Estate tax amnesty: Striking a balance

The availment of estate tax amnesty is a one-time opportunity in these uncertain times. It brings about a decidedly hopeful situation by offering a remedy beneficial for the stakeholders

Settlement of estates undeniably proves the certainty of death and taxes. Fulfilling estate tax obligations entails tedious work, as it usually involves several properties transferring down different family lines. Consequently, it is often neglected resulting in tax obligations and penalties that increase with every failure to settle estates from generation to generation.

Congress provided affected taxpayers with a limited window of opportunity to settle estate tax obligations at a reduced rate and without penalties by enacting Republic Act 11213 or the Tax Amnesty Act on 14 February 2019. The estate tax amnesty covers the estate of decedents who died on or before 31 December 2017, with or without assessments issued therefor, and whose estate taxes have remained unpaid or have accrued as of the said date. The amnesty excludes delinquent estate tax liabilities that are already final and executory, those covered by tax amnesty on delinquencies, and properties involved in particular cases pending in courts.

Congress provided affected taxpayers with a limited window of opportunity to settle estate tax obligations at a reduced rate and without penalties by enacting Republic Act 11213 or the Tax Amnesty Act on 14 February 2019.

A rate of six percent is imposed on each decedent’s total net taxable estate at the time of death at every stage of transfer of property. If an estate tax return was previously filed with the Bureau of Internal Revenue (BIR), this estate tax rate is imposed on the net undeclared estate, which is the difference between the total net estate valued at the time of the death of the decedent and the net estate previously declared with the BIR. The minimum estate amnesty tax for the transfer of the estate of each decedent shall be P5,000.

For Philippine residents and citizens, the gross estate shall be comprised of all properties, real and personal, tangible and intangible, wherever situated. For nonresident aliens, only real and personal properties situated in the Philippines are included. In ascertaining the decedent’s net taxable estate, the allowable deductions from the gross estate are those provided under the applicable tax laws at the time of the decedent’s death.

To apply for the tax amnesty, the sworn Estate Tax Amnesty

Return (ETAR), together with the Acceptance Payment Form and other requirements, may be filed by the executor or administrator, legal heirs, or even the transferees and beneficiaries. The application must be filed within two years from the effectivity of Revenue Regulations 6-2019 on 15 June 2019, or not later than 15 June 2021. For resident decedents, the ETAR is filed with the Revenue District Office (RDO) having jurisdiction over the last residence of the decedent. For non-resident decedents, with an executor or administrator, it is filed with the RDO where such executor/administrator is registered or if not yet registered, at the executor/administrator’s legal residence. Finally, for non-resident decedents with no executor or administrator in the Philippines, it is filed with RDO 39 — South Quezon City.

Full compliance with all the legal requirements and procedures merits immunity from payment of all estate taxes, including increments and additions arising from the failure to pay any and all estate taxes for taxable year 2017 and prior years, as well as any civil, criminal and administrative cases and penalties. Just as important, it ultimately enables the transfer of title of properties to the heirs and beneficiaries.

Because of the Coronavirus disease (COVID-19) pandemic, availment of tax amnesty on delinquencies was extended from 22 June 2020 to 31 December 2020 under the BIR’s Revenue Memorandum Circular 61-2020. Hopefully, a similar extension would be granted for estate tax amnesty.

The availment of estate tax amnesty is a one-time opportunity in these uncertain times. It brings about a decidedly hopeful situation by offering a remedy beneficial for the stakeholders — a simplified tax relief for the taxpayer, heirs, and beneficiaries, and an astute remedy for enhancing revenue collection for the State.

Atty. Migmar Bernped S. Francisco is a Junior Associate of Parker Faustino Pagayatan Law Offices.

Migs obtained his Bachelor of Laws degree from San Beda College Alabang School of Law, and his Bachelor of Arts in Social Sciences degree from the University of the Philippines Baguio. While in law school, he worked as a legal researcher for various property management corporations and as a legal assistant for Haribon Foundation. His practice areas include corporate law and compliance, civil, criminal and administrative litigation and taxation.