BIR Briefing on Tax Amnesty on Delinquencies and Estate Tax Amnesty

BIR Briefing on Tax Amnesty on Delinquencies and Estate Tax Amnesty

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
E: jpatag@remax.ph

RE/MAX Capital
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.

 

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Revised 2019 Zonal Values for San Juan, Metro Manila Published

Revised 2019 Zonal Values for San Juan, Metro Manila Published

Please be informed that the new zonal values (ZVs) of real properties in San Juan City was published in the Manila Standard on May 8, 2019. It will be effective on May 23, 2019. Prior to this update, ZVs for San Juan were last revised in 2015.

In 2019, a number of cities have published new ZVs including, Mandaluyong, Novaliches Q.C., Quiapo (et. al), and Pasig. Soon to be released is Taguig, which conducted their public hearing last December 2018.

Why is this important?

If you’re buying a property in BGC, you have to sign the Deed of Absolute Sale before the BIR releases the new ZV. Otherwise, the contract price might be lower than the ZV, and higher taxes must be paid by the Seller/Buyer. The Seller may also opt to back out from the deal if he finds out that he’s getting less proceeds than what was originally calculated.

Are my annual real property taxes going to increase?

No, real property taxes (i.e. RPT, amilyar) will not be affected. Zonal Values are determined by the BIR and are used for calculating taxes for sale of properties (CGT, DST, TT, RF).

Feel free to ask me questions.

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
E: jpatag@remax.ph

RE/MAX Capital
7th Floor, 8 Rockwell, Hidalgo Drive, Rockwell Center, Makati City

Once in a Lifetime Chance: Estate Tax Amnesty of 2019

Published March 5, 2019

Edit: July 9, 2019

 

In a move to alleviate the Bureau of Internal Revenue’s backlog of tax cases, increase revenue collection, and free up idle properties, the government finally approved the long-awaited Tax Amnesty Act (TAA). This is great news because it gives all taxpayers the once-in-a-lifetime chance to settle unpaid taxes and have a clean record. In this article, I’ll tackle one of three items covered by the TAA: the Estate Tax Amnesty (ETA).

 

Before the TAA was executed, the estate tax ranged from 0% to 20% of the net estate of the decedent (the person who passes away). Assuming heirs weren’t able to settle the estate taxes to transfer the inherited properties to their name, the BIR automatically slaps a 25% surcharge penalty of the tax payable. Moreover, each year of non-payment subjects the tax payable with a deficiency penalty of 20% annual interest. In short, the tax payable grows exponentially to exorbitant levels, which sometimes are even more than what the property is worth.

 

Let’s take a hypothetical case as example. In 2001, Jose Reyes (90 years old and widowed) passed away, leaving a 2,000 square meter lot in Forbes Park to his only son Joe. At the time of death, the zonal value of the lot was Php70 Mn. The estate tax payable at the time of death was Php12.7 Mn (after reducing the estate by some allowable deductions), which Joe didn’t have the cash to pay for. Years pass and by December 31, 2016, the tax payable had grown to Php82.5 Mn.

 

Sadly, Joe passed away on December 31, 2016, leaving behind his wife Josefina as the only heir.

 

On December 31, 2017, Josefina has to pay estate taxes of Php99 Mn to transfer the title from Jose’s name to Joe’s, and an additional Php88.4 Mn to transfer the title from Joe’s name to hers.

 

With this kind of tax burden, real properties often become idle. Sellers believe that buyers are willing to settle the estate tax payable as part of the acquisition price. More often than not, buyers shy away from these properties for the fear that undisclosed heirs may suddenly appear or for the possibility that sellers may disappear the moment they settle the tax burden.

 

This all changes with the TAA. The new law states that Josefina only has to pay Php4.1 Mn (Php67.3 Mn net estate as of Dec. 31, 2001 * 6% ETA rate) to transfer the title from Jose’s name to Joe’s and Php21.5 Mn (Php357.3 Mn Zonal Value as of Dec. 31, 2016 * 6% ETA rate) to transfer from Joe’s to her name.

 

What if Josefina doesn’t have the Php25.5 Mn needed to settle the estate? She could proceed with an “Extra Judicial Settlement of the Estate WITH ABSOLUTE SALE. This means that Josefina, the heir, will settle the estate as with the proceeds from the consequent sale of the property. This procedure transfers the title of the property straight from Jose’s name to the buyer’s name. Furthermore, the Buyer can acquire an “heir’s bond” from a reputable insurance company, to protect himself from unexpected claims of undeclared heirs.

 

If you would like to avail of the ETA with the goal of selling the property, you have to move quickly since the amnesty is only offered for a period of 2 years , or until June 14, 2021. If you miss this chance, the taxes to paid reverts back to the National Internal Revenue Code of 1997, which means the penalties revert back to what they were and the penalties will continue to continue grow at the old rate per year.

 

Send me an email; we can help provide a concrete plan and solution. It would be best if you’re first in line, especially with the sheer number of people who we believe will be claiming advantage of this development (as well as the General Tax Amnesty and Amnesty on Delinquencies).

Juan Alfredo S. Patag, REB
REB Lic.# 0023114; ID# 18-1612675 until 10/20/2022; PTR#7335646 until 12/31/2019

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.

BIR releases new zonal values for Rockwell Center (North Makati)

Effective June 11, 2017, Rockwell buildings in Rockwell Center will have the following zonal values:

13-Jan-1998* 11-Jun-2017**
Amorsolo Square 60,200 180,000
Edades Tower & Garden Villas 60,200 220,000
Joya Lofts & Towers 60,200 200,000
Kirov 60,200 220,000
Luna Gardens 60,200 200,000
One Rockwell East 60,200 180,000
One Rockwell West 60,200 180,000
Rizal Tower 60,200 200,000
Sakura – Proscenium 60,200 220,000
The Manansala 60,200 180,000

*4th Revision of Zonal Values
Zonal Values for these buildings were classified under “All Condominiums, Townhouses (CCT) & Commercial Buildings built after 1995.

**Additional Guidelines on the 5th Revision of Zonal Values
1. All parking slots of condominiums are valued at 70% of Residential or Commercial value whichever is higher.

2. Any unit in a purely residential condominium project found to be used in business shall be classified commercial condominium and 20% of the established value shall be added thereto.

3. Developer/Owner of condominium project built after the effectivity of this revision (5th Revision) shall request for an assignment of values from the technical committee on real property valuation, which is being chaired by the assistant regional director.

Source: https://www.bir.gov.ph/index.php/zonal-values.html

How does this affect Rockwell Center Properties?

Selling prices in Rockwell Center would generally have an upward pressure since sellers would want to keep the amount of proceeds the same as before the increase in zonal value.

Subsequently, I see downward pressure on rental rates in the mid-term as unit owners decide to lease their properties to derive income for units that can’t sell (in turn due to higher prices).

Selling prices of existing properties will have to be revisited since net proceeds to owners may be smaller with the increase in zonal values.

Annual real property taxes would likely increase with the increase in zonal values in the mid- to long-run. Yes, zonal values (determined by the BIR) are independent of the Fair Market Value(determined by the City Assessor and the basis for Real Property Taxes), however, the need to raise revenue collection for infra projects suggest that zonal values and fair market value between the 2 agencies will be synched. It might take time for this to happen since the Local Government Unit needs to conduct a series of public hearings before they could implement such an increase.

Association dues would also see a marginal increase as real property taxes for the common areas increase.

 

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 any other RE/MAX franchise. No liability whatsoever is accepted for any loss that may arise (whether direct or consequential) from any use of the information contained herein. Each RE/MAX franchise is independently owned and operated.