#AskTheTaxWhiz: Is there such a thing as ‘death tax?’
I am from a very poor family with both my parents unemployed. My brother just died of tuberculosis. Is he subject to tax? Is there such a thing as death tax? How do we compute it?
No. Death is not taxable. However, it is used as reference to assess and collect estate tax or sometimes called death tax. It is not a tax on the dead or his property but on the right to transfer property upon death. Here is the tax formula:
Less: Allowable deductions as provided under Section 86 of the Tax Code**
Equals: Net estate
|Over||But not over||The tax shall be***||Plus||Of the excess over|
|P 200,000.00 ($4,460.01)||Exempt|
|P 200,000.00 ($4,460.01)||P500,000.00 ($11,149.94)||0||5%||P 200,000.00 ($4,460.01)|
|P500,000.00 ($11,149.94)||P2 million ($44,599.13)||P15,000.00 ($334.50)||8%||P500,000.00 ($11,149.94)|
|P2 million ($44,599.13)||P5 million ($111,501.22)||P135,000.00 ($3,009.89)||11%||P2 million ($44,599.13)|
|P5 million ($111,501.22)||P10 million ($223,014.92)||P465,000.00 ($10,369.02)||15 %||P5 million ($111,501.22)|
|P10 million ($223,014.92)||P1.22 million ($27,097.33)
||20%||P10 million ($223,014.92)|
* All property – real or personal, tangible or intangible as defined under Section 85
** Medical and funeral expenses, losses, indebtedness, taxes, etc.
***Effective January 1, 1998 up to present
My father is a Japanese expatriate who decided to live with us here in the Philippines. He has properties here and abroad. He also gave us savings account and educational plans. Losing my father to cancer is unbearable. But a month after his death, the Bureau of Internal Revenue (BIR) wrote us a letter requiring us to report the death of my father to their office. Is BIR correct on this? Are we required to file and pay estate tax to BIR? Are all his properties including our savings account taxable?
Yes. If the gross estate exceeds P20,000 ($446), a notice of death must be filed with BIR and the estate tax return (BIR Form 1801) must be filed within 6 months.
Yes. The gross estate of a resident or citizen of the Philippines includes all properties regardless of location. And since your father is a resident of the Philippines, his properties here and abroad will be part of his gross estate, except the savings account and educational plan under your name.
Our family lawyer advised my dad who just turned 60 years old to transfer all properties under his name to me and my other siblings. Will it still be subject to estate tax even if my dad transferred it while he is still alive?
No. It is considered as a donation inter vivos (especially of a gift as opposed to a legacy between living people) since the transfer is intended to take effect during the lifetime of the transferor or donor. It will be subject to donor’s tax instead.
However, it may qualify as a transfer in contemplation of death or as a donation mortis causa since the advice of your family lawyer is in consideration of your dad turning 60 years old.
Got a question about taxes? #AskTheTaxWhiz! Tweet @rapplerdotcom or email us at email@example.com. – Rappler.com
Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He serves as chief strategy officer of the country’s first social consulting enterprise, the Abrea Consulting Group, which offers strategic finance and tax advisory services to businesses and professionals. Mon's tax handbook, Got a Question About Taxes? Ask the Tax Whiz! is now available in all bookstores nationwide. Follow Mon on Twitter: @askthetaxwhiz or visit his group’s Facebook page. You may also email him at firstname.lastname@example.org.
($1 = P44.85)
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