Let’s Talk Tax
By Gemmalu O. Molleno-Placido
This year, Game of Thrones — one of my favorite television shows — finally ended. I remember watching it for the first time eight years ago, finding it boring, and attempting to finish watching the first episode thrice. Since then, I got hooked until the last episode was aired this summer. Just like with any popular movie or television series, there were mixed reactions among fans over how the show ended. Some fans were happy but, of course, Game of Thrones received its fair share of criticism. Most unsatisfied fans wanted a remake with an ending they prefer.
Unlike Game of Thrones, Philippine tax amnesty is just reaching its climax.
The Bureau of Internal Revenue (BIR) has issued several memoranda to guide taxpayers on availing of the tax amnesty. What is left is the implementation of the one-year amnesty period on delinquencies and the two-year period on estate taxes. We all watched from the sidelines the year-long deliberations that led to the enactment of Republic Act (RA) No. 11213, or the Tax Amnesty Act. It was not an easy task for both houses of Congress, which drafted several versions before they finally agreed on the coverage, final rates, and basis. Hence, it was anticlimactic when the most-awaited part of the bill, the general tax amnesty, was vetoed by the President for having too many loopholes. Taxpayers were not happy, as most of them were hoping to simply pay the 3 or 5% general amnesty tax to wipe out all their exposure. Now, only those who have delinquent taxes are pleased and welcomed in the enactment of RA No. 11213.
The BIR faced its own challenges in drafting rules and regulations to properly implement the new law. In fact, for the estate tax amnesty, the BIR had to issue Revenue Memorandum Circular (RMC) 68-2019, which addresses the issues raised by taxpayers. The 10-page circular contains 40 questions and answers for specific concerns.
One notable issue discussed in RMC No. 68-2019 pertains to the means of filing in case of multiple transfers of property. RA No. 11213 requires that one Estate Tax Amnesty Return (ETAR) be filed for every stage of succession from the initial common property. Now, the ETAR may be filed in any Revenue District Office (RDO) having jurisdiction over the residence of any of the decedents. RMC No. 68-219 illustrates an example below: the property is in the name of Alpha, whose family is now survived by Delta. To effect the transfer of the property to Delta, RMC No. 68-2019 allows the filing of all four ETARs in Caloocan, Nueva Ecija, Samar, or Davao.
RMC No. 68-2019 also addresses situations where either an estate tax return or ETAR has been previously filed, but failed to declare all the properties of the decedent. The RMC rules that, in case a conjugal property was not included in the gross estate declared, the amnesty tax may still be availed of, provided that no other deduction will be allowed, except for the share of the surviving spouse. It is deemed that all the allowable deductions have been claimed in the original estate tax return or ETAR filed. In the illustrations provided, it is apparent that the heirs can avail of amnesty multiple times until all the properties are covered. It must be emphasized that the estate tax amnesty rate of 6% pertains to cases that are not yet considered delinquent. Otherwise, the rules provided by Revenue Regulations (RR) No. 4-2019 on tax amnesty on delinquencies will apply. However, if an estate has an existing estate tax delinquency case, but there is an undeclared property that is not included in the list of the properties covered in the existing estate tax delinquency, the heirs may avail of amnesty for such undeclared property. In this case, the ETAR will be filed in the RDO that issued the assessment for the estate tax that has become delinquent.
We are aware that family squabbles involving inheritance are common and that many cases have been filed in court. RMC No. 68-2019 also clarifies that even estates involving judicial settlement/last will of testament being disputed in the Courts can avail of estate tax amnesty. In such cases, the filer must submit a certified true copy of the Court’s resolution or a leave of court (or permission from the Court) with all other documentary requirements. However, only the Certificate of Availment (CA) is to be issued to the filer. The CA contains the inventory of the properties pending with the Court. An electronic Certificate Authorizing Registration (eCAR) will be issued only upon presentation of the final order of the Court.
Valuation of gross estate was another baffling concern prior to the issuance of RMC No. 68-2019. Estate tax rules require that the properties be valued at the time of death. Are records of property values in the 1940s, for example, still available today? In such cases, RMC No. 68-2019 resolved that the fair market value appearing in the tax declaration issued on the date of death or the succeeding available tax declaration issued nearest to the date of death shall be used to compute for the value of the property.
For the mode of filing, taxpayers must note that only manual filing of ETAR is allowed. Payment shall be one time, meaning that no installment is allowed and must, as a general rule, be made to Authorized Agent Banks. For cash payments amounting to P20,000 and below or the if the payment is through manager’s or cashier’s check, irrespective of the amount, payments may be made to the Revenue Collection Officer. If the heirs have no cash to pay for the amnesty tax, the BIR may allow partial or total withdrawal of the cash in bank of the decedent to pay for the estate tax amnesty; the bank must issue either a manager’s or cashier’s check with (For the Account of) the Bureau of Internal Revenue as the payee.
As the amnesty saga continues, issues of compliance and implementation have started to surface and are now being resolved. It cannot be denied that the overwhelming response and participation of taxpayers to speak up, raise their specific concerns, and seek clarification on the vague provisions of the rules implementing the Tax Amnesty Act shows that this law is indeed beneficial to many taxpayers. Now is the best time to start gathering documents to be able to take advantage and optimize this once-in-a-lifetime opportunity to have a clean slate.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Gemmalu O. Molleno-Placido is a senior associate of Tax Advisor & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.