I am currently working on two property transfers: one through a Deed of Donation, while the other is through an Extrajudicial Settlement. Which one would I recommend to an inquiring client? Undoubtedly, my answer would be through a Deed of Donation. And there are two excellent reasons why:
Zonal Value vs. Market Value The basis for the computation of the donation tax to be imposed by the BIR will be based on the zonal value of the property, unlike, estate taxes, which are computed using the current fair market value of the property listed in the extrajudicial settlement. In general, zonal values are always lower than market values, hence, lower taxes.
Simplicity of Requirements The list of requirements for a donation is finite. As long as you submit the necessary documents, the transfer will push through. The same cannot be said of the extrajudicial settlement, which is submitted by the heirs of the deceased. Aside from documents pertaining to the property, income tax and business tax can come into play.
For example, a deceased taxpayer may have a registered individual proprietorship. His business will be perused by the BIR whether all taxes pertaining to said business have been paid, and then, it has to be closed. These extra steps will each contain its own list of requirements, making the process even more difficult and lengthy. The route for donation is paved with much less obstacles, making it a faster and more certain course of action with regards to transferring property.
Zonal Value vs. Market Value The basis for the computation of the donation tax to be imposed by the BIR will be based on the zonal value of the property, unlike, estate taxes, which are computed using the current fair market value of the property listed in the extrajudicial settlement. In general, zonal values are always lower than market values, hence, lower taxes.
Simplicity of Requirements The list of requirements for a donation is finite. As long as you submit the necessary documents, the transfer will push through. The same cannot be said of the extrajudicial settlement, which is submitted by the heirs of the deceased. Aside from documents pertaining to the property, income tax and business tax can come into play.
For example, a deceased taxpayer may have a registered individual proprietorship. His business will be perused by the BIR whether all taxes pertaining to said business have been paid, and then, it has to be closed. These extra steps will each contain its own list of requirements, making the process even more difficult and lengthy. The route for donation is paved with much less obstacles, making it a faster and more certain course of action with regards to transferring property.
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