Tax Articles

Extending the life of the Estate Tax Amnesty Law

By Atty. Rodel C. Unciano

Atty. Rodel C. Unciano Partner   +632 8403-2001 loc.380 This email address is being protected from spambots. You need JavaScript enabled to view it. View Profile

The availment of the estate tax amnesty as extended by Republic Act (RA) 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 until tomorrow, the estate tax amnesty law under RA 11213, as amended by RA 11567, will soon 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 thru the payment of an estate tax at a rate of six percent (6%) of the decedent’s total net taxable estate. According to the records of the Department of Finance, the national government was able to collect PHP 7.41 billion from 133,860 beneficiaries who availed 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 (2) 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% 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% 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 six percent (6%) 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 non-availment of the tax amnesty program is the imposition of the 6% 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.