Transfer Taxation

walang conditions for transfer tax sa condi and revocable

gratuitous transactions

transfer tax shall apply only to

6%

tax rate for transfer tax

gratuitous transactions

are unilateral in a sense that no equivalent undertaking from the counterparty is required for its consummation

generosity of one party

consideration for a gratuitous transaction

undertaking of the counterparty

consideration for an onerous transaction

inter-vivos transfer

takes effect during the lifetime of the donor (and the donee)

law on donations

inter-vivos transfers are governed by

mortis-causa transfer

transfer upon death of the decedent, includes transfer by a living donor but are related to death

law on succession

mortis-causa transfer are governed by

annual tax

nature of donor’s tax

one-time tax

nature of estate tax

donor

taxpayer in donor’s tax

estate (netted from properties)

taxpayer in estate tax

donee

recipient in donor’s tax

heirs of or beneficiaries

recipient in estate tax

upon delivery of the thing donated

timing of imposition in donor’s tax

upon death of the decedent

timing of imposition in estate tax

net gift after 250k

value subject to tax in donor’s tax

net estate after 5m

value subject to tax in estate tax

30 days from the date of donation

deadline for filing of payment in donor’s tax

1 year from the date of death

deadline for filing of payment in estate tax

Privilege/Excise Tax

National Tax

Direct Tax

Ad-valorem Tax

Proportional Tax

Revenue Tax

Nature and Characteristics of Transfer Taxes

Privilege/Excise Tax

Imposed on the exercise of the privilege to transfer properties through succession or donation

National Tax

Estate and donor’s taxes are national internal revenue taxes since they are imposed by the BIR, a national government agency

Direct Tax

Only the transferor is liable to pay the tax. The burden to pay the tax cannot be shifted to anyone.

Ad-valorem Tax

Estate and Donor’s taxes are based on the value of the properties being transferred.

Proportional Tax

A flat rate of 6% shall be imposed on gratuitous transfers.

Revenue Tax

Primarily imposed for revenue collection of the government.

State-Partnership Theory

Ability to Pay Theory

Wealth Redistribution Theory

Theories for Transfer Taxes

State-Partnership Theory

The government is an indirect partner behind all forms of wealth accumulation by any person within the state. Hence, the government should take its fair share by taxing the transfer of the wealth to other persons.

Ability to Pay Theory

Transferring properties is a manifestation of a person’s capability to pay tax. As the saying goes, one cannot give what he does not have.

Wealth Redistribution Theory

Transfer taxation is one of the tools used to redistribute wealth from the rich to the poor. When one transfers his wealth, the transfer should be taxed so that part of the wealth will be redistributed to benefit the society

transfer in contemplation of death

transfer to take effect upon death

complex transfer

conditional & revocable transfer

Special Scenarios in Transfer Taxation

transfer in contemplation of death

A donation that is motivated by the thought of death is considered as a donation mortis-causa (subject to estate tax)

transfer to take effect upon death

A donation made on the decedent’s last will and testament is a donation mortis-causa.

complex transfer

A transfer that is less than full and adequate consideration where the sales price is sufficiently lower than the fair value of the property. Partakes two transaction, a donation and a sale.

conditional and revocable transfers

are initially not subject to transfer taxation.