Transfer-Taxation - Reviewer PDF

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Summary

Transfer Tax (6%) – transfer of ownership from one person to another.Natural Person – citizens, aliensJuridical Person – corporation, partnerships, estate, joint venturesPrivilege Tax – Excise TaxKinds of Transfer TaxGratuitous Tax – one-way trade or donation; no consideration; freeOnerous Tax – con...

Description

Transfer Tax (6%) – transfer of ownership from one person to another. Natural Person – citizens, aliens Juridical Person – corporation, partnerships, estate, joint ventures

Privilege Tax – Excise Tax Kinds of Transfer Tax Gratuitous Tax – one-way trade or donation; no consideration; free Onerous Tax – consideration for transfer (sale, barter, exchange)

Gratuitous Tax – Donation and Estate Donation – upon the life of donor and donee; donation inter-vivos Estate/Succession – upon the death of decedent; donation mortis causa

Basis is the INTENTION. Classification of Taxpayer Resident and Citizens Non-resident Aliens

Extent of Taxation Global Transfers Philippine Transfers

Kinds of Properties that can be Transfer: Real Properties Tangible Personal Property Intangible Personal Property

Intangible Personal Property transferred by NRA will be exempt if there is RECIPROCITY. Modes of Acquiring Property Occupation – property is acquired through service Intellectual creation – patent Law Donation Tradition Contract Prescription Succession

Estate Tax – mode of acquiring properties, rights, and obligations. Obligations should be up to the extent of the received property.

Elements of Succession 1. Decedent 2. Estate 3. Heirs

Types of Succession 1. Testamentary Succession – last will testament of the decedent. 2. Legal or Intestate Succession – law will dictate the heirs and the estate to be given. Void last will testament. 3. Mixed Succession

Requirement for the Validity of LWT: 1. Written form 2. Written in the language that is spoken by the decedent 3. Witness – executor

Disinheritance in the LWT: 1. Included in the LWT the name 2. Valid Reason stated in the law a. Child or descendant – attempt against the life of the testator. b. Child or descendant – false accusation which prescribes imprisonment for 6 or more years. c. Child or descendant – adultery or concubinage with the spouse of the testator d. Child or descendant – fraud or violence against the testator to make or change a will. e. Refusal without justifiable cause to support the parent or ascendant who disinherits such child or descendant. f. Child or descendant – maltreatment to the testator by word or deed. g. Child or descendant – leads a dishonorable or disgraceful life. h. Conviction of a crime which carries the penalty of civil interdiction.

Types of Heirs 1. Compulsory Heirs – directly related kay decedent 2. Voluntary Heirs – not related kay decedent 3. Legal or Intestate Heirs – law will dictate the heirs

Compulsory Heirs Primary Compulsory A. Legitimate children and their legitimate descendants B. Surviving Spouse C. Illegitimate children and their descendants; either legitimate or illegitimate

Secondary Compulsory D. Legitimate parents and legitimate ascendants. Default of A E. Illegitimate parents (no other descendants). Default of A & C.

Intestate Succession 1. 2. 3. 4. 5. 6. 7.

Legitimate children or descendants Legitimate parents or ascendants Illegitimate children or descendants Surviving spouse Brothers and sisters, niece and nephew Other collateral relatives within the 5th degree State

Estate Tax – Gross Estate Legitime – portion of the estate that will be given to compulsory heirs. Free portion – estate given to voluntary or compulsory heirs. 50% - legitimate children and their legitimate descendants 25% - surviving spouse 75% - total 25% - free portion

Decedents who died

Between Jan. 1, 1998 to Dec. 31, 2017

On or after Jan.1, 2018

NIRC

TRAIN Law

Shall be governed by

Estate Tax Model/Formula Gross Estate Less: Deductions from Gross Estate Net Taxable Estate Multiply: Estate Tax Rate Estate Tax

xx (xx) xx x 6% xx

Citizens, Residents NRA wo reciprocity NRA w/ reciprocity Situs Real property Personal Tangible Intangible

Within ✓

Abroad ✓

Within ✓

Abroad X

Within ✓

Abroad X

✓ ✓

✓ ✓

✓ ✓

X X

✓ X

X X

Accrual and Due Date of Estate Tax Accrual – upon the death of decedent immediately Due Date – one year from the death of decedent

Who should pay the Estate Tax? 1. Executor or Administrator 2. Any of the Heirs

If there is no payment of estate tax, who should be liable? 1. Executor or Administrator 2. Heirs

Formula for Gross Estate Inventory of properties at the time of death Less: Exempt transfers Properties not owned Properties owned but excluded by law Inventory of taxable present properties Add: Taxable transfers Gross Estate

xxx,xxx xxx,xxx xxx,xxx

(xxx,xxx) xxx,xxx xxx,xxx xxx,xxx

Composition of Gross Estate 1. Properties, movable or immovable, tangible or intangible 2. Decedent’s interest on properties 3. Proceeds of life insurance: a. Designated as revocable to any heir b. Designated to estate, administrator or executor as beneficiary 4. Taxable transfers Beneficiary Estate, Administrator, Executor Other parties

Designation of beneficiary Revocable Irrevocable Include Include Include Exclude

Timing of Valuation of Gross Estate 1. Real Property – higher between zonal value and assessed value at the time of death 2. Personal Property – fair value at the time of death 3. Shares of Stocks: Unlisted OS – book value per share; Total SHE/Outstanding OS Shares Unlisted PS – par value per share Listed shares – arithmetic mean of the highest and lowest quotation at the time of death or nearest date of death (average of highest and lowest). 4. Usufruct and annuities – present value 5. Taxable transfers – FV at the time of death less consideration paid

Sunchamp Corp [(40+39)/2 x 2,000] AgriNurture Corp (45 x 1,500) Greenergy Inc. (50 x 3,000) Car Real Properties Total Gross Estate

79,000 67,500 150,000 400,000 120,000 816,500

Allowable Deductions for RC Estates Standard Deduction (5,000,000) Claims against the estate Claims against an insolvent person Unpaid mortgages Properties previously taxed Transfer for public purposes The family home (10,000,000 maximum deduction) Amounts received by heirs under RA No. 4917

Allowable deductions for NRC Estates Standard Deduction (500,000) Properties previously taxed Transfer for public purpose Share in the conjugal property Tax credits for estate taxes paid to a foreign country Minimum Estate Tax – 5,000

Assuming Pedro is a RC: Gross Estate Less: Allowable Deductions Standard Deduction Net Taxable Estate

Assuming Pedro is a NRC: 2,000,000 (5,000,000) (3,000,000)

Estate Tax = nil or exempt

Gross Estate Less: Allowable Deductions Standard Deduction Net Taxable Estate Multiply: Estate Tax Rate Estate Tax

2,000,000 (500,000) 1,500,000 x 6% 90,000

Donor’s Tax Allowable Deductions 1. Government 2. Educational, Charitable, Religious, Cultural, Social Welfare (30% administrative) 3. Mortgages, obligations, encumbrances on property donated Standard Deduction for Donor’s Tax = 250,000

Timing of Valuation: At the time of completion or perfection (Fair Value) Due Date: within 30 days after the date of perfection or completion of donation

Page 591 number 4 Gross Estate (28,000,000/2) Less: Allowable Deductions Family Home (12,000,000/2) Ordinary Deductions (2,400,000/2) Standard Deduction Net Taxable Estate Multiply: Estate Tax Rate Estate Tax

14,000,000 (6,000,000) (1,200,000) (5,000,000) 1,800,000 x 6% 108,000...