the -ureau of Internal evenue (-I) already has computer software in
place which determines discrepancies automatically
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n the part of the buyer he must withhold taxes otherwise he will not be able to
deduct his expense or example if his expense is lt26666666 and he is required to
withhold 3C of this or lt366666 and he does not withhold and remit this amount for
income tax computation purposes he may not deduct his lt266666 expense from his
taxable income
Thus if his gross income is lt36666666 and he may not deduct the lt26666666
expense (assuming there are no other deductible expenses of course) he will pay taxes
based on a net income of lt36666666 instead of lt26666666
n the part of the seller since the taxes withheld act as his advanced payment of his
income tax when the time comes for the quarterly payment of income taxes he will
subtract the tax withheld from his income tax payable or example if his income taxpayable is lt0366666 and the tax withheld from him is lt366666 then he will only pay
lt0666666 income tax
s proof of the taxes withheld he should attach the -I orm 4o 3065 (ampertificate of
ampreditable Taxes Withheld) provided by the buyer to his income tax return
ampreditable Withholding Taxes n eal Estate Transactions
s earlier noted this only applies to the sale of real estate which are ordinary assets of
the seller Thus when the real estate sold is a capital asset to the seller his income
from the sale of real estate will be subgtect to capital gains tax and no creditable
withholding tax shall be imposed on the transaction
ltlease refer to my earlier post about ordinary assets vs capital assets rom hereon we
will assume that we are talking about the sale of ordinary real estate assets
oing now to the creditable withholding tax base the withholding agentDbuyer isrequired to withhold a creditable withholding tax based on the higher of the following$
a) gross selling priceDtotal amount of consideration or
b) the fair market value determined in accordance with Section (E) of the ampode
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
8152019 Capital Gain-estate Tax
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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ExcessK ASltK3966666pesos 7 2666666pesosK2966666 pesos
4ow lets compute for the ampT to be shouldered by the buyer$
ampT for the buyer KC x ExcessK66 x 2966666 pesosK16666 pesos
The ampT to be shouldered by the seller is as follows$
ampTKC x SltK66 x 2666666 pesosK6666 pesos
Take note that the total ampT is 16666 pesos M 6666 pesos K 296666 pesos which isconsistent with our first computation The ampT was gtust split between the buyer and theseller
s investors we should always try to negotiate for the best terms and in relation to thisparticular example always try to have the other party shoulder the ampT
The seller will still be the one to file the ampT and he shall have to file the return in an uthoriBed gent -ank within the evenue istrict where the property is located inakati within 06 days the deed of sale was executed
Creditable Withholding Tax In Real Estate Transactions
ampreditable withholding tax (ampWT) is the tax which is withheld by the buyerDwithholding
agent from his payment to the seller for the sale of the sellers ordinary assetDservices
and which tax is creditable against the income tax payable of the seller I know this
sounds confusing so let me tell you about the withholding tax system first
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices o
read up on the rele$ant laws and regulations also
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-ackground on the Withholding Tax System
We all know that the ordinary income of a personDcorporation is subgtect to regular
income tax Fnder the withholding tax system the government gives the buyer the
responsibility to withhold a certain percentage of his payment to the seller and remit thesame to the government Thus the amount remitted by the buyer to the seller is less
than the purchase price The buyer should provide the seller with -I orm 4o
3065 (ampertificate of ampreditable Taxes Withheld) which states the amount of the taxes he
withheld
The tax withheld is called the withholding tax and the buyer in this case is called a
withholding agent ltlease note that this only applies to the ordinary income of the seller
as opposed to his capital gain ltlease refer to my earlier post on the difference betweenordinary assets and capital assets
ldquoEhat is the rationale or this systemF+ you may ask
To put it simply the tax withheld by the buyer acts as the advanced payment of the
sellers taxes Since the seller will only pay income taxes on a quarterly basis and the
government spends all throughout the year it would be difficult for the government to
operate if it only gets income taxes quarterly lso since the buyer withholds only a
small percentage of the sellers gross receipts (lets say 3C) the government is alerted
that the seller realiBed income to the extent of the grossedup amount of the taxes
withheld
or example lt366666 which pertains to 3C withholding tax means that the seller sold
lt26666666 worth of assetsDservices for which he should pay income taxes When the
time comes for the payment by the seller of his income taxes and he doesnt declare
the income from which the buyer withheld taxes a discrepancy will arise and the
government will have a tip to investigate whether the seller is paying the correct taxes
Take note the -ureau of Internal evenue (-I) already has computer software in
place which determines discrepancies automatically
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n the part of the buyer he must withhold taxes otherwise he will not be able to
deduct his expense or example if his expense is lt26666666 and he is required to
withhold 3C of this or lt366666 and he does not withhold and remit this amount for
income tax computation purposes he may not deduct his lt266666 expense from his
taxable income
Thus if his gross income is lt36666666 and he may not deduct the lt26666666
expense (assuming there are no other deductible expenses of course) he will pay taxes
based on a net income of lt36666666 instead of lt26666666
n the part of the seller since the taxes withheld act as his advanced payment of his
income tax when the time comes for the quarterly payment of income taxes he will
subtract the tax withheld from his income tax payable or example if his income taxpayable is lt0366666 and the tax withheld from him is lt366666 then he will only pay
lt0666666 income tax
s proof of the taxes withheld he should attach the -I orm 4o 3065 (ampertificate of
ampreditable Taxes Withheld) provided by the buyer to his income tax return
ampreditable Withholding Taxes n eal Estate Transactions
s earlier noted this only applies to the sale of real estate which are ordinary assets of
the seller Thus when the real estate sold is a capital asset to the seller his income
from the sale of real estate will be subgtect to capital gains tax and no creditable
withholding tax shall be imposed on the transaction
ltlease refer to my earlier post about ordinary assets vs capital assets rom hereon we
will assume that we are talking about the sale of ordinary real estate assets
oing now to the creditable withholding tax base the withholding agentDbuyer isrequired to withhold a creditable withholding tax based on the higher of the following$
a) gross selling priceDtotal amount of consideration or
b) the fair market value determined in accordance with Section (E) of the ampode
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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-ackground on the Withholding Tax System
We all know that the ordinary income of a personDcorporation is subgtect to regular
income tax Fnder the withholding tax system the government gives the buyer the
responsibility to withhold a certain percentage of his payment to the seller and remit thesame to the government Thus the amount remitted by the buyer to the seller is less
than the purchase price The buyer should provide the seller with -I orm 4o
3065 (ampertificate of ampreditable Taxes Withheld) which states the amount of the taxes he
withheld
The tax withheld is called the withholding tax and the buyer in this case is called a
withholding agent ltlease note that this only applies to the ordinary income of the seller
as opposed to his capital gain ltlease refer to my earlier post on the difference betweenordinary assets and capital assets
ldquoEhat is the rationale or this systemF+ you may ask
To put it simply the tax withheld by the buyer acts as the advanced payment of the
sellers taxes Since the seller will only pay income taxes on a quarterly basis and the
government spends all throughout the year it would be difficult for the government to
operate if it only gets income taxes quarterly lso since the buyer withholds only a
small percentage of the sellers gross receipts (lets say 3C) the government is alerted
that the seller realiBed income to the extent of the grossedup amount of the taxes
withheld
or example lt366666 which pertains to 3C withholding tax means that the seller sold
lt26666666 worth of assetsDservices for which he should pay income taxes When the
time comes for the payment by the seller of his income taxes and he doesnt declare
the income from which the buyer withheld taxes a discrepancy will arise and the
government will have a tip to investigate whether the seller is paying the correct taxes
Take note the -ureau of Internal evenue (-I) already has computer software in
place which determines discrepancies automatically
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n the part of the buyer he must withhold taxes otherwise he will not be able to
deduct his expense or example if his expense is lt26666666 and he is required to
withhold 3C of this or lt366666 and he does not withhold and remit this amount for
income tax computation purposes he may not deduct his lt266666 expense from his
taxable income
Thus if his gross income is lt36666666 and he may not deduct the lt26666666
expense (assuming there are no other deductible expenses of course) he will pay taxes
based on a net income of lt36666666 instead of lt26666666
n the part of the seller since the taxes withheld act as his advanced payment of his
income tax when the time comes for the quarterly payment of income taxes he will
subtract the tax withheld from his income tax payable or example if his income taxpayable is lt0366666 and the tax withheld from him is lt366666 then he will only pay
lt0666666 income tax
s proof of the taxes withheld he should attach the -I orm 4o 3065 (ampertificate of
ampreditable Taxes Withheld) provided by the buyer to his income tax return
ampreditable Withholding Taxes n eal Estate Transactions
s earlier noted this only applies to the sale of real estate which are ordinary assets of
the seller Thus when the real estate sold is a capital asset to the seller his income
from the sale of real estate will be subgtect to capital gains tax and no creditable
withholding tax shall be imposed on the transaction
ltlease refer to my earlier post about ordinary assets vs capital assets rom hereon we
will assume that we are talking about the sale of ordinary real estate assets
oing now to the creditable withholding tax base the withholding agentDbuyer isrequired to withhold a creditable withholding tax based on the higher of the following$
a) gross selling priceDtotal amount of consideration or
b) the fair market value determined in accordance with Section (E) of the ampode
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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n the part of the buyer he must withhold taxes otherwise he will not be able to
deduct his expense or example if his expense is lt26666666 and he is required to
withhold 3C of this or lt366666 and he does not withhold and remit this amount for
income tax computation purposes he may not deduct his lt266666 expense from his
taxable income
Thus if his gross income is lt36666666 and he may not deduct the lt26666666
expense (assuming there are no other deductible expenses of course) he will pay taxes
based on a net income of lt36666666 instead of lt26666666
n the part of the seller since the taxes withheld act as his advanced payment of his
income tax when the time comes for the quarterly payment of income taxes he will
subtract the tax withheld from his income tax payable or example if his income taxpayable is lt0366666 and the tax withheld from him is lt366666 then he will only pay
lt0666666 income tax
s proof of the taxes withheld he should attach the -I orm 4o 3065 (ampertificate of
ampreditable Taxes Withheld) provided by the buyer to his income tax return
ampreditable Withholding Taxes n eal Estate Transactions
s earlier noted this only applies to the sale of real estate which are ordinary assets of
the seller Thus when the real estate sold is a capital asset to the seller his income
from the sale of real estate will be subgtect to capital gains tax and no creditable
withholding tax shall be imposed on the transaction
ltlease refer to my earlier post about ordinary assets vs capital assets rom hereon we
will assume that we are talking about the sale of ordinary real estate assets
oing now to the creditable withholding tax base the withholding agentDbuyer isrequired to withhold a creditable withholding tax based on the higher of the following$
a) gross selling priceDtotal amount of consideration or
b) the fair market value determined in accordance with Section (E) of the ampode
8152019 Capital Gain-estate Tax
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
8152019 Capital Gain-estate Tax
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 3662 the percentages of taxes to be withheld are as follows$
( Fpon the following values of real property where the seller Dtransferor is habitually
engaged in the real estate business as per proof of registration with the NF- or the
Fampamp or other satisfactory evidence (for example heDit consummated during the
preceding year at least six taxable real estate transactions regardless of amount)$
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P50000000) orless
15
)With a selling price of ore than Five Hundred Thousand Pesos ut not orethan To $illion Pesos (amp000amp00000)
0
c)With a selling price of ore than To $illion Pesos (amp000amp00000)50
Where the seller transferor is not haitually engaged in the real estate usiness(ut the real estate sold is an ordinary asset)
0
C
Where the seller transferor is eept fro creditale ithholding ta inaccordance ith Section 5+5 of evenue egulations -o When theseller is eept fro incoe taes 2s earlier notedamp the creditale taesithheld serve as advance payent of incoe taes So hen a seller is taeeptamp it follos that no ta should e ithheld fro his incoe3
4ept
ltlease note that the sale of foreclosed properties by banks is subgtect to creditable
withholding tax of C because banks are not considered as habitually engaged in the
real estate business and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to evenue egulations 4o 53660
Time and ltlace of ltayment of ampreditable Withholding Tax
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
8152019 Capital Gain-estate Tax
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3456
96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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eneral ule
Section 8 of 4o 6686 dated ebruary 21 366 provides for the time and place of
payment of creditable withholding tax and ST on the sale exchange or other mode of
onerous disposition of real properties classified as ordinary assets
AETISEE4T
ampreditable withholding taxes deducted and withheld by the withholding agentDbuyer on
the sale transfer or exchange of real property classified as ordinary asset shall be paid
by the withholding agentDbuyer upon filing of the return with the uthoriBed gent -ank
(-) located within the evenue istrict ffice () having gturisdiction over the
place where the property being transferred is located within ten (26) days following the
end of the month in which the transaction occurred The creditable withholding tax
return is -I orm 26
Taxes withheld in ecember shall be filed on or before Ganuary 29 of the following year
ltlease note that this is subgtect to the rules prescribed by Electronic iling and ltayment
System (E ltS) regulations in case the taxpayer is an E ltS taxpayer Fseful tip$ =ou
can find the -s for each in the -I website Gust click on the number
concerned
Rles nder ection )+) - o Revene Reglations RR 0o )1234 as amended by RR 0o 5+1)6674 in cases here the byers areengaged or not engaged in trade or bsiness8
- -uyer is not engaged in trade or business
5 Installment ale
Fnder Section 3953 (G) of evenue egulations () 4o 31 as amended by
4o 253660 if the sale is a sale of property on the installment plan (ie payments in
the year of sale do not exceed twenty five percent (39C) of the selling price) no
withholding is required to be made on the periodic installment payments
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 2856
espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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httpslidepdfcomreaderfullcapital-gain-estate-tax 2956
ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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In such a case the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell whichever is
higher shall be withheld on the last installment or installments immediately prior to such
last installment if the last installment is not sufficient to cover the tax due to be paid to
the seller until the tax is fully paid
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installment
plan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
amp -uyer is engaged in trade or business
5 Installment ale
If the sale is a sale of property on the installment plan +ie payments in the year of sale
do not exceed twenty five percent (39C) of the selling price the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the ampontract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the ampontract to Sell whichever is higher
) Cash asis or eerred 9ayment ale 0ot on the Installment 9lan
If the sale is on a cash basis or is a deferredpayment sale not on the installmentplan (that is payments in the year of sale exceed 39C of the selling price) the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property whichever is higher on the first installment
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
8152019 Capital Gain-estate Tax
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
8152019 Capital Gain-estate Tax
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
8152019 Capital Gain-estate Tax
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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In any case no ampertificate uthoriBing egistration (amp)DTax amplearance ampertificate
(TampN) shall be issued to the buyer unless the withholding tax due on the sale transfer
or exchange of real property has been fully paid
or the sale of property on installment basis or deferred payment basis where the
ampontract to Sell is always executed before the execution of the eed of Sale the said
ampontract to Sell must be attached to the eed of bsolute Sale executed upon
completion of the payments and the duly notariBed original duplicate copy of both
documents must be presented to the having gturisdiction of the place where the
property is located for validation of the correctness of issuance of ampDTampN
If upon completion of the payment of the purchase price of real property classified as
ordinary asset but before the execution of the eed of Sale the buyer decides toassign his right over the property to another person for a consideration the assignment
shall be considered a separate sale of real property and therefore subgtect to the
creditableDexpanded withholding tax (EWT) or final withholding of capital gains tax as
the case may be which shall be withheld by the assignee of such property based on the
consideration per eed of ssignment or the fair market value of such property at the
time of assignment whichever is higher and to the ST imposed under Sec 21 of the
same ampode using the same basis
It is to be clarified however that sale of interest in real property (real property
purchased on installment covered by ampontract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realiBed gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer
What yo need to no abot ale1(dded Tax (T on the sale oReal Estate
pdated on $ay amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 2556
case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
8152019 Capital Gain-estate Tax
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
8152019 Capital Gain-estate Tax
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3456
96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3556
366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3656
8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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lot of people have questions on taxes including Aaluedded Tax or AT +2 on the
sale of eal Estate +3 so I will try my best to explain it as simply as I can
The subgtect of taxes is quite technical so I apologiBe if my explanation may seem quite
hard to digest at times
Why should we learn about taxesJ
Why is it important to know whether the sale of a certain property is subgtect to AT and
ampreditable Withholding Tax (ampWT) or ampapital ains Tax (ampT)J To put it simply if you
pay the wrong tax for example ampT instead of AT and ampWT you may be liable for
deficiency AT and ampWT plus penalties and you would have to undergo a long and
difficult process to get a refund (ood luck in getting a refundO)
side from the very painful payment of a lot of taxes there may be a delay in the r
elease of the ampertificate uthoriBing egistration (amp) which you need in order for the
title to the property to be transferred to the name of the buyer
In addition to the above AT should be considered in the pricing of real estate sold
4ote that compared to a capital asset subgtect to C ampT an ordinary asset will be
subgtect to ampWT of as high as C plus 23C AT Thus AT may make or break atransaction or lower the profit of the seller
When is a sale of real property subgtect to ATJ
If the sellertaxpayer is a ATregistered person the sale of his ordinary asset shall be
subgtect to AT
person should register as a AT entity if his gross annual sales andDor receipts
exceed lt212196666 in a year If he is not originally registered as a AT entity but heexceeded the threshold he should submit -I orm 4o 2169 (Taxpayer egistration
Fpdate) to change to AT
When is an asset considered as ordinaryJ rdinary assets are those which are$
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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2 Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable yearP or
3 eal property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or businessP or
0 eal property used in trade or business (ie buildings andDor improvements) of a
character which is subgtect to the allowance for depreciation provided for under Sec 08( )
of the ampodeP or
8 eal property used in trade or business of the taxpayer
In simple terms real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer 9lease read Revene Reglations RR 0o
+1)667 +0 in ll to determine hen an asset shall be considered as capital or
ordinary lt this is also dependent on the classiication o the taxpayer
I also wrote about the ampreditable Withholding Tax (ampWT)
here$ http$DDwwwforeclosurephilippinescomD3661D60Dcreditablewithholdingtaxin
realhtml and the ampapital ains Tax (ampT)
here$ http$DDwwwforeclosurephilippinescomD3661D63Drealestatetaxationwhatis
capitalhtml you may read the said posts should you wish to learn more about them
AT Taxpayer
The AT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers real
estate developers andDor real estate lessors taxpayer whose primary purpose of
engaging in business or whose rticles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business
ow about those not in the above listJ egistration with the NF- or Fampamp as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate If the taxpayer is not registered with the
NF- or Fampamp as a real estate dealer or developer heDit may nevertheless be
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3456
96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3556
366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
8152019 Capital Gain-estate Tax
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
8152019 Capital Gain-estate Tax
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
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deemed to be engaged in the real estate business through the establishment of
substantial relevant evidence (such as consummation during the preceding year of at
least six () taxable real estate sale transactions regardless of amountP registration as
habitually engaged in real estate business with the Nocal overnment Fnit or the
-ureau of Internal evenue (-I) etc)
any ask how are the six taxable real estate sale transactions counted ccording to
our real estate mentor when you buy a property and later sell it those are counted as
two transactions I believe this is the conservative position It will actually depend on the
-I officer processing your papers Technically and as written it says six sale
transactions
person who is not engaged in the real estate business but who is selling real propertywhich is classified as its ordinary asset is also subgtect to AT This is pursuant to
4o 865 which provides$
ldquoGowe$er e$en i the real property is not primarily held or sale to customers or held or
lease in the ordinary course o trade or business but the same is used in the trade or
business o the seller the sale thereo shall be subect to HA- being a transaction
incidental to the taxpayerrsquos main business+
Thus if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business the said sale shall be subgtect to AT
notwithstanding that the taxpayer is not engaged in the real estate business
ltlease note thank banks are not considered as AT taxpayers Thus their sale of
foreclosed properties are not subgtect to AT They are subgtect instead to ampreditable
Withholding tax ( ampWT) Their foreclosed assets when sold are considered as ordinary
assets but banks are not considered as engaged in the real estate business
AT rate
The sale of properties which may be considered as ordinary assets would be subgtect to
the 23C +8 AT effective ebruary 2 366
Tax base of output AT
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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httpslidepdfcomreaderfullcapital-gain-estate-tax 2856
espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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The tax base of the 23C output AT is the selling price (Slt) or the fair market value
( A) of the property whiche$er is higher
If AT is not billed separately in the document of sale the selling price stated in the
deed is deemed inclusi$e o HA- Thus to get the selling price without AT divide the
selling price in the deed by 223 To get the AT multiply the selling price without AT by
23
What if the gross selling price in the document of sale is equal to the Bonal value or
market value of the propertyJ Will the selling price without AT be effectively lower than
the Bonal or market value of the propertyJ 4o the BonalDmarket value shall be
considered as net of the output AT +9
ltlease note that the AT should be separately indicated in the document of sale and
official receipt as there are penalties for noncompliance +
AT payable
The amount of AT payable is the difference between the output AT and input AT
Qeep the ATregistered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input AT
which can reduce your output AT payable
Time of payment of AT
The time of payment will depend on whether a sale is an Installment Sale or a eferred
ltayment Sale sale is on installment if the initial payments in the year of sale do not
exceed 39C of the gross selling price sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 39C of the gross selling price +5
AETISEE4T
Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made It
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
8152019 Capital Gain-estate Tax
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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covers any downpayment made and includes all payments actually or constructively
received during the year of sale the aggregate of which determines the limit set by the
law
In other words add the downpayment plus all amortiBation payments (principal portion
only) during the year and compute if the total exceeds 39C of the gross selling price
A eerred payment Cash basis
The transaction shall be treated as a cash sale which makes the entire selling price
subgtect to AT in the month of sale
Bnstallment basis
Each installment payment actually andDor constructively received by the seller is subgtect
to AT
The monthly AT return should be filed on or before the 36 th day of the month following
the close of the 2 st two months of the quarter ( ebruary 36 arch 36 ay 36 Gune 36
ugust 36 September 36 4ovember 36 ecember 36) while the quarterly AT return
should be filed on or before the 39 th day of the month following the last month of the
quarter (pril 39 Guly 39 ctober 39 Ganuary 39)
ltlace of payment
The AT should be paid at the uthoriBed gent -ank (-) of the evenue istrict
ffice () where the seller is registered as a taxpayer In places where there are
no - the return shall be filed directly with the evenue ampollection fficer or
uthoriBed ampity or unicipal Treasurer
-I orm to use
The monthly AT return is -I orm 4o 3996 + while the quarterly AT return is -I
orm 4o 3996R +1
Exemptions from AT
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3456
96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3556
366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3656
8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
8152019 Capital Gain-estate Tax
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
8152019 Capital Gain-estate Tax
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
8152019 Capital Gain-estate Tax
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4056
onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
8152019 Capital Gain-estate Tax
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
8152019 Capital Gain-estate Tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4356
quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
8152019 Capital Gain-estate Tax
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
8152019 Capital Gain-estate Tax
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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The following are exempt from AT$
Sale of residential lot not exceeding lt212196666 (effective Ganuary 2 3623 as per
4o 23622 +26 ) If two or more adgtacent lots are sold or disposed in favor of one
buyer for the purpose of utiliBing the lots as one residential lot the sale shall be exempt
from AT only if the aggregate value of the lots does not exceed lt212196666 (effective
Ganuary 2 3623 as per 4o 23622 +22 )
In practice I have heard of cases where adgtacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold I believe that the reasoning made is that adgtacent condominium units are
not the same as adgtacent residential lots and thus the rule on adgtacent residential lots
does not apply This is the aggressive position +Edit$ 203623 clarified the rules onadgtacent units
Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words a capital asset)P
Sale of real property utiliBed for lowcost ( ie lt59666666) and socialiBed housing ( ie
lt866666) as defined by epublic ct 4o 5351 or the Frban evelopment and ousing
ct of 2113P
Sale of residential house and lot not exceeding lt021136666 (effective Ganuary 23623 as per 4o 23622 +23 ) In practice condominiums use this amount as
the AT threshold
=ore On ocmentary tamp Tax T On Real Estate Transactions
pdated on 9eceer amp 015 y ay 7astillo 7oents
2984TS4$4-T
There are different ST rates on different types of transactions In my previous poston ow to Easily ampompute ST I was referring to ST on the sale of real property
ltlease note that there is ST too on loan agreements lease agreements andmortgages and there are also exemptions from ST or this post aside fromdiscussing these I will also discuss the deadline date and venue for filing the STreturn
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
8152019 Capital Gain-estate Tax
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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I will provide you as well with a blank ST form for your use and reference Take notethat most of this post was actually written by my wife
ST on the sale of real property
Section 21 of the Tax ampode as amended provides$
ltS47 1 Stap Ta on 9eeds of Sale and 7onveyances of eal Property = gtn allconveyancesamp deedsamp instruentsamp or ritingsamp other than grantsamp patents or originalcerticates of adudication issued y the Aovernentamp herey any landamp teneentor other realty sold shall e grantedamp assignedamp transferred or otherise conveyed tothe purchaseramp or purchasersamp or to any other person or persons designated y suchpurchaser or purchasersamp there shall e collected a docuentary stap taamp at therates herein elo prescriedamp ased on the consideration contracted to e paid forsuch realty or on its fair arBet value deterined in accordance ith Section (4) of
this 7odeamp hichever is higherC Providedamp That hen one of the contracting parties isthe Aovernentamp the ta herein iposed shall e ased on the actual considerationC
(a) Ehen the consideration or $alue recei$ed or contracted to be paid or such realtyater maing proper allowance o any encumbrance does not exceed ne thousand
pesos (1 ) iteen pesos (1)
(b) or each additional ne thousand pesos (1 ) or ractional part thereo inexcess o ne thousand pesos (1 ) o such consideration or $alue iteen pesos(1)
Ehen it appears that the amount o the documentary stamp tax payable hereunder hasbeen reduced by an incorrect statement o the consideration in any con$eyance deedinstrument or writing subect to such tax the Commissioner pro$incial or city -reasureror other re$enue oicer shall rom the assessment rolls or other reliable source oinormation assess the property o its true maret $alue and collect the proper taxthereon+
To copute the 9STamp divide the higher aount eteen the selling price and the fairarBet value y P1amp00000amp then round oD the aount to net higher nuer if there are decialsamp then ultiply it y P1500 2s a shortcutamp ultiply the higheraount eteen the selling price and the fair arBet value y 015 and if the 9ST isnot a ultiple of 15amp the 9ST shall e the net higher ultiple of 15
Take note that if the tax base is incorrect (for example the selling price or the Bonalvalue is understated to lower the ST) the true value of the property may be assessedso that the proper tax may be collected ltlease refer to my previous post on ow toEasily ampompute ST as to the sample computations
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
8152019 Capital Gain-estate Tax
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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ST on loan agreements
f you ill e taBing out a loanamp another type of 9ST ay e iposed Section 1+ of the Ta 7odeamp as aendedamp provides for the 9ST on loan agreeentsamp as follosC
ldquoamp C 159 amptamp -ax on All ebt Bnstruments I n e$ery original issue o debt instruments there shall be collected a documentary stamp tax on ne peso (1) oneach -wo hundred pesos (0) or ractional part thereo o the issue price o any such debt instruments ro$ided -hat or such debt instruments with terms o less thanone (1) year the documentary stamp tax to be collected shall be o a proportional amount in accordance with the ratio o its term in number o days to three hundred sixty4i$e ( 3) days ro$ided urther -hat only one documentary stamp tax shall beimposed on either loan agreement or promissory notes issued to secure such loan
or purposes of this section the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debenturescertificates of indebtedness due bills bonds loan agreements including those signedabroad wherein the obgtect of contract is located or used in the lthilippines instrumentsand securities issued by the government of any of its instrumentalities depositsubstitute debt instruments certificates or other evidences of deposits that are eitherdrawing interest significantly higher than the regular savings deposit taking intoconsideration the siBe of the deposit and the risks involved or drawing interest andhaving a specific maturity date orders for payment of any sum of money otherwise thanat sight or on demand promissory notes whether negotiable or nonnegotiable exceptbank notes issued for circulation
9ST on loan agreeents (hich ay e taBen out in order to purchase real property) is thus coputed as P100 for every P0000 To copute the 9STamp divide the loanaount y P0000amp then round oD the aount to net higher nuer if there aredecials 2s a shortcutamp ultiply the loan aount y 005 and round oD the aountto net higher nuer if there are decials
ST on lease agreements
If you will be leasing out your property ST will be imposed at the rate of lt066 for the
first lt366666 and an additional lt266 for every lt266666 in excess of the firstlt366666 pursuant to Section 218 of the Tax ampode to wit$
ldquoampection 19 amptamp tax on eases and ther Giring Agreements ndash n each leaseagreement memorandum or contract or hire use or rent o any lands or tenements or
portions thereo there shall be collected a documentary stamp tax o -hree pesos( ) or the irst -wo thousand pesos (0 ) or ractional part thereo and an
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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additional ne peso (1) or e$ery ne -housand pesos (1 ) or ractional partthereo in excess o the irst -wo thousand pesos (0 ) or each year o the term osaid contract or agreement+
To compute ST multiply the monthly rent by 23 months and then by the number ofyears stated in the contract Subtract lt366666 and multiply the amount by 662 thenadd lt066
2984TS4$4-T
or example the monthly rent is lt2666666 and the contract is for 0 years The ST iscomputed as follows$
onthly rent lt2666666ultiply by 23 months
nnual rent K lt23666666ultiply by 0 yearsTotal contract amount K lt0666666Subtract lt3666 K lt0966666ultiply this by 662 K lt09ltlus lt066ST K lt0266
s a shortcut multiply the contract amount by 662 and add lt266 to get the ST
If the total contract amount is not a multiple of lt266666 for example its lt0696666round it up to the next 2666 then multiply the contract amount by 662 and add lt266 toget the ST
ST on mortgages
Section 219 of the Tax ampode provides$
ldquo Section 195 amptamp -ax on 2ortgages ledges and eeds o -rust ndash n e$erymortgage or pledge o lands estate or property real or personal heritable or mo$able
whatsoe$er where the same shall be made as a security or the payment o any deiniteand certain sum o money lent at the time or pre$iously due and owing o orborne to be
paid being payable and on any con$eyance o land estate or property whatsoe$er in trust or to be sold or otherwise con$erted into moneywhich shall be and intended only as security either by express stipulation or otherwisethere shall be collected a documentary stamp tax at the ollowing rates
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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(a) Ehen the amount secured does not exceed i$e thousand pesos ( ) -wenty pesos (0)
(b) n each i$e thousand pesos ( ) or ractional part thereo in excess o i$ethousand pesos ( ) an additional tax o -en pesos (1)
n any mortgage pledge or deed o trust where the same shall be made as a security or the payment o a luctuating account or uture ad$ances without ixed limit thedocumentary stamp tax on such mortgage pledge or deed o trust shall be computedon the amount actually loaned or gi$en at the time o the execution o the mortgage
pledge or deed o trust additional documentary stamp tax shall be paid which shall becomputed on the basis o the amount ad$anced or loaned at the rates speciied abo$ero$ided howe$er -hat i the ull amount o the loan or credit granted under themortgage pledge or deed o trust shall be computed on the amount actually loaned orgi$en at the time o the execution o the mortgage pledge or deed o trust Gowe$er isubse8uent ad$ances are made on such mortgage pledge or deed o trust additionaldocumentary stamp tax shall be paid which shall be computed on the basis o theamount ad$anced or loaned at the rates speciied abo$e ro$ided howe$er -hat i theull amount o the loan or credit granted under the mortgage pledge or deed o trust isspeciied in such mortgage pledge or deed o trust the documentary stamp tax
prescribed in this ampection shall be paid and computed on the ull amount o the loan orcredit granted+
To compute ST subtract lt9666 from the contract amount then divide whats left by
lt966666 and round off any decimal to the higher number ultiply this by 26 then addlt3666
To illustrate if the amount secured is lt2666666 the ST is computed as follows$
mount secured lt2666666Subtract lt9666 K 262666ivide by lt966666 K 3636ound off to higher number K 32ultiply by 26 K 326
dd 36 K lt306 ST
s a shortcut divide the contract amount by lt966666 and round off any decimal to thehigher number ultiply this by 26 then add lt2666
Exemptions from ST
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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Section 1 of the Ta 7odeamp as aendedamp provides the docuents hich areeept fro 9STamp including loan agreeents hich does not eceed P50amp000amp viEC
lt(d) oan agreeents or proissory notesamp the aggregate of hich does not eceed To hundred fty thousand pesos (P50amp000)amp or any such aount as ay e
deterined y the Secretary of Financeamp eecuted y an individual for his purchaseon installent for his personal use or that of his faily and not for usiness orresaleamp arter or hire of a houseamp lotamp otor vehicleamp appliance or furnitureC Providedamphoeveramp That the aount to e set y the Secretary of Finance shall e inaccordance ith a relevant price inde ut not to eceed ten percent (10 ) of thecurrent aount and shall reain in force at least for three () yearsG
eadline for filing the ST return
nder evenue egulations () -o 5 00 dated $arch 1 amp 00amp the 9ST eturn( For -o 000 gtT) shall e led ithin ve (5) days after the close of the
onth hen the taale docuent as adeamp signedamp accepted or transferred Foreapleamp the 9ST on a taale docuent signed on 2pril 15amp 00 ill e due on$ay 5amp 00
Aenue for filing the ST return
The 9ST due shall e paid at the sae tie the aforesaid return is led ith the22 having urisdiction over the place here the property eing transferred islocated ased on the consideration contracted to e paid for such realty or on itsfair arBet value deterined in accordance ith Section (4) of the Ta 7odeamp
hichever is higher
ltlease feel free to leave a comment below
What is Transer Tax
pdated on gtctoer 5amp 01 y ay 7astillo 6+ 7oents
2984TS4$4-T
transfer tax is imposed on tax on the sale donation barter or any other mode of
transferring ownership or title of real property at the maximum rate of 96C of 2C (59C
of 2C in the case of cities and municipalities within etro anila) of the total
consideration involved in the acquisition of the property or of the fair market value in
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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case the monetary consideration involved in the transfer is not substantial whichever is
higher This is pursuant to Section 209 of the Nocal overnment ampode of 2112 (Namp)
=ou need to pay the transfer tax because the evidence of its payment is required by the
egister of eeds of the province concerned before registering any deed This is also
required by the provincial assessor before cancelling an old tax declaration and issuing
a new one in its place 9lease do not conse the transer tax hich is paid to the
local government ith the transer taxes de to the IR (which may either be
donors or estate taxes)
isclaimer Ehile great eort has been taen to ensure the accuracy o the discussion
here as o its writing this is not intended to replace seeing proessional ser$ices
Always consult with your tax attorneys and read up on the rele$ant laws and regulationsalso
Who should pay
The payment of the transfer tax is the responsibility of the seller donor transferor
executor or and administrator
When to pay
The deadline for payment is sixty (6) days from the date of the execution of the deed
or from the date of the decedents death ltlease note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (06) days from the date of
notariBation
Surcharges and penalties for late payments (as per section 2 of 526)
Surcharge 7 4o more than twentyfive percent (39C) of the amount of taxes fees orcharges not paid on time
ltenalty 7 4o more than two percent (3C) per month of the unpaid taxes fees or
charges including surcharges until such amount is fully paid but in not to exceed thirtysix
(0) months or seventytwo percent (53C)
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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Where to pay
The transfer tax is to be paid at the Treasurers ffice of the city or municipality where
the property is located
equirements
In general the requirements for the payment of transfer tax are the following$
ampertificate uthoriBing egistration from the -ureau of Internal evenueP
ealty tax clearance from the Treasurers fficeP and
fficial receipt of the -ureau of Internal evenue (for documentary stamp tax)
Transfer Tax ates
With regard to the transfer tax rates please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property =ou
have to check the rates on a per city or per municipality basis as the Namp only provides
for the maximum rates amplick on the links below for the transfer tax rates of magtor cities
anila
ampaloocan 7 +I have no idea why the transfer tax rate in ampaloocan is 39C of 2C
ampebu
avao
Nas ltinas
akati
andaluyong
arikina
ltasig
RueBon ampity
The http$DDwwwdoingbusinessorg site is so cool =ou can learn about the requirements
for registering property etc with cost and estimated time to complete
Transfer Tax -ase
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
8152019 Capital Gain-estate Tax
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
8152019 Capital Gain-estate Tax
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3556
366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 3656
8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
8152019 Capital Gain-estate Tax
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
8152019 Capital Gain-estate Tax
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
8152019 Capital Gain-estate Tax
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
8152019 Capital Gain-estate Tax
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
8152019 Capital Gain-estate Tax
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
8152019 Capital Gain-estate Tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
8152019 Capital Gain-estate Tax
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4956
f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
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In the case Domulo ampan Juan $s Dicardo Castro in his capacity as City -reasurer
o 2ariina City ltKD =o 15 315 dated ecember 05 05gt one of the issues was the
proper computation of the transfer tax base In this case petitioner San Guan conveyed
real properties to a corporation in exchange for its shares of stock +2 Fsing as basis
Section 209 of the Namp San Guan wanted to pay the transfer tax based on the
consideration stated in the eed of ssignment espondent ampastro as the Treasurer
informed him that the tax due is based on the fair market value of the property
ltetitioner ampastro protested the Treasurers computation in writing which the Treasurer
also denied in writing ltetitioner ampastro then filed a ltetition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transferDassignment
The bone of contention was the proper interpretation of Section 209 of the Namp which
provides$
ldquoamp C-B= 1 -ax on -ranser o Deal roperty wnership (a) -he pro$ince may
impose a tax on the sale donation barter or on any other mode o transerring
ownership or title o real property at the rate o not more than ity percent (L) o the
one percent (1L) o the total consideration in$ol$ed in the ac8uisition o the property or
o the air maret $alue in case the monetary consideration in$ol$ed in the transer is
not substantial whiche$er is higher -he sale transer or other disposition o real
property pursuant to DA =o 335 lt0gt shall be exempt rom this tax xxx+
ltetitioner San Guan took the position that the transfer tax base should be the total
consideration involved because the intention of the law is not to automatically apply the
whichever is higher rule e argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value is argument was that since he received
shares of stock in exchange for the real properties there was no monetaryconsideration involved in the transfer
AETISEE4T
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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espondent ampastro on the other hand took the position that the transfer tax base
should be the fair market value because it is higher than the monetary consideration
San Guan received in exchange for his real properties ampastro argued that monetary
consideration as used in the Namp does not only pertain to the price or money involved
but also as in the case of donations or barters to the value or monetary equivalent of
what is received by the transferor which in this case ampastro argued to be the par value
of the shares of stock San Guan transferred in exchange for shares of stock
s anticlimactic as this may sound the ampourt did not rule squarely on the correct
computation of the transfer tax base because it held that a ltetition for andamus was
not the correct remedy andamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of gtudgment)
Sample ampomputation
amponsidering that there is still an issue as to the proper computation of the transfer tax
base I suggest that we not delve into the various interpretations of Section 209 of the
Namp and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value
Nets take for example a residential condominium in ntipolo with a floor area of 96sqm
and a Selling ltrice (Slt) of lthp36 The existing market value as per Tax eclaration
is currently at lthp 2
Since Slt is higher than the arket Aalue we shall use Slt to compute the transfer tax$
ntipolo ampity Transfer Tax ate$ 659C +that is 59C of 2C
Transfer Tax K 659C x 3666666 K lthp29666
What if you dont agree with the Treasurers computationJ
ssuming you disagree with the tax assessment made by a local treasurer you may file
a written protest thereof pursuant to Section 219 of the Namp which provides$
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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ldquoamp C-B= 19 rotest o Assessment I Ehen the local treasurer or his duly
authori6ed representati$e inds that the correct taxes ees or charges ha$e not been
paid he shall issue a notice o assessment stating the nature o the tax ee or charge
the amount o deiciency the surcharges interests and penalties Eithin sixty (3) days
rom the receipt o the notice o assessment the taxpayer may ile a written protest with
the local treasurer contesting the assessment otherwise the assessment shall become
inal and executory -he local treasurer shall decide the protest within sixty (3) days
rom the time o its iling B the local treasurer inds the protest to be wholly or partly
meritorious he shall issue a notice cancelling wholly or partially the assessment
Gowe$er i the local treasurer inds the assessment to be wholly or partly correct he
shall deny the protest wholly or partly with notice to the taxpayer -he taxpayer shall
ha$e thirty ( ) days rom the receipt o the denial o the protest or rom the lapse o thesixty4day (3) period prescribed herein within which to appeal with the court o
competent urisdiction otherwise the assessment becomes conclusi$e and
unappealable+
In the case earlier discussed the ltetitioner protested in writing against the assessment
and espondent denied it in writing as well ltetitioner should thus have either$ 2)
appealed the assessment before the court of competent gturisdiction or 3) paid the tax
and then sought a refund
In my view the ltetitioner San Guan could have made another argument that is
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value) that value is substantial and thus
there is no need for the whichever is higher provision to kick in nyway hopefully this
issue would be decided upon squarely soon as there are really a lot of taxfree
exchanges occurring and we really need guidance on the computation of transfer tax
lterhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme ampourt for a final decision
Taking everything into consideration personally unless the difference in tax that you
need to pay is really significant it would be better to follow the computation of the
Treasurer iling a case in court would require filing fees and fees for tax attorneys not
to mention taking up much of your time If you will not pay the transfer taxes you cannot
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
8152019 Capital Gain-estate Tax
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
8152019 Capital Gain-estate Tax
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
8152019 Capital Gain-estate Tax
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
8152019 Capital Gain-estate Tax
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
8152019 Capital Gain-estate Tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
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transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction Weigh your options first before heading to battle In real
estate as in everything closing the deal fast is key
What gto 0eed to no (bot Real 9roperty Tax R9Tpdated on uly amp 016 y 7herry 8i Saldua 7astillo 7oents
2984TS4$4-T
eal ltroperty Tax (ltT) is a tax that owners of real property need to pay every year so
that the local government unit (NF) will not auction off their property
There are some investors who buy taxdelinquent real properties and participate in
auctions held by NFs and this is one of the ways one can buy properties at lowprices We also publish schedules and lists of taxdelinquent real properties of different
cities 7 they are classified under the category taxdelinquent properties
What is eal ltroperty TaxJ
eal ltroperty Tax is the tax on real property imposed by the Nocal overnment Fnit
(NF) The legal basis is Title II of the Nocal overnment ampode (Namp) epublic ct
() no 526 The implementing rules and regulations of 526 can be
found here
The ltT for any year shall accrue on the first day of Ganuary and from that date it shall
constitute a lien on the property which shall be superior to any other lien mortgage or
encumbrance of any kind whatever and shall be extinguished only upon payment of the
delinquent tax
If you have prior years delinquencies interests and penalties your ltT payment shall
first be applied to them nce they are settled your tax payment may be credited for thecurrent period
Who should pay the ltT
The owner or administrator of the property
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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Where to pay
t the ampity or municipal treasurers office
When to pay
If you choose to pay for one whole year the payment is due on or before Ganuary 02 If
the basic ltT and the additional tax accruing to the Special Education und (SE ) are
paid in advance the sanggunian concerned may grant a discount not exceeding twenty
percent (36C) of the annual tax due Gay wrote about the discount on ltT recently in
his post ow To et 36C iscount on eal ltroperty Taxes
If you choose to pay in installments the four quarterly installments shall be due on or
before the last day of each quarter namely$ arch 02 Gune 06 September 06 andecember 02
In case of failure to pay the basic ltT and other taxes when due the interest at the rate
of two percent (3C) per month shall be imposed on the unpaid amount until fully paid
The maximum number of months is thirtysix (0) months so effectively the maximum
interest rate is seventytwo percent (53C)
ow do you compute real property tax (ltT)J
R9T R9T Rate x (ssessed ale
What are the ltT ratesJ
aximum ltT rates$
Coverage R9T rate
7ities and $unicipalities ithin $etro$anila 3C
Provinces2C
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
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Special Education und (SE ) 7 2C
In addition to the basic ltT the NFs may levy and collect an annual tax of one
percent (2C) which shall accrued exclusively to the Special Education und (SE )
d Aalorem Tax on Idle Nands 7 9C
In addition to the basic ltT the NFs may collect a maximum idle land tax is 9C
assessed value of the property
ow do you compute the ssessed AalueJ
(ssessed ale ampair =aret ale x (ssessmentAevel
Sec 211 (l) of the Namp defines air arket Aalue as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is notcompelled to buy In practice however the air arket Aalue is based on the
assessment of the municipal or city assessor as written in the Tax eclaration
The ssessment Nevel shall be fixed through ordinances of the Sangguniang
ltanlalawigan Sangguniang ltanglungsod or the Sangguniang ltambayan of the
municipality within the etro anila area To get this data look for the tax rdinance of
the city or municipality where your property is located
aximum ssessment Nevel rates
I Nand
Class (ssessment Aevel
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
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esidential36C
Tierland36C
2gricultural86C
7oercial96C
ndustrial96C
$ineral96C
7
II -uilding and ther Structures
2 esidential
amp= Over t 0ot Over (ssessment Aevel
666 25966666 6C
25966666 06666666 26C
06666666 96666666 36C
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
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96666666 59666666 39C
59666666 266666666 06C
266666666 366666666 09C
366666666 966666666 86C
966666666 2666666666 96C
2666666666 6C
7
3 gricultural
amp= Over t 0ot Over (ssessment Aevel
06666666 39C
06666666 96666666 06C
96666666 59666666 09C
59666666 266666666 86C
266666666 366666666 89C
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
8152019 Capital Gain-estate Tax
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
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366666666 96C
7
AETISEE4T
0 ampommercialDIndustrial
amp= Over t 0ot Over (ssessment Aevel
06666666 06C
06666666 96666666 09C
96666666 59666666 86C
59666666 266666666 96C
266666666 366666666 6C
366666666 966666666 56C
966666666 2666666666 59C
2666666666 6C
7
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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8 Timberland
amp= Over t 0ot Over (ssessment Aevel
06666666 89C
06666666 96666666 96C
96666666 59666666 99C
59666666 266666666 6C
266666666 366666666 9C
366666666 56C
7
II achineries
Class (ssessment Aevel
2gricultural86C
esidential96C
7oercial6C
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
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ndustrial6C
Sample ampomputation
ata8
(ctal se o property8 esidential
Aocation8 ampity within etro anila
amp= per assessorBs oicer based on Tax eclaration 8
Nand 7 lt096666
Improvement 7 lt096666
(ssessment Aevel or Aand8 36C
(ssessment Aevel or Improvement8 36C
Note -he assessment le$els are ixed through ordinances o the ampangguniang
anlalawigan ampangguniang anglungsod or the ampangguniang ambayan o the
municipality within the 2etro 2anila area Ee will be using the maximum rates or
sample computation purposes
Comptation
(ssessed ale o Aand lt096666 x 36C K lt56666
(ssessed ale o Improvement lt096666 x 36C K lt56666
asic Real 9roperty Tax or Aand and Improvement
K (lt56666 M lt56666) x 3C K lt366
pecial Edcation ampnd Eamp or Aand and Improvement (lt56666 M lt56666) x
2C K lt2866
8152019 Capital Gain-estate Tax
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
8152019 Capital Gain-estate Tax
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
8152019 Capital Gain-estate Tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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Special amplasses of eal ltroperty
ll lands buildings and other improvements thereon actually directly and exclusi$ely
used for hospitals cultural or scientific purposes and those owned and used by local
water districts and governmentowned or controlled corporations rendering essentialpublic services in the supply and distribution of water andDor generation and
transmission of electric power
What are the assessment levels for special classes of real propertyJ
(ctal Use (ssessmentAevel
7ultural29C
Scientic29C
Hospital29C
ocal ater districts26C
Aovernent oned or controlledcorporations engaged in the supply
and distriution of ater and orgeneration and transission of
electric poer
26C
What are Idle NandsJ
2 gricultural lands more than one (2) hectare in area suitable for cultivation dairying
inland fishery and other agricultural uses of which remain uncultivated or
unimproved
Exceptions
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
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i Aands planted to permanent or perennial crops ith at least 6 trees to a
hectare and
ii Aands sed or graDing prposes 0ote8 pt goats or cos on yor property
3 Nands ther than gricultural located in a city or municipality more than 2666 sqm
in area of which remain unutiliBed or unimproved
7 Residential lots in sbdivisions4 regardless o land areaonation(s (n Estate 9lanning Tool ( iscssion on onorBs Tax
pdated on uly amp 016 y 7herry 8i Saldua 7astillo 1 7oents
2984TS4$4-T
-he donation o properties can be used as a tool or estate planning ne ust needs
to be aware that donations are subect to donorrsquos tax Dead this to ind out how much
donorrsquos tax you need to pay when donating a property as part o estate planning
eal property gtust like any other material possession may not be brought to the
afterlife =ou need to transfer property sooner or later Fsually however the transfer of
property prior to death is a taboo subgtect so many end up dealing with property transfer
problems only after a person has died It is always good to be prepared since we will allsurely die 7 there is simply no escaping it so might as well prepare for the inevitable
onation of properties are subgtect to donors tax
Why donate your properties prior to deathJ
8152019 Capital Gain-estate Tax
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
8152019 Capital Gain-estate Tax
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
8152019 Capital Gain-estate Tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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onation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates If you have a lot of properties at the
time of death the estate tax would be higher because the total amount of the
properties will probably fall under a higher tax range
MB you want to learn more about estate tax (the tax that needs to be paid ater death)
read this eath Deal state and state -ax
n another note it is usually the case that the family spends a lot for medical care prior
to death and because of this the familys cash reserves are depleted If the family is
not liquid and they need to pay the estate tax within six months from the time of death
many times the family is forced to sell their properties below market value because theyare under time pressure It is during these pressure points that many investors are able
to buy good properties at a good price I dont want to view it as taking advantage of the
misfortune of others 7 rather I want to think of it as the investors helping the family
solve their cash problem If no one bought the property the family would be in a worse
situation
nother problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property I dont think any parentwould want their loved ones to be fighting over money or property If the properties are
already distributed as agreed upon by all parties prior to death then this problem may
be alleviated
Nastly I believe that a person who already thought in advance of the transfer of
properties prior to death and actually had no more significant properties to transfer
upon death would be at peace upon death because heDshe did not leave problems to
hisDher family ealing with grief is hard enough it would be difficult to deal with thenittygritty taxes and whatnot during a most stressful time
f course there are downsides to donation too 7 Who shall control the propertiesJ Who
gets the fruitsDrental incomeJ etcU etcU These may be answered by trusts and other
legal documents -ut for now lets deal with straightforward donation
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
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2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
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3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
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What is onors TaxJ
onors tax is imposed on tax on the transfer by any person resident or nonresident of
a property by gift or an overview on donors tax please check the -I website The
legal basis for donors tax may be found in Sec 1 to Sec 268 of the 4ational Internalevenue ampode (4Iamp) (aka the Tax ampode) ampheck also the onors and Estate Tax
egulations (-I evenue egulations 4o 33660) and evenue emorandum rder
() 4o 21
What is the tax baseJ
The donors tax base shall be the total value of the net gifts during the taxable year The
value of the net gifts shall be based on the air maret $alue (2H) o the gits at the
time o donation In case of real property the tax base shall be the -I Lonal Aalue or
A per Tax eclaration whichever is higher If there is no Lonal Aalue the tax base
shall be the A based on the latest tax declaration If there is an improvement (like a
house or a building) the A of the improvement shall be the construction cost based
on the building permit andDor occupancy permit plus 26C per year after the year of
construction or the A based on the latest tax declaration
The term ldquonet git+ for purposes of donors tax pertains to the net economic benefit
which the done gets from the transfer Thus if a property encumbered with a mortgage
is transferred as a gift but the donee is required to pay the mortgage then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift
If you donate on different dates within a year a donors tax return shall be filed for each
date of donation and the donors tax base shall be based on the accumulated
donations for the current calendar year (Ganuary 2 to ecember 02) Thus the more
gifts you make within a calendar year the higher the probability that the donors tax willfall on a higher tax bracket 4ote though that donors tax previously paid on previous
donations shall be deducted from the donors tax payable The good news here is that
you will get a fresh start for each year and effectively you can donate lt266666 in cash
or in kind at Bero donors tax
8152019 Capital Gain-estate Tax
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=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
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quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4456
Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4556
-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4656
Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4756
When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4856
What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4956
f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
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be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4256
=ou may even donate cash which the donee can use to purchase property so the
property can be in the name of the donee or example a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name since the child cannot purchase directly without a source of income
ltlease note that in case of donation to relatives (not strangers) only one return shall be
filed for several giftsDdonations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date If the giftDdonation involves
congtugal or community property each spouse shall file a separate return for their
respective shares in the said property
eemed ift
If you purchased a property below its fair market value ( A) the difference between
the A and the selling price shall be deemed a gift of the seller subgtect to donors tax
This is also called a transfer for less than adequate consideration
Exemptions from onors Tax
2 owries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate recogniBed natural or adopted
children to the extent of the first Ten thousand pesos (lt26666)P3 ifts made to or for the use of the 4ational overnment or any entity created by any of
its agencies which is not conducted for profit or to any political subdivision of the said
overnmentP and
0 ifts in favor of an educational andDor charitable religious cultural or social welfare
corporation institution accredited nongovernment organiBation trust or philanthropic
organiBation or research institution or organiBation provided however That not more than
thirty percent (06C) of said gifts shall be used by such donee for administration purposes
-ased on the -I website the following are likewise exempt from donors tax$
2 Encumbrances on the property donated if assumed by the donee in the deed of donation
3 onations made to the following entities as exempted under special laws$
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4356
quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4456
Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4556
-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4656
Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4756
When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4856
What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4956
f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
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ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
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If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4356
quaculture epartment of the Southeast sian isheries evelopment ampenter of the
lthilippines
evelopment cademy of the lthilippines
Integrated -ar of the lthilippines
International ice esearch Institute
4ational Social ction ampouncil
amon agsaysay oundation
lthilippine Inventors ampommission
lthilippine merican ampultural oundation
Task orce on uman Settlement on the donation of equipment materials and services
What are the onors Tax ratesJ
The donors tax rate will be based on the law prevailing at the time o donation
or donations made on Ganuary 2 211 up to the present if the donee is a stranger
the donorBs tax rate is thirty percent 76
stranger is a person who is not a brother sister (whether by whole or halfblood)
spouse ancestor and lineal descendant or a relative by consanguinity in the collateral
line within the fourth degree of relationship This gtust means you are related by blood
and you count the degree by going up first to the person who connects you then go
down
AETISEE4T
or example your first cousin is within the fourth degree =ou go up to your dad (2
degree) then up to your lolo (2 degree) then go down to your uncle who is your
dads brother (2 degree) then down to your first cousin (2 degree) so 8 degrees in all
4ote that a child who is legally adopted is not considered a stranger onations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger
If the donee is not a stranger the donors tax rate based on the net gifts are as follows$
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Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
8152019 Capital Gain-estate Tax
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
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Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
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When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
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What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
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f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5056
ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
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o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
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Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4456
Over t not over The tax shallbe
9ls O the excessover
6 266666 Exempt
266666 366666 6 3C 266666
366666 966666 3666 8C 366666
966666 2666666 28666 C 966666
2666666 0666666 88666 C 2666666
0666666 9666666 368666 26C 0666666
9666666 26666666 868666 23C 9666666
26666666 2668666 29C 26666666
Who should pay
The donor or the transferor for less than adequate consideration
When to pay
Within thirty (06) days after the date the gift is made If more than one gift or donation is
made within one year a separate return should be filed for each giftDdonation within
thirty (06) days after the date the gift is made
8152019 Capital Gain-estate Tax
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-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4656
Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4756
When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4856
What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4956
f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5056
ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5156
o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4556
-I orm to be used
-I orm 4o 266 (onors Tax eturn)
Where to file and payD iling procedure
ltrepare three copies of the donors tax return (two copies shall be for the -I and one
copy shall be for the taxpayer) and file them with any uthoriBed gent -ank (-) of
the evenue istrict ffice () having gturisdiction over the place of the domicile of
the donor (that is where the donor lives) at the time of the transfer
In places where there are no - the return will be filed directly with the evenue
ampollection fficer or duly uthoriBed ampity or unicipal Treasurer where the donor was
domiciled at the time of the transfer If the donor has no legal residence in thelthilippines file the return with evenue istrict 4o 01 7 South RueBon ampity (this is
along RueBon venue with a -lt branch at the ground floor)
In the case of gifts made by a nonresident alien (that is not a ilipino citiBen) the
return may be filed with evenue istrict 4o 01 7 South RueBon ampity or with the
lthilippine Embassy or amponsulate in the country where donor is domiciled at the time of
the transfer
ltenalties for late payment
Same as other taxes 39C surcharge plus 36C interest per year (under Secs 38 and
381 of the Tax ampode respectively) If there is fraud the surcharge shall be 96C =ou
may also pay compromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties )
ocumentary requirements
-ased on the -I website the following requirements must be submitted before the Tax
amplearance ampertificateDampertificate uthoriBing egistration (that is the document required
for the title to be transferred) can be released$
1 9eed of 9onation
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4656
Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4756
When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4856
What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4956
f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5056
ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5156
o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4656
Sorn Stateent of the relationship of the donor to the donee
Proof of ta creditamp if applicale
6 7ertied true copy(ies) of the gtriginal Transfer 7ondoiniu 7erticate of Title
(front and acB ) of lot and or iproveent donatedamp if applicale
5 7ertied true copy(ies) of the latest Ta 9eclaration (front and acB pages) of lotand or iproveentamp if applicale
lt7erticate of -o proveentG issued y the 2ssessorIs oJce here theproperties have no declared iproveentamp if applicale
+ Proof of valuation of shares of stocBs at the tie of donationamp if applicale
KFor listed stocBs L nespaper clippings or certication issued y the StocB
4change as to the par value per share
KFor unlisted stocBs L latest audited Financial Stateents of the issuingcorporation ith coputation of the ooB value per share
Proof of valuation of other types of personal propertiesamp if applicale
Proof of claied deductionsamp if applicale
10
7opy of Ta 9eit $eo used as payentamp if applicale
dditional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures
eath4 Real Estate4 and Estate Tax
pdated on 2pril 6amp 015 y 7herry 8i Saldua 7astillo 6+ 7oents
2984TS4$4-T
The topic of death is usually taboo on ordinary days except the start of 4ovember when
we remember our dead on ll Saints and ll Souls ay or when we are gtolted by the
death of a close friend or relative We must accept though that we will all die 7 it is gtust
a matter of time With death estate taxes must be settled and we will discuss this here
In times of death we still need to pay our taxes
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4756
When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4856
What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4956
f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5056
ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5156
o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4756
When someone passes away loved ones left behind are usually overwhelmed with
emotions and are unable to do anything I know this from experience -ut there are
certain things that need to be done and someones got to do them Someone has to
arrange for the embalming the wake the casket the interment or cremation the burial
plot (incidentally there are a lot o oreclosed memorial lots) and the gravestone among
others
nd of course someone has to take care of the estate tax
0ote8 or the rest of this article we will use the terms decedent or deceased person
to refer to the person who died
(t ( Glance +show
What is Estate TaxJ
Estate tax is imposed on the transfer of the net estate4 which is the difference between
the gross estate (as defined under Section 9 of the Tax ampode) and allowable
deductions (under Section ) of the decedent Estate tax rates are graduated and
depend on the net estate amount
=et state N Kross state ndash eductions
eal property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax 4onpayment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4856
What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4956
f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5056
ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5156
o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4856
What to do when someone has died
Estate taxwise these are the things that need to be done$
2 ile a 4otice of eath with the -ureau of Internal evenue ithin to months after thedate of death This is applicable when the gross value of the estate exceeds lt3666666
This should be filed by the executor or administrator of the estate or any of the legal heirs
It shall be filed with the where the decedent was domiciled at the time of his death
There is no specific format
3 et a Tax Identification 4umber (TI4) for the Estate of the deceased person by
using -I orm 4o 2162 Fse this TI4 when filing the Estate Tax eturn (-I orm 4o
262)
0 ltrepare the list of assets and liabilities of the decedent et the fair market values of theproperties at the time of death
8 ltrepare the supporting documents for the assets and liabilities as well as the
deductions you are going to take =ou will need these for the estate tax computation and
as attachments to the Estate Tax eturn
a ampertified true copy of the eath ampertificate
b 4otice of eath duly received by the -I if gross estate exceeds lt36666 for
deaths occurring on or after Gan 2 211P or if the gross estate exceeds lt0666 for
deaths occurring prior to Ganuary 2 211c ny of the following$
eed of ExtraGudicial Settlement of the Estate if the estate is settled
extra gtudicially (sample forms may be found here and here )
ampourt rdersDecision if the estate is settled gtudiciallyP
ffidavit of Selfdgtudication (sample here ) and Sworn eclaration of all
properties of the Estate
certified true copy of the schedule of partition of the estate and the
order of the court approving the same if applicable
d ampertified true copy(ies) of the TransferDriginalDampondominium ampertificate of
Title(s) of real property(ies) (front and back pages) if applicable
e ampertified true copy of the latest Tax eclaration of real properties at the time of
death if applicable
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4956
f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5056
ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5156
o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 4956
f ampertificate of 4o Improvement issued by the ssessors ffice declared
properties have no declared improvement or Sworn eclarationDffidavit of 4o
Improvement by at least one (2) of the transferees
g ampertificate of epositDInvestmentDIndebtedness owned by the decedent and the
surviving spouse if applicable
h lthotocopy of ampertificate of egistration of vehicles and other proofs showing the
correct value of the same if applicable
i lthoto copy of certificate of stocks if applicable
gt ltroof of valuation of shares of stocks at the time of death if applicable
or listed stocks 7 newspaper clippings or certification from the Stock
Exchange
or unlisted stocks 7 latest audited inancial Statement of issuing
corporation with computation of book value per share
k ltroof of valuation of other types of personal property if applicable
l ltroof of claimed tax credit if applicable
m amplt Statement on the itemiBed assets of the decedent itemiBed deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos if applicable
n ampertification of -arangay ampaptain for claimed amily ome
o uly notariBed ltromissory 4ote for amplaims against the Estate arising fromampontract of Noan
p ccounting of the proceeds of loan contracted within three (0) years prior to
death of the decedent
q ltroof of the claimed ltroperty ltreviously Taxed
r ltroof of claimed Transfer for ltublic Fse
s ampopy of Tax ebit emo used as payment if applicable
3 ampompute the net estate and estate tax
0 ile the Estate Tax eturn and pay the estate taxes8 ollow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post)
9 ollow the procedure for cancellation of the TI4 of the decedent as discussed in Section
23 of evenue egulations 4o 53623 Fse -I orm 4o 2169 for the cancellation of
TI4
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5056
ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5156
o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5056
ross Estate
ross estate is the value at the time of death of all property real or personal tangible
or intangible wherever situated In the case of a nonresident decedent who at the time
of his death was not a citiBen of the lthilippines only that part of the entire gross estatewhich is situated in the lthilippines shall be included in his taxable estate
The vale o the properties shall be based on their air maret vale amp= as o
the time o death
If the property is a real property the A shall be the higher between the -I Bonal
valuation and A per tax declaration (I paraphrased this)
ltlease also note that also included in the computation of the gross estate are interest or
share in a property transfers in contemplation of death and revocable transfers
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable)
eductions from gross estate
2 Expenses Nosses Indebtedness and Taxes (ENIT)
a uneral expenses 7 Nowest among$
o ctual funeral expensesP
o 9C of the gross estateP and
o lt36666666
b Gudicial expenses of the testamentary and intestate proceedings
c amplaims against the estate
o t the time the indebtedness was incurred the instrument was duly notariBedP
and
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5156
o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5156
o If the loan was contracted within three (0) years before the death of the
decedent the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan
d amplaims of the deceased against insolvent persons
e Fnpaid mortgages etc
3 ltroperty ltreviously Taxed (Aanishing deduction)
3 Transfers for ltublic Fse
o The amount of all bequests legacies devises or transfers to or for the use of the
overnment of the epublic of the lthilippines or any political subdivision thereof for
exclusively public purposes8 amily ome
o air arket Aalue of the amily ome or lt2 million whichever is lower
o s a condition for the exemption or deduction said family home must have been
the decedents family home as certified by the barangay captain of the locality
9 Standard eduction 7 lt2 million (no substantiation needed)
edical Expenses
o edical expenses incurred by the decedent within one (2) year prior to his death
which shall be duly substantiated with receiptso aximum$ lt96666666
5 mount received by heirs under 8125 (retirement benefits of employees of private
firms)
5 Share in the ampongtugal ltroperty
The net share of the surviving spouse in the congtugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax ratesJ
The estate tax rates depend on the date of death or those who died on Ganuary 2
211 and onwards the following are the estate tax rates based on the net estate$
Over But not over The tax shall Plus Of the
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5256
be excess over
0 00amp000 4ept
00amp000 500amp000 0 5 00amp000
500amp000 amp000amp000 15amp000 500amp000
amp000amp000 5amp000amp000 15amp000 11 amp000amp000
5amp000amp000 10amp000amp000 6 5amp000 15 5amp000amp000
10amp000amp000 2nd gtver 1amp15amp000 0 10amp000amp000
AETISEE4T
If the decedent died between Guly 3 2113 to ecember 02 2115 the following are the
applicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 3666666 6C
lt36666666 96666666 9C lt 36666666
96666666 366666666 lt 2966666 C 96666666
366666666 966666666 20966666 23C 366666666
966666666 2666666666 81966666 32C 966666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5356
2666666666 298966666 09C 2666666666
If the decedent died between Ganuary 2 2150 and Guly 35 2113 the following are theapplicable estate tax rates based on the net estate amount$
Over t not Over The Taxhall be
9lsO the Excess
Over
lt 266666 Exempt
lt 2666666 9666666 0C lt 2666666
9666666 5966666 lt 236666 8C 9666666
59666666 26666666 336666 9C 5966666
26666666 29666666 089666 26C 26666666
29666666 36666666 89666 29C 29666666
36666666 06666666 2919666 36C 36666666
06666666 86666666 0919666 39C 06666666
86666666 96666666 619666 06C 86666666
96666666 3966666 1619666 09C 96666666
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5456
3966666 59666666 20856666 86C 3966666
59666666 5966666 2856666 89C 59666666
5966666 266666666 38619666 96C 5966666
266666666 366666666 06089666 90C 266666666
366666666 066666666 0089666 9C 366666666
066666666 201089666 6C 066666666
If the decedent died between September 29 2196 to ecember 02 2153 the following
are the applicable estate tax rates based on the net estate amount$
amprom To ET(TE I0$ERIT(0CE
966666 6 966666 Exempt Exempt
566666 966666 2366666 26C 3V
266666 2366666 0666666 36C 8C
3666666 0666666 9666666 39C C
0666666 9666666 5666666 06C C
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless of the gross value of the estate where the said estate consists of registered
or registrable property such as real property motor vehicle shares of stock or other similar
property for which a clearance rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5556
Sample computations
ltlease refer to -I evenue egulations 4o 33660 for sample computations
When is an Estate Tax return required to be filedJ
When the gross value of the estate exceeds lt366666 (though exempt from tax)P or
egardless 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 rom the BD is re8uired as a condition precedent for the
transfer or ownership thereof in the name of the transferee
When to file and pay
Within six () months from the decedents deathP
Fnless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs
4ot to exceed 9 years in case the estate is settled through the courtsP
4ot to exceed 3 years in case the estate is settled extragtudicially
ltenalties for late payment
The penalties shall include 39C surcharge and 36C interest per year (Fnder Secs 38
and 381 respectively) If fraud is involved the surcharge shall be 96C =ou may also
pay compromise penalties in lieu of imprisonment which can be viewed at the -Is
website through the following link$ chedle o compromise penalties
-I orm to be used
-I orm 4o 262 (Estate Tax eturn)
Where to file
The uthoriBed gent -ank (-) evenue istrict fficer () or duly authoriBed
Treasurer of the city or municipality where the decedent was domiciled at the time o his
death P or
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262
8152019 Capital Gain-estate Tax
httpslidepdfcomreaderfullcapital-gain-estate-tax 5656
If there be no legal residence in the lthilippines with the ffice of the ampommissioner
ow to et -I ampertificate uthoriBing egistration (amp)
The egistry of eeds will not allow you to transfer the title of real properties of adeceased person if there is no -I amp ltlease make sure that you have the
documents as enumerated in the amphecklist of ocumentary equirements (amp) for
Estate Tax which can be found in nnex and 2 of evenue emorandum rder
() 4o 2960 (see pages 5 to 1)
To help you determine the computation for the estate tax due you may refer to
the 4ETT (neTime Transaction) ampomputation Sheet in nnex -0 (pages 2 and
25) also of 4o 2960 ltlease also check the sample computations in -I 4o
33660 and -I orm 4o 262