REVENUE REGULATIONS NO. 2-2003 issued on January 17, 2003 consolidates all Revenue Regulations issued on Estate Tax and Donor’s Tax, incorporating the amendments introduced by the Tax Reform Act of 1997. Estate taxation is governed by the statute in force at the time of death of the decedent. The Estate Tax accrues as of the death of the decedent and the accrual of the tax is distinct from the obligation to pay the same. Upon the death of the decedent, succession takes place and the right of the State to tax the privilege to transmit the estate vests instantly upon death. The application of the rates prescribed in the Regulations and the procedures in determining the Estate Tax due shall apply to Estate Taxes falling due or have accrued beginning January 1, 1998. The gross estate of a decedent shall be comprised of the following properties and the interest therein at the time of his death, including revocable transfers and transfers for insufficient consideration, etc: 1) for residents and citizens – all properties, real and personal, tangible or intangible, wherever situated; and 2) for non-resident aliens – only properties situated in the Philippines provided, that, with respect to intangible personal property, its inclusion in the gross estate is subject to the rule of reciprocity provided for under Sec. 104 of the Tax Code. The properties comprising the gross estate shall be valued based on their fair market value as of the time of the death. If the property is a real property, the fair market value shall be the fair market value as determined by the Commissioner or the fair market value as shown in the schedule of values fixed by the provincial and city assessors, whichever is higher. In the case of shares of stocks, the fair market value shall depend on whether the shares are listed or unlisted in the stock exchanges. Unlisted common shares are valued based on their book value while unlisted preferred shares are valued at par value. In determining the book value of common shares, appraisal surplus shall not be considered as well as the value assigned to preferred shares, if there are any. For shares, which are listed in the stock exchanges, the fair market value shall be the arithmetic mean between the highest and lowest quotation at a date nearest the date of death, if none is available on the date of death itself. To determine the value of the right to usufruct, use or habitation, as well as that of annuity, there shall be taken into account the probable life of the beneficiary in accordance with the latest basic standard mortality table, to be approved by the Secretary of Finance, upon recommendation of the Insurance Commissioner. Items of deduction in the computation of the net estate of a decedent, who is either a citizen or resident of the Philippines and a non-resident alien of the Philippines, are specified in the Regulations. The Estate Tax return shall be filed within six (6) months from the decedent’s death. The Court approving the project of partition shall furnish the Commissioner with a certified copy thereof and its order within thirty (30) days after promulgation of such order. The Commissioner or any Revenue Officer authorized by him shall have the authority to grant, in meritorious cases, a reasonable extension, not exceeding thirty (30) days, for filing the return. When the Commissioner finds that the payment of the Estate tax or of any part thereof would impose undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five (5) years in case the estate is settled through the courts, or two (2) years in case the estate is settled extrajudicially. If an extension is granted, the Commissioner or his duly authorized representative may require the executor, or administrator, or beneficiary to furnish a bond in such amount, not exceeding double the amount of the tax and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance with the terms of the extension. Any amount paid after the statutory due date of the tax, but within the extension period, shall be subject to interest but not to surcharge. In case the available cash of the estate is not sufficient to pay its total Estate Tax liability, the estate may be allowed to pay the tax by installment and a clearance shall be released only with respect to the property the corresponding/computed tax on which has been paid. The computation of the Estate Tax, however, shall always be on the cumulative amount of the net taxable estate. The Estate Tax imposed shall be paid by the executor or administrator before the delivery of the distributive share in the inheritance to any heir or beneficiary. Where there are two or more executors or administrators, all of them are severally liable for the payment of the tax. The estate clearance issued by the Commissioner or the Revenue District Officer having jurisdiction over the estate will serve as the authority to distribute the remaining/distributable properties/share in the inheritance to the heir or beneficiary. The executor or administrator of an estate has the primary obligation to pay the Estate Tax but the heir or beneficiary has subsidiary liability for the payment of that portion of the estate, which his distributive share bears to the value of the total net estate. The extent of his liability, however, shall in no case exceed the value of his share in the inheritance. For donor’s tax purposes, donations made before January 1, 1998 shall be subject to Donor’s Tax computed on the basis of the old rates imposed under the Tax Code of 1977, while donations made on or after January 1, 1998 shall be subject to the Donor’s Tax computed in accordance with the amended schedule of rates prescribed under the Tax Code of 1997. The computation of the Donor’s Tax is on a cumulative basis over a period of one calendar year. The Donor’s Tax return shall be filed within thirty (30) days after the date the gift is made or completed and the tax due thereon shall be paid at the same time that the return is filed. In order to be exempt from Donor’s Tax and to claim full deduction of the donation given to qualified-donee institutions duly accredited by the Philippine Council for NGO Certification, Inc., the donor engaged in business shall give a notice of donation on every donation worth at least Fifty Thousand Pesos (P 50,000) to the RDO which has jurisdiction over his place of business within thirty (30) days after receipt of the qualified donee institution’s duly issued Certificate of Donation.