Estate Tax Amnesty Deadline Extended

Good news to those with property inheritance. The House of Representatives approved on the third and final reading the bill extending the Estate Tax Amnesty by two (2) more years from its original deadline of June 14, 2021. This will give more time and opportunity to taxpayers seeking amnesty to settle their estate tax dues, especially those affected by the pandemic. 

What is the Estate Tax Amnesty?

The Estate Tax Amnesty is a component of the Tax Amnesty Act or Republic Act No. 11213 which was signed into law last 14 February 2019. The Estate Tax Amnesty aims to resolve the common problem of most Filipinos who were not able to settle the estate taxes of their deceased predecessors and transfer the title of their inherited properties under their names. 

The BIR started accepting application for the estate tax amnesty last June 17, 2019, following the release and publication of the Implementing Rules & Regulations (IRR) for the estate tax amnesty under BIR Revenue Regulations No. 6-2019. The estate tax amnesty program runs for two (2) years and will expire next year on June 14, 2021. 

When can people avail of this amnesty? The application for estate tax amnesty can be filed within two years from June 15, 2019 or until June 15, 2021. The estate tax amnesty can be availed by heirs of decedents who died on or before December 31, 2017.

Taxpayers and property owners should avail of this once in a lifetime opportunity to settle the estate taxes of their property inheritance and transfer the titles of the properties under their name at a much lower cost without penalties, surcharge and interest.

One of the major problems in the real estate market today is a lot of inherited properties are still under the name of the deceased relatives. The heirs cannot enjoy the benefits of their inheritance because they cannot sell these properties. Why? Because they haven’t transferred the title under their names yet. One of the main reasons is the failure to settle the estate taxes.

Why is the Estate Tax Important?

The estate tax is very important because the properties or estate of the deceased cannot be transferred to the heirs without the payment of estate tax. Even if there is already a buyer, the heirs cannot sell the property and transfer the property in the name of the buyer if the title is not yet transferred under their names. 

However, due to the high estate tax rates, the estate tax proved to be a burden to the heirs in enjoying the benefits of their property inheritance. Since this is an unplanned expense on the part of the heirs, in most cases, they fail to settle the estate taxes on time resulting in the accumulation of penalties and interests and locking up of properties and delay in their development. 

What are the BENEFITS of the Estate Tax Amnesty?

  1. Lower Estate Taxes

Prior to the estate tax amnesty and TRAIN Law, estate tax rates could go as high as twenty (20%) percent of the decedent’s net taxable estate. Under the estate tax amnesty, the estate tax rate is fixed at six (6%) percent of net taxable estate or PHP5,000 whichever is higher. 

  1. Waiver of Tax Penalties, Interest & Surcharges

Under the tax amnesty, the tax penalties, interest and surcharges resulting from non-payment of estate tax are waived. In most cases, the amount of accumulated penalties and interest is more than the value of the estate tax. The waiver of penalties and interest will translate to a huge “tax savings” for taxpayers.

  1. Immunities from Civil and Administrative Cases

Those who availed of the estate tax amnesty and have fully complied with the conditions will be immune from all civil, criminal and administrative cases under the 1997 Tax Code as amended.

What happens when the Estate Tax Amnesty EXPIRES?

When the estate tax amnesty expires, the old estate tax rates will prevail in the computation of estate tax. Likewise, there will be additional penalties and interest accruing from the time of death of decedent resulting in higher estate tax obligations which may cause financial burden for the heirs.

Here is an illustrative example of the BENEFITS of the Estate Tax Amnesty:

Tom Cruz, an 80-year-old actor, single, died of a heart attack on November 31, 2010. His three (3) siblings will be his heirs. His gross estate is P7 Million consisting of the following properties, family home of P4 Million, other real properties of P2 Million and other assets of P1 Million.

He incurred P1M worth of medical expenses and burial expenses of about P500K.

How much will be the Estate Tax liabilities if the heirs will settle the estate taxes now? 

Gross Estate 7,000,000.00
Less:  
Deductions  
Funeral Expenses 200,000.00
Family Home 1,000,000.00
Standard Deductions 1,000,000.00
Medical Expenses 500,000.00
Total Deductions 2,700,000.00
Net Estate 4,300,000.00

 

  OLD TAX CODE ESTATE TAX AMNESTY TAX SAVINGS
Estate Tax Due 388,000.00 258,000.00  
Surcharge (25%) 97,000.00 0.00  
Interest (20% per annum) 10 years 776,000.00 0.00  
Total Estate Tax Due 1,261,000.00 258,000.00 1,003,000.00

 

Under the Old Tax Code, the total estate taxes to be paid by the heirs amount to about P1.26 Million including penalties and accumulated interest for the past 10 years.

However, if the heirs avail of the Estate Tax Amnesty, the heirs need to pay an amnesty tax of 6 percent of the net estate or only P258K which translates to a tax savings of about P1 Million.

This is welcome news for taxpayers, especially for the heirs. This will make it affordable for the heirs to settle the estate taxes and transfer the title of the properties under their names.  They will now be able to maximize the value of the inherited real estate assets and enjoy the benefits of their property inheritance. For this reason, RR No. 6-2019 is worth studying since it implements the provisions of Estate Tax Amnesty pursuant to the provisions of Republic Act No. 11213 (Tax Amnesty Act). 

If you need clarification above or assistance regarding the transfer of title of inherited properties, you may call 0917-1-266839 (CONVEY) or inquire thru its website at www.conveyance.com.ph


About Hardy Lipana

Hardy is the President and CEO of Conveyance Realty Services, Inc., a company offering full range of services for land title transfer including title verification, advisory on modes of property transfer (sale, donation and inheritance), determination of transfer costs and securing new titles for the property transferred. A professional licensed real estate broker, Hardy has more than 15 years of experience in the land title transfer services business. He is well versed with the dynamics of government procedures and compliance requirements for registration of properties.  Hardy has been featured on Philippine Realty TV and recently served as mentor on the show’s The Final Pitch aired by CNN Philippines.  He is also a frequent resource speaker for Land Title topics in seminars and forums organized by various real estate organizations. Among his advocacies is to help educate property owners and real estate brokers on the different property laws and regulations.

Hardy completed his MBA at the Ateneo De Manila Graduate School of Business and obtained a diploma in Entrepreneurship at the Asian Institute of Management. He graduated with a bachelor’s degree in Business Administration major in Computer Applications from De La Salle University-College of Saint Benilde.

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