Question & AnswerQ&A (Republic Act No. 7499)
Republic Act No. 7499 aims to restructure the estate and donor's taxes by amending Sections 77, 79(a), 83(b), and 92(a) and (b) on transfer taxes of the National Internal Revenue Code, as amended.
The estate tax rates are graduated as follows: Exempt if net estate is up to P200,000; 5% on excess over P200,000 up to P500,000; 8% plus P2,000 on excess over P500,000 up to P2,000,000; 12% plus P135,000 on excess over P2,000,000 up to P5,000,000; 21% plus P495,000 on excess over P5,000,000 up to P10,000,000; and 35% plus P1,545,000 on excess over P10,000,000.
Every decedent, whether resident or nonresident of the Philippines, whose net estate is transferred is subject to estate tax.
Allowed deductions include actual funeral expenses or 5% of the gross estate (whichever is lower, max P100,000), judicial expenses, claims against the estate with certain requirements, claims of the deceased against insolvent persons, unpaid mortgages or indebtedness on property included in the estate, losses from casualties uncompensated by insurance, property previously taxed under specified conditions, transfers for public use, and an exemption for the family home up to P1,000,000 value certified by the barangay captain.
The family home is exempted from estate tax up to P1,000,000 in current or fair market or zonal value, whichever is higher, provided it was the decedent's family home and certified by the barangay captain. Any value in excess of one million pesos is subject to estate tax.
It prevents double taxation by allowing deductions for property that was part of a gross estate or given as a gift within five years prior to the decedent's death, based on percentages that decrease over the years between the transfer and death, provided that the prior gift or estate tax was paid.
The estate tax return must be filed within six months from the decedent's death. Moreover, a certified copy of the schedule of partition and court approval must be submitted to the Commissioner within thirty days after the order's promulgation.
The donor's tax is computed based on the total net gifts made during the calendar year using a graduated schedule starting with exemption for gifts up to P50,000 and increasing rates thereafter, up to 20% on gifts over P5,000,000.
If the donee is a stranger—that is, not a brother, sister, spouse, ancestor, lineal descendant, or relative within the fourth degree—the donor pays a ten percent (10%) tax on the net gifts regardless of the graduated schedule.
Any contribution in cash or in kind to any candidate, political party, or coalition of parties for campaign purposes is governed by the Election Code, as amended, and not by the donor's tax provisions in this law.