Upload
flab-villasencio
View
1.265
Download
1
Tags:
Embed Size (px)
DESCRIPTION
Estate Tax
Citation preview
Taxation 2 │ESTATE TAX
FLABERT VILLASENCIO, CPANotre Dame of Dadiangas University
Estate Tax
oImposed on the right of the deceased to transmit his/her properties to his/her legal heirs upon deathoBased on laws in force at the time of death
Estate Tax Table
Rates of Estate TaxNet Estate Estate Tax Excess
Over Not Over Tax of Plus % Over
0 200,000 Exempt 0 0
200,000 500,000 0 5% 200,000
500,000 2,000,000
15,000 8% 500,000
2,000,000
5,000,000
135,000 11% 2,000,000
5,000,000
10,000,000
465,000 15% 5,000,000
10,000,000
And over 1,215,000
20% 10,000,000
Estate Tax Table
▪ Illustration
GiesThony, a Philippine resident alien, died leaving with total net taxable estate amounting to P7,000,000. The amount of the Philippine estate tax due would be:
Estate Tax on 5,000,000465,000
Add: Estate tax on the excess (2M x 15%)300,000
Amount of the Phil estate tax due765,000
Estate Tax Credit
▪ The amount of estate taxes paid to a foreign country could be claimed as credit against the Philippine Estate Tax subject to limit, if such taxes pertain to properties which are included in the gross estate for Philippine estate tax computation .
▪ Available to avoid double taxation
▪ Applicable only to Citizens or Resident Alien decedent
▪ NOT Allowed to Non Resident Aliens
Estate Tax Credit
1. Only ONE Foreign country is involvedEstate Tax = Net Estate in Foreign Country x Philippine
Credit World Net Estate Estate Tax
Estate Tax = Actual estate tax paid to foreign country whichever is LOWER
2. TWO or MORE Foreign CountriesLimit A: Per Foreign Country
Net Estate per Foreign Country x Phil. Estate TaxEntire Net Estate
Limit B: By TotalNet Estate ALL Foreign Country x Phil. Estate Tax
Entire Net EstateOR
The Actual Estate Tax paid to Foreign Country, LOWER Value
Estate Tax CreditIllustration:
GiesThony, an unmarried resident alien of the Philippines, died leaving the following properties:
Location of Properties Net Estate Estate Tax PaidPhilippines 1,000,000United States 2,000,000 135,000Australia 3,000,000 365,000Total 6,000,000 500,000
Compute for the Philippine Net Estate Tax payable.
Estate Tax CreditIllustration:
Location of Properties Net Estate Estate Tax PaidPhilippines 1,000,000United States 2,000,000 135,000Australia 3,000,000 365,000Total 6,000,000 500,000
Limit A – Per CountryNet Estate Per Foreign Country x Philippine Estate Tax
Entire Net Estate
United States 2,000,000 x 615,000 = 205,0006,000,000
Actual vs 135,000 135,000
Australia 3,000,000 x 615,000 = 307,5006,000,000
Actual vs 365,000 307,500
Estate Tax CreditIllustration:
Location of Properties Net Estate Estate Tax PaidPhilippines 1,000,000United States 2,000,000 135,000Australia 3,000,000 365,000Total 6,000,000 500,000
Limit B – ALL Foreign CountryNet Estate ALL Foreign Country x Philippine Estate Tax
Entire Net Estate
Foreign Country5,000,000 x 615,000 = 512,5006,000,000
Actual (135,000 + 365,000) vs 500,000 500,000vs 442,500 442,500
Tax Credit 442,500
Estate Tax CreditIllustration:
Location of Properties Net Estate Estate Tax PaidPhilippines 1,000,000United States 2,000,000 135,000Australia 3,000,000 365,000Total 6,000,000 500,000
Tax Credit 442,500
Estate Tax on 5,000,000 465,000Estate Tax on excess (1,000,000 x 15% ) 150,000Total 615,000Less: Tax Credit 442,500Philippine Net Estate Tax Payable 172,500
SEATWORK: (1/2
CW)5-115-135-18
#DO IT INDIVIDUALLY#SHOW YOUR
SOLUTIONS
#WRITE THE LETTER AND THE ANSWER OF
YOUR CHOICE
Problem 5–11 B Conjugal Properties P3,400,000 Funeral expense, limit
( 200,000) Judicial expenses ( 250,000)
Claims against properties ( 550,000) Net conjugal estate
P2,400,000 Problem 5–13 A Estate tax of P5,000,000 P465,000
ANSWERS:
Problem 5–18 B
Total gross estate (P1,700,000 + P800,000) 2,500,000Less: Deductions Net taxable estate 1,500,000Net Taxable Estate 1,000,000 Estate tax on P500,000 15,000Excess P500,000 x 8% 40,000Total estate tax in the Philippines 55,000 Tax credit allowed (P800,000/P2,500,000) x P55,000 = P17,600 vs. P20,000
P17,600
ANSWERS:
Estate Tax with Allocated Deductions
Illustration:
KieRish, a resident alien decedent, died due to fractured jaw. The following is the reported assets and obligations:
China PhilippinesFamily Home 4,000,000Other Properties 2,000,000 2,000,000Funeral Expense 100,000 300,000Other Charges and Obligations 400,000 600,000Donations to governments 100,000 300,000Medical expenses (within 1 year) 400,000 600,000Estate taxes paid 90,000
Properties located in China are exclusive properties of the decedent. The donation to the Philippine government is taken from his only exclusive property in the Philippines.
Estate Tax with Allocated Deductions
Computation of Net Estate:China Phil Total
Family Home 4,000,000Other Properties 2,000,000 2,000,000Gross Estate 2,000,000 6,000,000 8,000,000Less: Ordinary DeductionsELITE:
Funeral Exp(200,000] x 1/4 and 3/4 50,000 150,000Other Charges and Obligations 400,000 600,000
Transfer for Public Use 300,000Total Ordinary Deductions 450,000 1,050,000 1,500,000Net Exclusive or Net Community Estate 1,550,000 4,950,000 6,500,000Less: Special Deductions
Standard [1,000,000] x 2/8 and 6/8 250,000 750,000Family Home 1,000,000Medical Exp [500,000] x 4/10 and 6/10 200,000 300,000
Total Special Deductions 450,000 2,050,000 2,500,000Net Estate 1,100,000 2,900,000 4,000,000Less: Share of the Surviving Spouse (4,950,000 x 50%) 2,475,000Net Taxable Estate 1,525,000
Estate Tax with Allocated Deductions
Computation of Tax Credit AllowedForeign Estate Tax Paid = 90,000
Estate Tax Credit = Net Estate Foreign Country xPhil Estate Tax
World Net Estate= 1,100,000 x 97,000
4,000,000= 26,675 vs 90,000
Estate Tax Credit = 26,675
Estate Tax with Allocated Deductions
Computation of Philippine Estate Tax Payable
Estate Tax on 500,000 = 15,000Estate Tax on Excess(1,025,000 x 8%) = 82,000Philippine Estate Tax = 97,000Less: Estate Tax Credit = 26,675Philippine Estate Tax = 70,325Payable
Estate Tax of Nonresident Alien
Only properties WITHIN the Philippines are subject to Philippine estate tax.
Illustration:Assume that Brad Naipit, a married and non-resident alien decedent, left the following properties and expenses to his surviving spouse.
House and lot- France 4,000,000Business Interest- France 2,000,000Car-Baguio 1,000,000Dollar Time Deposit-Cebu City 1,000,000Franchise-Manila 1,000,000Share of Stocks- Nestle Corp (donated 3.5 years ago)1,000,000Medical Expense 600,000Actual Funeral Expense 300,000Judicial Expense 300,000
Estate Tax of Nonresident Alien WITH RECIPROCITY
Reportable Gross estate-WithinCar- Baguio 1,000,000
Less: Ordinary deductionsELITE:
Funeral Expense(200,000) x 4,000,000/10,000,000 80,000Judicial Expense(300,000) x 4,000,000/10,000,000 120,000 200,000
Net Conjugal/Community estate 800,000Less: Share of the surviving spouse (800,000x50%) 400,000Net Taxable Estate 400,000
Estate Tax:On 200,000 -On excess (200,000 x 5%) 10,000Estate Tax 10,000
Estate Tax of Nonresident Alien WITHOUT RECIPROCITY
Reportable Gross estate-WithinCar- Baguio 1,000,000Dollar Time Deposit 1,000,000Franchise 1,000,000Shares of Stocks 1,000,000 4,000,000
Less: Ordinary deductionsELITE: Funeral Expense
(200,000) x 4,000,000/10,000,000 80,000Judicial Expense(300,000) x 4,000,000/10,000,000 120,000Vanishing Deduction 313,600 513,600
Net Conjugal/Community estate 3,486,400Less: Share of the surviving spouse (3,486,400 x50%) 1,743,200Net Taxable Estate 1,743,200
Estate Tax:On 500,000 15,000On excess (1,243,200 x 8%) 99,456Estate Tax 114,456
Administrative Requirements
Value of Gross EstateExceeds Exceeds Exceeds
Requirements 20,000 200,000 2,000,0001.Notice of Death (within 2 months)Yes Yes Yes2.Estate Tax Return (w/in 6 months)No Yes Yes3.CPA Certificate (w/in 6 months) NO No Yes
Additional Requirement-Registering the estate of the decedent and getting a separate TIN for the estate
Liability for Payment of Estate Tax1.Primary Obligation- Estate through Executor or Administrator (severally liable)2.Subsidiary Obligation- the Heirs or Beneficiaries
To the extent of their obligation but in no case shall it exceed the value of their inheritance.
Administrative Requirements
Surcharges, Interests and Penalties- imposed in the event of violation of the law, criminal
penalties and civil liabilities.
Payment of Estate Tax by Installment- may be allowed provided:
1.A clearance shall be released only with respect to the property on which tax has been paid2.Any amount paid after the due date shall be subject to applicable penalty3.If the late payment has been approved by the Commissioner or his representative, the penalty shall only be the interest.4.The Commissioner may enforce action against the estate after the due date of the estate tax provided that all the applicable laws and required procedures are observed.
SEATWORK: (1/2
CW)5-6 5-19
5-9 5-20
5-14 5-21
5-17
#DO IT BY PAIR #SHOW YOUR SOLUTIONS
#WRITE THE LETTER AND THE ANSWER OF
YOUR CHOICE
Problem 5–6 B Conjugal gross estate (P3,120,000 + P180,000) P3,300,000 Funeral expense allowed (P3,300,000 x 5%) ( 165,000) Share of surviving spouse (P3,300,000 – P165,000) x 50% ( 1,567,500) Standard deduction
( 1,000,000) Net estate P 567,500
ANSWERS:
Problem 5–9 D Exclusive Conjugal
Property – cash P1,000,000 P4,000,000 Family home
800,000 Transfer for public use (1,000,000) Funeral expense allowed ( 200,000) Net conjugal estate P4,600,000 Family home (P800,000/2)
(400,000) Standard deduction (1,000,000)
Net estate P3,200,000 Share of surviving spouse (P4,600,000 x 50%) (2,300,000) Net taxable estate P 900,000
ANSWERS:
Problem 5–14 D Net estate Estate tax
Amounts P2,000,000 P135,000
Nonresident alien decedent is not allowed to have standard deduction. The funeral expense is not deductible because no part of gross estate located outside the Philippines is reported. (Sec. 86 (B), NIRC)
ANSWERS:
Problem 5–17 C
Tax credit P100,000 x (2M/5M) P40,000
ANSWERS:
Problem 5–19 Conjugal Exclusive Total Real property P1,500,000 Inherited property P700,000 Other properties 500,000 Gross estate P2,000,000 P700,000 P2,700,000 Less: Deductions: ELITE: Funeral expenses 100,000 Judicial expenses 80,000 Claims against the estate 300,000 Transfer for public use 20,000 Total deductions 500,000
500,000 \Net conjugal/exclusive estate P1,500,000 P700,000 P2,200,000 Less: Special deductions: Standard deduction 1,000,000 Medical expense 200,000 Net estate before share of surviving spouse P1,000,000 Less: Share of surviving spouse (P1,500,000 x 50%)
750,000 Net taxable estate P 250,000 Estate tax: Tax on P200,000 P - 0 - Tax on excess (P50,000 x 5%) 2,500 Estate tax due P 2,500
Problem 5–20 Conjugal Exclusive Total Family home – Philippines P2,000,000 Family business – Philippines 2,000,000 Properties – USA . P1,000,000 Gross estate P4,000,000 P1,000,000 P5,000,000 Deductions: ELITE – Funeral expense 200,000 Net conjugal/exclusive P3,800,000 P1,000,000 P4,800,000 Less: Special deduction Std. deduction 1,000,000 Family home 1,000,000 Net estate before share of surviving spouse P2,800,000 Less: Share of surviving spouse (P3,800,000 x 50%)
1,900,000 Net taxable estate P 900,000
Tax on P500,000 P15,000 Tax on excess (P400,000 x 8%) 32,000 Estate tax due P47,000 Less: Estate tax credit allowed (P47,000 x 8/28) – lower 13,429 Estate tax still due and payable P33,571
Problem 5–21 Conjugal Exclusive Total
Gross estate* P5,800,000 P4,200,000 10,000,000 Less Deductions: Ordinary deductions: Funeral expenses (actual, P350,000; 5% limit, P500,000; statutory
Maximum allowed, P200,000) - lowest (200,000) Judicial expenses (500,000) Other deductions (100,000) Vanishing deductions ( 92,000) Net conjugal/exclusive estate P5,000,000 P4,108,000 9,108,000 Special deductions: Standard deduction (1,000,000) Family home (50% is P1,500,000) max. allowed (1,000,000) Medical expenses (actual, P600,000) max. allowed (500,000) Amount receivable under R.A. 4917
(200,000) Net estate P6,408,000 Less: Share of the surviving spouse
(P5,000,000 x 50%) 2,500,000 Net taxable estate P3,908,000