Revisiting the estate tax amnesty and its current 'status'
By Ken John Asadon
"I AM INEVITABLE!" We cannot deny the fact that whenever we see or hear this movie line, we always remember the famous movie of 2019 titled "Avengers: Endgame." Wherein the main antagonist tried to kill half of the universe for the second time.
Death is really inevitable, taxes as well. These two when joined forces will result to a big problem to individuals with inherited properties that cannot be transferred under their names because of the unpaid tax obligations over the years. Noncompliance of paying the necessary taxes with the Bureau of Internal Revenue (BIR) pertaining to the transfer of properties from the decedent to its heirs is a burden to the latter, especially if the time of death we are talking about here is way back five, 10 or even more years ago.
On Feb. 14, 2019, President Rodrigo Duterte signed Republic Act (RA) 11213, or the "Tax Amnesty Act of 2019," that granted estate tax amnesty for two years that expired last June 14, 2021, unless extended by law. The estate tax amnesty allows heirs to have the unpaid estate taxes settled at the rate of 6 percent without penalty. This applies to estates of decedents who died on or before Dec. 31, 2017. The amnesty also covers "undeclared estates" or properties that were not included in previously filed estate tax returns and were not subjected to estate taxes. The 6-percent amnesty tax rate is imposed on the net estate of the decedent; and in determining the net estate, deductions are allowed against the value of the gross estate of the decedent at the time of death.
The BIR issued the implementing rules and regulations (IRR) of the Estate Tax Amnesty under the Revenue Regulation 6-2019. The features are as follows:
Coverage
Any estate of the decedents who died on or before Dec. 31, 2017 with or without assessments duly issued and remained unpaid or have accrued as of Dec. 31, 2017.
Exceptions
• Delinquent estate tax liabilities, which have become final and executory and those covered by Tax Amnesty on Delinquencies.
• Properties involved in cases pending in appropriate courts such as Presidential Commission on Good Government (PCGG) cases, Anti-Graft and Corrupt Practices Act cases, plunder cases, Anti-Money Laundering Act cases, Tax Evasion cases and other criminal offenses.
Rate of estate tax
• Flat rate of 6 percent on each decedent's total net taxable estate at the time of death without penalties at every stage of transfer of property, provided that, P5,000 is the minimum estate tax amnesty for the transfer of each decedent.
Valuation of gross estate
• For real properties, higher value between the zonal value and the fair market value as shown in the schedule of values fixed by the provincial and city assessors.
• For shares of stocks, if listed and traded in stock exchange, the price at the time of death or 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. If not listed shares, common shares and preference share will be based on the book value of the issuing corporation and par value, respectively.
• For personal properties, fair market value at the time of death.
• For proprietary shares such as participation in any association, recreation or amusement clubs, the bid price on the date of death or nearest to the date of death, if none is available on the date of death itself, as published in the newspaper of general circulation.
Deductions from the gross estate
• Deductions allowed by the estate tax law applicable at the time of death of the decedent.
Time of filing
• Shall be filed by the executor or administrator, legal heirs, transferees or beneficiaries within two years from June 15, 2019 until June 14, 2021, unless extended by law.
Place of filing
• In case of a resident decedent, with the revenue district office (RDO) having jurisdiction over the last residence of the decedent.
• In case of a nonresident decedent, with executor or administrator in the Philippines, the return shall be filed with the RDO where such executor/administrator is registered or if not yet registered, at the executor/administrator's legal residence.
• In case of a nonresident decedent with no executor or administrator in the Philippines, the return shall be filed with RDO 39-South Quezon City.
In case the heirs failed to submit the necessary documents in availing the estate tax amnesty within the prescribed deadline indicated, the estate will be subjected to the applicable estate tax rate plus interest, surcharge and compromise penalty. Any payment made may be applied against the total regular estate tax due.
One can imagine how important the Tax Amnesty Act of 2019 was. Considering the tax rate plus the penalties incremented over the years, the heirs might be surprised to see large assessments by the BIR. Thus, the extension of the deadline to avail of the estate tax amnesty would provide a big relief to the heirs of the inherited properties that cannot be transferred under their names, say, 10 years ago or 15 years ago.
What's next?
During year 2020 up to the present, mankind experienced hardships in terms of surviving against the coronavirus disease 2019 (Covid-19) virus so are those taxpayers opting to avail the Estate Tax Amnesty. Finding it difficult to process the estate tax dues as well as gathering the necessary requirements because of the Covid-19 restrictions and health protocols.
Last May, the Senate passed the Senate Bill 2208, allowing a two-year extension of availment of the estate tax amnesty. Finally, last June 30, the President signed RA 11569 amending the Tax Amnesty Act of 2019. This new act will take effect 15 days after publication in the Official Gazette or in newspapers.
With this current development, we can assure that the taxpayers will be encouraged to avail the said estate tax amnesty program. This will not just free them up from the aggregate penalties resulting from unsettled tax obligations from the past but also will provide great opportunity for the government to collect taxes, which can be used on the betterment of our country's economy during these trial times.
Ken John B. Asadon, CPA, CTT is the tax partner of Paguio, Dumayas & Associates, CPAs (PrimeGlobal Philippines),
and a member of the Association of CPAs in Public Practice (Acpapp). The opinion of the writer does not
reflect in any way the opinion of these institutions.