DEDUCTIONS FROM THE GROSS ESTATE Question 3: What amount should be included as part of the allowable

deductions from the gross estate assuming the property was insured
Deductions from the gross estate are classified as follows: for P25,000,000? Answer: P0 Since the loss was fully compensated by
1. Ordinary deductions insurance, no deduction shall be claimed against the gross estate of
2. Special deductions the decedent
3. Share of the surviving spouse, if the decedent is married
Question 4: What amount should be included as deductible loss
Beginning January 1, 2018 or upon the effectivity of the TRAIN Law, assuming the incident happened beyond the settlement period of one
the allowable deductions from the gross estate are summarized as year, and the property was not insured? Answer: P0 Only losses
follows: incurred during the settlement period (within 1 year after death) are
SUMMARY OF ALLOWABLE DEDUCTION FROM THE GROSS ESTATE allowed as deduction from the gross estate.
Deduction Decedent
Citizen/Resident Non-Resident Alien Question 5: What amount should be included in the gross estate of the
Ordinary Deductions decedent assuming the incident happened on year before the death of
1. LITe (Losses, ✓ ✓ the decedent? Answer: P0 Gross estate shall compose of the
Indebtedness, Taxes, (proportionaldeduction properties of the decedent at the time of his death. If the incident
etc.) only)** Total LITe x (GE happened before death, then the property is no longer existing as of
Phils/GE World) the date of death, hence, should no longer be included in his gross
2. Vanishing deduction ✓ ✓ estate
3. Transfer for Public ✓ ✓
Use (TFPU) Question 6: In relation to question #5, what amount should be
included as deduction from the gross estate of the decedent? Answer:
SPECIAL DEDUCTIONS P0 Aside from the requirement that losses, to be deductible, should
have been incurred after death but during the settlement period, the
1. Standard deduction ✓ (P5,000,000) ✓ (P500,000)
property is no longer included in the gross estate of the decedent.
2. Family home ✓ NA
Consequently, no deduction from the gross estate should be allowed.
3. RA 4917 ✓ NA
ILLUSTRATION 2
SHARE OF THE Use the same data in Illustration 1. In addition, assume that the
SURVIVING SPOUSE property earned gross income of P6,000,000 and incurred operating
(for married decedents) ✓ ✓ expenses of P2,000,000 from the date of death of the decedent up to
the time of the incident or the calamity (typhoon). Assume further
ORDINARY DEDUCTIONS that the loss incurred due to the typhoon was recognized as additional
A. LITe (Losses, Indebtedness, Taxes, etc.) operating expenses for purposes of computing the net taxable income
1. Losses of the estate.
2. Indebtedness or Claims against the Estate
3. Unpaid Mortgage or Indebtedness on Property Question: How much should be allowed as deduction from the gross
4. Taxes estate? Answer: P0 Since the loss was already claimed as deduction
5. Claims against insolvent person (CAIP) for purposes of determining the taxable net income of the estate, such
B. Vanishing Deduction loss should no longer be allowed as deduction in determining the
C. Transfer for Public Use taxable gross estate.

LOSSES INDEBTEDNESS OR CLAIMS AGAINST THE ESTATE

 For purposes of estate taxation, deductible losses from the gross  Claims is generally construed to mean debts or demands of a
estate shall pertain to “casualty losses”. pecuniary nature which could have been enforced against the
 Casualty losses include losses arising from acts of God such as deceased in his lifetime and could have been reduced to simple
losses due to storms, shipwreck and other casualties. It also money judgments. The liability represents a personal obligation
includes losses arising from acts of man, specifically from of the deceased existing at the time of his death, contracted in
robbery, theft or embezzlement. The amount deductible is the good faith (during his lifetime) for adequate and full
value of the property lost. consideration in money or money’s worth. Claims against the
 Requisites of Deductibility: estate (CAE) or indebtedness in respect of property may arise
1. Arising exclusively fro out of the following sources:
 Acts of God such as fire, storm, shipwreck and other 1. Contract
similar casualty 2. Tort
 Acts of man such as robbery, theft, embezzlement 3. Operation of Law
2. Not compensated by insurance or otherwise
3. Not claimed as a deduction in an income tax return of the ➢ REQUISITES FOR DEDUCTIBILITY (RR 12-2018):
estate subject to income tax a. The liability represents personal obligation of the deceased existing
4. Incurred during the settlement period of the estate. at the time of his death;
Settlement period pertains to the period prescribed by law to file b. The liability was contracted in good faith and for adequate and full
and pay the estate tax, which is, under the TRAIN Law, within consideration in money or money’s worth;
one year from the date of death. c. The liability must be a debt or claim which is valid in law and
enforceable in court;
ILLUSTRATION 1 d. The debt must not have been condoned by the creditor or the
Among the properties included in the gross estate of the decedent at action to collect from the decedent must not have been prescribed.
the time of his death was a newly developed tourist destination in
Siargao valued at P20,000,000. George is the sole heir to the property. SUBSTANTIATION REQUIREMENTS:
During the settlement of the estate and before the last day of filing ➢ All unpaid obligations and liabilities of the decedent at the time of
the estate tax return, a super typhoon hit Siargao partially destroying his death are allowed as deduction from gross estate. Provided,
the newly developed property. It was determined that the fair market however, that the following requirements/documents are complied
value of the property after the incident was reduced to P18,000,000. with/submitted:

Question 1: What amount should be included in the decedent’s gross In case of simple loan (including advances):
estate? Answer: P20,000,000 (FMV at the time of death) a. The debt instrument must be duly notarized at the time the
indebtedness was incurred, such as promissory note or contract of
Question 2: How much should be the allowable deduction from the loan, except for loans granted by financial institutions where
gross estate? Answer: P2,000,000 (P20,000,000 – P18,000,000) notarization is not part of the business practice/policy of the financial
institution-lender.
 partnership is a relative of the debtor in the degree mentioned above,
a copy of the promissory note or other evidence of indebtedness must
b. Duly notarized Certification from the creditor as to the unpaid be filed with RDO having jurisdiction over the borrower within 15 days
balance of the debt, including interest as of the time of death from execution thereof.
• If the creditor is a corporation, the sworn certification should be
signed by the President, or Vice President, or other principal officer of c. Certified true copy of the latest audited balance sheet of the
the corporation. creditor with a detailed schedule of its receivable showing the unpaid
• If the creditor is a partnership, the sworn certification should be balance of the decedent-debtor. Moreover, a certified true copy of the
signed by any of the general partners updated latest subsidiary ledgers/records of the debt of the debtor-
• If the creditor is a bank or other financial institutions, the decedent (certified by the creditor) should likewise be submitted.
Certification shall be signed by the branch manager of the
bank/financial institution which monitors and manages the loan of the d. Where the settlement is made through the Court in a testate or
decedent-debtor. intestate proceeding, pertinent documents filed with the Court
• If the creditor is an individual, the sworn declaration should be evidencing the claims against the estate, and the Court Order
signed by him. approving the said claims, if already issued, in addition to the
• In any of these cases, the one who should certify must not be a documents mentioned in the preceding paragraphs.
relative of the borrower within the fourth civil degree, either by
consanguinity or affinity, except when the requirement below is FUNERAL, MEDICAL AND JUDICIAL EXPENSES
complied with: ➢ Beginning January 1, 2018 or upon effectivity of the TRAIN Law, the
following expenses are no longer allowed as deduction from the gross
When the lender, or the President/Vice-President or Principal Officer estate of a decedent:
of the creditor corporation, or the General Partner of the creditor- 1. Funeral expenses
partnership is a relative of the debtor in the degree mentioned above, 2. Medical expenses
a copy of the promissory note or other evidence of indebtedness must 3. Judicial expenses
be filled with RDO having jurisdiction over the borrower within 15 days
from execution thereof. ILLUSTRATION 3
A resident decedent died on April 1, 2021. He availed of a P500,000
c. In accordance with the requirements as prescribed in existing or salary loan from ABC Manufacturing Corporation (his employer) by
prevailing internal revenue issuances, proof of financial capacity of the issuing a promissory note during his lifetime.
creditor to lent the amount at the time the loan was granted, as well Question 1: If all the requisites in order to be allowed as a deduction
as its latest audited balance sheet with a detailed schedule of tis as claims against the estate were present, what amount may be
receivable showing the unpaid balance of the decedent-debtor. deducted from the gross estate? Answer: P500,000

In case of the creditor is individual who is no longer required to file an Question 2: If the obligation has prescribed as the time of his death,
income tax return with the Bureau, a duly notarized declaration by the what amount may be deducted from the gross estate? Answer: P0
creditor of his capacity to lend at the time when the loan was granted
without prejudice to verification that may be made by the BIR to Question 3: If the loan document (promissory note) was not duly
substantiate such declaration of the creditor. notarized, what amount may be deducted from the gross estate
pertaining to the claim? Answer: P0 If the indebtedness arises from a
If the creditor is a non-resident, the executor/administrator or any of debt instrument (i.e. loan document), it must be notarized to be
the legal heirs must submit a duly notarized declaration of his capacity deductible
to lend at the time when the loan was granted, authenticated or
certified to as such by the tax authority of the country where the non- Question 4: If the loan was contracted 3 years ago and the executor
resident creditor is a resident. cannot determine how the loan proceeds were disposed of, what
amount may be deducted from the gross estate pertaining to the
d. A statement under oath executed by the administrator or executor claim? Answer: P0 RR 2-2003/RR 12-2018 provides that if the loan was
of the estate reflecting the disposition of the proceeds of the loan if contracted within 3 years before the death of the decedent, a
said loan was contracted within 3 years prior to the death of the statement under oath (by the executor/administrator) must be
decedent. executed and must be attached therewith a statement showing the
disposition of the proceeds of the loan
If the unpaid obligation arose from purchase of goods or services: a.
Pertinent documents evidencing the purchase of goods or service, UNPAID MORTGAGE OR INDEBTEDNESS ON THE PROPERTY
such as sales invoice/delivery receipt (for sale of goods), or contact for ➢ These are deductions allowed when a decedent leaves property
the services agreed to be rendered (for sale of service), as duly encumbered by a mortgage or indebtedness contracted in good faith
acknowledged, executed and signed by the decedent-debtor and and for adequate and full consideration. To be allowed as a deduction,
creditor, and statement of account given by the creditor as duly his gross estate must include the fair market value of the property
received by the decedent-debtor. encumbered. The amount allowed as a deduction would be the
outstanding debt or mortgage. In case unpaid mortgage payable is
c. Duly notarized Certification from the creditor as to the unpaid being claimed by the estate, verification must be made as to who was
balance of the debt, including interest as of the time of death. the beneficiary of the loan proceeds.
• If the creditor is a corporation, the sworn certification should be
signed by the President, or Vice president, or other principal officer of ACCOMODATION LOAN
the corporation. ➢ If the loan is found to be merely an accommodation loan where the
• If the creditor is a partnership, the sworn certification should be loan proceeds went to another person, the value of the unpaid loan
signed by any of the general partners. must be included as a receivable of the estate. If there is a legal
• If the creditor is a bank or other financial institutions, the impediment to recognize the same as receivable of the estate, said
certification shall be signed by the branch manager of the unpaid obligation/mortgage payable shall not be allowed as a
bank/financial institution which monitors and manages the loan of the deduction from the gross estate. In all instances, the mortgaged
decedent-debtor. property, to the extent of the decedent’s interest therein, should
• If the creditor is a sole-proprietorship, the sworn certification should always form part of the gross estate.
be signed by the owner of the business
• In any of these cases, the one who should certify must not be a ILLUSTRATION 4
relative of the borrower within the fourth civil degree, either by A resident decedent left the following upon his death:
consanguinity or affinity, except when the requirement below is
complied with:

When the lender, or President/Vice-president or principal officer of

the creditorcorporation, or the general partner of the creditor-
The real property located in the Philippines was mortgaged for of P1,000,000 due from Juan. Juan intentionally ignored several
P8,000,000. Determine the following: collection/demand letters from Pedro. In 2021, Pedro died.
1. Gross estate of the decedent Question 1: Should the P1,000,000 collectible from Juan be included in
2. Deductions for unpaid mortgage the gross estate of Pedro? Answer: Yes. The P1,000,000 is a valid and
enforceable claim of Pedro as of the date of his death.
Answers:
Question 2: Should the P1,000,000 collectible from Juan be deducted
in Pedro’s gross estate? Answer: No. Only uncollectible claims against
insolvent persons are deductible from the gross estate. In the case
provided, Juan is obviously not an insolvent person for estate tax
purposes.

ILLUSTRATION 8
Assume the same data in Illustration 7, except that during 2020, Juan
ILLUSTRATION 5 experienced financial difficulty and his assets are no longer sufficient
Pedro died in 2021. The following claims against Pedro’s estate were to settle his liabilities. Consequently, Juan was only able to pay
claimed by his heirs as deductions from the decedent’s gross estate. P500,000 to Pedro in 2020. In the same year, Juan asked a competent
court for a judicial declaration that he is insolvent. The court is yet to
decide on Juan’s petition. In 2021, Pedro died.

Question 1: Should the remaining amount of P500,000 collectible from

How much is the deductible indebtedness or claim against the estate? Juan be included in the gross estate of Pedro? Answer: Yes
Question 2: Should the unpaid amount of P500,000 collectible from
Juan be deducted in Pedro’s gross estate? Answer: Yes. Judicial
declaration of insolvency is not required to consider a person insolvent.
It is sufficient that the person’s insolvency is proven.
• Claims against the estate should pertain only to valid claims as of the
ILLUSTRATION 9
date of death. Claims arising after death are not allowed as deductions
Pedro died in 2021. At the time of his death, he has a collectible sum
from gross estate.
of P1,000,000 from a debtor who was subsequently declared by a
• Receivables from gambling (wagering gains) before death are
court as insolvent for having total liabilities of P4,000,000 against his
inclusions from the decedent’s gross estate, however, debts from
total properties valued at P800,000 only.
wagering or gambling losses are not allowed as deductions from the
gross estate
Question 1: How much should be included in the gross estate of Pedro?
Answer: P1,000,000
TAXES
Question 2: How much may be claimed as deduction from the gross
➢ These are unpaid taxes that accrued prior to the death of the
estate of Pedro? Answer: P800,000
decedent. However, the following are not allowed as a deduction:
1. Income tax on income received after death
2. Property taxes accrued after death
3. Estate tax
B. TRANSFER FOR PUBLIC USE
ILLUSTRATION 6
➢ Transfers for Public Use (TFPU) are dispositions in a last will and
Which among the following should be allowed as deduction from the
testament or transfers to take effect after the death in favor of the
Gross Estate of a Filipino decedent who died on March 30, 2021?
government of the Philippines or any of its political subdivisions
thereof (e.g. barangay, province, city/municipality) for exclusively
public purposes.
➢ In order for a transfer for public use to be allowed as a deduction
from the gross estate of a decedent, the same amount shall be
included in the computation of the decedent’s gross estate.

Legacies to the Philippine Red Cross (PRC)

➢ Under RA 10072 (An Act Recognizing the Philippine Red Cross as an
independent autonomous, nongovernmental organization auxiliary to
ANSWER: ITEMS 1, 2, 3, 4, 6, 7, 9, 11 and 12 the authorities of the Republic of the Philippines in the Humanitarian
Field, to be know as “The Philippine Red Cross Act of 2009”), all
CLAIMS AGAINST INSOLVENT PERSONS (CAIP) donations, legacies and gifts made legacies to the PRC to support its
➢ Claims against the estate are “receivables due or owing from purposes and objectives shall be exempt from donor’s tax and shall be
persons who are not financially capable of meeting their obligations”. deductible from the gross income of the donor for income tax
Hence, these are claims by the decedent during his lifetime that are purposes or from the computation of the donor-decedent’s net estate
not collectible. An insolvent is a person whose properties are not as a “transfer for public use” for estate tax purposes.
sufficient to satisfy, whether fully or partially, his debt(s).
➢ REQUISITES FOR DEDUCTIBILITY C. VANISHING DEDUCTIONS (PROPERTY PREVIOUSLY TAXES)
For purposes of estate taxation, a judicial declaration of insolvency is This deduction is also referred to as a deduction for “property
not required but previously taxed”. It is an amount allowed to reduce the taxable estate
a. The incapacity of the debtor to pay his obligation should be proven; of a decedent where a property included in hiss gross estate was
b. The full amount owned by the insolvent must first be included in previously received by him, either:
the decedent’s gross estate and the amount uncollectible shall be 1. From a prior decedent by way of inheritance; or
allowed as a deduction; and 2. From a donor by way of gift or donation
c. If the insolvent could only pay partial amount, the full amount
owned shall be included in the gross estate, and the amount The aforementioned property has been the object of a previous
uncollectible shall be allowed as a deduction. transfer taxation, either estate tax or donor’s tax (thus, the term
property previously taxed). Therefore, vanishing deduction is allowed
ILLUSTRATION 7 as a deduction from the gross estate to minimize the effect of or as a
Juan is indebted to Pedro for P1,000,000. For the past 10 years, the remedy against indirect double taxation.
credit standing and reputation of Juan is outstanding. However, during
2020, the relationship of Juan and Pedro was tainted by a personal REQUISITES FOR DEDUCTIBILITY:
disagreement. Consequently, Pedro was unable to collect the amount
1. Death – the present decedent died within 5 years from the date of Answer: P0
death of the prior decedent or date of gift.
2. Identity of property – the property with respect to which deduction Vanishing deduction is a mode of “tax relief” from multiple imposition
is sought can be identified as the one received from the prior of indirect taxes. This is the reason why payment of donor’s tax or
decedent, or from the donor, or as the property acquired in exchange estate tax from the grantor is a requisite before vanishing deduction is
for the original property so received. allowed. Hence, if the donor’s tax was not paid at the time of the
3. Location – the property on which vanishing deduction is being donation, vanishing deduction is not allowed due to the absence of
claimed must be located in the Philippines. “indirect double taxation”
4. Inclusion of the property – the property must have formed part of
the gross estate situated in the Philippines of the prior decedent or Question 3: Assume the corresponding donor’s tax was paid by Juan
have been included in the total amount of the gifts of the donor made upon perfection of the donation. Assume further that the donation
within 5 years prior to the present decedent’s death. was made on January 1, 2010. How much is the allowable vanishing
5. Previous taxation of the property – the estate tax on the prior deduction?
succession or the donor’s tax on the gift must have been finally Answer: P0 The donation was made more than 5 years prior to
determined and paid by the prior decedent or by the donor as the Pedro’s death.
case maybe and
6. No previous vanishing deduction on the property – no such SPECIAL DEDUCTIONS
deduction on the property, or the property given in exchange ➢ The law allows a standard deduction without qualification,
therefore, was allowed in determining the value of the net estate of condition nor requisite, whatsoever. This amount shall be allowed as
the prior decedent. an additional deduction without need of substantiation. The full
amount shall be allowed as deduction for the benefit of the decedent.
VANISHING DEDUCTION RATES: The allowable amounts under the TRAIN Law are:
1. If the decedent is a citizen or resident – P5,000,000
2. If the decedent is a nonresident alien – P500,000
➢ This is the only special deduction allowed to a nonresident alien
decedent. The other special deductions (family home and RA 4917)
can be claimed only by citizen and resident decedents

C. FAMILY HOME
PRO-FORMA COMPUTATION OF VANISHIN DEDUCTION: ➢ The term family home refers to the dwelling house, including the
land on which it is situated, where the husband and wife, or a head of
the family, and members of their family reside, as certified to by the
Barangay Captain of the locality.
➢ The amount of family home allowable as a deduction would be
whichever is lower of P10,000,000 or the fair market value at the time
of the decedent’s death, of the family home and the land on which it
stands.
➢ The family home is deemed constituted on the house and lot from
the time it is actually occupied as a family residence and is considered
Under the Tax Code, as amended under the TRAIN Law, the multiplier as such for as long as any of its beneficiaries actually resides therein.
to the ratio of Initial Basis over the Gross Estate is the total of LITe, (Art 152 and 153, Family Code)
plus Transfer for Public Use. ➢ Actual occupancy of the house or house and lot as the family
residence shall not be considered interrupted or abandoned in such
ILLUSTRATION 10 cases as the temporary absence from the constituted family home due
Pedro received a car as a gift from Juan on January 1, 2019. The value to travel or studies or work abroad.
of the car at the time it was donated to Pedro was P1,000,000. ➢ In other words, the family home is generally characterized by
However, Pedro assumed a P200,000 mortgage on the car. The permanency, that is, the place to which, whenever absent for business
corresponding donor’s tax was paid by Juan. Pedro paid a total of or pleasure, one still intends to return. The family home must be part
P100,000 on the mortgage in 2019 and 2020. of the properties of the absolute community of the conjugal
partnership, or of the exclusive properties of either spouse, depending
On Nov. 1, 2021, Pedro died. His gross estate at the time of his death upon the classification of the property (family home) and the property
amounted to P5,000,000 including the Car received from Pedro valued relations prevailing on the properties of the husband and wife. It may
at P700,000. also be constituted by an unmarried head of a family on his or her own
property.
The following deductions were also claimed by his beneficiaries
UNMARRIED HEAD OF A FAMILY
➢ An unmarried or legally man or woman with one or both parents,
or with one or more brothers or sisters, or with one or more legitimate,
recognized natural or legally adopted children living with and
dependent upon him or her for their chief support, where such
Question 1: How much is the allowable vanishing deduction? brothers or sisters or children are not more than twenty one (21) years
The vanishing deduction shall be computed as follows: of age, unmarried and not gainfully employed or where such children,
brothers or sisters, regardless of age are incapable of self-support
because of mental or physical defect, or any of the beneficiaries
mentioned in Article 154 of the Family Code who is living in the family
home and dependent upon the head of the family for legal support

BENEFICIARIES OF A FAMILY HOME:

1. The husband and wife, or the head of the family; and
2. Their parents, ascendants, descendants including legally adopted
To compute the LITe:
children, brothers and sisters, whether the relationship be legitimate
or illegitimate, who are living in the family home and who depend
upon the head of the family for legal support.

REQUISITES FOR DEDUCTIBILITY:

1. The decedent was married or if single, was a head of the family.
Question 2: Assume the corresponding donor’s tax was not paid by 2. The family home as well as the land on which it stands must be
Juan upon donation, how much is the allowable vanishing deduction? owned by the decedent. Therefore, the fair market value of the family
home should have been included in the computation of the decedent’s DEDUCTIONS FROM THE GROSS ESTATE OF A NON-RESIDENT ALIEN
gross estate. ➢ The summary of allowable deductions are shown below (based on
3. The family home must be the actual residential home of the RR 1-2003; RR 12-2018)
decedent and his family at the time of his death, as certified by the
Barangay Captain of the locality where the family home is situated. ILLUSTRATION 12
4. Allowable deduction must be in an amount equivalent to the Mr. Krung, a resident of Seoul, South Korea and a Korean citizen died
current fair market value of the family home as declared or included in on July 4, 2021 leaving the following properties:
the gross estate, or the extent of the decedent’s interest (whether
conjugal/community or exclusive property), whichever is lower, but
not exceeding P10,000,000, as amended.

ILLUSTRATION 11
Determine the allowable deduction for Family Home (FH) from the
following independent cases:
Case A: Family home valued at P15,000,000. Decedent was single.
Case B: Family home valued at P15,000,000. Decedent was head of the
family.
Case C: Family home valued at P5,000,000. Decedent was head of the
family.
Case D: Family home valued at P15,000,000 (exclusive). Decedent was Required: Determine the net taxable estate.
married.
Case E: Family home valued at P15,000,000 (conjugal). Decedent was Solutions:
married. Case F: Family home valued at P15,000,000 of which,
P10,000,000 is allocated to the land (exclusive) and P5,000,000 to the
house (conjugal). Decedent is married.
Case G: The fair market value of the family home which is partly
exclusive and partly common follows:

ANSWERS:
Case A: P0
Case B: P10,000,000 Case
C: P5,000,000
Case D: P10,000,000
Case E: P7,500,000 (For married decedents, the FMV of the family
home should be divided by two (2) if the same is conjugal or
community property.)

Maximum deductible amount is P10,000,000

Case F: P10,000,000

Maximum deductible amount is P10,000,000

Case G: P9,500,000
ESTATE TAX PAYABLE AND ESTATE TAX DUE

An unmarried Filipino decedent (head of the family) died leaving the

D. AMOUNTS RECEIVED BY HEIRS UNDER THE RA 4917 following properties and possible deductions:
➢ Any amount received by heir(s) from the decedent’s employer as a
consequence of the death of the decedent-employee in accordance
with RA No. 4917 (An Act Providing that Retirement Benefits of
Employees of Private Firms shall not be subject to Attachment, Levy,
Execution or Any Tax Whatsoever), provided such amount is included
as part of the gross estate of the decedent.

NET SHARE OF THE SURVIVING SPOUSE

➢ The amount deductible under this category is the net share of the
surviving spouse in the conjugal partnership property. The net share is
equivalent to ½ or 50% of the conjugal property after deducting the ILLUSTRATION 1: ESTATE TAX PAYABLE
obligations chargeable (ordinary deductions only) to such property. The net taxable estate and tax due shall be computed in the estate tax
The share of the surviving spouse must be removed to ensure that return as:
only the decedent’s interest in the estate is taxed.

DEDUCTIONS FROM THE GROSS ESTATE OF A NON-RESIDENT ALIEN

➢ The value of the net estate of a decedent who is a non-resident
alien in the Philippines shall be determined by deducting from the
value of that part of his gross estate which at the time of his death is
situated in the Philippines. The summary of allowable deductions are
shown below (based on RR 1-2003; RR 12-2018)
NOTE: 1. The gross estate of citizens and residents includes both separate
1. Since decedent is resident or citizen, gross estate covers all property of the decedent and common properties wherever situated.
properties within or without. 2. The deductible family home is the lower of P5.4M (P10.8M/2) and
2. No more deduction for funeral, judicial or medical expenses is the P10M limit.
allowed.
3. Family home deduction = lower of P10,000,000 and P10,200,000 ILLUSTRATION 4: ESTATE TAX PAYABLE
actual family home. Mrs. Kay Yakoto, a non-resident Japanese, died leaving the following
properties and estate deductions:
ILLUSTRATION 2: ESTATE TAX PAYABLE
A non-resident Japanese died leaving the following properties and
possible deductions:

A breakdown of the items of LIT is presented as follows:

The net taxable estate and tax due shall be computed in the estate tax
return as:

Philippine Gross Estate Ratio = P12M/P20M = 60%

Note: It must be noted that the NIRC required a pro-rata treatment of

deduction on LITe items. Due to this there is a possibility that the
deductible amounts can become higher than the actual LITe in the
Philippines. This prorate procedure is mandated by law; hence, it must
be followed even if it may not be the more theoretically acceptable
procedure.
NOTE:
1. Gross estate of NRA decedents include Philippine properties only. The total allowable deductions for LITe items shall be computed as
2. Matching rules apply to transfer for public uses and vanishing follows:
deductions. Only those transferred within the Philippines is deductible.
3. NRA decedents are allowed P500,000 standard deductions.

ILLUSTRATION 3: ESTATE TAX PAYABLE

Note: Transfer for public purpose is a separate item of deduction.
Mr. Rice, a resident alien, died leaving the following properties and
estate deductions:
The deductible amounts of LITe between separate and common
properties shall be pro-rated based on the ratio of actual LITe amounts
as follows:

The executor of Mr. Rice compiled the following expenses and

deductions which are matched to their respective sources:

A breakdown of the items of LIT is presented as follows:

The net taxable estate and tax due shall be computed as:

NOTE:
The gross estate shall be computed as: ILLUSTRATION 5
A resident decedent paid P110,000 estate tax in Japan. The following
shows a breakdown of his net taxable estate:

Philippine Gross Estate Ratio = P12M/P20M = 60%

Note: It must be noted that the NIRC required a pro-rata treatment of The estate tax on the P3,000,000 world net taxable estate is P180,000.
deduction on LITe items. Due to this there is a possibility that the
deductible amounts can become higher than the actual LITe in the The estate tax credit shall be computed as:
Philippines. This prorate procedure is mandated by law; hence, it must
be followed even if it may not be the more theoretically acceptable
procedure.

The total allowable deductions for LITe items shall be computed as

The estate tax payable shall be computed as:
follows:

Note: Transfer for public purpose is a separate item of deduction ILLUSTRATION 6

A citizen decedent has the following data:
The deductible amounts of LITe between separate and common
properties shall be pro-rated based on the ratio of actual LITe amounts
as follows:

The estate tax on the P6,000,000 world net taxable estate is P360,000.

Limit 1: Per country limit

Limit 2: Total foreign countries

The net taxable estate and tax due of Mrs. Yakoto shall be computed
as: The estate tax payable shall be computed as:

FILING AND PAYMENT OF ESTATE TAX

The estate tax return and its contents
➢ The executor, administrator or any of the heirs shall file in duplicate
an estate tax return under oath, setting forth the following:
1. Value of gross estate at the point of death or, in the case of non-
resident alien, that part of his gross estate situated in the Philippines
2. The deductions allowed from gross estate
NOTE: Only properties located in the Philippines can be claimed as 3. Supplemental data which may be necessary to establish the correct
transfer for public purpose. (Matching Rule) tax

DETERMINATION OF FOREIGN TAX CREDIT CPA CERTIFICATION

➢ The estate tax due of decedents who are taxable on global estate ➢ Where the value of gross estate exceeds P5,000,000, the return
such as resident citizens, resident aliens and non-resident citizens shall shall be accompanied by a statement certified by a Certified Public
further reduced by foreign tax credit for estate taxes paid in foreign Accountant.
countries.
➢ The foreign tax credit shall depend on whether the decedent has Contents of the statement:
properties in a single foreign country or multiple countries. 1. Itemized assets of the decedent with their corresponding gross
value at the time of death or, in the case of a non-resident decedent,
Single Foreign Country that part of his gross estate situated in the Philippines
➢ The foreign tax credit shall be whichever us lower of the actual 2. Itemized deductions from gross estate
foreign estate tax paid and the following limit: 3. The amount of tax due whether paid or still due and outstanding

DEADLINE OF FILING THE ESTATE TAX RETURN

➢ The estate tax return shall be filed within one year after the date of
Multiple Foreign Countries death of the decedent.
➢ The lower of actual estate tax and the foregoing limit for each
country is determined first. EXTENSION OF FILING
➢ The final foreign tax credit shall be lower of the total of the tax ➢ The Commissioner is authorized to grant, in meritorious cases, a
credit allowable per country and the world estate tax credit limit reasonable extension not exceeding 30 days for filing the return.
computed as:
BIR FORM TO BE USED IN FILING THE ESTATE TAX
➢ BIR Form 1801
VENUE OF FILING order of the court, they shall have a right to the restitution of the
a. For resident decedents proportional part of the tax paid.
➢ The administrator or executor shall register the estate of the
decedent and secure a new TIN therefor from the RDO where the INTRODUCTION TO DONOR’S TAX
decedent is domiciled at the date of his death.
DONATION
b. For non-resident decedents ➢ is the gratuitous transfer of property from one living person (donor)
➢ Whether non-resident citizen or alien with executor or to another (donee).
administrator in the Philippines, the estate tax return shall be filed and ➢ Is an act of liberality whereby a person disposes gratuitously of a
a new TIN shall be secured from the RDO where such executor or thing or right in favor of another who accepts it
administrator is registered. If he is not registered, the return shall be
filed and new TIN shall be secured from the RDO having jurisdiction of ESSENTIAL REQUISITES OF DONATION
where such executor or administrator is domiciled. 1. Capacity of the donor
➢ If the decedent has no legal residence in the Philippines, the return • The donor must be legally competent to make a donation.
shall be field with the Office of the Commissioner (RDO No.39, South 2. Intention to donate
Quezon City) • The donation must be intentional or voluntary
2. Donative act or delivery
PAYMENT OF ESTATE TAX • Donation is a real contract and is completed by the delivery of the
➢ The estate tax shall be paid at the time the return is filed following property to be donated, either actual or constructively.
the rule, “pay as you file” 4. Acceptance by the donee
• The acceptance of the donee perfects the contract of donation. The
INSUFFICIENCY OF CASH TO PAY TAX donation is deemed perfected when the donor knows of the
➢ If there is difficulty in paying the tax, the same may be settled by: acceptance of the donee.
1. Installment payment • Acceptance must be made during the lifetime of the donor and of
2. Partial disposition of estate the donee.

INSTALLMENT PAYMENT FORMALITIES OF DONATION

➢ The estate tax may be paid in installment within 2 years without DONATION OF MOVABLE PROPERTY
the imposition of interest or civil penalties. ➢ Donation of movable property may be made orally or in writing. An
➢ Subject to approval of the CIR, the estate tax may be paid as follows: oral donation requires the simultaneous delivery of the thing or of the
1. 24 monthly payments document representing the right donated. If the value of the personal
2. 8 quarterly payments property donated exceeds P5,000, the donation and the acceptance
3. 4 semi-annual payments shall be made in writing. Otherwise, the donation shall be void. (Art
4. 2 annual payments 748 CC)

In case of lapse of 2 years without payment of the entire tax due, the DONATION OF IMMOVABLE PROPERTY
remaining cash balance thereof shall be due and demandable subject ➢ In order that the donation of an immovable may be valid, it must
to the applicable penalties and interest reckoned from the prescribed be made in public instrument, specifying therein the property donated
deadline for filing the return and payment of tax. and the value of the charges which the donee must satisfy (Art 749 CC).
A donation of this kind that does not comply with the formalities
PARTIAL DISPOSITION required by law shall be deemed void.
➢ Some of the properties of the estate may be conveyed for cash
considerations to be used to settle the estate tax due. A written ACCEPTANCE OF IMMOVABLE PROPERTY
request for partial disposition shall be approved by the BIR. The said ➢ To be valid, immovable property may be accepted:
request shall be filed, together with a notarized undertaking that the ▪ In the same deed of donation; or
proceeds thereof shall be exclusively used for the payment of estate ▪ In a separate public document. The donor shall be notified
tax due. thereof in an authentic form, and this step shall be noted in
➢ In case of a failure to pay the total estate tax due out from the both instruments.
proceeds of said disposition, the estate tax dye shall be immediately
due and demandable subject to the applicable penalties and interest SUMMARY OF FORMAL REQUIREMENTS
reckoned from the prescribed deadline of filing of the returb. Property Required formality
Real Property Public instrument
LIABILITY FOR PAYMENT OF THE ESTATE TAX Tangible personal property
➢ The estate tax shall be paid by the executor or administrator before Amount exceeding P5,000 Written
delivery to any heir of his distributive share of the estate. Where there Amount not exceeding P5,000 Oral
are two or more executors or administrators, all of them shall be Intangible personal property Public instrument
severally liable for the payment of tax. A donation which does not conform to these legal forms is not valid
➢ The executor or administrator of an estate has the primary and is unenforceable and therefore not subject to tax.
obligation to pay the estate tax but the heir or beneficiary has
subsidiary liability for the payment of that portion of the estate which TYPES OF INTER-VIVOS DONATION
his distributive share bears to the value of the total net estate. The 1. Direct Donation
extent of his liability, however, shall in no case exceeds the value of his ➢ A direct donation is one made by the donor directly to
share in the inheritance. the donee.
2. Indirect Donation
DISCHARGE OF EXECUTOR OR ADMINISTRATOR FROM PERSONAL ➢ An indirect donation involves transfer of property by the
LIABILITY donor in favor of the donee but under the supervision of
➢ The executor or administrator shall make a written application for another party. This is called donation in trust.
the Commissioner of the amount of the estate tax and discharge from
personal liability. The executor or administrator, upon payment of the The designation of a donation in trust may either be:
amount of which he is notified, shall be discharged from personal 1. Revocable – not a completed donation and is not taxable
liability for any deficiency in the tax thereafter found to be due and 2. Irrevocable – a completed donation; hence, taxable
shall be entitled to a receipt in writing showing such discharge.
➢ No judge shall authorize the executor or judicial administration to TYPES OF DONORS
deliver a distributive share to any party interested in the estate unless A. Resident or citizen – taxable on global donations, such as
a certification from the Commissioner that the estate has been paid is 1. Resident citizen
shown. 2. Non-resident citizen
➢ If, after the payment of estate tax, new obligations of the decedent 3. Resident alien
shall appear, and the persons interested shall have satisfied them by
B. Non-resident alien – taxable only on Philippine donations, except 7. National Commission for Culture and the Arts (Sec 35, RA No. 10066)
intangible personal property subject to reciprocity conditions. 8. National Social Action Council (Sec 4, PD 295)
9. National Water Quality Management Fund (Sec 9, RA No. 9275)
Reciprocity rule for non-resident aliens 10. People’s Television Network, Incorporated (Sec 15, RA No. 10390)
➢ The Philippine exempts donations of intangible personal property 11. People’s Survival Fund (Sec 13, RA No. 10174)
by nonresident alien donors if their country also exempts the 12. Philippine-American Cultural Foundation (Sec 4, PD 3062)
donations of intangible personal properties by Filipino non-residents 13. Philippine Normal University (Sec 7, RA No. 9647)
therein. 14. Philippine Investors Commission (Sec 9, RA No. 3850)
15. Philippine Red Cross (Sec 5, RA No. 10072)
SUMMARY OF RULES ON TAXABLE DONATION 16. Ramon Magsaysay Award Foundation (Sec 2, RA 3676)
17. Rural Farm School (Sec 14, RA No. 10618)
18. Task Force on Human Settlements (Sec 3(b)(8), EO 419)
19. Tubbataha Reefs Natural Park (Sec 17, RA No. 10067)
20. University of the Philippines (Sec 25, RA No. 9500)

ILLUSTRATION 1 Donations for election campaign

Mr. Kumar donated the following properties: ➢ Any contribution in cash or in kind to any candidate, political party,
or coalition of parties for campaign purposes shall be governed by the
Election Code, as amended. Exemption is not automatic. These
donations must be reported to the Commission of Elections to be
exempt from donor’s tax and must be used for campaign purposes.
Determine the taxable donation in each of the following cases:
1. If Kumar is a resident or citizen donor Transfers for insufficient consideration involving real property
2. If Kumar is a non-resident alien with reciprocity classified as capital assets
3. If Kumar is a non-resident alien without reciprocity ➢ The sale, exchange and other disposition of real property classified
as capital asset is subject to a capital gains tax of 6% based on fair
The following shall be the taxable donation in each of the following value or gross selling price, whichever is higher.
cases:
General Renunciation of Inheritance
If Kumar is a The taxable donation is
➢ General renunciation by an heir, including the surviving spouse, of
Resident or citizen donor P 2,800,000.00
his/her share in the hereditary estate left by the decedent is not
Non-resident alien
subject to donor’s tax, unless, specifically and categorically done in
With reciprocity exemption 1,400,000.00
favor of identified heir/s to the exclusion or disadvantage of the other
Without reciprocity exemption 1,600,000.00 coheirs in the hereditary estate.
➢ There are instances where in the settlement of the estate of the
DONOR’S TAX decedent, instead of all the heirs receiving their respective shares in all
➢ a tax upon the gratuitous transfer of property between two or the properties of the decedent, the heirs will agree among themselves
more living persons at the time of transfer whether the transfer is for a specific property that each one of them will receive. In this
direct in trust and without regard to the type of property transferred. scenario, there will definitely be an heir who will receive a share lower
or higher than the value of what should have been his rightful share in
NATURE OF DONOR’S TAX all the properties of the decedent. In this case, there is actually a
1. Privilege tax partial renunciation of inheritance since the heir is waiving his share
2. Proportional tax to only identified properties but not to the entire properties of the
3. Annual tax decedent. Hence, donor’s tax shall be imposed on the value forgone
4. Ad valorem as a result of such waiver/renunciation.
5. National tax
6. Revenue or fiscal tax ILLUSTRATION 2
Don Juan died with a net distributable estate of P1,200,000 for heirs:
RATIONALE OF DONOR’S TAXATION Clara, Brenda and Cedie. Cedie renounced his P400,000 share in the
1. To control tax evasion of the estate tax inheritance in favor of Clara and Brenda. Is Cedie’s renunciation
2. To control tax evasion on income tax subject to donor’s tax?
3. To recoup future loss of income tax revenue
This is called general renunciation. If the renunciation is a general
EXEMPT GIFTS/DONATIONS renunciation (in favor of coheirs in accordance with their respective
1. Donations to exempt donees under the NIRC and special laws interest in the inheritance), the law on accretion applies and the
2. Donations for election campaign property waived is considered to pass through the other co-heirs by
3. Transfers for insufficient consideration involving real property inheritance; hence, it has no tax implication. There is no donation of
classified as capital assets property because the property had never become the property of the
4. General renunciation of inheritance donor. Such being the case, the renunciation is not subject to donor’s
5. Donations with reserved powers tax.
6. Donation to the government for public use
7. Donation to accredited non-profit institution ILLUSTRATION 3
8. Quasi-transfers Don Juan died with a net distributable estate of P1,200,000 for heirs:
9. Void donations Clara, Brenda and Cedie. Cedie renounced his P400,000 share in the
10. Foreign donations of non-resident alien donors 11. Donations of inheritance in favor of Brenda. Is Cedie’s renunciation subject to
property exempt under reciprocity donor’s tax?
This is called specific renunciation. The specific renunciation operates
Donations to certain exempt donees under the NIRC and special laws as if Cedie accepted his inheritance from Don Juan and then
➢ Donations to the following donee entities are exempt: transferred his ownership thereto to Brenda. This is a constructive
1. Aquaculture Department of the Southeast Asian Fisheries donation subject to the donor’s tax
Development Center (Sec. 2, P.D. 292)
2. Aurora Pacific Economic Zone and Freeport Authority (Sec 7, R.A No. Renunciation by the Surviving Spouse
10083) ➢ Renunciation by the surviving spouse of his/her share in the
3. Development Academy of the Philippines (Sec 12, PD 205) conjugal partnership or absolute community after the dissolution of
4. Girl Scouts of the Philippines (Sec 11, RA No. 10073) the marriage in favor of the heirs of the deceased spouse or any other
5. Integrated Bar of the Philippines (Sec 3, PD 181) person/s is subject to donor’s tax.
6. International Rice Research Institute (Art 5(2), PD 1620)
ILLUSTRATION 4 Accrediting Agencies
Mr. Kupido died on November 1, 2021 with net conjugal estate of ➢ Previously, the accreditation of donee institutions was handles by
P20,000,000 before deducting the share of the surviving spouse. Mrs. the Philippine Council for NGO Certification (PCNC). Effective
Kupido waived/renounced the following in favor of their only child, November 16, 2007, the accreditation function was transferred by EO
Pedro, her share in the community property and her share in the No. 671 to the following government entities:
hereditary estate left by Mr. Kupido. 1. Department of Social Welfare and Development
2. Department of Science and Technology
The renunciation of Mrs. Kupido of her share in the community 3. Philippine Sports Commission
property amounting to P10,000,000 (computed as P20,000,000 4. National Council for Culture and Arts
divided by 2) is subject to donor’s tax regardless of whether it is 5. Commission on Higher Education
specific or general.
Quasi-transfers
The renunciation of Mrs. Kupido of her share in the hereditary estate ➢ Involve delivery of property to another person but will never results
amounting to P5,000,000 (computed as P10,000,000 divided by 2), is in transfer of ownership thereto. These are not subject to donor’s tax.
not subject to donor’s tax since it is a general renunciation. However, Examples:
assuming that Mr. Kupido has 3 heirs: Mrs. Kupido, Pedro and Juan, 1. Merger of the usufruct in the owner of the baked title during the
and Mrs Kupido waived her share in the hereditary estate left by Mr lifetime of the usufructuary
Kupido to Pedro, the renunciation is subject to donor’s tax since it is a 2. The transmission or delivery of the inheritance or legacy by the
specific renunciation fiduciary heir or legatee to the fideicommissary during the lifetime of
the fiduciary heir
Donation with reserved powers (Incomplete transfers) 3. The transmission from the first heir, legatee or donee during his
➢ This pertains to transfers of property wherein ownership will lifetime in favor of another beneficiary, in accordance with the desire
transfer only upon the happening of a future event which is specified of the predecessor
by the donor, such as:
1. Conditional donation Void donations
2. Revocable transfers ➢ Void donations are invalid donations. Void donations include those
prohibited by law and those with defects in their execution. Void
The donor’s tax shall not apply unless and until there is a completed donations are not objects of taxation.
gift. Incomplete transfers are not subject to tax upon delivery of the
property. They are taxable upon completion and perfection of the Prohibited donation under the Civil Code
donation. 1. Donations between spouses, except minor gifts
2. Donations between persons who were guilty of adultery or
A gift that is incomplete because of reserved powers become concubinage at the time of donation
complete when either: 3. Donations between persons found guilty of the same criminal
1. The donor renounces the power; or offense, in consideration thereof.
2. His right to exercise the reserved power ceases because of the 4. Donations to a public officer or his wife, descendants or ascendants
happening of some event or contingency or the fulfillment of some by reason of his office
condition, other than because of the donor’s death. 5. Donations to incapacitated persons
6. Donations of future property.
ILLUSTRATION 5
Mrs. Q made a revocable donation of a car to her daughter H. The car Donations with defects at execution
was worth P1,400,000 when delivered to H 1. Donation by a person who has no legal title to the property
2. Oral or written donation of real property or intangible personal
Even if the car is delivered, there is no donation in this case since Mrs. property
Q still owns the car. The value of the car is not subject to donor’s tax 3. Donation refused by the donee
on delivery. The same shall be taxed only when Mrs. Q renounces the
power to revoke. Foreign donations of non-resident alien donors
➢ Donations of property situated in a foreign country by non-resident
Assuming Mrs.Q died without revoking the car, the same shall be alien (NRA) donors are not subject to donor’s tax
subject to estate tax.
Donation of property exempt under reciprocity
Donation to the government for public use ➢ The donations of intangible personal property in the Philippines by
➢ Gifts made to or for the use of the national government or any a non-resident alien are exempt if the reciprocity exemption applies.
entity created by any of its agencies which are not conducted for
profit or to any political subdivision of the said government are TAXABLE DONATION
exempt from donor’s tax. ➢ Donations that do not qualify among those exemption criteria are
subject to donor’s tax.
Donation to accredited non-profit organization
➢ Gifts in favor of an educational and or charitable, religious, cultural DONOR’S TAX
or social welfare corporation, institution, accredited nongovernment THE DONOR’S TAX
organization trust, or philantrophic organization or institution are The donor’s tax is imposed on annual net gifts reckoned over a
exempt from donor’s tax. calendar year basis. For every taxable donation, the donor shall
determine and report his/her net gift. The tax is paid within 30 days
Requisites for exemption after every donation.
1. Not more than 30% of said gift shall be used by such donee for
administrative purposes. Net Gift
2. The donee entity must be organized as a non-stock entity. Refers to the net economic benefits from the transfer that accrues to
3. The donee entity does not pay dividends. the donee.
4. The donee entity’s board of trustees earns no compensation.
5. The donee entity must devote all its income, donations, subsidies, Donor’s Tax Rate
or other forms of philantrophy to the accomplishment and promotion The donor’s tax rate for each calendar year shall be six percent (6%)
of its purposes enumerated in its Articled of Incorporation. computed on the basis of the total gifts in excess of two hundred fifty
thousand pesos (P250,000) exempt gift made during the calendar year
In practice, donee entities are accredited by the applicable
government agency. Donations to accredited donee institutions are
exempt. Donations to non-accredited donee institutions are taxable
ILLUSTRATION 1 VALUATION OF NET GIFT
In 2019, Mr. Generoso donated a condominium, unit with a value of The following are considerations in measuring net gift:
4,000,000 to his first cousin, Mr. Alfonso. 1. Valuation rights
2. Timing of valuation
3. Donation of common properties
4. Encumbrances on the property donated

Valuation of property donated

For purposes of donor’s taxation, the valuation of properties donated
follow the same rules as those of estate taxation, namely:
ILLUSTRATION 2
A donor made the following donations in 2019: A. Real Property – the higher of zonal or fair value per assessor’s
office
B. Personal Properties
a) Shares of stocks
If listed in the PSE – the average high and low price of the stocks
at the date of donation
b) If not listed:
Preferred stocks – par value
January 4, 2019 Donation Common stocks – the book value appearing in financial
The donor’s tax due shall be zero. statements published nearest to the date of donation
C. Other Properties
a) Newly purchased – purchase price
b) Old items – second hand value
c) Monetary claims – the amount fixed in the contract

March 7, 2019 Donation ILLUSTRATION 3

The donor’s tax shall be computed as follows: Mr. H donated a parcel of land in favor of his son. The land had a zonal
value of P3,000,000, fair value from assessor’s office of P2,000,000,
and an independent appraisal value of P4,000,000.

The amount to include in net gift shall be P3,000,000 (whichever is

higher between zonal value and fair value from the assessor’s office).
Independent appraisal value shall not be used in accordance with the
NIRC.

ILLUSTRATION 4
November 10, 2019 Donation Tony donated a Toyota Fortuner to his brother Andrew. The car was
The donor’s tax shall be computed as follows: acquired five years ago at P1,800,000. At the date of donation, the car
was saleable as second hand at P1,000,000 but was subject to a
P300,000 mortgage which Tony promised to pay before the transfer.

The donation shall be included in net gift at P1,000,000. Note that the
P300,000 is not assumed by the donee.

Timing of valuation of gift

Donation is valued at the point of completion or perfection of the
donation.
December 25, 2019 Donation
The donor’s tax shall be computed as follows: Donation is perfected upon acceptance by the donee. In conditional
donations, the donation is completed and perfected upon satisfaction
by the donee of the terms of donation or upon waiver by the donor of
the conditions.

ILLUSTRATION 5
Mr. A made a revocable transfer of a residential property in favor of
his brother B. The value of the property was P3,000,000. B’s family
moved to the property when it was worth P3,500,000. Mr. A
subsequently waived his ownership and transferred title in favor of B
February 14, 2020 Donation when the property was worth P4,000,000.
The donor’s tax shall be computed as follows:
The donation shall be valued at P4,000,000.

Donation of common properties

Donation of conjugal or community property by the spouses is
deemed ½ made by the husband and ½ made by the wife. The
husband and the wife shall file separate donor’s tax returns for the
donation.

However, if what was donated is a conjugal or community property

NOTE: and only the husband signed the deed of donation, there is only one
The gifts made in 2019 shall not be included since the donor’s tax is a donor for donor’s tax purposes, without prejudice to the right of the
tax on annual donation. The accumulation of donation stops at the wife to question the validity of the donation without her consent
end of every calendar year. pursuant to the pertinent provisions of the Civil Code of the
Philippines and the Family Code of the Philippines.
Husband and wife are considered as separate and distinct taxpayers ILLUSTRATION 8 – INTEGRATIVE ILLUSTRATION
for purposes of the donor’s tax Mr. Caticlan, a resident citizen, made the following donations during
the year:
ILLUSTRATION 6  February 2 – donation to his brother who is getting married,
Mr. and Mrs. Japson donated a brand new car worth P2,000,000 to P300,000
their son on his graduation.  March 18 – P200,000 to a public school for public use
 April 15 – donation to daughter on account of marriage,
Mr. and Mrs. Japson shall report half of the donation in their P400,000
respective donor’s tax return as follows:  August 5 – donation to an accredited non-profit research
institution, P400,000
 October 30 – donation of land valued at P500,000 to Mr.
Caticlan’s father subject to a condition that the latter shall
assume the P150,000 unpaid real property tax on the property

February 2 donation:
The donor’s tax shall be computed as follows:
NOTE:
This rule applied to donation of co-owned properties.

Encumbrances on the property donated assumed by the donee

 Obligations on the donated property which are assumed by the
done are diminutions to the gratuity accruing to the done. These
are onerous assignments of debt and are nor gratuity; hence,
these are deductible from the value of the donation.

ILLUSTRATION 7
Don Pablo donated an agricultural land to his son, Sayno. The land March 18 donation:
which was encumbered by an P8,000,000 mortgage had value of The donor’s tax shall be computed as follows:
P20,000,000. The land also had P500,000 unpaid real property tax.
Sayno assumed the mortgage while Don Pablo Assumed the real
property tax.

The net gift of Don Pablo shall be computed as:

NOTE:
The obligation assumed by the donor is not deductible as it will not
April 15 donation:
reduce the economic benefits accruing to the donee.
The donor’s tax shall be computed as follows:
DONOR’S TAX RETURN
Any person making a donation (whether direct or indirect),
unless the donation is specifically exempt under the Code or
other special laws, is required to accomplish under oath a
donor’s tax return in duplicate for every donation

Filing date
BIR Form 1800 is filed within 30 days after the donation is
made. A separate return is required for donations made at
different dates during the calendar year reflecting therein any August 5 donation:
previous net gift made in the same year. The donor’s tax shall be computed as follows:

Only one return is required for donations made on at a single

day even if made to several donees. If the donation is a
conjugal or communal property, each spouse shall file a
separate return corresponding to their respective share in the
conjugal or community property.

Content of the donor’s tax return

The return shall set forth:
1. Each gift made during the calendar year which is to be included
in computing net gifts;
October 30 donation:
2. The deductions claimed and allowable;
3. Any previous net gifts made during the same calendar year;
4. The name of the donee;
5. Such further information as the Commissioner may require.

Donor’s tax computation and reporting

The computation of the donor’s tax is on a cumulative basis over a
period of one calendar year. The net gift of every taxable donation
during the year is determined and the additional tax is computed,
reported, and paid to the government within 30 days from the day the
gift was made or completed.