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Clean slate for taxpayers with pending Estate Tax Bill

Let’s Talk Tax
By Marie Fe F. Dangiwan
Posted on March 07, 2017 [ bworldonline ]

According to news reports, the House of Representatives approved on third and final reading two tax bills: House Bill (HB) No. 4814 proposing an estate tax amnesty, and HB 4815 which calls for a single lower estate tax rate. Our congressmen unanimously passed the bills. HB 4814 garnered a vote of 216-0-0, while HB 4815 received a vote of 219-0-0.

File photo of taxpayers at the Bureau of Internal Revenue in Quezon City -- BW FILE PHOTO

Under HB 4814, the proposed tax amnesty covers estate taxes for taxable years 2016 and prior periods. A person who wishes to avail of the amnesty will pay 6% of the net estate within two years. In addition, the amnesty is designed to free up properties which are tied up due to unsettled estate tax.

As mentioned by a proponent of the estate tax amnesty law, “The primary cause of the inability to settle estate tax is due to high estate tax rates and, secondly, the inability to cope with the penalties that have accrued. In 95% of the cases, the penalties are even higher than the value of the properties.”

Capturing these concerns, the proposed tax amnesty law also seeks to grant the following immunities and privileges to taxpayers who avail of the planned amnesty: taxpayers will be immune from estate taxes, civil, criminal or administrative penalties; estate tax amnesty returns for 2016 and prior years will not be admissible as evidence in judicial, quasi-judicial, or administrative proceedings; and books of account and other records of the taxpayers for the years covered by the amnesty will not be examined. These are definitely welcome proposals to the heirs who were not able to completely declare the estate that they inherited for tax purposes. Please note, however, that in the proposed bill, the amnesty does not apply to: (a) those with pending cases falling under the jurisdiction of the Presidential Commission on Good Government; (b) those cases involving unexplained or unlawfully acquired wealth or under the Anti-Graft and Corrupt Practices Act; (c) those cases filed in court involving violations of the Anti-Money Laundering Law; (d) those criminal cases for tax evasion and other criminal offenses and the felonies of fraud, illegal exactions and transactions, and malversation of public funds and property; and (e) Tax cases subject of final and executory judgment by the courts.

On the other hand, HB 4815 suggests a single estate tax rate of 6%. Currently, the estate tax rates depend on where the value of the net estate falls. The schedule is below:





Thus, if someone were to die now under the current estate tax rates, and the net estate is P10 million, the heir would have to pay an estate tax of P1,215,000. On the other hand, given the same net estate, once the single rate of 6% is passed into law, the tax is only P600,000 (P10,000,000 x 6%), a difference of P615,000.

An even bigger impact would be on a net estate or P50 million, where the savings could be as high as P6,215,000. That’s a huge amount!

HB 4814 and HB 4815, if passed into law, would also be an opportune time for those who have yet to register the properties that they inherited from their deceased parents or relatives. These heirs often encounter problems, as they cannot readily sell or dispose of their properties simply because it remains registered under the names of the deceased. That’s because before a property is registered under the name of the heirs, the estate tax has to be paid first. Paying the estate tax means the declaration of all the properties of the deceased and the corresponding payment of the correct estate taxes on all the declared properties with Bureau of Internal Revenue (BIR).

Hence, if there is an amnesty estate tax law and a lower estate tax rate, these would help the heirs in facilitating the BIR requirements to eventually expedite the registration of the properties under the heirs’ names.

So for those who would like to be relieved from estate tax and those who would like to sell their properties, keep your fingers crossed that HB 4814 and HB 4815 are approved into law.

Interestingly, the estate tax bills appear to be moving faster than the long-awaited bill on the reduction of income tax rates. Of course, we would love to have higher take-home pay so that we can enjoy the fruits of our labor while we are alive. Higher take-home pay definitely means having extra money to travel with the family, to invest or save, or to build a dream house. We hope the income tax bill comes soon. Nonetheless, developments on the estate tax front seem like a turning point in providing relief for taxpayers.


Marie Fe F. Dangiwan is a manager with the Tax Advisory and Compliance division of Punongbayan & Araullo. P&A is a leading audit, tax, advisory and outsourcing services firm and is the Philippine member of Grant Thornton International Ltd.
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KNOWING YOUR BIR REGULATIONS AND ISSUANCES

Revenue Regulations (RRs)
are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes

Revenue Memorandum Orders (RMOs) are issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other tax laws, as applied to a specific set of facts, with or without established precedents, and which the Commissioner may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations. BIR Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio

Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices.

Revenue Bulletins (RB) refer to periodic issuances, notices and official announcements of the Commissioner of Internal Revenue that consolidate the Bureau of Internal Revenue's position on certain specific issues of law or administration in relation to the provisions of the Tax Code, relevant tax laws and other issuances for the guidance of the public.

BIR Rulings are official position of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.