On estate tax amnesty

Just this month, a number of earthquakes have hit the country. One of the recent ones is the 5.9-magnitude earthquake which struck Davao de Oro. These unforeseen events have perhaps made several taxpayers wonder about how to manage their family assets and estate. There are families fortunate enough to inherit vast properties and assets from their loved ones who passed away. However, for most taxpayers, the distribution of their estate is often left to the whims, beliefs, and traditions which find no basis in law. Because of this, some estates in the country are left undivided.

It is a well-established rule that no estate can be divided without first securing a valid Certificate Authorizing Registration (CAR or eCAR) from the Bureau of Internal Revenue (BIR). Heirs who wish to finally settle disputes as to ownership of the decedent’s properties within the family are constrained to secure a CAR or eCAR in order to secure a Transfer Certificate of Title with their local Register of Deeds. However, many, if not most, are often discouraged to settle estate taxes due on the estate when they finally see the amount to be paid. Sometimes, taxes remain unsettled not because of issues regarding the amount to be paid but because of problems on who among the heirs will foot the bill first. Even if the amendments in the Tax Code reducing the estate tax rate to six (6) percent based on the value of the net estate had been implemented, there are still estates of different sizes that are left undivided.

To encourage taxpayers to settle estate tax obligations, Republic Act (RA) No. 11213 or the Tax Amnesty Act of 2019, was passed into law which has the following purposes:

a. Provide a one-time opportunity to settle estate tax obligations through an estate tax amnesty program that will give reasonable tax relief to estates with deficiency estate taxes;

b. Broaden the tax base by offering a general tax amnesty for all unpaid internal revenue taxes that will help cleanse, organize, and improve the BIR’s database;

c. Enhance revenue collection by providing a tax amnesty on delinquencies that will minimize administrative costs in pursuing tax cases and declog the dockets of the Bureau of Internal Revenue and the courts; and,

d. Provide a more equitable tax system by adopting a comprehensive tax reform program that will simplify the requirements on tax amnesties with the use of simplified forms, and utilization of information technology in broadening the tax base.

On June 30, 2021, RA No. 11569 was signed into law which extended the period for availment of estate tax amnesty for two years, from June 15, 2021 per RA 11213 to June 14, 2023. Taxpayers worrying about their estate can find comfort in that new law. As a reminder, the estate tax amnesty program provides an opportunity for those who have unsettled tax liability for estates of decedents who died on or before December 31, 2017. Those who will avail within the prescribed period will pay either the reduced estate tax amnesty rate of six percent, from the previous rate of 20%, of the decedent’s total net taxable estate or the minimum amnesty tax of P5,000, in case there is a negative net estate.

Under the Revenue Regulation (RR) No. 17-2021, the Estate Tax Amnesty Returns (ETAR) shall be filed by either the executor, administrator, legal heirs, transferees, or beneficiaries who wish to avail of the estate tax amnesty with the Revenue District Office (RDO) having jurisdiction over the last residence of the deceased (or decedent). For non-resident decedents, the ETAR shall be filed with RDO 39 – South Quezon City.

The ETAR must be accompanied by an Acceptance Payment Form (APF-BIR Form No. 0621-EA) in the submission with the concerned RDO. The RDO shall endorse the APF for payment to the Authorized Agent Banks or Revenue Collection Officers or notify the taxpayer of any deficiency in the application within five (5) working days from receipt of the documents. Failure to submit the same until June 14, 2023 is tantamount to non-availment of the Estate Tax Amnesty and any payment made shall be applied against the total regular estate tax due inclusive of any incurred penalties.

To reiterate, an eCAR shall only be issued upon submission of proof of estate settlement, such as but not limited to extra-judicial settlement of estate and copy of the court order. In the event that these documents include properties which are not covered in the ETAR, such properties shall be excluded from the eCAR. Additional estate tax shall be imposed to additional properties which are not covered in the ETAR.

At a time when unforeseen critical events, including earthquakes that jolt various parts of our country, taxpayers should be reminded of the remedies available to them to ease the burden of settlement of long unpaid estate tax obligations that will fall on the shoulders of the heirs they may leave behind

As published in Mindanao Times, dated 03 April 2023