CHAPTER FOUR: PROPERTY RELATIONS 3.

Claim against insolvent person is either

PRENUPTIAL AGREEMENT exclusive or conjugal
- Must be: (WES)
o Writing  EXCLUSIVE PROPERTY UNDER ACOP
o Executed prior to marriage 1. Art. 92(1) NFC – property acquired by
o Signed by future spouses GRATUITOUS title unless donor, testator or
- Any modification may only be allowed BEFORE grantor expressly provided it be part of
marriage community
NOTE: Fruits or income shall depend on
LOCAL CIVIL REGISTRY (MARRIAGE) classification of principal source
REGISTER OF DEEDS (PROVINCE OF PROPERTY) 2. Art. 92(2) NFC – property for personal and
- For records of prenuptial agreement exclusive use of either spouse (regardless of
what is used to acquire it), however JEWELRY is
PROPERTY RELATIONS part of community property.
- Applicable only to married persons 3. Property acquired before the marriage by either
- Used to distinguish conjugal/community from spouse who has legitimate descendants by a
exclusive property former marriage.

Art. 74 of the New Family Code, property relationship are CONJUGAL PARTNERSHIP OF GAINS (CPG)
governed in the following order: (MPL) - Spouses place in a common fund the proceeds from
1. By Marriage settlements executed BEFORE marriage their separate properties and those acquired by
2. By Provisions of law either or both spouses through their efforts or by
3. By Local custom chance and upon dissolution the net gains obtained
shall be divided equally between them unless
TYPES OF PROPERTY RELATIONS (Art. 75 NFC) (ACCA) otherwise agreed in the marriage settlements
1. Absolute community of property (ACoP)
2. Conjugal partnership of gains (CPG)  EXCLUSIVE PROPERTY UNDER CPG (BAAP)
3. Complete separation of property 1. Brought to marriage as his or her own
4. Any other regime 2. Acquired DURING marriage by gratuitous title
3. Acquired by right of redemption or by exchange
NOTE: If they had not agreed on the type, the rule is: ACOP with property belonging exclusively
4. Purchased with exclusive money
CONJUGAL PROPERTY – owned by both
EXCLUSIVE PROPERTY – owned by either  CONJUGAL PROPERTY UNDER CPG (AOFSPI)
1. Acquired by onerous title at expense of common
ABSOLUTE COMMUNITY OF PROPERTY (ACOP) fund
- Most common regime 2. Obtained by labor of either or both
- GENERAL RULE: the provisions of co-ownership 3. Fruits received or due DURING marriage from
shall apply common or exclusive
NOTE: Here the “fruits”, regardless of source, is
PROPERTY ACQUIRED BEFORE MARRIAGE (COMMUNITY classified as conjugal property.
PROPERTY): 4. Share to treasures discovered during marriage
IN GENERAL, property owned by the spouses before 5. Property acquired by occupation
or upon celebration of marriage is part of community 6. Improvements on the separate property (FPC)
property; includes those inherited or received as donation  Family home: when constituted by spouses
BEFORE marriage. is conjugal property (EXCLUSIVE REMAINS
EXCEPTION: property and fruits acquired before EXCLUSIVE).
marriage by spouse who has legitimate descendants by a  Proceeds of life insurance (if included in the
former marriage is classified as EXCLUSIVE PROPERTY. gross estate) is exclusive when paid from
exclusive funds otherwise it is conjugal.
PROPERTY ACQUIRED DURING MARRIAGE (EITHER  Claim against insolvent person is either
COMMUNITY OR EXCLUSIVE) exclusive or conjugal
Presumed to belong to community unless proven as
exclusive; property acquired by ONEROUS title from a
common fund or from income of either from labor is
community property

 COMMUNITY PROPERTY UNDER ACOP (FPC)

1. Family Home (unless it is EXCLUSIVE)
2. Proceeds of life insurance (if included in the
gross estate)
 EXCLUSIVE: premium paid from exclusive
funds
 CONJUGAL: premium paid from conjugal
funds or from income of either spouse

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TABLE 4-1: SIMILARITIES AND DIFFERENCES TABLE 4-2: PRO-FORMA COMPUTATION OF NET TAXABLE
PROPERTY ACOP CPG ESTATE & ESTATE TAX DUE IF DECEDENT WAS MARRIED
Property acquired DURING marriage WITH SURVIVING SPOUSE (TRAIN LAW)
 Gratuitously E E CONJ./ EXC TOTAL
 Onerously C C COMM.
Property from Labor of Spouses C C GROSS ESTATE: xx xx
Personal Property for EXCLUSIVE USE E E Real or Immovable Property xx xx
 Jewelry C C Tangible Personal Property xx xx
Property acquired BEFORE marriage Intangible Property xx xx
 WITH Legitimate Descendants C E Certain Transfers xx xx
 WITHOUT Legitimate Descendants E E TOTAL xx xx xx
Fruits
 From EXCLUSIVE Property E C LESS: ORDINARY DEDUCTIONS
 From CONJUGAL Property C C Losses/ Indebtedness/ Taxes (xx) (xx)
Property acquired IN EXCHANGE for: (LIT)
 EXCLUSIVE Property E E Transfer for Public Use --- (xx)
 CONJUGAL Property C C Vanishing Deduction*** (xx) (xx) (xx)
NET COMMUNITY/ EXCLUSIVE xx xx xx
CONJUGAL AND EXCLUSIVE DEDUCTIONS (FJ) BEFORE SPECIAL DEDUCTION
Whether CPG or ACP the following are conjugal deductions:
 Funeral Expenses LESS: SPECIAL DEDUCTIONS
 Judicial Expenses Standard Deduction (xx)
Family Home (xx)
OTHER CONJUGAL DEDUCTIONS: (TADAAEDVE) Amount Received under Republic Act 4917 (xx)
1. The support of the spouses, their common children NET ESTATE BEFORE SHARE OF THE SURVIVING xx
and legitimate children of either spouse SPOUSE
2. All debts and obligations contracted during marriage
for their benefit or with consent LESS: ½ share of the surviving spouse on the net (xx)
3. Debts contracted by either without consent to the conj./ comm. property before special deductions
extent that family benefitted NET TAXABLE ESTATE Pxx
4. All taxes, liens, charges and expenses including major x Estate Tax Rate 6%
and minor repairs upon conjugal property
ESTATE TAX DUE Pxx
5. All taxes and expenses for mere preservation made
during marriage upon separate property of either NOTE:
spouse * Intangible Properties INCLUDING rights accruing BEFORE
6. Expenses to enable spouse to commence an activity death, claims against insolvent persons, RA 4917, and
for self-improvement receivable as proceeds from life insurance taken out by the
7. Debts before marriage of either spouse in so far as decedent
they have redounded to the benefit of the family ** Made BEFORE death but will take effect UPON death as
8. Value of what is promised by both spouse in favor of well as transfer under GENERAL POWER OF APPOINTMENT
their common legitimate children to commence an *** Always an EXCLUSIVE DEDUCTION under CPG
activity for self-improvement
9. Expenses of litigation between spouses, unless the COMPLETE SEPARATION OF PROPERTY
suit is found to be groundless (OSMOWF) - If the future spouses agree in the marriage
 Obligations contracted during marriage are settlement shall be govern by this regime
conjugal deductions while those before are - To each spouse shall belong all earnings and fruits
exclusive unless proven to have benefitted - Both spouses shall bear the family expenses in
the family proportion to their income or to the current market
 Share of surviving spouse, family home, value of their separate properties
medical expenses and standard deductions - Liability to creditors for family expenses however is
are deductions to net estate SOLIDARY
 Medical expenses are neither conjugal nor
exclusive PROPERTY REGIME OF UNIONS WITHOUT MARRIAGE
 Other deductions depends on whether it is  CAPACITATED TO MARRY
chargeable against conjugal or exclusive - When a man and woman who are capacitated to
property marry each other, live exclusively with each other
 Wagering loss is borne by the loser but without the benefit of marriage or under a void
winnings is part of conjugal property marriage the following rules shall apply:
 Fines or pecuniary damages imposed upon (cohabitation) (WPN)
either shall be charged against exclusive 1. Wages owned in equal shares
property 2. Property acquired by both of them through their
work (presumed unless proven otherwise) shall
be governed by rules of CO-OWNERSHIP

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 3. Neither party can encumber or dispose by act COMPARATIVE SCHEDULE OF NTA AND NDE
inter-vivos his or her share in the property
acquired during co-habitation and owned in
common without the consent of the other until
after termination of cohabitation

 INCAPACITATED TO MARRY (OT)

1. Only property acquired by both of them through
their actual joint contribution shall be owned in
common proportion (if silent assume equal shares)
2. The share of any party who is married to another
shall accrue to the absolute community or conjugal
partnership, as the case may be, if existing under
valid marriage

CHAPTER FIVE: ESTATE TAX CREDIT AND

DISTRIBUTABLE ESTATE
ESTATE TAX CREDIT
- ALLOWABLE DEDUCTIONS: Gross Estate
- TAX CREDIT: Philippine Estate Tax itself
- This is the ONLY foreign estate tax that may be
claimed against the Philippine estate tax (other
unpaid taxes are Ordinary Deductions on gross
estate)
- The taxpayer’s right to deduct from the tax due the
amount of tax paid to a foreign country (the amount
claimed as a deduction must pertain to properties
included in the gross estate.
- Deduction allowed by law to lessen burden of double
taxation
- NON-RESIDENT ALIEN are NOT entitled to this

PHILIPPINE ESTATE TAX DUE

FORMULA:
Estate Tax Due (based on Estate Tax Table) xx
LESS: Tax Credit for Foreign Estate Taxes Paid (xx)
PHILIPPINE ESTATE TAX PAYABLE xx

STATUTORY FORMULA FOR THE COMPUTATION OF ESTATE

TAX CREDIT

NET DISTRIBUTABLE ESTATE

- It is the amount arrived at from gross estate that
consists of all properties in the possession and
control of the decedent at the time of death and
actual expenses, charges and payments from the
gross estate.
- NET TAXABLE ESTATE is used to determine the
estate tax after deductions; result of the application
of the law under estate taxation

CHAPTER SIX: DONOR’S TAX

DONATION
- Act of liberality whereby a person (natural/juridical)
disposes GRATUITOUSLY a thing or right in favor of
another who accepts it (Art.725 NCC)
- Law considers it as a “CONTRACT” (formal hence
donations not in accordance with formalities
required by law are void) since it requires
acceptance and rules on obligations and contracts
apply (Art.732 NCC)

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DONOR’S TAX during lifetime of donor and donor shall be notified
“The donor’s tax shall be imposed to the transfer of thereof and this step shall be noted in both
property by gift, whether the transfer is in trust or otherwise, instruments
whether the gift is direct or indirect, and whether the
property is real or personal, tangible or intangible.”
- Also known as GIFT TAX; a tax paid upon the transfer
by any person of the property by gift
- A tax imposed on the exercise of donor’s right during
his lifetime to transfer gifts inter-vivos
- NOT A PROPERTY TAX BUT AN EXCISE TAX (RR12-
2018) AND DIRECT TAX
- “transfer of property in trust or otherwise, direct or
indirect” – not only transfer of ownership but
transfer of any right or interest in property
- TRANSFER IS COMPLETE AND TAXABLE when donor
CHARACTERISTICS OF DONOR’S TAX (ECTDRG)
divested himself of all beneficiary benefit and has no
1. Excise tax
power to revert interest in himself/estate
2. Contract (completed gift)
3. Transfer perfected the moment donor knows of
PERFECTION OF DONATION
acceptance
 Apply ONLY when there is a completed gift and
4. Direct tax
perfected from the moment the donor knows of the
5. Renunciation of surviving spouse of his/her share
acceptance by done
after dissolution of marriage is subject to donor’s tax
 Completed by DELIVERY (actually or constructively)
6. General renunciation by an heir of his/her share is
NOT subject to tax UNLESS done in favor of identified
ELEMENTS OF DONATION (CDDA)
heirs to the exclusion or disadvantage of the other
1. CAPACITY OF THE DONOR TO MAKE DONATION
co-heirs
o Capacity to contract and to dispose property
donated
CLASSIFICATION OF DONATION
2. DONATIVE INTENT
 AS TO MOTIVE/PURPOSE: (SRM)
o Proper declaration of legal owner to
1. SIMPLE – pure liberality
transfer ownership without consideration
2. RENUMERATORY – made due to past or future
o Required only in direct gifts
services; NOT really donations in substance HENCE
o If indirect (transfer for inadequate
NOT subject to donor’s tax
consideration) it is not necessary
3. MODAL – insufficient consideration
3. DELIVERY
4. ACCEPTANCE
 AS TO TIME OF TAKING EFFECT (PERFECTION)
1. Donation inter-vivos
INCOMPLETE GIFT
2. Donation mortis-causa
- Incomplete because of reserved powers becomes
complete when either:
VALUATION OF GROSS GIFTS
o Donor Renounces power
- Same with estate tax property valuation
o Donor’s Right to exercise power ceases
- FMV of property donated at time donation is
because of the happening of some
perfected
event/condition other than death of donor
- REAL PROPERTY: HIGHER between FMV determined
by CIR and FMV determined by assessors
PURPOSE OF DONOR’S TAX (T2)
- STOCKS, BONDS AND OTHER SECURITIES:
1. To prevent avoidance of estate tax
o Traded: mean between highest and lowest
2. To prevent or compensate for the loss of progressive
quoted selling prices on valuation date
rates of income tax when large estates are split up by
o NOT TRADED ORDINARY: book value
gifts to numerous donees
o NOT TRADED PREFERRED: par value

FORMALITIES
 DONATION OF MOVABLE PROPERTY
- Orally or Written
- ORAL: requires simultaneous delivery of thing or
document of right
- If value donated EXCEEDS 5,000 donation shall be
made in WRITING otherwise it is VOID

 DONATION OF IMMOVABLE PROPERTY

- MUST be in PUBLIC document specifying therein the
property to be donated and the value of the charges
done must satisfy to be valid otherwise VOID
- Acceptance may be made in the same deed of
donation or in separate public document but must be

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 DONOR’S TAX RATE
BEGINNING JANUARY 01, 2018 OR UPON EFFECTIVITY OF
REPUBLIC ACT 10963 (TRAIN LAW)

 TAX RATE: 6% in excess of P250 000 exempt gifts

 Donor’s tax computation is on a cumulative basis over a

period of one (1) calendar year
 Tax rate of 6% is regardless of the relationship of the
donor and donee
 Any contribution in cash or in kind to any candidate of
election (political party) shall be governed by the
Election Code
 Husband and wife are considered as separate and
distinct taxpayers for the purpose of computing the
donor’s tax

TRANSFER FOR INSUFFICIENT CONSIDERATION

- Where property is a real property classified as an
GROSS GIFTS ordinary asset, (other than a real property that has
- Depend on classification of donor been subjected to the final capital gains tax—capital
- R/C: w/in and w/o PH asset: NO donor’s tax), is transferred for less than an
- NRA: w/in PH only adequate and full consideration then the amount by
- Same rules on computing “gross estate” such as which the FMV of the property at time of execution of
the RECIPROCITY RULE and Intangible Personal the Contract to Sell or execution of the Deed of Sale
Property (which is not preceded by a Contract to Sell)
exceeded the value of the agreed or actual
consideration or selling price shall be “DEEMED A
GIFT” and shall be included in computing the amount
of gifts made during the calendar year (Gift = FMV –
SP)
- Where consideration is fictitious, the ENTIRE VALUE
OF PROPERTY TRANSFERRED is subject to donor’s
tax
NOTE: transfers made bona fide in the ordinary course of
business and free from donative intent even if consideration
is inadequate on account of bad bargain is NOT subject to
donor’s tax

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DONOR’S TAX FOR SALE OR EXCHANGES NOT THROUGH THE VOID DONATIONS (GGP)
LOCAL STOCK EXCHANGE OF SHARES OF STOCK OF 1. Those made between persons GUILTY OF ADULTERY
DOMESTIC CORPORATIONS OR CONCUBINAGE AT TIME OF DONATION (action
- Starting 2018, when it is sold less than fair value, the for declaration of nullity may be made by spouse of
excess of FMV over SP shall be treated as a gift donor or donee)
subject to donor’s tax except when it is sold at arm’s 2. Those made between persons GUILTY OF THE SAME
length, free from any donative intent (in the ordinary CRIMINAL OFFENSE IN CONSIDERATION THEREOF
course of the business) 3. Those made to a PUBLIC OFFICER OR HIS WIFE,
DESCENDANTS AND ASCENDANTS BY REASON OF
RENUNCIATION OF SHARE IN COMMON PROPERTY BY OFFICE
SURVIVING SPOUSE AND INHERITANCE
- Renunciation by surviving spouse of his/her share in EXEMPT GIFTS
CPG or ACP AFTER the dissolution of marriage in - Exemptions are NOT to be treated as exclusions from
favor of the heirs of the deceased is subject to the gross gift of the donor
donor’s tax - They partake the nature of deductions and are
- General Renunciation by an heir of his/her share in therefore deductible from gross gifts to arrive at
the hereditary estate is NOT subject to donor’s tax taxable net gifts
UNLESS done in favor of identified heirs to the - Shall be presented in the GROSS GIFTS OF THE
exclusion of other co-heirs DONOR

CONDONATION OR CANCELLATION OF INDEBTEDNESS DEDUCTIONS FROM THE GROSS GIFTS (GGEDD)

- Condonation/remission of debt is a mode of - Same with EXEMPT GIFTS
extinguishing an obligation 1. Gifts made to or for the use of the National
- “An act of liberality, by virtue of which the creditor, Government (if conducted for profit donation is
without receiving any equivalent, renounces the subject to donor’s tax)
enforcement of the obligation which is extinguished 2. Gifts in favor of non-profit educational and/or
in its entirety or in that part or aspect of the same to charitable, religious, cultural or social welfare
which the remission refers.” corporation, institution, accredited non-government
- Subject to DONOR’S TAX association, trust or philanthropic organization or
- There is NO CONDONATION: condonation due to the research institution or organization. PROVIDED that
rendition of service (income tax) and condonation not more than 30% of gift shall be used by done for
made by a corporation in favor of its shareholders administration purposes. (if more than 30% it will be
(payment of dividends) subjected to donor’s tax)
NOTICE OF DONATION BY A DONOR ENGAGED IN BUSINESS:
PAYMENT OF LOAN BY GUARANTOR To be exempt from donor’s tax and to claim full deduction
- Guarantee as a rule is gratuitous UNLESS stated donor shall give a notice of donation on every donation worth
otherwise. However if it is jointly entered into by the at least P50,000 to the Revenue District Office within 30 days
guarantor and the borrower with a creditor-bank, after receipt of donee’s Certificate of Donation which shall be
the security given by guarantor is NOT gratuitous attached to the said notice stating that not more than 30%
hence not subject to donor’s tax will be used for administrative purposes.
3. Encumbrances on property donated if assumed by
CONTRIBUTION FOR ELECTION CAMPAIGN done. Net gift means the net economic benefit that
- Governed by the Election Code, hence, NOT SUBJECT accrues to the done, so if a mortgaged property is
TO DONOR’S TAX transferred as a gift but imposing upon the donee the
obligation to pay mortgage liability then net gift is
SPLITTING OF GIFT measured by deducting from FMV the amount of
- Tax minimization scheme, done by spreading the mortgage assumed
gifts over numerous calendar years to avoid a higher 4. Donations not exceeding P250,000
tax due to a higher tax base 5. Donations made to entities as exempted under
special laws: (PIRPIDPPTISNMA)
DONATIONS MADE BY A FOREIGN CORPORATION a. Prizes and awards given to athletes
- Subject to donor’s tax ONLY IF the donated property b. International Rice Research Institute
is located in the Philippines c. Ramon Magsaysay Award Foundation
- Donation of a foreign corporation of its own shares d. Philippine Inventor’s Commission
of stock is NOT SUBJECT TO DONOR’S TAX e. Integrated Bar of the Philippines
- However if 85% of the business of FC is located in PH f. Development Academy of the Philippines
or the shares donated acquired business situs in PH g. Philippine-American Cultural Foundation
the donation may be taxed in the Philippines h. Philippine Health Insurance Corporation
SUBJECT TO THE RULE OF RECIPROCITY i. Task Force on human settlement
- If in favor of a resident employee it is NOT subject to j. Intramuros Administration
donor’s tax and shall constitute taxable income of k. Southern Philippines Development
employee and the value of the shares shall therefore Administration
constitute deductible expense to the corporation l. National Social Action Council
provided it is SUBJECTED TO APPLICABLE m. Museum of Philippine Costumes
WITHHOLDING TAXES ON COMPENSATION

cjb.idl Page 6
 n. Aqua-culture Department of Southeast Asia 5. Further information as may be required by law
Fisheries Development Center of the Philippines - The return is filed and paid within 30 days after the
date gift is made or completed and the tax due
NOTE: All donations, legacies and gifts made to Philippine Red thereon shall be paid when you file
Cross shall be exempt from donor’s tax and deductible on - Place of Filing: (1) an authorized agent bank, (2)
gross income of donor or from computation of donor- RDO, or (3) Revenue Collection Officer / Office of the
decedent’s net estate as a transfer for public use for estate tax Commissioner
purposes - Gifts made by nonresidents return may be filed with:
Philippine Embassy or Consulate or Directly with
Office of the Commissioner

 CIVIL PENALTIES AND INTEREST (PPI)

1. Penalty of 25% if there is no false or fraudulent
intent
2. Penalty of 50% if there is false, malice or fraudulent
intent
3. Interest on the unpaid amount of tax from the date
computed until fully paid (12%)

TAX CREDIT FOR FOREIGN DONOR’S TAX

- Same reason and same format of computation with
foreign estate tax credit
- Can only be claimed by R/C of PH at time donation
was made (not applicable for NRA)

ADMINISTRATIVE PROVISIONS
 FILING AND PAYMENT
- Any individual who makes any transfer by gift shall
make a return in duplicate. The return shall set forth:
(GTANF)
1. Gift made in calendar year to be included in
computing net gifts
2. The deduction claimed and allowable
3. Any previous net gifts made during the same
calendar year
4. Name of donee

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