AN ACT AMENDING
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED,
AND FOR OTHER
PURPOSES
TITLE III
ESTATE AND
DONOR'S TAX
CHAPTER I
ESTATE TAX
SEC.
84. Rates of Estate Tax.
- There shall be levied, assessed, collected and paid upon the transfer
of the net estate as determined in accordance with Sections 85 and 86 of
every decedent, whether resident or nonresident of the Philippines, a tax
based on the value of such net estate, as computed in accordance with the
following schedule:
If the net estate is:
OVER
BUT
NOT OVER
THE
TAX SHALL BE
PLUS
OF
THE EXCESS OVER
P
200,000
Exempt
P
200,000
550,000
0
5%
P
200,000
500,000
2,000,000
P
15,000
8%
500,000
2,000,000
5,000,000
135,000
11%
2,000,000
5,000,000
10,000,000
465,000
15%
5,000,000
10,000,000
And
Over
1,215,000
20%
10,000,000
SEC.
85. Gross Estate.
- the value of the gross estate of the decedent shall be determined by
including the value at the time of his death of all property, real or personal,
tangible or intangible, wherever situated: Provided, however, that
in the case of a nonresident decedent who at the time of his death was
not a citizen of the Philippines, only that part of the entire gross estate
which is situated in the Philippines shall be included in his taxable estate.
(A) Decedent's
Interest.
- To the extent of the interest therein of the decedent at the time of
his death;
(B) Transfer
in Contemplation of Death.
- To the extent of any interest therein of which the decedent has at any
time made a transfer, by trust or otherwise, in contemplation of or intended
to take effect in possession or enjoyment at or after death, or of which
he has at any time made a transfer, by trust or otherwise, under which
he has retained for his life or for any period which does not in fact end
before his death (1) the possession or enjoyment of, or the right to the
income from the property, or (2) the right, either alone or in conjunction
with any person, to designate the person who shall possess or enjoy the
property or the income therefrom; except in case of a bonafide sale for
an adequate and full consideration in money or money's worth.
(C) Revocable
Transfer. -
(1) To the extent of
any interest therein, of which the decedent has at any time made a transfer
(except in case of a bona fide sale for an adequate and full consideration
in money or money's worth) by trust or otherwise, where the enjoyment thereof
was subject at the date of his death to any change through the exercise
of a power (in whatever capacity exerciseable) by the decedent alone or
by the decedent in conjunction with any other person (without regard to
when or from what source the decedent acquired such power), t o alter,
amend, revoke, or terminate, or where any such power is relinquished in
contemplation of the decedent's death.
(2) For the purpose
of this Subsection, the power to alter, amend or revoke shall be considered
to exist on the date of the decedent's death even though the exercise of
the power is subject to a precedent giving of notice or even though the
alteration, amendment or revocation takes effect only on the expiration
of a stated period after the exercise of the power, whether or not on or
before the date of the decedent's death notice has been given or the power
has been exercised. In such cases, proper adjustment shall be made representing
the interests which would have been excluded from the power if the decedent
had lived, and for such purpose if the notice has not been given or the
power has not been exercised on or before the date of his
death, such notice
shall be considered to have been given, or the power exercised, on the
date of his death.
(D) Property Passing
Under General Power of Appointment.
- To the extent of any property passing under a general power of appointment
exercised by the decedent: (1) by will, or (2) by deed executed in contemplation
of, or intended to take effect in possession or enjoyment at, or after
his death, or (3) by deed under which he has retained for his life or any
period not ascertainable without reference to his death or for any period
which does not in fact end before his death (a) the possession or enjoyment
of, or the right to the income from, the property, or (b) the right, either
alone or in conjunction with any person, to designate the persons who shall
possess or enjoy the property or the income therefrom; except in case of
a bona fide sale for an adequate and full consideration in money or money's
worth.
(E) Proceeds
of Life Insurance.
- To the extent of the amount receivable by the estate of the deceased,
his executor, or administrator, as insurance under policies taken out by
the decedent upon his own life, irrespective of whether or not the insured
retained the power of revocation, or to the extent of the amount receivable
by any beneficiary designated in the policy of insurance, except when it
is expressly stipulated that the designation of the beneficiary is irrevocable.
(F) Prior Interests.
- Except as otherwise specifically provided therein, Subsections (B), (C)
and (E) of this Section shall apply to the transfers, trusts, estates,
interests, rights, powers and relinquishment of powers, as severally enumerated
and described therein, whether made, created, arising, existing, exercised
or relinquished before or after the effectivity of this Code.
(G)Transfers
of Insufficient Consideration. - If any one of the transfers, trusts,
interests, rights or powers enumerated and described in Subsections (B),
(C) and (D) of this Section is made, created, exercised or relinquished
for a consideration in money or money's worth, but is not a bona fide sale
for an adequate and full consideration in money or money's worth, there
shall be included in the gross estate only the excess of the fair market
value, at the time of death, of the property otherwise to be included on
account of such transaction, over the value of the consideration received
therefor by the decedent.
(H) Capital of
the Surviving Spouse.
- The capital of the surviving spouse of a decedent shall not, for the
purpose of this Chapter, be deemed a part of his or her gross estate.
SEC.
86. Computation of Net Estate.
- For the purpose of the tax imposed in this Chapter, the value of the
net estate shall be determined:
(A) Deductions
Allowed to the Estate of Citizen or a Resident.
- In the case of a citizen or resident of the Philippines, by deducting
from the value of the gross estate -
(1) Expenses, Losses,
Indebtedness, and taxes. - Such amounts:
(a) For actual funeral
expenses or in an amount equal to five percent (5%) of the gross estate,
whichever is lower, but in no case to exceed Two hundred thousand pesos
(P200,000);
(b) For judicial expenses
of the testamentary or intestate proceedings;
(c) For claims against
the estate: Provided, That at the time the indebtedness was incurred
the debt instrument was duly notarized and, if the loan was contracted
within three (3) 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) For claims of the
deceased against insolvent persons where the value of decedent's interest
therein is included in the value of the gross estate; and
(e) For unpaid mortgages
upon, or any indebtedness in respect to, property where the value of decedent's
interest therein, undiminished by such mortgage or indebtedness, is included
in the value of the gross estate, but not including any income tax upon
income received after the death of the decedent, or property taxes not
accrued before his death, or any estate tax. The deduction herein allowed
in the case of claims against the estate, unpaid mortgages or any indebtedness
shall, when founded upon a promise or agreement, be limited to the extent
that they were contracted bona fide and for an adequate and full consideration
in money or money's worth. There shall also be deducted losses incurred
during the settlement of the estate arising from fires, storms, shipwreck,
or other casualties, or from robbery, theft or embezzlement, when such
losses are not compensated for by insurance or otherwise, and if at the
time of the filing of the return such losses have not been claimed as a
deduction for the income tax purposes in an income tax return, and provided
that such losses were incurred not later than the last day for the payment
of the estate tax as prescribed in Subsection (A) of Section 91.
(2) Property Previously
Taxed. - An amount equal to the value specified below of any property
forming a part of the gross estate situated in the Philippines of any person
who died within five (5) years prior to the death of the decedent, or transferred
to the decedent by gift within five (5) years prior to his death, where
such property can be identified as having been received by the decedent
from the donor by gift, or from such prior decedent by gift, bequest, devise
or inheritance, or which can be identified as having been acquired in exchange
for property so received:
One hundred percent
(100%) of the value, if the prior decedent died within one (1) year prior
to the death of the decedent, or if the property was transferred to him
by gift within the same period prior to his death;
Eighty percent (80%)
of the value, if the prior decedent died more than one (1) year but not
more than two (2) years prior to the death of the decedent, or if the property
was transferred to him by gift within the same period prior to his death;
Sixty percent (60%)
of the value, if the prior decedent died more than two (2) years but not
more than three (3) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to
his death;
Forty percent (40%)
of the value, if the prior decedent died more than three (3) years but
not more than four (4) years prior to the death of the decedent, or if
the property was transferred to him by gift within the same period prior
to his death;
Twenty percent (20%)
of the value, if the prior decedent died more than four (4) years but not
more than five (5) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to
his death;
These deductions shall
be allowed only where a donor's tax or estate tax imposed under this Title
was finally determined and paid by or on behalf of such donor, or the estate
of such prior decedent, as the case may be, and only in the amount finally
determined as the value of such property in determining the value of the
gift, or the gross estate of such prior decedent, and only to the extent
that the value of such property is included in the decedent's gross estate,
and only if in determining the value of the estate of the prior decedent,
no deduction was allowable under paragraph (2) in respect of the property
or properties given in exchange therefor. Where a deduction was allowed
of any mortgage or other lien in determining the donor's tax, or the estate
tax of the prior decedent, which was paid in whole or in part prior to
the decedent's death, then the deduction allowable under said Subsection
shall be reduced by the amount so paid. Such deduction allowable shall
be reduced by an amount which bears the same ratio to the amounts allowed
as deductions under paragraphs (1) and (3) of this Subsection as the amount
otherwise deductible under said paragraph (2) bears to the value of the
decedent's estate. Where the property referred to consists of two or more
items, the aggregate value of such items shall be used for the purpose
of computing the deduction.
(3) Transfers for
Public Use. - The amount of all the bequests, legacies, devises or
transfers to or for the use of the Government of the Republic of the Philippines,
or any political subdivision thereof, for exclusively public purposes.
(4) The Family Home.
- An amount equivalent to the current fair market value of the decedent's
family home: Provided, however, That if the said current fair market value
exceeds One million pesos (P1,000,000), the excess shall be subject to
estate tax. As a sine qua non condition for the exemption or deduction,
said family home must have been the decedent's family home as certified
by the barangay captain of the locality.
(5) Standard Deduction.
- An amount equivalent to One million pesos (P1,000,000).
(6) Medical Expenses.
- Medical Expenses incurred by the decedent within one (1) year prior to
his death which shall be duly substantiated with receipts: Provided,
That in no case shall the deductible medical expenses exceed Five Hundred
Thousand Pesos (P500,000).
(7) Amount Received
by Heirs Under Republic Act No. 4917. - Any amount received by the heirs
from the decedent - employee as a consequence of the death of the decedent-employee
in accordance with Republic Act No. 4917: Provided, That such amount
is included in the gross estate of the decedent.
(B) Deductions Allowed
to Nonresident Estates.
- In the case of a nonresident not a citizen of the Philippines, by deducting
from the value of that part of his gross estate which at the time of his
death is situated in the Philippines:
(1) Expenses, Losses,
Indebtedness and Taxes. - That proportion of the deductions specified
in paragraph (1) of Subsection (A) of this Section which the value of such
part bears to the value of his entire gross estate wherever situated;
(2) Property Previously
Taxed. - An amount equal to the value specified below of any property
forming part of the gross estate situated in the Philippines of any person
who died within five (5) years prior to the death of the decedent, or transferred
to the decedent by gift within five (5) years prior to his death, where
such property can be identified as having been received by the decedent
from the donor by gift, or from such prior decedent by gift, bequest, devise
or inheritance, or which can be identified as having been acquired in exchange
for property so received:
One hundred percent
(100%) of the value if the prior decedent died within one (1) year prior
to the death of the decedent, or if the property was transferred to him
by gift, within the same period prior to his death;
Eighty percent (80%)
of the value, if the prior decedent died more than one (1) year but not
more than two (2) years prior to the death of the decedent, or if the property
was transferred to him by gift within the same period prior to his death;
Sixty percent (60%)
of the value, if the prior decedent died more than two (2) years but not
more than three (3) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to
his death;
Forty percent (40%)
of the value, if the prior decedent died more than three (3) years but
not more than four (4) years prior to the death of the decedent, or if
the property was transferred to him by gift within the same period prior
to his death; and
Twenty percent (20%)
of the value, if the prior decedent died more than four (4) years but not
more than five (5) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to
his death.
These deductions shall
be allowed only where a donor's tax, or estate tax imposed under this Title
is finally determined and paid by or on behalf of such donor, or the estate
of such prior decedent, as the case may be, and only in the amount finally
determined as the value of such property in determining the value of the
gift, or the gross estate of such prior decedent, and only to the extent
that the value of such property is included in that part of the decedent's
gross estate which at the time of his death is situated in the Philippines;
and only if, in determining the value of the net estate of the prior decedent,
no deduction is allowable under paragraph (2) of Subsection (B) of this
Section, in respect of the property or properties given in exchange therefore.
Where a deduction was allowed of any mortgage or other lien in determining
the donor's tax, or the estate tax of the prior decedent, which was paid
in whole or in part prior to the decedent's death, then the deduction allowable
under said paragraph shall be reduced by the amount so paid. Such deduction
allowable shall be reduced by an amount which bears the same ratio to the
amounts allowed as deductions under paragraphs (1) and (3) of this Subsection
as the amount otherwise deductible under paragraph (2) bears to the value
of that part of the decedent's gross estate which at the time of his death
is situated in the Philippines. Where the property referred to consists
of two (2) or more items, the aggregate value of such items shall be used
for the purpose of computing the deduction.
(3) Transfers for
Public Use. - The amount of all bequests, legacies, devises or transfers
to or for the use of the Government of the Republic of the Philippines
or any political subdivision thereof, for exclusively public purposes.
(C) Share in the
Conjugal Property.
- the net share of the surviving spouse in the conjugal partnership property
as diminished by the obligations properly chargeable to such property shall,
for the purpose of this Section, be deducted from the net estate of the
decedent.
(D) Miscellaneous
Provisions.
- No deduction shall be allowed in the case of a nonresident not a citizen
of the Philippines, unless the executor, administrator, or anyone of the
heirs, as the case may be, includes in the return required to be filed
under Section 90 the value at the time of his death of that part of the
gross estate of the nonresident not situated in the Philippines.
(E) Tax Credit
for Estate Taxes paid to a Foreign Country.
-
(1) In General.
- The tax imposed by this Title shall be credited with the amounts of any
estate tax imposed by the authority of a foreign country.
(2) Limitations
on Credit. - The amount of the credit taken under this Section shall
be subject to each of the following limitations:
(a) The amount of the
credit in respect to the tax paid to any country shall not exceed the same
proportion of the tax against which such credit is taken, which the decedent's
net estate situated within such country taxable under this Title bears
to his entire net estate; and
(b) The total amount
of the credit shall not exceed the same proportion of the tax against which
such credit is taken, which the decedent's net estate situated outside
the Philippines taxable under this Title bears to his entire net estate.
SEC.
87. Exemption of Certain Acquisitions and Transmissions.
- The following shall not be taxed:
(A) The merger of usufruct
in the owner of the naked title;
(B) The transmission
or delivery of the inheritance or legacy by the fiduciary heir or legatee
to the fideicommissary;
(C) The transmission
from the first heir, legatee or donee in favor of another beneficiary,
in accordance with the desire of the predecessor; and
(D) All bequests, devises,
legacies or transfers to social welfare, cultural and charitable institutions,
no part of the net income of which insures to the benefit of any individual:
Provided, however, That not more than thirty percent (30%) of the
said bequests, devises, legacies or transfers shall be used by such institutions
for administration purposes.
SEC.
88. Determination of the Value of the Estate. -
(A) Usufruct.
- To determine the value of the right of usufruct, use or habitation, as
well as that of annuity, there shall be taken into account the probable
life of the beneficiary in accordance with the latest Basic Standard Mortality
Table, to be approved by the Secretary of Finance, upon recommendation
of the Insurance Commissioner.
(B) Properties.
- The estate shall be appraised at its fair market value as of the time
of death. However, the appraised value of real property as of the time
of death shall be, whichever is higher of:
(1) The fair
market value as determined by the Commissioner, or
(2) The fair market
value as shown in the schedule of values fixed by the Provincial and City
Assessors.
SEC.
89. Notice of Death to be Filed.
- In all cases of transfers subject to tax, or where, though exempt from
tax, the gross value of the estate exceeds Twenty thousand pesos (P20,000),
the executor, administrator or any of the legal heirs, as the case may
be, within two (2) months after the decedent's death, or within a like
period after qualifying as such executor or administrator, shall give a
written notice thereof to the Commissioner.
SEC.
90. Estate Tax Returns. - (A) Requirements.
- In all cases of transfers subject to the tax imposed herein, or where,
though exempt from tax, the gross value of the estate exceeds Two hundred
thousand pesos (P200,000), or regardless of the gross value of the estate,
where the said estate consists of registered or registrable property such
as real property, motor vehicle, shares of stock or other similar property
for which a clearance from the Bureau of Internal Revenue is required as
a condition precedent for the transfer of ownership thereof in the name
of the transferee, the executor, or the administrator, or any of the legal
heirs, as the case may be, shall file a return under oath in duplicate,
setting forth:
(1) The value of the
gross estate of the decedent at the time of his death, or in case of a
nonresident, not a citizen of the Philippines, of that part of his gross
estate situated in the Philippines;
(2) The deductions
allowed from gross estate in determining the estate as defined in Section
86; and
(3) Such part of such
information as may at the time be ascertainable and such supplemental data
as may be necessary to establish the correct taxes.
Provided, however,
That estate tax returns showing a gross value exceeding Two million pesos
(P2,000,000) shall be supported with a statement duly certified to by a
Certified Public Accountant containing the following:
(a) Itemized assets
of the decedent with their corresponding gross value at the time of his
death, or in the case of a nonresident, not a citizen of the Philippines,
of that part of his gross estate situated in the Philippines;
(b) Itemized deductions
from gross estate allowed in Section 86; and
(c) The amount of tax
due whether paid or still due and outstanding.
(B) Time for Filing.
- For the purpose of determining the estate tax provided for in Section
84 of this Code, the estate tax return required under the preceding Subsection
(A) shall be filed within six (6) months from the decedent's death.
A certified copy of
the schedule of partition and the order of the court approving the same
shall be furnished the Commissioner within thirty (30) after the promulgation
of such order.
(C) Extension
of Time.
- The Commissioner shall have authority to grant, in meritorious cases,
a reasonable extension not exceeding thirty (30) days for filing the return.
(D) Place of
Filing.
- Except in cases where the Commissioner otherwise permits, the return
required under Subsection (A) shall be filed with an authorized agent bank,
or Revenue District Officer, Collection Officer, or duly authorized Treasurer
of the city or municipality in which the decedent was domiciled at the
time of his death or if there be no legal residence in the Philippines,
with the Office of the Commissioner.
SEC.
91. Payment of Tax. -
(A) Time of Payment.
- The estate tax imposed by Section 84 shall be paid at the time the return
is filed by the executor, administrator or the heirs.
(B) Extension
of Time.
- When the Commissioner finds that the payment on the due date of the estate
tax or of any part thereof would impose undue hardship upon the estate
or any of the heirs, he may extend the time for payment of such tax or
any part thereof not to exceed five (5) years, in case the estate is settled
through the courts, or two (2) years in case the estate is settled extrajudicially.
In such case, the amount in respect of which the extension is granted shall
be paid on or before the date of the expiration of the period of the extension,
and the running of the Statute of Limitations for assessment as provided
in Section 203 of this Code shall be suspended for the period of any such
extension.
Where the taxes are
assessed by reason of negligence, intentional disregard of rules and regulations,
or fraud on the part of the taxpayer, no extension will be granted by the
Commissioner.
If an extension is granted,
the Commissioner may require the executor, or administrator, or beneficiary,
as the case may be, to furnish a bond in such amount, not exceeding double
the amount of the tax and with such sureties as the Commissioner deems
necessary, conditioned upon the payment of the said tax in accordance with
the terms of the extension.
(C) Liability
for Payment.- The estate tax imposed by Section 84 shall be paid by the executor
or administrator before delivery to any beneficiary of his distributive
share of the estate. Such beneficiary shall to the extent of his distributive
share of the estate, be subsidiarily liable for the payment of such portion
of the estate tax as his distributive share bears to the value of the total
net estate.
For the purpose of this
Chapter, the term "executor" or "administrator" means the
executor or administrator of the decedent, or if there is no executor or
administrator appointed, qualified, and acting within the Philippines,
then any person in actual or constructive possession of any property of
the decedent.
SEC.
92. Discharge of Executor or Administrator from Personal Liability.
- If the executor or administrator makes a written application to the Commissioner
for determination of the amount of the estate tax and discharge from personal
liability therefore, the Commissioner (as soon as possible, and in any
event within one (1) year after the making of such application, or if the
application is made before the return is filed, then within one (1) year
after the return is filed, but not after the expiration of the period prescribed
for the assessment of the tax in Section 203 shall not notify the executor
or administrator of the amount of the tax. The executor or administrator,
upon payment of the amount of which he is notified, shall be discharged
from personal liability for any deficiency in the tax thereafter found
to be due and shall be entitled to a receipt or writing showing such discharge.
SEC.
93. Definition of Deficiency.
- As used in this Chapter, the term "deficiency" means:
(a) The amount by which
the tax imposed by this Chapter exceeds the amount shown as the tax by
the executor, administrator or any of the heirs upon his return; but the
amounts so shown on the return shall first be increased by the amounts
previously assessed (or collected without assessment) as a deficiency and
decreased by the amount previously abated, refunded or otherwise repaid
in respect of such tax; or
(b) If no amount is
shown as the tax by the executor, administrator or any of the heirs upon
his return, or if no return is made by the executor, administrator, or
any heir, then the amount by which the tax exceeds the amounts previously
assessed (or collected without assessment) as a deficiency; but such amounts
previously assessed or collected without assessment shall first be decreased
by the amounts previously abated, refunded or otherwise repaid in respect
of such tax.
SEC.
94. Payment Before Delivery by Executor or Administrator.
- No judge shall authorize the executor or judicial administrator to deliver
a distributive share to any party interested in the estate unless a certification
from the Commissioner that the estate tax has been paid is shown.
SEC.
95. Duties of Certain Officers and Debtors.
- Registers of Deeds shall not register in the Registry of Property any
document transferring real property or real rights therein or any chattel
mortgage, by way of gifts inter vivos or mortis causa, legacy
or inheritance, unless a certification from the Commissioner that the tax
fixed in this Title and actually due thereon had been paid is show, and
they shall immediately notify the Commissioner, Regional Director, Revenue
District Officer, or Revenue Collection Officer or Treasurer of the city
or municipality where their offices are located, of the non payment of
the tax discovered by them. Any lawyer, notary public, or any government
officer who, by reason of his official duties, intervenes in the preparation
or acknowledgment of documents regarding partition or disposal of donation
inter vivos or mortis causa, legacy or inheritance, shall have the duty
of furnishing the Commissioner, Regional Director, Revenue District Officer
or Revenue Collection Officer of the place where he may have his principal
office, with copies of such documents and any information whatsoever which
may facilitate the collection of the aforementioned tax. Neither shall
a debtor of the deceased pay his debts to the heirs, legatee, executor
or administrator of his creditor, unless the certification of the Commissioner
that the tax fixed in this Chapter had been paid is shown; but he may pay
the executor or judicial administrator without said certification if the
credit is included in the inventory of the estate of the deceased.
SEC.
96. Restitution of Tax Upon Satisfaction of Outstanding Obligations.
- If after the payment of the estate tax, new obligations of the decedent
shall appear, and the persons interested shall have satisfied them by order
of the court, they shall have a right to the restitution of the proportional
part of the tax paid.
SEC.
97. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights.
-
There shall not be transferred to any new owner in the books of any corporation,
sociedad anonima, partnership, business, or industry organized or established
in the Philippines any share, obligation, bond or right by way of gift
inter vivos or mortis causa, legacy or inheritance, unless
a certification from the Commissioner that the taxes fixed in this Title
and due thereon have been paid is shown.
If a bank has knowledge
of the death of a person, who maintained a bank deposit account alone,
or jointly with another, it shall not allow any withdrawal from the said
deposit account, unless the Commissioner has certified that the taxes imposed
thereon by this Title have been paid: Provided, however, That the
administrator of the estate or any one (1) of the heirs of the decedent
may, upon authorization by the Commissioner, withdraw an amount not exceeding
Twenty thousand pesos (P20,000) without the said certification. For this
purpose, all withdrawal slips shall contain a statement to the effect that
all of the joint depositors are still living at the time of withdrawal
by any one of the joint depositors and such statement shall be under oath
by the said depositors.
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