Publishing the Amendments Effected by Presidential Decree No. 1457 to Title III. — Estate and Donor's Taxes of the National Internal Revenue Code of 1977, as Amended

August 15, 1978 REVENUE MEMORANDUM CIRCULAR NO. 075-78 SUBJECT : Publishing the Amendments Effected by Presidential Decree No. 1 457 to Title III. Estate and Donor's Taxes of the National Internal Revenue Co de of 1977, as Amended TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, there is published below certain Sections of Title III. Estate and Donor's Taxes of the National Internal Revenue Code of 1977, as amended by Presidential Decree No. 1457. TITLE III. ESTATE AND DONOR ' S TAXES "SEC. 12. The opening paragraph of Section 100 of the National Internal Revenue Code of 1977, is hereby amended to read as follows: 'Section 100. Gross estate . The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, PROVIDED , HOWEVER , that in the case of a nonresident decedent who at the time of his death, was not a citizen of the Philippines, only that part of the entire gross estate which is situated in the Philippines shall be included in his taxable estate.' "SEC. 13. The title of Section 101 of the National Internal Revenue Code of 1977 is hereby amended and a new paragraph (e) is added thereto to read as follows: 'Section 101. Computation of net estate and estate tax . . . . xxx xxx xxx '(e) Tax credit for estate taxes paid to a foreign country . (1) In general . The tax imposed by this Title shall be credited with the amounts of any estate tax imposed by the authority of a foreign country. '(2) Limitations on credit . The amount of the credit taken under this section shall be subject to each of the following limitations: '(A) The amount of the credit in respect to the tax paid to any country shall not exceed the same proportion of the tax against which such credit is taken, which the decedent's net estate situated within such country taxable under this Title bears to his entire net estate; and '(B) The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the decedent's net estate situated outside the Philippines taxable under this Title bears to his entire net estate. aisa dc "SEC. 14. Section 118 is hereby amended by adding a new paragraph to read as follows: 'If a bank has knowledge of the death of a person who maintained a joint account or deposit jointly with another, it shall not allow any withdrawal by a surviving depositor from the said joint deposit account unless the Commissioner has certified that the taxes imposed thereon by this Title have been paid. For this purpose, all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositor.' "SEC. 15. Section 119 of the National Internal Revenue Code is hereby amended to read as follows: 'xxx xxx xxx '(c) Any executor or administrator who shall deliver or distribute to an heir, legatee, devisee, donee, or beneficiary any real or personal property, credit, right, or franchise, and any officer, manager or employee of any corporation, firm or association, sociedad anonima, partnership, business or industry who transfers in its books to any new owner any share, obligation, bond, or right, pertaining to an estate or gift or allows the withdrawal of deposits and/or other investments subject to the taxes imposed in this Title without the certification from the Commissioner of actual payment of the corresponding tax, shall be fined in the amount of not more than five thousand peso or imprisoned for not more than one year, or both.' "SEC. 16. A new section is hereby added after Section 123 of the National Internal Revenue Code to be known as Section 123-A to read as follows: '(c) Tax credit for donor ' s taxes paid to a foreign country . (1) In general . The tax imposed by this Title upon a donor who was a citizen or a resident at the time of donation shall be credited with the amount of any donor's taxes of any character and description imposed by the authority of a foreign country. '(2) Limitations on credit . The amount of the credit taken under this section shall be subject to each of the following limitations: '(A) The amount of the credit in respect to the tax paid to any country shall not exceed the same proportion of the tax against which such credit is taken, which the net gifts situated within such country taxable under this Title bears to his entire net gifts; and '(B) The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the donor's net gifts situated outside the Philippines taxable under this Title bears to his entire net gifts. "SEC. 17. The first paragraph of Section 133 of the National Internal Revenue Code of 1977 is hereby amended as follows: 'Section 133. Definitions . For the purposes of this Title, the terms 'gross estate' and 'gifts' include real and personal property, whether tangible or intangible, or mixed, wherever situated: Provided , however , that where the decedent or donor was a nonresident alien at the time of his death or donation, as the case may be, his real and personal property so transferred but which are situated outside the Philippines shall not be included as part of his 'gross estate' or 'gross gift': Provided , further , that franchise which must be exercised in the Philippines; shares, obligations, or bonds issued by any corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws; shares, obligations, or bonds issued by any foreign corporation eighty-five per centum of the business of which is located in the Philippines; shares, obligations, or bonds issued by any foreign corporation if such shares, obligations, or bonds have acquired a business situs in the Philippines; shares or rights in any partnership, business or industry established in the Philippines, shall be considered as situated in the Philippines; and Provided still further , that no tax shall be collected under this Title in respect of intangible personal property (a) if the decedent at the time of his death or the donor at the time of the donation was a citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of any character, in respect of intangible personal property of citizens of the Philippines not residing in that foreign country or (b) if the laws of the foreign country of which the decedent or donor was a citizen and resident at the time of his death or donation allows a similar exemption from transfer or death taxes of every character or description in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country.'" aisa dc FEATURES OF THE AMENDMENTS Amendment to Section 100. Gross estate . The amendment provides that in the case of a resident who at the time of his death was a citizen or resident alien, all his properties wherever situated, now including real and personal properties located abroad, should be included as part of his gross estate. In the case of a nonresident alien, only that part of his gross estate located in the Philippines should be included. Likewise, in the case of a donor who at the time of donation was a citizen or resident alien, all properties given as gifts, now including real and personal properties abroad, should be included as part of the gross gifts. Amendment to Section 101 . Computation of net estate and estate tax . A new paragraph provides that, subject to certain limitations, estate taxes paid to a foreign country are creditable from the Philippine estate tax. Amendment to Section 118 . Payment of tax antecedent to the transfer of shares , bonds , or rights . A new paragraph requires that a bank which has knowledge of the death of a depositor who maintains a joint account with another shall not allow the surviving depositor to withdraw from the joint account without a certification from the Commissioner that the estate tax due thereon has been paid. Amendment to Section 119 . Specific penalties . The amendment provides penalty for withdrawal by a surviving joint depositor from a joint deposit account without the Commissioner's certificate that the estate tax has been paid. Amendment to Section 123 . Tax Credit for Donor ' s Taxes . A new sub-section was added which provides that subject to certain limitations, donor's taxes paid to a foreign country are creditable from the Philippine donor's tax. Amendment to Section 133 . Definitions . The definitions of the terms "gross estate" and "gifts" have been amended to include all property wherever situated with respect to a decedent or donor who at the time of death or donation was a citizen or resident of the Philippines. However, with respect to a decedent or donor, not a citizen or resident of the Philippines, at the time of death or donation, only items of gross estate or donation situated in the Philippines are includible in the gross estate or gift. EFFECTIVITY All of the amendments to Title III of the National Internal Revenue Code under Presidential Decree No. 1457 took effect on August 5, 1978, the date of the publication of the decree in the newspapers. ENFORCEMENT All internal revenue officers and others concerned are enjoined to be guided accordingly and to give this circular as wide a publicity as possible. aisa dc EFREN I. PLANA Acting Commissioner