RR No. 02-2003: Consolidates all Revenue Regulations issued on Estate Tax and Donor’s Tax, incorporating the amendments introduced by the Tax Reform Act of 1997

Summary

RR No. 02-2003 consolidates all Revenue Regulations on Estate Tax and Donor’s Tax, incorporating the amendments of the Tax Reform Act of 1997.

Key points

1. Accrual and gross estate. Estate taxation follows the statute in force at the decedent’s death, and the tax accrues at death. For residents and citizens the gross estate covers all properties wherever situated, while for non-resident aliens it covers only properties in the Philippines, with intangible personal property subject to the reciprocity rule under Sec. 104 of the Tax Code.
2. Valuation. Properties are valued at fair market value at the time of death. For real property this is the higher of the Commissioner’s value or the schedule of values of the provincial and city assessors, and unlisted common shares are valued at book value and unlisted preferred shares at par value.
3. Estate Tax return and extensions. The return is filed within six (6) months from the decedent’s death. The Commissioner or an authorized Revenue Officer may grant, in meritorious cases, an extension not exceeding thirty (30) days for filing.
4. Extension and installment of payment. For undue hardship, payment may be extended up to five (5) years if the estate is settled through the courts, or two (2) years if settled extrajudicially. A bond not exceeding double the tax may be required, and amounts paid within the extension are subject to interest but not surcharge, and the estate may pay by installment if its cash is insufficient.
5. Who pays. The executor or administrator pays before delivering any heir’s share, and all of them are severally liable if there are two or more. Heirs or beneficiaries are subsidiarily liable, but never beyond the value of their share in the inheritance.
6. Donor’s Tax. Donations made before January 1, 1998 use the old rates under the Tax Code of 1977, while those on or after that date use the Tax Code of 1997 rates, computed cumulatively over one calendar year. The return is filed within thirty (30) days after the gift is made or completed, with payment at the same time, and a donor in business must give notice of donation to the RDO within thirty (30) days for each donation of at least Fifty Thousand Pesos (P 50,000) to accredited donee institutions.

Who is affected

• Estates of decedents
• Executors, administrators, heirs and beneficiaries
• Donors
• Donors engaged in business giving to qualified donee institutions

Deadlines and effectivity

• Estate Tax return: within six (6) months from death
• Filing extension: not exceeding thirty (30) days
• Payment extension: not exceeding five (5) years (judicial) or two (2) years (extrajudicial)
• Donor’s Tax return and payment: within thirty (30) days after the gift

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.