1. Taxation 2 │
INTRODUCTION TRANSFER TAXES
and ESTATE TAX
FLABERT VILLASENCIO, CPA
Notre Dame of Dadiangas University

2. Learning objectives
1. Define a transfer tax
2. Differentiate an estate tax to a
donor’s tax
3. Discuss the nature and concept
of succession
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3. Transfer of Property
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Onerous TransferOnerous TransferOnerous TransferOnerous Transfer

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Gratuitous TransferGratuitous Transfer
Transfer of Property

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Onerous TransferOnerous TransferOnerous TransferOnerous Transfer
Casual TransferCasual Transfer
Normal Course ofNormal Course of
businessbusiness
Vat or
Percentage
and Excise
Tax
Capital
Gain Tax
Transfer of Property

6. 07/07/14 6
Gratuitous TransferGratuitous Transfer
Gift/ DonationDeath
Estate Tax
Donor’s
Tax
Transfer of Property

7. Difference of Estate and
Donor’s Tax
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Estate
Tax
Donor’s
Tax
o Impose on privilege to
transmit property
upon death
o rate of tax is HIGHER
o Allowed to extend
filing and paying
o Exemption per tax is
P200,000
o Impose on privilege to
transmit property
during lifetime
o rate of tax is LOWER
o No extension for filing
and paying
o Exemption per tax is
P100,000

8. Introduction to Estate Tax
ESTATE TAX
Theories Justifying the Imposition of Estate Tax
▪Benefit Received theory
othe state renders services in the distribution of the
decedent’s estate
▪Privilege theory
oState Partnership theory
oCollects the share in the accumulation of profit
▪Redistribution of Wealth Theory
oResults in equitable distribution of wealth
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9. Introduction to Estate Tax
ESTATE TAX
▪Tax on the RIGHT of the deceased person to
transmit his ESTATE to his lawful heirs and
beneficiaries at the TIME OF DEATH
▪Levied on Net Estate
▪Not on the Property Transferred
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10. Taxation 2 │
INTRODUCTION TRANSFER TAXES
and ESTATE TAX
FLABERT VILLASENCIO, CPA
Notre Dame of Dadiangas University

11. Succession and Will
SUCCESSION- a mode of acquisition by virtue
of which the property, rights and obligation
to the extent of the value of the inheritance,
of a person are transmitted through his death
to another or others either by will or by
operation of law.
WILL- an act whereby a person is permitted
with the formalities prescribed by law, to
control to a certain degree the disposition of
his estate, to take effect after his death.
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12. Element of Succession
Decedent- the person whose
property is transmitted through
succession, whether or not he left a
will.
Heir- The person called to the
succession either by the provision of a
will or by operation of law.
Estate- Refers to all the property, rights
and obligations of a person which are
not extinguished by his death.
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13. Illustration:
Rosario died leaving a five hectare
coconut land to his son, Honesto.
Identify the elements of succession.
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Element of Succession

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Element of Succession

15. Kinds of Succession
Testamentary- made in a will
executed in the form prescribed by
law.
Intestate- no will or if there is, the
same is void or nobody will
succeed.
Mixed- Partly by will and partly by
law.
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16. Kinds of Successors
Legatee- An heir to a particular
personal property given by virtue
of a will.
Devisee- An heir to a particular
real property given by virtue of a
will.
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17. Classification of Successors
PRIMARY COMPULSORY
HEIRS
SECONDARY
COMPULSORY HEIRS
1. Legitimate children and
their legitimate
descendants
4. Legitimate parents and
legitimate ascendants.
(In default of No.1)
2. Surviving spouse
(legitimate)
3. Illegitimate children
and their descendants
(legit. and illegit.)
5. Illegitimate parents (No
other ascendants, in
default of 2 and 3)
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18. Persons Authorized to
Manage Estate
1. Executor- person
appointed by a testator to
carry out the directions
and requests of his will
and the disposal of his
property.
2.Administrator- person
appointed by the court to
administer his property.
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19. Summary Diagram
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SUCCESSION
Testamentary Mixed Intestate
Legatee Devisee
Executor Administrator
Kinds of
Succession
Kinds of
Successors
Authorized to Manage

20. Definition:
An act whereby a person is
permitted with the formalities
prescribed by law, to control to a
certain degree the disposition of his
estate, to take effect after his death.
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Will

21. Not Allowed to Make a Will
oBelow 18 years old
oIncapacitated
oTwo or more persons who make a will jointly
Not Allowed to Witness to a Will
oAny person not domiciled in the Philippines
oThose convicted of falsification of a
document, perjury or false testimony
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Disqualify to Make and Witness to a Will

22. Holographic Will
▪A will that is kept secret
▪Must be:
oWritten, dated and signed by the hand of
the testator
oMaybe made inside or outside the
Philippines
oNeed not to be witnessed
oNot subject to formalities
Codicil- a supplement or addition to
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