BIR Briefing on Tax Amnesty on Delinquencies and Estate Tax Amnesty held last July 2, 2019 was very helpful. Some of my notes are as follows:
“The Estate Tax Amnesty shall cover the estate of decedent/s who died on or before December 31, 2017, with or without assessments”
- Estates “with Assessment” pertain to properties that have been declared to and were assessed by the BIR, but still have not been paid.
- Estates “without Assessment” pertains to properties that have NOT been declared to the BIR.
The Estate Tax Amnesty shall not extend to the following: Delinquent estate tax liabilities which have become final and executory”
- Delinquent Estate Tax Liabilities pertain to estates where the BIR has issued a Final Assessment Notice (FAN), meaning the delinquency has become final and executory, you can no longer avail the ESTATE TAX AMNESTY. Instead, you can avail of the AMNESTY ON DELINQUENCY.
An Estate Tax Amnesty rate of six percent (6%) shall be imposed on each decedent’s total net taxable estate at the time of death without penalties at every stage of transfer of property…
- “at every stage of transfer of property” – This pertains to properties that were transferred without passing through the BIR (and heirs never paid for estate tax).
- For real estate properties, the titles still remain in the original decedent’s name.
- If A passed away and the sole heir B also passed away, C would have to pay for estate taxes of A and estate tax of B.
“The gross estate of a decedent…shall be comprised of the following properties and interest therein at the time of his/her death, and such lifetime transfers includible in the gross estate…”
- “Such lifetime transfers includible in the gross estate”
- An example of this is when an owner, Mr. A, transfers the legal ownership to his son, Mr. B, but has withheld usufruct (beneficial ownership) until the A’s death.
- In this case, the property shall still be considered part of A’s estate and estate taxes should be paid.
“Cash in bank in local and/or foreign currency shall be based on the peso value of the balance at the date of death.”
- Gross estate shall not include accrued interest earned, just the balance at the time of death.
“For purposes of determining the Net Estate, the gross estate may be reduced by the deductions allowed by the Estate Tax law applicable at the time of death of the decedent.”
- The historical allowable deductions are presented in Annex A of the Revenue Regulations.
“…the Estate Tax Amnesty Return … shall be filed…within two (2) years…”
- The two years shall start on June 15, 2019 and will end June 14, 2021.
- The Executor/Administrator pertains to the person mandated to manage the estate and distributes the properties to heirs.
“The duly accomplished and sworn Estate Tax Amnesty Return and Acceptance Payment Form …shall be presented to the concerned RDO for endorsement of the APF prior to the payment of the Estate Amnesty Tax with the Authorized Agent Banks or Revenue Collection Officers”
- Two forms are needed Estate Tax Amnesty Return (ETAR) and Acceptance Payment Form (APF).
- ETAR will have the computation of the tax due and the APF will serve as proof that you’ve paid the tax due.
- These need to be approved/signed by the RDO before payment in a bank/RCO.
- Don’t commit the mistake of using the wrong form (i.e. form 0605), your payment will not be considered!
- Banks are instructed by the BIR not to accept ETAR if it doesn’t have the signature of the Rev. District Officer (RDO) or the Assistant RDO.
“Failure to submit the ETAR and APF within the two (2)-year period from the effectivity of the Regulations is tantamount to non-availment of the Estate Tax Amnesty and any payment made may be applied against the total regular estate tax due inclusive of penalties.”
- Once you’ve paid for the estate taxes, and you FAIL to submit to BIR, the payment will be considered as an advance payment, deductible to the estate tax liabilities based on the OLD estate tax regulation.
“In case the estate has properties which were not declared in the previously filed return, the legal heirs/executors/administrators can file an ETAR or an amended ETAR…within two (2) years from the effectivity of the Regulations.”
- If you have filed and claimed estate tax amnesty for one property, and later realize that there’s another property, you can still claim tax amnesty on the second property–provided filing transpires before June 14, 2021.
“Properties included in the Estate Tax Amnesty availment which are likewise subject of taxable donation/sale shall be assessed of the corresponding donor’s/capital gains/or other applicable taxes at the time of donation/sale including penalties, if applicable.”
- Example of this is when an heir enters into an Extra Judicial Settlement of Estate with Deed of Sale/Donation before the ETA was implemented, the heirs can still avail estate tax amnesty.
- However, the relevant Capital Gains Tax or Donor’s Tax are not covered by the estate tax amnesty. Penalties due to failure to pay the relevant CGT/Donor’s Tax within the set deadlines shall apply.
- Another example of this is if a spouse dies, his 50% share of the property shall be distributed to the surviving spouse and their kids.
- In case, the surviving spouse decides to forego (donate to her kids) her 50% share as well as the portion that she is in entitled to inherit, this act shall be considered as a donation (to her kids), and corresponding donor’s tax shall apply.
- If one of the kids, meant to inherit a portion of the property is rich, and decides to waive his inheritance, WITHOUT naming a specific person who shall receive his share, this shall NOT be considered as a donation, but merely a waiver of rights.
- If the named a specific person to inherit his share, this shall be considered as a donation.
Juan Alfredo S. Patag, REB
REB Lic.# 0023114; ID# 18-1612675 until 10/20/2022; PTR#7335646 until 12/31/2019
M: +63 917 520.5826
7th Floor, 8 Rockwell, Hidalgo Drive, Rockwell Center, Makati City
DISCLAIMER: This material, which is strictly for information purposes only. The views and opinions expressed in this article are those of Juan Patag’s and do not necessarily reflect the position of RE/MAX Capital, or of any other RE/MAX franchise. Any information is subject to change without prior notice. No liability whatsoever is accepted for any loss that may arise (whether direct or consequential) from any use of the information contained herein. Information Each RE/MAX franchise is independently owned and operated.