Forgive and forget: Estate tax under the Tax Amnesty Bill

In November 2018, the Senate approved on third and final reading the Tax Amnesty Bill.

The Tax Amnesty Bill, which is expected to be signed into law by President Duterte, aims to protect and enhance revenue administration and collection, and to simplify tax compliance requirements by, among others, providing a one-time opportunity to settle estate tax obligations through a tax amnesty program.

If enacted into law, the Tax Amnesty Bill shall provide for the estate tax amnesty, which covers the estate of taxpayers who died on or before Dec. 31, 2017, with or without duly issued assessments, whose estate taxes have remained unpaid or accrued as of Dec. 31, 2017.

It shall not extend, however, to those with:

pending cases under jurisdiction of the Presidential Commission on Good Government;

pending cases on unexplained or unlawfully acquired wealth or under the Anti-Graft and Corrupt Practices Act;

pending cases filed in the appropriate court involving violations of the Anti-Money Laundering Law;

pending criminal cases for tax evasion and other criminal offenses under Title X, Chapter II of the National Internal Revenue Code, as amended (NIRC);

with pending cases for frauds, illegal exactions and transactions, as well as malversation of funds and property, as defined under Title VII, Chapters III and IV, of the Revised Penal Code; and

involved in tax cases subject of final and executory judgment by the courts.

In order to avail themselves of the estate tax amnesty, the legal heirs, transferees or beneficiaries, or the authorized executor or administrator of the estate shall file an Estate Tax Amnesty Return in the form that may be prescribed in the implementing rules and regulations (IRR) of said Bill, and pay the applicable estate tax amnesty, with the Bureau of Internal Revenue (BIR).

The Estate Tax Amnesty Return must be filed within two years from the effectivity of the IRR. It shall be subscribed under oath and shall sufficiently contain the particulars of the properties forming part of the estate.

It shall be filed before the Revenue District Office (RDO) exercising jurisdiction over the decedent’s last residence.

Meanwhile, the returns of nonresidents who have properties in the Philippines shall be filed at RDO No. 39, or any other prescribed RDO under the IRR.

The estate amnesty tax shall be paid upon filing the return, after which the RDO shall issue an acceptance payment form addressed to the authorized agent bank, or in the absence thereof, the collection agent or municipal treasurer concerned.

Proof of judicial or extrajudicial estate settlement should likewise be attached to the return in order to verify the mode of transfer and the recipients of the properties comprising the estate.

Upon full compliance with the abovementioned requirements, the concerned estate shall be immune from the payment of estate tax at the rate of 6 percent of its net value, as well as increments and additions thereto, arising from failure to pay any and all the estate taxes for taxable year 2017 and the prior years, and from all appurtenant civil, criminal and administrative cases and penalties under the NIRC.

With prejudice to the laws on succession, the BIR shall coordinate with the applicable regulatory agencies in setting up a system enabling the transfer of title over properties to heirs and/or beneficiaries, including their cash withdrawals on the decedent’s bank account, where applicable.

“We hope that this measure will encourage those in the formal and non-formal [sectors] to legitimize, properly declare, and pay the correct taxes without fear of civil, criminal or administrative penalties,” Sen. Sonny Angara said earlier in a press statement. “This is our chance to have a fresh start especially in something as important as taxes. As Filipinos seek a government they can trust, let this amnesty serve as another step closer to the end.”