Estate tax amnesty: The extension, part II
Thousands of families with unsettled estates will welcome Republic Act (RA) No. 11956, which further amends RA 11213 or the Tax Amnesty Act. RA 11956 lapsed into law on Aug. 5. In the Philippines, 6% estate tax is imposed on the net estate of a decedent which must be filed and paid within one year from the death of the decedent. Failure to file and pay within the tax deadline is subject to penalties and interest.
The Tax Amnesty Act was signed into law in 2019 to allow heirs to settle any unpaid estate taxes on or before June 15, 2021, without penalty or interest. Due to the COVID-19 pandemic, the estate tax amnesty was extended by two years until June 14, 2023, through RA 11569. In 2023, legislators lobbied for another two-year period in response to the acknowledged difficulties in applying for the estate tax amnesty, especially for those in the provinces where information dissemination on the estate tax amnesty is wanting.
Apart from stretching the deadline to file the estate tax amnesty returns and to pay the corresponding estate taxes until June 14, 2025, RA 11956 also amended the coverage of the amnesty. The Tax Amnesty Act only covered unpaid estates of decedents who died on or before Dec. 31, 2017. In the latest amendment, estate tax amnesty now covers those estate taxes that have remained unpaid or have accrued as of May 31, 2022, a very good development as the expanded coverage allows more heirs to avail of the benefits of the estate tax amnesty.
RA 11956 also enumerated the requirements to apply: death certificate or certificate of no record of death from the Philippine Statistics Authority (PSA) and any valid secondary evidence to establish the fact of death of the decedent, Tax Identification Number (TIN) of decedent and heir/s, proof of claims against estate, proof of the claimed “property previously taxed,” proof of the claimed “transfer for public use,” at least one government-issued identification card of the executor/administrator of the estate or its authorized representative, and the duly notarized original Special Power of Attorney (SPA) if the person transacting is the authorized representative. If the document is executed overseas, it must be certified by the Philippine Consulate or apostilled.
For real property, the requirements are certificate/s of title of the real property, tax declaration nearest to the time of death of the decedent, and Certificate of No Improvement issued by the assessor’s office, if applicable. In the event that the zonal value of the real property cannot be readily determined from the documents submitted, the law requires submission of a location plan or vicinity map. On the other hand, for personal property, RA 11956 requires the Certificate of Deposit/Investment/Indebtedness owned by the decedent alone or jointly with the surviving spouse or with others, Certificate of Registration of vehicle/s, Certificates of Stock, proof of valuation of shares of stock at the time of death, or proof of valuation of other types of personal property.
The recent law is also in line with the government’s push to digitize by allowing the filing of returns and payment of estate taxes either manually or electronically with any authorized agent bank, Revenue District Office through the Revenue Collection Officer or authorized software provider. Further, the law also allows payment by installment of estate taxes due within two years from the statutory date for its payment without civil penalty or interest.
With that said, the government is yet to issue the implementing rules and regulations of RA 11956.
Parting from a loved one can be taxing — physically, emotionally, and financially. It is completely understandable why some families have postponed the timely payment of estate taxes of their deceased loved ones. However, such taxes are inevitable especially if the heirs will want to transfer their inherited property and obtain a Certificate Authorizing Registration from the Bureau of Internal Revenue (BIR).
Death is one of the hard conversations we must talk about more openly. To quote American surgeon and bestselling author Atul Gawande in one of his books, Being Mortal — lacking a coherent view of how people might live successfully all the way to the very end, we have allowed our fates to be controlled by medicine, technology, and strangers. His book notes the need for courage to confront the reality of mortality. Conversely, there are ways to gain control of our lives going forward, which includes estate planning.
Estate planning is a legal tool that can minimize the burden of taxes upon a person’s death. Contrary to popular belief, not only high net-worth individuals need estate planning. As long as you own property, you can set a plan in place to settle your affairs in the event of your passing. The Supreme Court in several cases has acknowledged the legality of tax avoidance which is a tax-saving device within the means sanctioned by law.
The 6% estate tax can be burdensome even without penalties and interest. The extension of the application period for estate tax amnesty will definitely benefit thousands of families. We hope that the pending IRR of RA 11956 will streamline the application process and ease the compliance requirements to accommodate the families who still plan on availing of the amnesty within the new deadline.
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.
Azanith Ann B. Payad is a manager from the Tax Advisory & Compliance Practice Area of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines, with 29 Partners and more than 1000 staff members.
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