Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
UP LAW CENTER
ESTATE TAX
Estate Tax is a tax levied on the transmission of properties from a decedent to his heirs. It is not a tax on
property nor on the transferor or transferee.
In consideration of death, without the donors intention to lose the thing conveyed or its free disposal in case
of survival
Transfer conveys no title or ownership to the transferee before death of transferor, or transferor retains
ownership, full or naked, of property conveyed
Transfer is revocable before the transferors death and revocability may be provided indirectly by means of the
reserved power in the donor to dispose of the property conveyed
Being in the form of a will, donation mortis causa is not accepted by the donee during the donors lifetime.
Death is the generating source of the power to tax (Lorenzo v. Posadas). No manual or physical transfer of the
property is required for the estate tax to accrue.
Residence refers to the permanent home, the place to which whenever absent, for business or pleasure, one
intends to return, and depends on facts and circumstances, in the sense that disclose intent (Corre v. Tan Corre).
It is not necessarily the actual place of residence at the time of death.
All properties and interests in properties of the decedent at the time of his death shall be included in his gross
estate. However, properties transferred or interests relinquished by the decedent before his death are excluded
from his gross estate.
The estate shall be appraised at its fair market value at the time of death.
Shares of stocks: fair market value as shown in the audited financial statements closest to the date of death of
the decedent
ESTATE TAX
Real property
Personal property
Less: Deductions:
Funeral expenses
Medical expenses
Family home
Standard deduction
Estate tax due (First P200,000 is exempt; 5% from P200,001; and 20% on over P10 M)
ESTATE TAX
WHO IS THE DECEDENT AND WHAT PROPERTIES FORM PART OF HIS GROSS ESTATE?
Include in his gross estate all properties, real or personal, tangible or intangible, regardless of location (within
or without the Philippines)
For intangible properties, use the principle of mobilia sequuntur personam Taxation of intangibles follows the
residence or domicile of the owner, except for certain intangible properties mentioned in Sec. 104, NIRC.
ESTATE TAX
THESE INTANGIBLE PROPERTIES HAVE SITUS IN THE PHILIPPINES (Sec. 104, NIRC):
Shares, obligations or bonds issued by any foreign corporation, 85% of the business of which is located in the
Phil or if such properties have acquired business situs in the Phil (Wells Fargo case)
ESTATE TAX
Revocable transfers
ESTATE TAX
Transfers in contemplation of death refers to the thought of death, as a controlling motive, which induces the
disposition of the property for the purpose of avoiding the tax.
Revocable transfers covers transfers, by trust or otherwise, where the enjoyment was subject at the date of
his death to any change or where such power is relinquished in contemplation of death.
Deceased declared her conveyance was a donation mortis causa and forbade the registration of the deed until
after her
It does not cover bona-fide sale of property for an adequate and full consideration in money or moneys worth.
ESTATE TAX
By will, or by deed executed in contemplation of death, or by deed where he retains for his life or any period
not ascertainable without reference to his death, which in fact does not end before his death
Possession or enjoyment of, or the right to the income from, the property, or the right to designate the persons
who shall possess or enjoy the property or the income thereof
Except in case of bona-fide sale for an adequate and full consideration in money or moneys worth.
Power of appointment is general when it gives to the donee the power to appoint any person he pleases, thus
having as full dominion over the property as though he owned it. It is special when the donee can appoint
only among a restricted or designated class of persons other than himself.
ESTATE TAX
Taxable:
Beneficiary is the estate of the deceased, his executor or administrator, irrespective of whether or not the
insured retained the power of revocation
Beneficiary is other than the decedents estate, executor or administrator, when the designation of beneficiary
is not expressly made irrevocable. Under the Insurance Code, insurance policies are presumed revocable.
Not Taxable:
ESTATE TAX
Death
No previous vanishing deduction on the property (to preclude application of vanishing deduction on same
property more than once).
Percentage of deduction decreases over a period of 5 years or 20% reduction every year
ESTATE TAX
Value taken of property previously taxed (as declared in prior decedents gross estate)
Initial basis less 2nd deduction = Final basis multiplied by applicable rate of vanishing deduction =
DONORS TAX
Donors Tax is a tax on the privilege to transfer property from a living person to another living person.
Donees tax was already abolished and incorporated into donors tax.
Sale or exchange of property for less than adequate and full consideration is subject to donors tax, except
where the property is capital gains tax, such as real property located in the Phil and shares of stock of a
domestic corporation.
Donated property must be valued at fair market value at the time of the donation.
DONORS TAX
Transfer of property may be in trust or otherwise, direct or indirect. Transfer becomes complete and taxable
only when the donor has divested himself of all beneficial interest in himself or his estate.
2% on P100,001 to P200,000
(whether by whole or half-blood), spouse, ancestor, and lineal descendant; or (b) relative by consanguinity in
the collateral line within the fourth degree of relationship.
DONORS TAX
Donor
Individual
Corporation
Donation of conjugal
DONORS TAX
Cumulative computation of donors tax is required for all donations by the same donor to members of the
family during the calendar year, but no cumulative computation is required for donations to strangers.
Exempt donations
To social welfare, cultural, and charitable organizations, not more than 30% shall be used for administration
purposes
To Intramuros Administration
BUSINESS TAXES
VAT (Title IV, NIRC)
Taxable transactions
Sale of services
Importation of goods
Formula
Output Tax
Transaction is subject to
(Title V, NIRC)
No VAT or OPT is
CHARACTERISTICS OF VAT
Indirect tax
TAXABLE PERSONS
Sale, barter or exchange of goods or properties that are consumed or for consumption in the Phil
Seller of services
Importer of goods
Whether done in the course of his trade or business or for personal consumption
Unincorporated joint venture undertaking construction activity is subject to VAT, although exempt from
income tax
Government
Association dues and special assessments; guest fees and fees for use of facilities exempt from VAT
Income from operating restaurant, boutique or shop or for leasing facilities -- taxable
VALUE ADDED TAX
Real property is held primarily for sale or for lease in the ordinary course of trade or business
However, Rev. Regs. No. 4-2007 (Feb 2007) provides that if the
real property sold is used in his trade or business, said transaction is subject to VAT, being incidental to the main
business of the taxpayer, who is a VAT-registered taxpayer engaged in other types of business.
Rules on installment sales of real property in income tax law are adopted for VAT purposes. Thus, sales with
initial payments of 25% or less of GSP shall be reported only in period of sales.
Deemed sale is subject to VAT (output tax) in order to recoup previous VAT (input tax) allowed
Excise tax, if any, interest, and delivery charges form part of gross selling price
The regular conduct or pursuit of a commercial or an economic activity, including transactions deemed
incidental thereto, regardless of whether or not the person engaged therein is a non-stock, non-profit private
organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members
or their guests), or government entity.
(CIR v.
The absence of profit in the performance of taxable services does not make such activity for a fee exempt
from VAT
COMASERCO, GR 125355, Mar 30, 2000).
Goods or properties must be located in the Philippines and consumed or destined for consumption in the Phil.
Special economic zones under RA 7916 (PEZA Law) and freeport zones under RA 7227 (BCDA Law) are
treated as foreign territories by fiction of law. Hence, importation of goods by a special economic or freeport
zone enterprise shall be exempt from VAT and customs duties and will be subject to VAT and duties only upon
their withdrawal from the customs custody.
Destination Principle:
Export sales of goods are zero-rated (0% VAT), provided seller is VAT-registered person
Tax base for sale of goods or property is Gross Selling Price (GSP) - the total amount of money or its
equivalent, which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or
exchange of the goods or properties, excluding the VAT.
As a rule, output tax accrues on sale of goods or properties (other than a real property sold with initial
payments of 25% or less) at the time of sale, when the VAT sales invoice is issued, although none or only a part
of the gross selling price is paid by the buyer at the time of sale.
Sales discounts determined and granted at the time of sale, which are expressly indicated in the sales invoice
do not form part of the tax base. Grant of discount must not depend upon the happening of a future event or the
fulfillment of certain condition. They must be recorded in the books of accounts of the seller.
20% sales discounts to senior citizens under RA 9257 (Amended Senior Citizens Law) shall be deducted from
gross sales before applying the VAT rate.
When VAT is not separately indicated in the invoice or receipt, to determine Gross Selling Price or Gross
Receipts (100%), divide Total Invoice Amount (112%) by 1.12.
If Total Invoice Amount includes EWT, determine first the Gross Selling Price, and then apply the VAT rate on
GSP.
If initial payments (consisting of down payment and all monthly amortizations in the year of sale) exceeds
25% of the gross selling price, the tax base is the entire gross selling price as shown in the document of sale,
even though only a part of it has been received during the period
If initial payments during the year of sale do not exceed 25% of gross selling price, the tax base during the
period is only the amount received
Tax rates
(Coconut Oil
Internal or constructive export sales under BOI law (EO 226) and special laws (RA 7916 and RA 7227) are
automatically zero-rated.
fiction of law (CIR v. Seagate Technology (2005); CIR v. Toshiba Information Equipment (2005)
For as long as the goods remain within the zone, consumed or destroyed there, they will be duty-free and tax-
free
Effectively zero-rated sales (sales to ADB, embassies, etc) need approval from BIR before sale; otherwise, sale
is exempt.
Sales of goods, supplies, equipment and fuel to persons engaged in international shipping or international air
transport operations
ZERO-RATED SALE
VAT-registered seller can reclaim input taxes passed on to it by sellers of goods or services from BIR in form
of refund or tax credit
Zero-rated sales are taxable sales for purposes of registration as VAT taxpayer to determine threshold
EXEMPT SALE
Exemption removes the VAT at the exempt stage
Brokers
Warehousing services
Proprietors or operators or keepers of hotels, motels, resthouses, pension houses, inns and resorts
Dealers in securities
Lending investors
Domestic common carriers by air and sea between points in the Philippines
Sales of electricity
Similar services, regardless of whether or not the performance thereof calls for the exercise or use of the
physical or mental faculties
Gross receipts means the total amount of money or its equivalent, representing the contract price,
compensation, service fee, rental or royalty, including the amount charged for materials supplied with the
services and deposits and advance payments actually or constructively received during the taxable quarter for
the services performed or to be performed for another person, excluding the VAT, except those amounts
earmarked for payment to unrelated third party or received as reimbursement for advance payment on behalf of
another, which do not redound to the benefit of the payor.
For sale of services, the test is not whether services have been performed or not, but whether amount of
compensation or fee is received, actually or constructively. The rule is: NO RECEIPT OF PAYMENT, NO VAT
LIABILITY.
A contractor that agrees to provide the materials and labor for a construction project is a seller of services for
the entire amount of consideration.
Processing, manufacturing or repacking goods for other persons doing business outside the Phil, which goods
are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in
accordance with BSP rules and regulations
Services other than processing, manufacturing or repacking rendered to a person engaged in business
conducted outside the Phil or to a non-resident person not engaged in business who is outside the Phil when the
services are performed, the consideration for which are paid for in acceptable foreign currency and accounted
for in accordance with BSP rules and
Services rendered to persons or entities whose exemption under special laws or international agreements to
which the Phil is a signatory effectively subjects the sale of services to 0% rate
Services rendered to persons engaged in international shipping or international air transport operations,
including leases of property for use thereof
Services rendered by local shipping agents and by local shipping lines to international carriers are zero-rated
only if they pertain to outbound trips; on inbound trips, they are subject to 12% VAT.
Services performed by subcontractors and/or contractors in processing, converting or manufacturing goods for
an enterprise whose export sales exceeds 70% of total annual production
Transport of passengers and cargo by domestic air or sea carriers from the Phil to a foreign country
Sale of power or fuel generated thru renewable sources of energy (biomass, solar, wind, hydropower,
geothermal and other emerging sources)
While this requirement is not expressly stated in the 2nd paragraph of Sec. 102(b), this is clearly provided in
the 1st paragraph of Sec 102(b) where the listed services must be for other persons doing business outside the
Phil.
The above phrase not only refers to services enumerated in the first paragraph, but also pertains to the general
term services appearing in the second paragraph.
Otherwise, those subject to the regular VAT under Sec 102(a) can avoid paying the VAT by simply stipulating
payment in foreign currency inwardly remitted by the recipient of services. To interpret Sec. 102(b)(2) shall
apply to a payer-recipient of services doing business in the Phil is to make the payment of regular VAT
dependent on the generosity of the taxpayer.
Significantly, the amended Section 108(b) [previously Sec 102(b)] of the present Tax Code clarifies this
legislative intent. For zero-rating of services, it must be rendered to a person engaged in business conducted
outside the Phil.
The payer-recipient of respondents services is the Consortium which is a joint venture doing business in the
Phil. While the Consortiums principal members are non-resident foreign corps, the Consortium itself is doing
business in the Phil. This is shown in BIR Ruling 23-95, which states that the contract between Consortium and
NPC is for a 15-year term.
Considering the length of time, the Consortiums operation and maintenance of NPCs power barges cannot be
classified as a single or isolated transaction.
This case is different from CIR v. American Express International, Inc. (Phil Branch), because in the latter
case, the recipient of services is AEII (HK
Branch) doing outside the Phil (CIR v. BWSC Mindanao, Inc., GR153205, Jan 22, 2007).
CIRs filing of its Answer before the CTA challenging claim for refund effectively serves as a revocation of
VAT Ruling 03-99 and BIR Ruling 23- 95. However, such revocation cannot be given retroactive effect since it
will prejudice respondent.
VAT-EXEMPT TRANSACTIONS
A. Sale or importation of agricultural and marine food products in their original state; livestock and poultry
generally producing food for human consumption; and breeding stock
B. Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds
(except specialty feeds for race horses, fighting cocks and other pets)
C. Importation of personal and household effects belonging to residents of the Phil returning from abroad and
non-resident citizens coming to resettle in the Phil
D. Importation of professional instruments and implements, and personal effects (except vehicle, vessel,
aircraft, machinery for use in manufacture) belonging to persons coming to settle in the Phil
E. Services subject to percentage tax under Title V, such as 3% percentage tax, common carriers tax on land
transportation and international carriers, gross receipts tax on banks and finance companies, premium tax on life
insurance companies, franchise tax on gas and water grantees, etc.
VAT-EXEMPT TRANSACTIONS
G. Medical, dental, hospital and veterinary services, except those rendered by professionals
Sales of medicines by hospitals to in-patients are exempt from VAT as medical/hospital services.
H. Educational services rendered by private educ institutions accredited by DepEd, CHED, TESDA, and those
rendered by government educational institutions
Review schools and training institutes are not accredited by govt; hence, subject to VAT
P. Sale of real property not primarily held for sale to customers or for lease in the ordinary course of trade or
business, or real property for low-cost and socialized housing, residential lot valued at P1.5 M or below, house
and lot and other residential dwellings valued at P2.5 M or below
VAT-EXEMPT TRANSACTIONS
Lease of commercial buildings are subject to VAT, regardless of rental per month or unit, provided threshold of
P1.5 M is exceeded.
R. Sale, importation, printing or publication of books and any newspaper or magazine which appear at regular
intervals with fixed prices and is not devoted principally to publication of paid advertisements
V. Sale or lease of goods or property or the performance of services other than transactions mentioned above,
the gross sales or receipts do not exceed P1.5 M
If sale of goods pertains to agricultural or marine food products in their original state or sale of books, or sale
of service relates to rental of residential unit not exceeding P10,000, transaction is exempt even if gross sales or
receipts exceed P1.5 M.
Sale of medicines by the hospital pharmacy to in-patients is exempt from VAT, but sale to out-patients is
subject to 12% VAT (St. Lukes Medical Center
Tolling fees received by a hotel for PLDT is not part of its gross receipts
Payment of VAT by the hotel on fees for providing limousine service to its client is correct. It is not subject to
the 3% common carriers tax. Claim for
moviegoers are exempt from VAT. Theatres and movie houses are not included in the enumeration of taxable
services in the VAT law. Our tax laws, past and present, did not adopt more specific terms for sale or exchange
of services to include showing of films in public
PAGCOR is exempt from VAT pursuant to its charter, PD 1869. Being a special law, PD 1869 prevails over RA
7716, a subsequent general law. To
be valid, repeal of special law should be express (CIR v. Acesite Hotel Corp, GR
Input tax credit on importations of goods and current local purchases of goods, properties and services
Only VAT-registered persons are entitled to credit input taxes against their output tax.
Non-registration as a VAT taxpayer does not exempt him from VAT output tax liability on his taxable sales of
goods, properties or services.
2% of value of inventory or actual VAT paid on such goods, materials and supplies, whichever is higher
but also on land itself (CIR v. Fort Bonifacio Dev Corp, 2009)
Persons or firms engaged in the processing of sardines, mackerel and milk, and in manufacturing refined sugar
and cooking oil, and packed noodle-based instant meals are entitled to presumptive input tax equivalent to 4%
of gross value in money of their purchases of primary agricultural products which are used as inputs to their
production (Sec. 111, NIRC)
Tax reliefs of VAT taxpayers on their excess input taxes (EIT) attributable to zero-rated and effectively zero-
rated sales
Carry over the excess input tax to the next quarter, until excess is utilized
File a claim for tax credit, within two years after the close of taxable quarter where the sales were made, (NOT
from the filing of the quarterly VAT return)
For non-zero-rated sales, remedy available is only to carry over EIT to the next quarter(s), or to dissolve the
corporation or cease operation of business subject to VAT within 2 years from date of dissolution or cessation of
business
Prescriptive period commences from the close of the taxable quarter when the sales were made and not from
the time the input VAT was paid nor from the time the official receipt was issued. Thus, when a zero-rated VAT
taxpayer pays its input VAT a year after the pertinent transaction, said taxpayer only has a year to file a claim for
refund or tax credit of the unutilized creditable input VAT. The reckoning frame would always be the end of the
quarter when the pertinent sales or transaction was made, regardless when the input
NOTE: It appears that the SC strictly interprets the provision of Sec. 112 of the Tax Code, even with respect to
sale of services. In other words, where the law does not qualify, it is not for the court nor the BIR to so qualify.
ADMINISTRATIVE REQUIREMENTS
REGISTRATION
INVOICING
BOOKKEEPING
WITHHOLDING OF TAX
INVENTORY OF:
ANY PERSON WHO IS NOT REQUIRED TO REGISTER FOR VAT UNDER SUBSEC. (G) MAY ELECT
TO REGISTER FOR VAT PURPOSES.
ELECTION IS IRREVOCABLE FOR 3 YEARS FROM QUARTER ELECTION WAS MADE (Sec. 236(H),
RA 9337)
ANY PERSON WHO IS VAT-EXEMPT UNDER SEC. 4.109-1(B)(1)(V), NOT REQUIRED TO REGISTER
FOR VAT MAY, IN RELATION TO SEC. 4.109-2, ELECT TO BE VAT-REGISTERED. ONCE VAT-
REGISTERED, HE CANNOT CANCELL HIS
14-05)
VENUE
LARGE TAXPAYER
NON-LARGE TAXPAYER
BIR FORM
TOTAL AMOUNT
VAT-EXEMPT SALE
ZERO-RATED SALE
NAME, BUS. STYLE, ADDRESS AND TIN OF VAT-REGIS- TERED BUYER OR CUSTOMER, IF
AMOUNT IS P1,000 OR
SUBJECT TO VAT
AMOUNT RECEIVED IS NOT ITS INCOME OR FEE BUT FOR ANOTHER ENTITY
VAT-EXEMPT SALE
If VAT invoice or receipt is issued by a seller for a VAT-exempt transaction, he is liable to VAT output tax as a
penalty, but the buyer is entitled to claim VAT input tax.
Sec. 116 3% percentage tax on sale or lease of goods, properties or services of non-VAT registered persons
whose annual gross sales or receipts do not exceed P1.5 M
Sec. 117 3% common carriers tax on domestic common carriers by land on transport of passengers and
keepers of garages
Sec. 118 3% common carriers tax on international air and sea carriers
Sec. 119 3% franchise tax on grantees of radio and/or TV broadcasting whose gross receipts do not exceed
P10 M and 2% franchise tax on grantee of gas and water utilities
Sec. 120 10% overseas communication tax on dispatch originating from the Phil
Sec. 125 Amusement tax on proprietors, lessees or operators of cockpits, cabarets, night or day clubs (18%),
boxing exhibitions (10
FACTS
Mar 11, 1991 - CIR issued RMO 15-91 classifying pawnshop business as akin to lending investors business
activity, which is broad enough to encompass the business of lending money at interest by any person, and
imposing the 5% lending investors tax based on gross income, pursuant to Sec. 116 of (1977) Tax Code.
The RMO was later clarified by RMC 43-91 dated May 27, 1991. It revoked BIR Ruling No. 6-90 and VAT
Ruling No. 22-90 and 67-90. In order to avoid unfairness if they are required to pay the tax on past transactions,
pawnshop owners shall become liable to the lending investors tax beginning Jan 1, 1991. Since the deadline for
filing OPT return and payment of tax for Q1 1991 has already lapsed, taxpayers were given until June 30, 1991
to pay the tax without penalty.
For 1995, AEBI was issued FAN and assessed for def. lending investors tax of 5% on gross income.
June 28, 1998 AEBI filed administrative protest which BIR Director denied on Feb 3, 1999.
cancelled assessment.
BIR appealed to CA. On Mar 23, 2001, CA rendered decision reversing and setting aside decision of CTA.
AEBI filed MR but was denied; hence, it filed this petition for review on certiorari.
ISSUE
SC RULING
The Court agrees with the contention of AEBI and EPJI, the issue herein not being a novel one.
In CIR v. Michel J. Lhuillier Pawnshop, this Court held that pawnshops are not included in the term lending
investors for the purpose of imposing the 5% percentage tax under Sec. 116, as amended by EO 273.
In CIR v. Trustworthy Pawnshop, this Court reiterated its ruling Lhuillier for the following reasons:
Sec. 192 of Tax Code, prior to its amendment by EO 273, pawnshops and lending investors were subjected to
different tax treatments.
Congress never intended pawnshops to be treated in the same way as lending investors. The definition of
lending investors found in Sec 157(u) of 1986 NIRC is not found in 1977 NIRC, as amended by EO 273.
Sec. 116 of 1977 NIRC, as amended by EO 273, subjects to percentage tax dealers in securities and lending
investors only. There is no mention of pawnshops. The mention of one thing implies the exclusion of another
thing not mentioned.
BIR had ruled several times prior to issuance of RMO 15-91 and RMC 43-91 that pawnshops were not subject
to 5% percentage tax imposed in Sec. 116, as amended by EO 273.
RA 7716 (EVAT Law) repealed Sec. 116 of 1977 NIRC, as amended, which was the basis of RMO 15-91 and
RMC 43-91. Since Sec. 116, which breathed life on the questioned administrative issuances, had been repealed,
RMO 15-91 and RMC 43-91, which depended upon it, are deemed automatically repealed.
Absence of publication of RMO and RMC makes them invalid. CIR may not disregard legal requirements or
applicable principles in the exercise of quasi-legislative powers.
Once a case has been decided one way, any other case involving exactly the same point at issue should be
decided in the same manner under the doctrine of stare decisis et not quieta movere.