Tax Law for Business

THE availment of the estate tax amnesty as extended by Republic Act 11567 is set to expire tomorrow, June 14, 2023. While there is a pending proposal to extend the period of availment of this program up to June 14, 2025, the proposed bill is yet to be signed into law as of this writing. If not extended tomorrow, the estate tax amnesty law under RA 11213, as amended by RA 11567, will be a dead law.

To date, many inherited real properties remain to be in the name of older generations because of the huge amount of estate taxes and increments that should be paid prior to transferring the title of the property from the decedent to the heirs. Probably, this is also partly because of the tedious process of transferring the title from the decedent’s name to the heirs.

To recall, in 2019, RA 11213 or the Tax Amnesty Act of 2019, as amended by RA 11567, attempted to remedy this concern by granting estate tax amnesty through the payment of an estate tax at a rate of 6 percent of the decedent’s total net taxable estate. According to the records of the Department of Finance, the national government was able to collect P7.41 billion from 133,860 beneficiaries who availed themselves of the estate tax amnesty. However, many were unable to avail of this program probably because of lack of awareness of the law coupled with the devastation brought by the Covid-19 pandemic.

The good thing is, though the estate tax amnesty law will soon become a dead law, the proposed amendments will hopefully bring this program back to life, at least for another two years.

Under the proposed amendments, the estate tax amnesty shall be expanded to cover the estate of decedents who died on or before May 31, 2022. On the other hand, the period of availment shall be extended up to June 14, 2025. The amendments also provide for electronic filing of estate tax amnesty applications and streamlines the documentary requirements for filing. The bill also allows payment of outstanding liabilities in two-year installments without civil penalty or interest.

One important provision that needs to be revisited though is the one-time imposition of the 6 percent tax amnesty rate, irrespective of the fact that the property involved had passed on from one decedent to another. To recall, under the enrolled bill submitted to then President Duterte in 2019, the 6 percent tax amnesty rate would be imposed only once, and that is based on the total net estate at the time of death of the last decedent, and that will already cover all taxes arising from the transfer of such estate from all prior decedents or donors through which the property or properties comprising the estate shall pass.

That provision was, however, vetoed by then President Duterte. Thus, Revenue Regulations (RR) 6-2019, which implemented the estate tax amnesty provisions of RA 11213 made it clear that the estate tax amnesty rate of 6 percent shall be imposed on each decedent’s total net taxable estate at the time of death at every stage of transfer of property in cognizance with the rules on succession under the Civil Code.

To my mind, one-time application of the 6% tax amnesty rate is already reasonable. To many heirs, perhaps, another reason for the nonavailment of the tax amnesty program is the imposition of the 6 percent rate to every stage of transfer of the property from one decedent to another. One-time imposition of the 6% amnesty rate will have to be reconsidered as this will certainly increase the taxpayer’s availment on this program.

And, perhaps, once the amendment is passed into law, the BIR can probably launch a more aggressive tax campaign to promote taxpayer’s awareness on the program. While the law may be in place, many covered taxpayers, however, lack awareness on the same. The BIR can increase its tax campaign efforts in order to boost its tax collections from this area.

The author is a partner of Du-Baladad and Associates Law Offices (BDB Law), a member-firm of WTS Global. The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at rodel.unciano@ bdblaw.com.ph or call 8403-2001 local 140.