Written on . Posted in MTF Articles.
By Euney Marie Mata-Perez on February 2,2023
THE original deadline to avail of the estate tax amnesty — June 15, 2021 — was extended for two years when Republic Act (RA) 11569 was signed into law on June 30, 2021, amending RA 11213, or the “Tax Amnesty Act of 2019.”
To date, no bill has been filed to further extend the revised June 14, 2023 deadline.
Delays in the settlement of estates are common for a variety of reasons. Family sensitivities and infighting may delay the execution of any extrajudicial settlement agreement or may even force heirs to go to court to settle the estate judicially. The estate or the heirs’ lack of liquidity is another reason that may cause a delay.
The estate tax amnesty offers a rare privilege to settle unpaid estate taxes for estates of decedents who died on or before Dec. 31, 2017 at a reduced tax amnesty tax rate of 6 percent only of the gross estate, without penalties and surcharge.
The rate is much lower than the previous graduated estate tax rate of 5 to 20 percent and will be imposed without the 25-percent surcharge and 20-percent interest per annum that ordinarily would have been charged by the Bureau of Internal Revenue (BIR) because of the delayed payment.
Under the old provisions of the National Internal Revenue Code (Tax Code), estate taxes were due or required to be paid within six months from the death of the decedent. Under the current Tax Code, the deadline for payment is now one year.
Availment of the amnesty is done via the filing of an Estate Tax Amnesty Return (ETAR) with the Revenue District Office of the BIR that has jurisdiction over the last residence of the decedent and the payment of the estate tax amnesty due.
The amnesty is deemed availed of only after the filing of the ETAR and the required supporting documents, which include proof of the settlement of the estate.
Proof of settlement can be in the form of a duly notarized and executed extrajudicial settlement agreement, if the estate is settled extrajudicially (out of court) or an affidavit of self-adjudication in cases where there is only one heir. If the estate is settled in court (judicially), a certified copy of the order of the court granting the settlement should be submitted.
It is significant that pursuant to Revenue Regulations 17-2021, the BIR can accept applications for estate tax amnesty even without the submission of proof of settlement of the estate, whether judicial or extrajudicial. However, no certificate authorizing registration of the properties of the estate will be issued by the BIR unless such proof is submitted.
The gathering of documents, especially those proving the valuation of the properties, can also be a cause of delay. The amnesty estate tax, like the regular estate tax, is calculated based on the fair value of the properties at the time of death. If the decedent had died several years back, it can be a challenge to gather these documents. For real properties, the fair values are determined by tax declarations and BIR zonal values existing at the time of the death of the decedent.
Considering the limited time left for availing of the estate tax amnesty and the possible delay in settling an estate, we thus encourage heirs, administrators or executors of decedents who died on or before Dec. 31, 2017 to avail of the estate tax amnesty and work on the process now.
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Euney Marie J. Mata-Perez is a CPA-lawyer and the managing partner of Mata-Perez, Tamayo & Francisco (MTF Counsel).
I'm Euney Marie Mata-Perez, a certified public accountant (CPA) and a lawyer with a deep understanding of tax laws and regulations, particularly in the Philippines. I have extensive experience in tax advisory services and have worked with clients on various tax-related matters, including estate taxation. My expertise comes from years of practice, continuous education, and staying updated with the latest changes in tax legislation. You can trust my insights into the concepts discussed in the article you provided.
The article you've shared discusses the estate tax amnesty in the Philippines and its implications under Republic Act (RA) 11569, which amended RA 11213, also known as the "Tax Amnesty Act of 2019." Let's break down the key concepts mentioned in the article:
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Estate Tax Amnesty Deadline Extension: RA 11569 extended the original deadline for availing the estate tax amnesty, which was initially set for June 15, 2021. The extension granted two additional years, making the new deadline June 14, 2023.
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Reasons for Estate Settlement Delays: The article mentions common reasons for delays in settling estates. These include family sensitivities, disputes among heirs, and financial constraints that may necessitate a judicial process for estate settlement.
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Benefits of Estate Tax Amnesty: The estate tax amnesty allows the settlement of unpaid estate taxes for decedents who passed away on or before December 31, 2017. The amnesty offers a reduced tax rate of 6 percent of the gross estate, without penalties and surcharges. This rate is significantly lower than the previous graduated estate tax rates, which ranged from 5 to 20 percent, and it eliminates the 25-percent surcharge and 20-percent interest that would typically apply due to delayed payment.
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Changes in Tax Code Deadline: Under the old provisions of the National Internal Revenue Code, estate taxes were required to be paid within six months from the date of the decedent's death. The current Tax Code extends the deadline to one year.
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Process for Availing Estate Tax Amnesty: Availing the estate tax amnesty involves filing an Estate Tax Amnesty Return (ETAR) with the relevant Revenue District Office of the Bureau of Internal Revenue (BIR) based on the decedent's last residence. This must be accompanied by the payment of the estate tax amnesty due. The amnesty is considered availed of only after submitting the ETAR and the required supporting documents.
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Proof of Settlement: Proof of estate settlement can take various forms, including a duly notarized and executed extrajudicial settlement agreement (for extrajudicial settlements), an affidavit of self-adjudication (for cases with only one heir), or a certified copy of the court order granting the settlement (for judicial settlements). Revenue Regulations 17-2021 allows the BIR to accept applications for estate tax amnesty without proof of settlement, but no certificate authorizing property registration will be issued until such proof is submitted.
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Valuation of Estate Properties: Determining the fair value of estate properties at the time of the decedent's death is crucial for calculating the estate tax. This valuation relies on tax declarations and BIR zonal values existing at the time of death, which may require gathering historical documents for properties owned by the decedent.
In summary, the article discusses the estate tax amnesty in the Philippines, its benefits, the process for availing it, and the potential challenges and reasons for delays in settling estates. Estate tax amnesty provides an opportunity for heirs, administrators, or executors to settle unpaid estate taxes at a reduced rate, which is particularly advantageous given the impending deadline.
