Introduction to Transfer Taxation Flashcards
Types of Transfers
Bilateral transfers
Unilateral transfers
Complex transfers
Examples of Bilateral Transfers
Sale
Barter
Taxation Rules on Sale or Barter
Business tax (for business sellers) Income tax (for both business and non-business sellers)
Types of Unilateral Transfers
Donation
Succession
Donation inter vivos
Donation
Donation mortis causa
Succession
Complex transfers
Transfers for less than adequate consideration
Tax rules on complex transfers
Transfer element - subject to transfer tax
Exchange element - subject to business tax
Transfer element of complex transfers are generally considered
Donation inter vivos, unless
a. The sale was made in contemplation of the death of the seller
b. Titled to be transferred upon the death of the seller
Rationale of Transfer Taxation
The Tax Evasion or Minimization Theory Tax Recoupment Theory The Benefit Received Theory The State Partnership Theory The Wealth Redistribution Theory The Ability to Pay Theory
Nature of Transfer Taxation
- Privilege tax
- Ad valorem tax
- Proportional tax
- National tax
- Direct tax
- Fiscal tax
Extent of Taxation of Residents or Citizens
Global transfers of property
Extent of Taxation of Non-Resident Aliens
Philippine transfers of property
Incorporation Tests
Determination of citizenship of juridical persons
Situs of Transfer
Location of the property
- Date of donation (donation)
- Date of death (succession)
Exceptional Rules on Transfers
Transfer in contemplation of death
Transfer intended to take effect at death
Incomplete transfers
Inter-vivos transfer with thought of death
Mortis causa
Inter-vivos transfer with motive associated with life
Inter-vivos
Motives associated with life
To reward services rendered
To relieve the donor of the burden of management of the property
To save on income tax
To see children financially independent
To see children enjoy the property while the decendent still lives
To settle family disputes
“Last will and testament”
A document expressing the decendent’s desire on how his properties will be distributed after his death
Types of incomplete transfers
Conditional transfers
Revocable transfers
Transfers with reservation of title to property until death
How are conditional transfers completed?
Fulfillment of the condition by the transferee or
Waiver of the condition by the transferor
How are revocable transfers completed?
Waiver by the transferor to exercise their right to revocation or
The lapse of the transferor’s right to revocation
How are transfers with reservation of title to property until death completed?
The death of the decendent
Are physical transfers = completed transfers?
No
A transferor unilaterally transfers property to their son/daughter. If the transferor dies before a condition is fulfilled or before the right to revocation lapsed, and it (either condition or right to revocation) is not waived, which type of unilateral transfer is it?
Mortis causa
Test of Taxability of Complex Incomplete Transfers
@ date of delivery of the property, consideration paid < full and adequate consideration
@ date of completion of the transfer, FV of property ≥ consideration paid
Non-Taxable Transfers
Void transfers
Quasi-transfers
Void transfers
Prohibited by law or
Do not conform to legal requirements for their validity
Quasi-transfers
Transmissions of property which will never involve transfer of ownership
Examples of void transfers
Donation of properties not owned by the donor
Donation between spouses
Donations which do not manifest all essential requisites to validity such as donations refused by the donee
Donations that do not conform to formal requirements such as oral donation of real properties
Examples of quasi-transfers
Transmission of the property by the usufructuary to the owner of the naked title
Transmission of the property by a trustee to the real owner
Transmission of the property from the first heir to the second heir in accordance with the desire of a predecessor
Examples of intangible properties
Financial assets
Accounting intangible assets
Who does the reciprocity rule apply to?
Non-Resident Aliens
