TAXATION1

1997 NIRC v. TRAIn LAW1

State Policies for the Tax Reform for Acceleration and Inclusion Law: 2
1. Enhance the progressivity of the tax system through the rationalization of the Philippine
internal revenue tax system, thereby promoting sustainable and inclusive economic growth;
2. Provide an equitable relief to a greater number of taxpayers and their families in order to
improve levels of disposable income and increase economic activity; and
3. Ensure that the government can provide for the needs of those under its jurisdiction and care
through the provision of better infrastructure, health, education, jobs, and social protection for
the people.

Amended portions of the NIRC:

1. Powers of the Commissioner of Internal Revenue;
2. Income Tax;
3. Value-Added Tax;
4. Transfer Taxes:
1. Estate Tax;
2. Donor’s Tax;
5. Documentary Stamp Taxes;
6. Excise Taxes;
7. Administrative Provisions; and
8. Penalties.

POWERS OF THE COMMISSIONER

1. Power of the Commissioner to Obtain Information, and to Summon, Examine, and Take
Testimony of Persons3:

The Cooperative Development Authority (CDA) shall submit a report on tax

incentives availed of by cooperatives to the BIR and DOF.

2. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for
Tax Administration and Enforcement:4

This authority shall be notwithstanding any law requiring the prior

authorization of any government agency or instrumentality.

Example: before TRAIn, the CIR needs to secure the prior authorization of
the CDA before the BIR can audit or investigate the tax returns of any of the entities
under the CDA’s supervision. This provision under the Cooperative Act was removed
by this TRAIn provision.

3. Authority of the Commissioner to Prescribe Real Property Values 5:

In exercising this authority, the following shall be observed:

a. Mandatory consultation with both private and public competent appraisers before
division of the Philippines into zones;
b. Prior notice to affected taxpayers before the determination of fair market values of the
real properties;

1
Only the pertinent provisions of RA 10963 which took effect on 01 January 2018.
2
Section 2. Declaration of Policy of RA 10963.
3
Section 5(B), NIRC.
4
Section 6(A), NIRC.
5
Section 6(E), NIRC. These provisions are currently being enforced through Revenue Regulations. Congress just
codified them.

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c. Publication or posting of adjustments in zonal value in a newspaper of general
circulation in the province, city or municipality concerned;
d. The basis of valuation and records of consultation shall be public records open to the
inquiry of any taxpayer;
e. Zonal valuations shall be automatically adjusted once every three years.

INCOME TAX
1. Income Tax Rates on Individual Citizen and Individual Resident Alien of the Philippines 6:
a. The previous tax rates of 5% to 32% was changed to 0% to 35%, as follows:

Until 2022 2023 onwards

Rate on Rate on
Tax on the Tax on the
Over But not over the the
Base Base
Excess Excess
0.00 250,000.00 0 0% 0 0%
250,000.00 400,000.00 0 20% 0 15%
400,000.00 800,000.00 30,000.00 25% 22,500.00 20%
800,000.00 2,000,000.00 130,000.00 30% 102,500.00 25%
2,000,000.00 8,000,000.00 490,000.00 32% 402,500.00 30%
8,000,000.00 2,410,000.00 35% 2,202,500.00 35%

Notes:
1. In the unamended Tax Code, any amount not exceeding 10,000.00 is taxed at 5%.
Under the TRAIn, the taxpayer becomes liable to pay income tax only when the
taxable income exceeds 250,000.00;
2. Under both laws, NIRC and TRAIn, minimum wage earners are exempt from
payment of income tax. These earners are not subject to income tax;
3. The amount to be subjected to the foregoing tax rates pertains to taxable income,
not gross income, gross receipts, gross sales, or any other revenue;
4. The definition of Taxable Income was modified to include only the pertinent
items of gross income, less deductions, if any, authorized for such types of
income by this Code or other special laws. The TRAIn Law removed the personal
and additional exemptions7;
5. The basic and personal exemptions8 removed from Tax Code;
6. The exemption Allowed to Estates and Trusts9 was removed.
7. The amount of tax-exempt 13th month pay and other benefits was increased from
₱82,000.00 to ₱90,000.0010;
8. Allowable deduction for premium payments on health and/or hospitalization
insurance of an individual taxpayer is removed11.

b. Rate of Tax on income of Purely Self-employed Individuals and/or Professionals

Whose Gross Sales or Gross Receipts and Other Non-operating Income Does Not
Exceed the Value-added Tax (VAT) Threshold as Provided in Section 109(BB) 12:

This provision creates two (2) methods of computing individual income tax:
i. 8% tax on gross sales or gross receipts and other non-operating income
in excess of 250,000.00 in lieu of the graduated income tax rates under

6
Section 24(A)(2)(a), NIRC.
7
Section 31, NIRC.
8
Section 35, NIRC.
9
Section 62, NIRC.
10
Section 32(B), NIRC.
11
Section 34(M), NIRC.
12
Section 24(A)(2)(b), NIRC. This is a new provision.

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Section 24(A)(2)(a) and the percentage tax under Section 116 of the
Tax Code; or
ii. Pay the income tax using the graduated tax rates and the corresponding
percentage tax under Section 116 of the NIRC.

Notes:
1. Self-employed individual – a sole proprietor or an independent contractor who
reports income earned from self-employment. S/he controls who s/he works for,
how the work is done and when it is done. It includes those hired under a contract
of service or job order, and professionals whose income is derived purely from the
practice of profession and not under an EER13;
2. To qualify under the 8% income tax rate imposed on the excess of 250,000.00, the
taxpayer must not be liable to pay VAT or any of the OPT under Sections 117 to
127 of the Tax Code;
3. If for example, the taxpayer’s gross receipts do not exceed the 3,000,000.00
threshold under Section 109(BB), but such taxpayer is liable for OPT under
Section 117 as a common carrier operator, this taxpayer cannot qualify to avail of
the 8% flat rate. As such, this common carrier taxpayer must pay income tax using
the graduated tax rate and percentage tax provided for by Section 117;
4. Another example: A is an operator of a night club. A’s gross receipts for the year
amounted to 2,000,000.00. A cannot avail of the 8% tax regime even if his or her
gross receipts is below the VAT threshold because night club business is subject to
OPT under Section 125, NIRC.

c. Rate of Tax for Mixed Income Earners14:

This new provision provides for separate income tax treatment for income
from compensation and income from self-employment:

i. Income from compensation – always subject to the graduated income

tax rates under Section 24(A)(2)(a);
ii. Income from self-employment – two (2) methods are available:
1. If Total Gross Sales and/or Gross Receipts and Other Non-operating
Income Do Not Exceed the VAT Threshold as Provided in Section
109(BB) of this Code – 8% flat rate on the gross sales or gross
receipts and other non-operating income in lieu of the graduated
income tax rates under Section 24(A)(2)(a) and the percentage tax
under Section 116 of this Code; or
2. Use the graduated tax rates under Section 24(A)(2)(a) and pay the
percentage tax.

Notes:
1. Mixed Income Earner is an individual earning compensation income from
employment, and income from business, practice of profession and/or other
sources aside from employment15;
2. If the business income reaches the VAT threshold, the taxpayer can only use the
graduated income tax rates;
3. The incomes of the taxpayer from both compensation and self-employment shall
be consolidated in the taxpayer’s income tax return regardless of the tax method
or regime that the taxpayer chose;
4. The 8% income tax rate, if chosen by the mixed income earner, shall be imposed
directly on the gross receipts or gross sales, regardless of the level of such
receipts or sales. The 250,000.00 exemption is reflected in the computation of the
income tax on the taxpayer’s compensation. Any excess, however, on the
13
Revenue Regulations 8-2018, Section 2(n).
14
Section 24(A)(2)(c), NIRC. This is a new provision.
15
Revenue Regulations 8-2018, Section 2(j).

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 TAXATION4
compensation income over the 250,000.00 cannot be offset against the gross
receipts from self-employment;
5. The intention to elect the 8% income tax rate by any taxpayer must be made in
the taxpayer’s first Quarterly Percentage Tax Return or first Quarterly Income
Tax Return, or both, or in the initial quarter return of the taxable year after the
commencement of a new business. Failure to elect this option within the first
quarter return shall be considered as having availed of the graduated tax rates;
6. Once the election is made, it shall be irrevocable and no amendment of option
shall be made.

2. Passive Income16
a. PCSO and Lotto Winnings – winnings in excess of ₱10,000.00 shall be taxed at 20%
final tax;
i. In Section 27©, PCSO’s income tax exemption was revoked. This is
the reason for the imposition of final taxes on winnings.
b. Interest on foreign currency deposit – from 7.5% to 15% 17;

Notes:
1. Incomes subjected to final taxes are not to be included in the filing of the taxpayer’s
income tax return.

3. Capital Gains on Sale of Share not Traded in the Stock Market 18

a. The present rate is at 15% on the gain19;
b. The old rates are:
i. 5% for gains not over ₱100,000.00; and
ii. 10% for the gains exceeding ₱100,000.00.

4. Tax on Nonresident Alien Individual:

a. The preferential income tax rate of 15% to Nonresident Alien Individuals shall not be
applicable to regional headquarters (RHQs), regional operating headquarters
(ROHQs), offshore banking units (OBUs), or petroleum service contractors and
subcontractors registering with the Securities and Exchange Commission (SEC) after
January 1, 2018;
b. This means that these alien employees, including Filipinos employed with the cited
offices, shall be subjected to the Graduated Tax Rates under Section 24(A)(2)(a);
c. For those employed with RHQs, ROHQs, OBUs, or PSCs that registered prior to
2018, they shall still be qualified to use the 15% preferential tax rates for their present
and future employees.

5. Fringe Benefits Tax:

a. With the income tax rate increase from 32% to 35%, the Fringe Benefit Tax Rate 20
was also increased to 35%. The grossed-up monetary value therefore is at 65%;
b. The 35% FBT rate shall be applicable only to employee other than rank and file who
is a citizen, resident alien, non-resident alien engaged in trade or business within the
Philippines;
c. For an employee other than rank and file who is a non-resident alien not engaged in
trade or business within the Philippines, the FBT rate shall be at 25% 21. This means
that the gross-up monetary value shall be at 75%.

6. Optional Standard Deduction22

16
Section 24(B), NIRC.
17
Same with Section 27(D)(1) on Corporations.
18
Section 24(C), NIRC.
19
Same with Section 27(D)(2) on Corporations.
20
Section 33(A), NIRC.
21
Section 25(B), NIRC.
22
Section 34(L), NIRC.

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a. A general professional partnership and the partners comprising such partnership may
avail of the optional standard deduction only once, either by the general professional
partnership or the partners comprising the partnership;
b. The general professional partnership is only a pass-through entity. It is not a taxable
entity. Its income which will be distributed to its partners shall ultimately be taxed to
the partners comprising it;
c. The distributable net income of the partnership may be determined by claiming either
itemized deductions or OSD. The share in the net income of the partnership, actually
or constructively received, shall be reported as taxable income of each partner. The
partners comprising the GPP can no longer claim further deduction from their
distributive shares. They are also not allowed to avail of the 8% income tax rate
option because their distributive shares from the GPP are net of cost and expenses.

7. Filing of ITR:
a. Substituted Filing Scheme23:
i. This is available provided the following concur:
1. Individual taxpayers;
2. Receiving purely compensation income;
3. From only one employer in a calendar year; and
4. The tax due equals the taxes withheld.

b. Payment of Taxes24:
i. The installment payment of taxes of individuals is allowed. The due
date for second installment was changed from July 15 to October 15;

c. Rates of withholding – changed from 1% to 32% to 1% to 15% 25

d. The return for final and creditable withholding taxes shall be filed and the payment
made not later than the last day of the month following the close of the quarter during
which withholding was made.26
i. Before TRAIn, the due dates were always the 10 th day of the month
following the end of the taxable month, except for December, the taxes
for which shall be paid on the 15th of January;
ii. The TRAIn made the filing and payment quarterly. However, by
exigencies of government service, disbursements of public fund could
not be made on a quarterly basis. As such, the monthly remittance of
withheld final and creditable taxes shall still be made. The reporting of
these taxes shall be made quarterly.

e. Due dates for filing and payment of Individual Income Taxes:

Return Period Unamended NIRC TRAIn

1st Quarter April 15 May 15
2nd Quarter August 15 August 15
3rd Quarter November 15 November 15
April 15, the next
Annual April 15, the next year
year

VALUE-ADDED TAX
1. Value-added Tax on Sale of Goods or Properties:

23
Section 51-A. This provision is new.
24
Section 56(A)(2), NIRC.
25
Section 57(B), NIRC.
26
Section 58(A), NIRC.

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The following zero-rated sale of goods or properties shall be subject to the 12% VAT rate 27:
a. Sale of raw materials or packaging materials to a nonresident buyer for delivery to a
resident local export-oriented enterprise to be used in manufacturing, processing,
packing or repacking in the Philippines of the said buyer’s goods and paid for in
acceptable foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
b. Sale of raw materials or packaging materials to export-oriented enterprise whose
export sales exceed seventy percent (70%) of total annual production; and
c. Those considered export sales under Executive Order No. 226, otherwise known as
the Omnibus Investment Code of 1987, and other special laws.

Notes:
1. The foregoing transactions shall be subject to the 12% VAT and no longer be
considered export sales subject to 0% VAT upon satisfaction of the following
conditions:
a. There is a successful establishment and implementation of an enhanced VAT
refund system that grants refunds of creditable input tax within 90 days from
the filing of the VAT refund application with the Bureau; and
b. All pending VAT refund claims as of December 31, 2017 shall be fully paid
in cash by December 31, 2019.
2. The Department of Finance shall establish a VAT Refund Center in the BIR and BOC
that will handle the processing and granting of cash refunds of creditable input tax;

3. An amount equivalent to 5% of the total VAT collection of the BIR and BOC from
the immediately preceding year shall automatically be appropriated annually and
shall be treated as a special account in the General Fund or as trust receipts for
funding VAT refund claims.

d. The sale of goods, supplies, equipment, and fuel to persons engaged in international
shipping or international air transport shall still be zero-rated provided the goods,
supplies, equipment and fuel have been sold and used for international shipping or air
transport operations28;

e. Sale of gold to the BSP was omitted. It is not an exempt VAT transaction 29;

f. Foreign Currency Denominated Sale was removed from the zero-rated VAT
transaction30.

2. Value-added Tax on Sale of Services and Use or Lease of Properties:

The following zero-rated sale of goods or properties shall be subject to the 12% VAT rate 31:
a. Processing, manufacturing or repacking goods for other persons doing business
outside the Philippines which goods are subsequently exported, where the services
are paid for in acceptable foreign currency and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP); and
b. Services performed by subcontractors and/or contractors in processing, converting, or
manufacturing goods for an enterprise whose export sales exceed seventy percent
(70%) of total annual production.

Notes:
1. The foregoing transactions shall be subject to the 12% VAT and no longer be
considered export sales subject to 0% VAT upon satisfaction of the following
conditions:
27
Section 106(A)(2)(a)(3,4,5), NIRC.
28
Section 106(A)(2)(a)(6), NIRC.
29
Section 109(Z), NIRC.
30
Section 106(A)(2)(b), NIRC.
31
Section 106(B)(1,5), NIRC.

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a. There is a successful establishment and implementation of an enhanced VAT
refund system that grants refunds of creditable input tax within 90 days from
the filing of the VAT refund application with the Bureau; and
b. All pending VAT refund claims as of December 31, 2017 shall be fully paid
in cash by December 31, 2019.

2. The Department of Finance shall establish a VAT Refund Center in the BIR and BOC
that will handle the processing and granting of cash refunds of creditable input tax;

3. An amount equivalent to 5% of the total VAT collection of the BIR and BOC from
the immediately preceding year shall automatically be appropriated annually and
shall be treated as a special account in the General Fund or as trust receipts for
funding VAT refund claims.
3. VAT-Exempt Transactions:
a. Importation of professional instruments and implements, tools of trade, occupation or
employment, wearing apparel, domestic animals, and personal and household effects
belonging to persons coming to settle in the Philippines or Filipinos or their families
and descendants who are now residents or citizens of other countries, such parties
hereinafter referred to as overseas Filipinos, in quantities and of the class suitable to
the profession, rank or position of the persons importing said items, for their own use
and not for barter or sale, accompanying such persons, or arriving within a reasonable
time: Provided, That the Bureau of Customs may, upon the production of satisfactory
evidence that such persons are actually coming to settle in the Philippines and that the
goods are brought from their former place of abode, exempt such goods from
payment of duties and taxes: Provided, further, That vehicles, vessels, aircrafts,
machineries and other similar goods for use in manufacture, shall not fall within this
classification and shall therefore be subject to duties, taxes and other charges 32;
b. Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business or real property utilized for low-cost and
socialized housing33:
i. The threshold values were changed:
1. House and Lot – from ₱3,199,200.00 to ₱2,500,000.00;
2. Lot only – from ₱1,919,500.00 to ₱1,500,000.00.

c. Lease of a residential unit. If the monthly rental per unit 34:

i. Does not exceed ₱15,000.00 – VAT-exempt;
ii. Exceeds ₱15,000.00 but the total annual rentals do not exceed the
₱3,000,000.00 VAT threshold35 – subject to 3% Other Percentage Tax rate
under Section 116, NIRC;
iii. Exceeds ₱15,000.00 and the total annual rentals exceed the ₱3,000,000.00
VAT threshold – subject to 12% VAT rate.

d. Importation of fuel, goods and supplies by persons engaged in international shipping

or air transport operations – VAT-exempt provided, that the fuel, goods, and supplies
shall be used for international shipping or air transport operations 36;

e. The following transactions are VAT-Exempt37:

i. Sale or lease of goods and services to senior citizens and persons with
disability, as provided under Republic Act Nos. 9994 (Expanded Senior

32
Section 109(D). The 90-day period before or after arrival of the person coming to settle in the Philippines was
removed.
33
Section 109(P), NIRC.
34
Section 109(Q), NIRC.
35
Section 109(BB), NIRC.
36
Section 109(U), NIRC.
37
Section 109(W to BB), NIRC.

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 TAXATION8
Citizens Act of 2010) and 10754 (An Act Expanding the Benefits and
Privileges of Persons with Disability), respectively;
ii. Transfer of property pursuant to Section 40(C)(2) of the NIRC, as amended;
iii. Association dues, membership fees, and other assessments and charges
collected by homeowners associations and condominium corporations;
iv. Sale of gold to the Bangko Sentral ng Pilipinas (BSP)38;
v. Sale of drugs and medicines prescribed for diabetes, high cholesterol, and
hypertension beginning January 1, 2019; and
vi. Sale or lease of goods or properties or the performance of services other than
the transactions mentioned in the preceding paragraphs, the gross annual
sales and/or receipts do not exceed the amount of Three million pesos
(₱3,000,000).

4. Amortization of Input VAT of Capitalized Depreciable Goods 39

a. The amortization of the input VAT shall only be allowed until December 31, 2021
after which taxpayers with unutilized input VAT on capital goods purchased or
imported shall be allowed to apply the same as scheduled until fully utilized;
b. Any purchase made starting 2022, no amortization shall be allowed 40.

5. Refunds or Tax Credits of Input Tax41:

a. Period: changed from 120 days to 90 days from the submission of the official receipts
or invoices or other documents in support of the application;
b. The period shall apply only to VAT refund. Please note that in paragraph C of
Section 112, the issuance of a tax credit certificate was omitted.
c. Failure on the part of any official, agent, or employee of the BIR to act on the
application within the ninety (90)-day period shall be punishable under Section 269
of this Code;
d. Should the Commissioner find that the grant of refund is not proper, the
Commissioner must state in writing the legal and factual basis for the denial.

6. Filing42:
a. Beginning January 1, 2023, the filing and payment required shall be done within
twenty-five (25) days following the close of each taxable quarter;
b. Presently the filing and payment of VAT is made monthly and quarterly:
i. 20th day of the month following the end of the taxable month for the monthly
remittance;
ii. 25th day of the month following the end of the taxable quarter for the
quarterly filing and remittance.
c. Beginning January 1, 2021, the VAT withholding system shall shift from final to a
creditable system.

OTHER PERCENTAGE TAXES

1. Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the Local
Stock Exchange or through Initial Public Offering43:
a. The percentage tax rate of 1/2 of 1% was changed to 6⁄10 of 1%;
b. The tax basis for the tax shall be the gross selling price or gross value in money of the
shares of stock sold, bartered, exchanged or otherwise disposed which shall be paid
by the seller or transferor.

38
Previously a zero-rated transaction.
39
Section 110(A)(2)(b), NIRC.
40
See Revenue Regulations 13-2018.
41
Section 112(C), NIRC.
42
Section 114, NIRC.
43
Section 127, NIRC.

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2. Filing of Return44:
a. The Percentage Tax Return shall be filed and paid quarterly at the 25 th day of the
month following the close of the taxable quarter;
b. The power of the Commissioner to set deadlines under paragraph C of Section 128
was removed.

ESTATE TAX
45
1. Estate Tax Rates :
a. The estate tax rates were changed from exempt to 20% to only 6%;
b. The tax base shall still be the net estate, computed by deducting all allowable
deductions from the decedent’s gross estate.
c. Situs of Taxation:
i. Citizens and Resident Alien – Properties from all over the world;
ii. Non-Resident Alien – only properties situated in the Philippines.

2. Allowable Deductions for Citizens and Resident Alien46:

a. Ordinary Deductions
i. The following deductions were removed by the TRAIn Law:
1. Funeral Expenses – 5% of the gross estate or 200,000.00 or actual
expenses, whichever is lowest;
2. Judicial Expenses.

b. Special Deductions:
i. Standard Deduction – from ₱1,000,000.00 to ₱5,000,000.00;
ii. Family Home – from ₱1,000,000.00 to ₱10,000,000.00;
iii. The following deduction was removed by the TRAIn Law:
1. Medical Expenses – 500,000.00 or actual expenses incurred one (1)
year prior to the date of death.

Notes:
1. The sine qua non condition for the exemption or deduction of family home that
the family home must have been the decedent's family home as certified by the
barangay captain of the locality was removed.

c. As a result, only the following may be allowed as deductions from the decedent’s
gross estate:
i. Standard deduction;
ii. Claims against the estate;
iii. Claims against insolvent persons;
iv. Unpaid mortgage or indebtedness on property;
v. Property previously taxed or vanishing deduction;
vi. Transfers for public use;
vii. Family home;
viii. Amounts received by heirs RA No. 4917 (Retirement benefits of private firm
employees);
ix. Share of the Surviving Spouse for conjugal properties.

3. Allowable Deductions for Non-Resident Aliens47:

a. Ordinary Deductions
i. The following deductions were removed by the TRAIn Law:
1. Funeral Expenses – 5% of the gross estate or 200,000.00 or actual
expenses, whichever is lowest;

44
Section 128, NIRC.
45
Section 84, NIRC.
46
Section 86(A), NIRC.
47
Section 86(B), NIRC.

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2. Judicial Expenses.

b. Special Deductions:
i. Standard Deduction – from ₱0.00 to ₱500,000.00;
ii. The following deduction was removed by the TRAIn Law:
1. Medical Expenses – 500,000.00 or actual expenses incurred one (1)
year prior to the date of death.

c. As a result, only the following may be allowed as deductions from the decedent’s
gross estate:
i. Standard deduction;
ii. Claims against the estate;
iii. Claims against insolvent persons;
iv. Unpaid mortgage or indebtedness on property;
v. Property previously taxed or vanishing deduction;
vi. Transfers for public use; and
vii. Share of the Surviving Spouse for conjugal properties.

d. The following Miscellaneous Provision under the unamended NIRC was removed
under the TRAIn Law:
i. 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.

4. Filing and Payment of the Estate Tax Return:

a. No Notice of Death is required48;
i. In all cases of transfers subject to tax, or where, though exempt from tax, the
gross value of the estate exceeds ₱20,000.00, 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.

b. Requirement of a CPA Certification49:

i. A CPA Certification is required if the value of the decedent’s gross estate is
more than ₱5,000,000.00. Before TRAIn law, it was ₱2,000,000.00;

c. Time for Filing50:

i. Changed from 6 months from the date of death to 1 year from the date of
death.

d. Payment:
i. Payment by installment51 - In case the available cash of the estate is
insufficient to pay the total estate tax due, payment by installment shall be
allowed within two (2) years from the statutory date for its payment without
civil penalty and interest;

ii. Final withholding estate tax52 - If a bank has knowledge of the death of a
person, who maintained a bank deposit account alone, or jointly with another,
it shall allow any withdrawal from the said deposit account, subject to a final
withholding tax of six percent (6%);
48
Section 89, NIRC.
49
Section 90(A), NIRC.
50
Section 90(B), NIRC.
51
Section 91(C), NIRC.. This is a new provision.
52
Section 97, NIRC. This new provision applies only to the cash of the decedent.

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1. This requirement was removed: the bank 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 ₱20,000.00
without the said certification.

DONOR’S TAX
1. Donor’s Tax Rate53:
a. The donor’s tax rates were changed from exempt to 15% to only 6% on the excess of
₱250,000.00 net estate made during the calendar year;
b. The classification of the donee as to whether such donee is a relative or a stranger
was removed. As such, the donor may donate to any one, relative or stranger, and the
donor’s tax rate would still be the same.

2. Transfer for Less Than Adequate and Full Consideration54:

a. A sale, exchange, or other transfer of property made in the ordinary course of
business (a transaction which is a bona fide, at arm’s length, and free from any
donative intent), will be considered as made for an adequate and full consideration in
money or money’s worth55;

b. As a result, even if the property transferred for less than an adequate and full
consideration in money or money’s worth, that is, the amount by which the fair
market value of the property exceeded the value of the consideration shall not be
deemed a gift, and shall not be included in computing the amount of gifts made
during the calendar year.

3. Exemption of Certain Gifts56:

a. Removed exemption: Dowries or gifts made on account of marriage and before its
celebration or within one year thereafter by parents to each of their legitimate,
recognized natural, or adopted children to the extent of the first ₱10,000.00.

b. As a result, only the following are exempt from donor’s tax. Those made to:
i. Gifts made to or for the use of the National Government or any entity created
by any of its agencies which is not conducted for profit, or to any political
subdivision of the said Government; and
ii. Gifts in favor of an educational and/or charitable, religious, cultural or social
welfare corporation, institution, accredited nongovernment organization, trust
or philanthropic organization or research institution or organization:
Provided, however, That not more than thirty percent (30%) of said gifts shall
be used by such donee for administration purposes.

53
Section 99, NIRC.
54
Section 100, NIRC.
55
This proviso was added to Section 100, NIRC.
56
Section 101, NIRC.

pj.t.c.2019