Estate Tax in the Philippines (TRAIN Law)
Summary
TLDRThis tutorial video explores estate taxes in the Philippines, defining the concept and detailing the impact of TRAIN law on tax rates and allowable deductions. It explains that estate tax is levied on the privilege of property transfer upon death, not on the property itself. The video outlines the updated standard deduction, clarifies deductions for resident and non-resident estates, and provides a step-by-step calculation of estate tax using illustrative problems. It concludes with instructions on filing requirements and forms, encouraging viewers to subscribe for more taxation insights.
Takeaways
- π Estate tax is a tax on the right of a deceased person to transmit their estate to lawful heirs or beneficiaries.
- π Succession is the mode of acquisition by which property rights and obligations are transmitted after a person's death.
- πΌ The estate tax is not a tax on property itself but on the privilege of transmitting property upon the owner's death.
- π The Tax Reform for Acceleration and Inclusion (TRAIN) law updated estate tax rates and deductions effective January 1, 2018.
- π‘ The standard deduction for estate tax purposes has been increased from 1 million to 5 million pesos under TRAIN law.
- π For non-resident decedents who were not citizens of the Philippines, only properties situated in the Philippines are included in the taxable estate.
- πΌ If the gross estate is over five million pesos, a certification from a certified public accountant is required for the estate tax return.
- π The family home is considered as an allowable deduction for estate tax purposes.
- π‘ Actual funeral, medical, and judicial expenses related to testamentary and intestate proceedings are no longer deductible under TRAIN law.
- πΌ For Philippine resident citizens who died after January 1, 2018, estate tax computation follows the TRAIN law rates and regulations.
- π The estate tax is computed by multiplying the net estate (after allowable deductions) by the flat rate of six percent.
Q & A
What is the main topic of the tutorial video?
-The main topic of the tutorial video is estate taxes in the Philippines, specifically discussing the definition, updated tax rates, allowable deductions, and an illustrative problem related to estate tax.
What is the difference between succession and estate tax as per the video?
-Succession is the mode of acquisition by which the property rights and obligations of a deceased person are transmitted to another or others, either by will or by operation of law. Estate tax, on the other hand, is a tax on the right of the deceased person to transmit their estate to lawful heirs and beneficiaries at the time of death.
When does the video state that the old tax laws are applicable?
-The old tax laws are applicable if the decedent died prior to January 1, 2018.
What is the general format for computing estate tax as mentioned in the video?
-The general format for computing estate tax is to deduct allowable deductions from the gross estate to arrive at the net estate, and then multiply the net estate by six percent to compute the estate tax due.
What is the updated standard deduction for estate tax purposes after TRAIN law?
-The updated standard deduction for estate tax purposes after TRAIN law has been increased from 1 million to 5 million.
What is the requirement for estate tax returns if the gross estate is more than five million, according to the video?
-If the gross estate is more than five million, the estate tax return shall require a certification from a certified public accountant.
What are the allowable deductions for estate tax purposes that have been updated due to TRAIN law?
-The allowable deductions updated due to TRAIN law include an increased standard deduction, claims against the estate, unpaid mortgages, properties previously taxed, the family home, and amounts received by heirs under Republic Act No. 4917.
What deductions are allowed to non-resident estates for estate tax purposes?
-Deductions allowed to non-resident estates include a standard deduction of 500,000, property previously taxed, transfers for public use, share in the conjugal property, and tax credit for estate taxes paid to a foreign country.
What has changed regarding actual funeral expenses, medical expenses, and judicial expenses under TRAIN law?
-Under TRAIN law, deductions for actual funeral expenses, medical expenses, and judicial expenses in relation to testamentary and intestate proceedings have been repealed.
Can you provide an example of how estate tax is computed based on the video?
-For a Philippine resident citizen who died on January 2018 with a net taxable estate of 10 million, the estate tax due would be computed by multiplying the net estate (10 million) by the estate tax rate of 6%, resulting in an estate tax due of 600,000.
What is the process for filing estate tax and which form should be used according to the video?
-Estate tax should be filed within one year from the death of the decedent, and the BIR Form 1801 should be used for filing.
Outlines
π Introduction to Estate Taxation in the Philippines
This paragraph introduces a tutorial video on estate taxes in the Philippines. The speaker outlines the topics to be covered, including defining estate tax, discussing updates on tax rates post-TRAIN law, listing allowable deductions, and presenting an illustrative problem. The video aims to provide a working knowledge of succession and property relations in the context of estate tax. It clarifies that estate tax is not a tax on property but on the privilege of transmitting property upon the owner's death. The general method of computing estate tax is also briefly explained, which involves deducting allowable deductions from the gross estate and applying a 6% tax rate on the net estate.
πΌ Detailed Calculation of Estate Tax with Illustrative Examples
The second paragraph delves into the specifics of estate tax calculations with examples. It discusses the updated standard deductions due to TRAIN law, the valuation of the gross estate, and the requirement for a CPA certification if the gross estate exceeds five million. The paragraph provides an illustrative problem involving a Philippine resident citizen who died in January 2018, leaving a net taxable estate of 10 million. The estate tax is calculated as 6% of the net estate, resulting in a tax of 600,000. Another example is given for a citizen who died leaving a total gross estate of twenty-two million five hundred thousand, with various properties and life insurance proceeds. Allowable deductions are applied, and the net estate is calculated before applying the 6% tax rate. The paragraph concludes with information on filing the estate tax return and the use of BIR form 1801.
Mindmap
Keywords
π‘Estate Tax
π‘Succession
π‘Gross Estate
π‘Allowable Deductions
π‘TRAIN Law
π‘Non-Resident Deceased
π‘Standard Deduction
π‘Conjugal Property
π‘Tax Credit
π‘Estate Tax Return
Highlights
Introduction to a tutorial video on taxation, specifically estate taxes in the Philippines.
Definition of estate tax and its update post-TRAIN law.
Explanation of succession and its relation to estate tax.
Clarification that estate tax is not a tax on property but on the privilege of transmitting property upon death.
General format for computing estate tax, including deductions and tax rate.
Valuation of the gross estate includes all property at the time of death, with special considerations for non-residents.
Requirement for a certified public accountant's certification if the gross estate exceeds five million.
Updated list of allowable deductions for estate tax purposes post-TRAIN law.
Increase in the standard deduction from 1 million to 5 million due to TRAIN law.
Details on deductions allowed to non-resident estates, including standard deduction and property previously taxed.
Repeal of deductions for actual funeral, medical, and judicial expenses under TRAIN law.
New provision allowing the withdrawal of cash from the decedent's deposits, with a 6% withholding tax.
Illustrative problem calculating estate tax for a Philippine resident citizen with a net taxable estate of 10 million.
Second illustrative problem with a total gross estate of twenty-two million five hundred thousand, including various properties and life insurance proceeds.
Calculation of the net estate after allowable deductions and the subsequent estate tax due.
Information on the filing of estate tax and the use of BIR form 1801 within one year from the decedent's death.
Call to action for viewers to engage with the content and subscribe for more taxation knowledge.
Transcripts
what's up guys this is the run back to
you with another tutorial video on
taxation so in this episode I'm gonna be
talking about estate taxes here in the
Philippines so in this video I'm gonna
be defining what estate tax is and also
mentioning the update on estate tax
rates after trained law and then
enumerate thing the list of allowable
deductions for estate tax purposes and
then give you an illustrative problem of
estate tax so for us to understand
estate tax
we should have a working knowledge on
the concept of succession along with the
different property relations of
marriages here in the Philippines
if the dissident is married now just a
disclaimer the things that I'll be
talking about here are updates in
connection to trade law so therefore if
the decedent died prior January 1 2018
then therefore the old tax laws shall be
applicable so to define succession this
is a mode of acquisition by virtue of
which the property rights and
obligations to the extent of the value
of the inheritance of a person are
transmitted through his death to another
or others either by his will or by
operation of law whereas to define
estate tax this is a tax on the right of
the deceased person to transmit his or
her estate to his or her lawful heirs
and beneficiaries at the time of death
and on certain transfers which are made
by law as equivalent to testamentary
disposition now take note it is not a
tax on property it is a tax imposed on
the privilege of transmitting property
upon the death of the owner the estate
tax is based on the loss in force at the
time of death notwithstanding the
postponement of the Act all possession
or enjoyment of the estate by the
beneficiary so the general format in
computing estate tax is from the gross
estate deduct the allowable deductions
for estate tax purposes and then will
arrive with the net estate
multiply that with six
percent to compute the estate tax Jew so
the valuation of gross estate of the
dissident shall be determined by
including the value at the time of his
death all of the property either real or
personal tangible or intangible wherever
situated provided however that in the
case of a non-resident dissident who at
the time of his death was not a citizen
of the Philippines only that part of the
entire gross estate which is situated in
the Philippines shall be included in his
taxable estate now take note based on
the update of trained law if the gross
estate is more than five million the
estate tax return shall require a
certification coming from a certified
public accountant now take note the
allowable deductions for estate tax
purposes has been updated due to your
trade law so here are the following
first one standard deduction has been
increased from 1 million to 5 million
claims against the estate claims against
insolvent person unpaid mortgages
properties previously tax transferred
for public purposes the family home and
then amounts received by heirs under
Republic at number 49 17 now deductions
allowed to non-resident estates first
one standard deduction is only 500,000
and then property previously taught next
is transfers for public use share in the
conjugal property and then tax credit
for estate taxes paid to a foreign
country now with respect to actual
funeral expenses medical expenses and
judicial expenses in relation to
testamentary and intestate proceedings
they are now repealed under trade law
another update is it's now allowed to
withdraw cash from the deposits of the
dissident provided the bank shall
withhold 6% so let's now go to the
illustrative problem on estate taxes so
first problem is a philippine resident
citizen died on January 2018 living a
total of net taxable estate of 10
million the Philippine estate tax Joo
will be computed as follows so the net
estate of 10 mil
will be multiplied by 6% so the estate
tax due shall be 600,000 so take note of
the date when the dissident night its
January 2018 so meaning the computation
of estate tax shall be based on trained
law so let's go to the second problem a
philippine resident citizen died leaving
a total gross estate of twenty-two
million five hundred which includes
conjugal family home of two million five
hundred so take note you have your total
conjugal real properties which is four
point five million and then total
exclusive properties which is two
million and then business network based
on interim financial statements at the
time of death which is fifteen million
and then proceeds of life insurance 1
million so the allowable deductions
shall be the standard deductions which
is five million and then family home
which is a conjugal property so two
point five million divided by two so 1
million two hundred fifty and then also
deduct the share of the surviving spouse
which is 1 million and then also include
proceeds of life insurance which is 1
million so the total deductions is eight
million two hundred fifty thousand so
the net estate is fourteen million two
hundred fifty and then simply multiplied
that with six percent estate tax rate so
our estate tax jew is eight hundred
fifty five thousand so the estate tax
shall be filed within one year from the
death of the decedent and the BIR form
1801 shall be used so if you found this
video very helpful please give it a
thumbs up and make sure to check out
these other relevant content right here
and make sure to subscribe to improve
your skills and knowledge in taxation so
this is yours have a great day
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