Question & AnswerQ&A (KRI REVENUE REGULATION NO. 17-93)
These regulations govern the taxation of the transmission of the decedent's estate and donations made by persons, whether natural or juridical, citizens or aliens, residents or non-residents. It also provide that the Family Code governs property relations between husband and wife if married on or after August 3, 1988.
The estate tax rates are graduated based on net estate value with specific brackets: Exempt up to P200,000; 5% on excess over P200,000 up to P500,000; 8% for P500,000 to P2 million; 12% for P2M to P5M; 21% for P5M to P10M; and 35% for over P10M.
Estate taxation is governed by the statute in force at the time of the decedent's death. The right of the state to tax vests at the moment of death.
The net estate is the gross estate less allowable deductions such as funeral expenses (actual or 5% of gross estate up to P100,000), judicial expenses, claims against the estate, property previously taxed (within 5 years with diminishing deduction), transfers for public use, family home (up to P1 million), and surviving spouse’s share in conjugal partnership or community property.
Allowable funeral expenses include actual funeral expenses or 5% of gross estate (whichever is lower but not exceeding P100,000), medical expenses during last illness, mourning apparel, wake expenses, publication and telecommunication charges related to death notice, burial plot and interment fees but exclude upkeep or expenses after interment like masses or entertainment.
The family home is the dwelling house and the land where the husband and wife or unmarried head of family and their dependents actually reside, certified by the Barangay Captain. It must be part of absolute community, conjugal partnership, or exclusive property of either spouse and only one family home per person qualifies.
The family home is appraised at either current or fair market value or zonal value, whichever is higher, up to a maximum deduction of P1 million. It must be the actual residence at the decedent's death with proper certification.
The estate tax return must be filed within six (6) months from the decedent’s death with the Revenue District Officer, Collection Agent, or authorized Treasurer where the decedent was domiciled or, if lacking legal residence, with the Office of the Commissioner of Internal Revenue.
Donor's tax rates are graduated starting from exempt for net gifts up to P50,000, then ranging from 1.5% up to 20% for amounts over P5,000,000. The tax applies to the total net gifts during the calendar year.
If the donee is a stranger, meaning not a relative within certain degrees, the tax payable by the donor is a flat 10% of the net gifts, regardless of value.
Gifts made on or before July 28, 1992 are taxed under the old NIRC rates; gifts made on or after July 28, 1992 (the effective date of RA 7499) are taxed under the new amended rates.
Civil penalties and interest as prescribed under Sections 248 and 249 of the Tax Code apply, collected with the tax. Criminal penalties of fines or imprisonment, or both under Sections 253 and 254 may also apply upon conviction for violations.
Exclusive property includes property brought to the marriage by either spouse; property acquired during marriage by gratuitous title; property acquired by right of redemption, barter, or exchange with property belonging to only one spouse; and properties purchased with exclusive money of either spouse.
The family home allowance is computed after deducting the net share of the surviving spouse in the conjugal property. The deduction is half of the fair market or zonal value, up to P1 million.
The family home must be the decedent's actual residential home at time of death, included in the gross estate, with a certificate from the Barangay Captain, and the deduction is limited to one million pesos.