A Draft Revenue Regulation for Estate Tax Amnesty

The Bureau of Internal Revenue (BIR) issued a draft revenue regulation (RR) covering the estate tax amnesty in reference to the passing of the  Republic Act No. 11213 which was approved by President Rodrigo Duterte last February 14, 2019 to provide taxpayers the one-time opportunity to settle estate tax obligations through a tax amnesty program that will give reasonable tax relief to estates with estate tax liabilities.

According to the draft, the estate tax amnesty will cover the estate of the decedent(s) who died on or before December 31, 2017, with or without assessments duly issued therefor, whose estate tax(es) have remained unpaid or have accrued as of December 31, 2017. However, the Estate Tax Amnesty shall not extend to: (1.) Delinquent estate tax liabilities which have become final and executory covered by Tax Amnesty on Delinquencies; and to (2.) Properties involved in cases pending in appropriate courts that are:

 1. Falling under the jurisdiction of the Presidential Commission of Good Government;

 2. Involving unexplained or unlawfully acquired wealth under R.A. No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, and R.A. No. 7080 or an Act Defining and Penalizing the Crime of Plunder;

 3. Involving violations of R.A. No. 9160, otherwise known as the Anti-Money Laundering Act, as amended;

 4. Involving tax evasion and other criminal offenses under Chapter II of Title X of the National Internal Revenue Code (NIRC) of 1997, as amended; and

 5. Involving felonies of frauds, illegal exactions and transactions and malversation of public funds and property under Chapters III and IV of Title VII of the Revised Penal Code.

The draft states that "an estate tax amnesty rate of six percent (6%) will be imposed on each of the decedent’s total net taxable estate at the time of death without penalties at every stage of transfer of property in cognizance with the rules of succession under the Civil Code of the Philippines on the transmission of properties, interests, rights and obligations of the decedent, provided that the minimum amnesty tax for the transfer of the estate of each decedent shall be Five Thousand Pesos (P5,000.00). The provisions of the NIRC of 1997, as amended, or the applicable estate/inheritance tax laws prevailing at the time of death of the decedent with respect to valuation, manner of computation, and other related matters shall apply suppletorily at the time of entitlement."

Furthermore, the draft states that "the properties comprising the gross estate shall be valued, in general, on the fair market value as of the time of death of the decedent. If the property is a real property, the fair market value shall be the higher value between the zonal value as determined by the Commissioner and the fair market value as shown in the schedule of values fixed by the provincial and city assessors.

In the case of shares of stock, the fair market value shall be:

a. Listed and traded in the stock exchange – The value at the time of death or the closing rate nearest to the date of death

b. Not listed shares – The book value for common shares and par value for preferred shares as shown in the audited financial statement of the issuing corporation nearest to the date of death of the decedent. The valuation of these shares shall be exempt from the provisions of Revenue Regulations No. 06-2013, as amended.

Proprietary shares in any association, recreation or amusement club (such as golf, polo, or similar clubs) shall be valued using the transaction value on the date of death or nearest to the date of death, if none is available on the date of death itself, as published in the newspaper of general circulation.

Cash in bank in local and foreign currency shall be based on the peso value of the balance at the date of death.

To determine the value of the right to usufruct, use or habitation, as well as of that of annuity, there shall be taken into account the probable life of the beneficiary in accordance with the latest basic standard mortality table, to be approved by the Secretary of Finance, upon recommendation of the Insurance Commissioner.

The gross estate will be reduced by the deductions allowed by law applicable at the time of death of the decedent."

The draft further provides that the return must be filed within two (2) years from the effectivity of the regulations with the Revenue District Office (RDO) having jurisdiction over the last residence of the decedent. After payment, the return together with the complete documentary requirements shall be immediately submitted to the  RDO. Failure to submit the same within the two (2) year period from the effectivity of the regulations shall tantamount to non-availment of the tax amnesty.

The draft was published on the BIR website on Wednesday, April 24, 2019 for public consultations. For more information, please visit the BIR website for information where to send comments  before the final revenue regulation on estate tax amnesty is issued and published.