They are excise taxes imposed upon the privilege of gratuitously transmitting one's property to another. There are two types of transfer taxes: DONOR'S TAX and ESTATE TAX.
Donor's tax vs. Estate tax
(1) ________ are imposed upon the privilege to give, while ________ are imposed upon the privilege to transmit property to heirs; (2) In ________ the transfer is between the living, while in ________ the transfer is from the deceased, through his/her estate, to the living; (3) In ________ the transfer may take place between natural and juridical persons, while in ________ the transfer takes place only between natural persons.
It is a graduated tax imposed upon the privilege of the decedent to transmit property at death and is based on the entire net estate. It is not a direct tax on the property transmitted or transferred although its amount is based thereon. It is a well-settled that the rule on estate taxation is governed by the statute in force at the time of the death of the decedent. The tax accrues as of the death of the decedent and the accrual of the tax is distinct from the obligation to pay the same. Upon the death of the decedent, succession takes place and the right of the State to tax the privilege to transmit the estate vests instantly upon death. (SECTION 3, RR 2-2003)
Transfers affected by estate tax
(1) Gratuitous transfers mortis causa or after death are the usual objects of the estate tax. Such transfers are either testate or intestate; (2) Generally, gratuitous transfers inter vivos attract donor's tax. However, certain transfers inter vivos are treated as testamentary dispositions and are accordingly included in the computation of the gross estate in order to arrive at the proper estate tax liability.
Transfers Inter Vivos which are treated as testamentary dispositions and are accordingly included in the computation of the gross estate in order to arrive at the proper estate tax liability
(1) Transfers in contemplation of death (Sec. 85B); (2) Transfer with retention or reservation of certain rights (Sec. 85B); (3) Revocable transfers (Sec. 85C); (4) Transfers of property arising under a general power of appointment (Sec. 85D); (5) Transfers for insufficient consideration (Sec. 85G).
In contemplation of death
It does not refer to the general expectation of death. The transfers referred to are those impelled by the thought of death, regardless of whether the transferor was near the possibility of death or not. In ascertaining such intent consider the: (1) Age of the decedent at the time of the transfer; (2) Health; (3) Interval between the transfers and the decedent's death; (4) Amount of the property transferred in proportion to the amount of property retained; (5) Nature and disposition of the decedent; (6) General testamentary scheme of which the transfers were part; (7) Relationship of the donee to the decedent; (8) Desire of the decedent to escape the burden of managing property by transferring the property to others; (9) Long established gift-making policy of the decedent; (10) Desire of the decedent to vicariously enjoy the enjoyment of the donees of the property transferred; and (11) Desire by the decedent of avoiding estate taxes by making inter vivos transfers of property.
Transfer with retention or reservation of certain rights
This contemplates those cases where the owner transfers his property during his lifetime but still retains the economic benefits, i.e. the possession or enjoyment of the property, or the power to designate the persons who may exercise such rights. Because of this restriction or encumbrance, the transferee is incapable of freely enjoying or disposing of the property until the transferor's death and the transfer is merely regarded as having been intended to take effect at the transferor's death.
It is one where the transferor has reserved the right to alter, amend or revoke such transfer, regardless of whether or not the power is actually exercised during his lifetime, and whether or not the power should be exercised by him alone or in conjunction with someone else. The power to alter, amend or revoke exists on the date of the decedent's death even though (1) the exercise of the power is subject to the giving of notice; or (2) the alteration, amendment or revocation takes effect only on the expiration of a stated period after the exercise of the power, whether or not on or before the date of the decedent's death notice has been given or the power has been exercised.
Transfers of property arising under a general power of appointment
The rule is that the gross estate shall include any property passing or transferred under a general power of appointment exercised by the decedent: (1) by will; (2) by deed executed in contemplation of, or intended to take effect in possession or enjoyment at, or after his death; or (3) by deed under which he has retained for his life or any period not ascertainable without reference to his death, or any period which does not in fact end before his death, (a) the possession or enjoyment of, or the right to the income from, the property; or (b) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom.
Transfers for insufficient consideration
These are transfers that are not bona fide sales of property for an adequate and full consideration in money or money's worth. The following rules apply: (a) If bona fide sale - no value shall be included in the gross estate; (b) If not a bona fide sale - the excess of the fair market value at the time of death over the value of the consideration received by the decedent shall form part of his gross estate; (c) If inter vivos transfer is proven fictitious - the total value of the property at the time of death shall be included in the gross estate.
Capital Gains Tax
It is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.
Documentary Stamp Tax
It is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, rights, or property incident thereto.
It is a tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer.
It is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers which are made by law as equivalent to testamentary disposition.
It is a tax on all yearly profits arising from property, profession, trades or offices or as a tax on a person's income, emoluments, profits and the like.
It is a business tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed P550,000 and are not VAT-registered.
Value Added Tax
It is a business tax imposed and collected from the seller in the course of trade or business on every sale of properties (real or personal) lease of goods or properties (real or personal) or vendors of services. It is an indirect tax, thus, it can be passed on to the buyer.
Withholding Tax on Compensation
It is the tax withheld from individuals receiving purely compensation income.
Expanded Withholding Tax
It is a kind of withholding tax which is prescribed only for certain payors and is creditable against the income tax due of the payee for the taxable quarter year.
Final Withholding Tax
It is a kind of withholding tax which is prescribed only for certain payors and is not creditable against the income tax due of the payee for the taxable year. Income Tax withheld constitutes the full and final payment of the Income Tax due from the payee on the said income.
Withholding Tax on Government Money Payments
It is the withholding tax withheld by government offices and instrumentalities, including government-owned or -controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations.
It is a tax assessment made by an authorized Revenue Officer without the benefit of complete or partial audit, in light of the RO's belief that the assessment and collection of a deficiency tax will be jeopardized by delay caused by the Taxpayer's failure to: (1) Comply with audit and investigation requirements to present his books of accounts and/or pertinent records; or (2) Substantiate all or any of the deductions, exemptions or credits claimed in his return.
Pre-Assessment Notice (PAN)
It is a communication issued by the Regional Assessment Division, or any other concerned BIR Office, informing a Taxpayer who has been audited of the findings of the Revenue Officer, following the review of these findings. If the Taxpayer disagrees with the findings stated in the PAN, he shall then have 15 days from his receipt of the PAN to file a written reply contesting the proposed assessment.
Instances when a PAN shall not be required in which case issuance of the formal assessment notice for the payment of the taxpayer's deficiency tax liability shall be sufficient
(1) Finding for any deficiency tax is the result of MATHEMATICAL ERROR in the computation of the tax appearing on the face of the tax return filed by the taxpayer; (2) A DISCREPANCY has been determined between the tax withheld and the amount actually remitted by the withholding agent; (3) A taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have CARRIED OVER AND AUTOMATICALLY APPLIED the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year; (4) EXCISE TAX DUE on excisable articles has not been paid; or (5) An ARTICLE LOCALLY PURCHASED OR IMPORTED BY AN EXEMPT PERSON, such as, but not limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non-exempt persons.
Notice of Assessment
It is a declaration of deficiency taxes issued to a Taxpayer who fails to respond to a PAN within the prescribed period of time, or whose reply to the PAN was found to be without merit. It shall inform the Taxpayer of this fact, and that the report of investigation submitted by the Revenue Officer conducting the audit shall be given due course.
Formal Letter of Demand
It is a formal letter calling for payment of the taxpayer's deficiency tax or taxes which shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment is based, otherwise, the formal letter of demand and the notice of assessment shall be void.