Tax bureau clarifies property valuation

By Elijah Joseph C. Tubayan
Reporter
THE BUREAU of Internal Revenue (BIR) recently amended rules on the valuation of real property gifts for the computation of the donor’s tax in order to ease compliance.
Revenue Regulation (RR) 17-2018, signed by Finance Secretary Carlos G. Dominguez III on July 24 but published last week, said that “the valuation of gifts in the form of property shall follow the rules set forth in Section 5,” from Section 6 previously, provided that “the reckoning point for valuation shall be the date when the donation is made.”
This means that payment of tax on such properties are now based on gross estate value according to their fair market value at the time of the decedent’s death.
Previously under RR 12-2018 — the consolidated implementing rules and regulations on imposing estate and donors taxes — the value of such property was determined by deducting claims against the estate; claims of the deceased against insolvent persons; unpaid mortgages, taxes and casualty losses; property previously taxed; transfers for public use; current fair market value of the decedent’s family home; amount received by heirs and the net share of the surviving spouse in the conjugal partnership or community property.
BIR Deputy Commissioner Marissa O. Cabreros said in a mobile phone message yesterday that the new regulation “provided ease in compliance.”
Sought for comment, Tax Management Association of the Philippines President Raymund S. Gallardo said the previous rule had “nothing to do with valuation.”
“Under RR12 -2018, valuation of properties subject to Donor’s Tax made reference to Sec. 6 which is about the computation of the net estate, which has nothing to do with valuation. Sec. 5 of RR 12-2018 is about valuation of properties included in the gross estate of a decedent,” Mr. Gallardo explained in a mobile phone message over the weekend.
“Valuation of properties subject of gratuitous transfers such as donation and inheritance follow the same principle of valuation, such that the valuation of real properties in computing the estate or donor’s tax is the higher of the fair market value (FMV) as determined by the Commissioner (which is normally the zonal value) or the FMV as shown in the values fixed by provincial or city assessors at the time of death of the decedent or date when the gift was made,” he added.
Republic Act No 10963, or the Tax Reform for Acceleration and Inclusion law, simplified estate and donor’s taxes at fixed rate of six percent.
“For the purposes of prescribing real property values, the Commissioner is authorized to divide the Philippines into different zones or areas shall, upon consultation with competent appraisers, both from the private and public sectors, determine the fair market value of real properties located in each zone or area,” read the regulation.