Tax Amnesty Bill awaits Duterte’s OK

With the ratification by Congress before it adjourned for the Christmas break, the measure is now on President Duterte’s desk for signing.                                                                                                       Edd Gumban
Paolo Romero (The Philippine Star) - December 26, 2018 - 12:00am 
MANILA, Philippines — The Tax Amnesty Bill is one step closer to becoming a law after the Senate and the House of Representatives ratified the measure generally viewed as a “win-win” for taxpayers and the government, which is expected to generate at least P41 billion in additional revenues.

With the ratification by Congress before it adjourned for the Christmas break, the measure is now on President Duterte’s desk for signing.

The bill grants those who have failed to pay for taxable year 2017 and prior years a one-time opportunity to settle tax obligations, including estate taxes, general taxes and delinquent accounts.

The government is expected to raise up to P41 billion, which will be used to finance crucial infrastructure projects and augment appropriations needed for the social mitigating measures under the Tax Reform for Acceleration and Inclusion or TRAIN law. 

At least P500 million from the proceeds will be used exclusively for establishing a tax database.

“This is but another step in the long quest toward an efficient and equitable tax system,” said Sen. Sonny Angara, chairman of the ways and means committee.

Angara added that the two chambers have agreed to make the tax amnesty bill “pro-taxpayer” that would attract “ordinary citizens who have long wanted to come clean but feared prosecution to finally settle their arrears.”

For general tax amnesty, the bicameral conference committee agreed that taxpayers would be given the option to choose the rate between two percent of total assets or five percent of net worth or a minimum tax.

“This will give taxpayers more flexibility, which would encourage them more to avail of the amnesty,” Angara said.

Taxpayers can also avail themselves of a reprieve from all estate taxes and instead pay six percent based on the decedent’s total net estate.

The tax will benefit families who have idle properties because of years of unpaid estate taxes, resulting in huge penalties and surcharges while use of assets is not maximized.

“With the amnesty, heirs can now enjoy the assets that will be freed for development,” Angara said.

The bill also covers an amnesty on delinquencies. Taxpayers can avail themselves of 40 percent of the basic tax for delinquencies and assessments, which have become final and executory, 50 percent for cases subject of final and executory judgment by the courts and 60 percent for those subject of pending criminal cases.

Taxpayers will be given a year from the issuance of the implementing rules and regulations to avail themselves of the amnesty, except for estate tax amnesty where taxpayers will be given two years. Discounts will be granted for early availers.

Those who avail themselves of the amnesty program will be immune from payment of all taxes and the filing of civil, criminal and administrative cases and penalties.

Any information and data provided shall be confidential and shall not be admissible as evidence in any proceeding. Also, the books of accounts and other records of the taxpayer for the years covered by the tax amnesty availed of shall not be examined by the Bureau of Internal Revenue.

With tax evasion cases taking decades to be decided in clogged courts, with the expenses to investigate, prosecute and hear greater than the taxes sought to be paid, Angara said “an amnesty, in many instances, could yield bigger amounts than the prosecution route.”

Angara said unlawful divulgence of tax amnesty return and supporting documents has corresponding penalties under the bill.

A fine of P150,000 and a maximum jail term of 10 years await violators from the private sector.

If the violation is committed by a government official or employee, the penalties are fine of up to P1 million, maximum jail term of five years and perpetual disqualification from holding public office.

Filinvest-JG Summit’s Clark airport bid to be endorsed to NEDA

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THE Department of Transportation (DoTr) said it will endorse the North Luzon Airport Consortium’s (NLAC) bid to take over the operations and management of Clark International Airport to the National Economic and Development Authority (NEDA) next week.

“Meron nang nanalo doon eh. Isu-submit na namin sa Wednesday. Yung grupo ng Changi airport… Isu-submit sa NEDA [A group already won the bidding. We’ll submit it on Wednesday. It’s the group of Changi airport. We’ll submit to NEDA],” Transportation Secretary Arthur P. Tugade told reporters on Friday when asked for updates on the Clark Airport O&M bidding.

NLAC is comprised of Gotianun-led Filinvest Development Corp., Gokongwei’s JG Summit Holdings, Inc., Philippine Airport Ground Support Solutions, Inc. and Changi Airport Philippines.

The Bases Conversion and Development Authority (BCDA) qualified two bid submissions on Nov. 9 for the 25-year concession period to operate the airport.

Aside from NLAC, the X-Droid Consortium, formed by Indonesia’s Angkasa Pura II, Michael L. Romero’s Globalport 900, Inc., Alfredo M. Yao’s Mazy’s Capital, Inc. and Desco, Inc. submitted a bid.

In the opening of technical documents on Nov. 19 and of financial documents on Nov. 27, both live streamed on the Facebook page of BCDA, only NLAC’s submissions were opened. Its financial bid promised an 18.25% percentage share of gross revenue to the government, above the minimum requirement which is 10%.

X-Droid’s submissions were not opened, without providing explanations why. A BCDA representative told BusinessWorld on Friday it cannot issue a statement on the developments of the bidding until the whole process is complete.

Based on Sections 9.1 and 9.3 of the Build-Operate-Transfer Law, a bidder is subjected to direct negotiation with the NEDA Investment Coordination Committee if it is the only participant left compliant to bid requirements.

Special Bids and Awards Committee (SBAC) Chairperson Joshua M. Bingcang said last month the awarding of the O&M contract is targeted this December. — Denise A. Valdez

Bourse operator creates real estate subsidiary

THE Philippine Stock Exchange, Inc. (PSE) will establish a new subsidiary that will handle its real estate assets, including its old office in Ayala Avenue, Makati City. 

In a disclosure posted on Thursday, the PSE said its board of directors has approved the incorporation of PSE Realty, Inc. (PRI). The wholly-owned unit will have a capitalization of P1 billion, of which P701.80 million will be subscribed and paid-up. 

The PSE earlier said that it can either sell the office spaces in Ayala Tower One or rent them out instead. 

The bourse operator moved out of its office in Ayala Tower One last February, in favor of the new PSE tower along Bonifacio High Street. The new building stands 26-storeys high and has a gross leasable area of 30,000 square meters. Aside from the PSE, the building also houses more than 100 active trading participants. 

The PSE has already sold its old office, the PSE Tektite Building in Ortigas Center, to Philippine Realty Holdings Corp. (Philrealty) for P257.18 million in August last year. Philrealty was the developer of the Tektite Building. — Arra B. Francia

Comprehensive tax amnesty just a step away from enactment

THE PLANNED TAX AMNESTY program is now up for signing by President Rodrigo R. Duterte after the House of Representatives and the Senate ratified the measure on Wednesday and Thursday, respectively.

The program will provide a one-time legal relief for those with unpaid taxes for years up to 2017.

It seeks to broaden the country’s tax base and reduce administrative costs of the Bureau of Internal Revenue and courts that could otherwise be clogged with tax evasion cases.

The measure — which imposes an amnesty charge equivalent to a portion of the taxpayers’ outstanding unpaid taxes in exchange for immunity from civil, criminal and administrative penalties — covers unpaid estate tax that is collected by local governments, unpaid national taxes as well as national tax delinquency in specific circumstances.

Taxpayers will be given a year from issuance of implementing rules and regulations to avail of amnesty, except in the case of estate tax amnesty where interested parties will be given two years to avail. Discounts will be given to early availers.

For estate taxes, the amnesty charge is six percent based on decedents’ total net estate at the time of death declared in the estate tax amnesty return.

The general tax amnesty will charge a two percent rate based on total assets declared in a statement of assets, liabilities and net worth to be filed as part of the amnesty application, or five percent if the applicant were to opt for net worth as base or P75,000-P1 million, “whichever is higher”.

The general tax amnesty covers all national internal revenue taxes such as, but not limited to income tax, withholding tax, capital gains tax, donor’ tax, value-added tax, other percentage taxes, excise tax, and documentary stamp taxes collected by the BIR and the Bureau of Customs.

The amnesty on estate and other internal revenue taxes excludes those with pending cases with the Presidential Commission on Good Government, those involving unlawfully acquired wealth under the Anti-Graft and Corrupt Practices Act, violations of the Anti-Money Laundering Law, pending criminal cases for tax evasion and related charges, those involving felonies of frauds, illegal exactions and transactions, and malversation of public funds, and tax cases that have been final and executory.

The measure also includes an amnesty on tax delinquent accounts in specific circumstances, subject to a charge of 40-100% of the basic tax assessed depending on the circumstances.

These amnesty on delinquencies can be availed of in cases that have become final and executory where application for compromise has been requested due to doubtful validity of the assessment and the claim of financial incapacity of the taxpayer was denied by the Regional Evaluation Board or the National Evaluation Board composed of BIR officials on the day or before the implementing rules and regulations (IRR) of the amnesty program take effect.

Among others, the amnesty program on tax delinquencies also covers cases subject of final and executory judgment by courts on the day or before the IRR take place, as well as those involving withholding tax agents who withheld taxes but failed to remit to the BIR.

The final version ratified by Congress did not contain measures to relax bank secrecy restrictions and the automatic exchange of tax information (AEoI) with foreign institutions that were deemed crucial to verifying amnesty applicants’ declarations.

Lawmakers and tax experts argued that the said administrative measures violate the constitutional provision that a law must only have only one subject matter, but officials of the Finance department (DoF) have argued that these provisions are integral to an effective tax amnesty program.

Although the main objective is to grow the tax base, the DoF expects the tax amnesty program to generate P41 billion in additional revenue, and only P26 billion without the easing of bank secrecy and the AEoI. — Elijah Joseph C. Tubayan

Tax amnesty okay seen soon

By Mario J. Mallari -
‘No vacuum,’ says Senator Miguel Zubiri. FILE PHOTO
People having problems with their tax deficiencies are likely to get the best Christmas gift this year as the Senate would likely pass the Tax Amnesty Act of 2018 before the year ends.
Senate Majority Floor Leader Juan Miguel Zubiri told reporters yesterday that Senate Bill 2059 or the Tax Amnesty Act of 2018 was approved on second reading.
On the other hand, Zubiri said the House of Representatives had just passed their version of the tax amnesty measure on the committee level.
“We will pass this on third reading by Monday next week. The House just approved their version at the committee level so we are ahead in the Senate,” Zubiri said.
“How soon the measure can be enacted into law would depend on when the House could pass their version on third reading. But I am confident this measure will pass by both House before the Christmas break,” he added.
The measure is aimed at enhancing revenue administration and collection and broadening the tax base by granting an amnesty on all unpaid internal revenue taxes imposed by the national government for taxable year 2017 and prior years.
On estate tax amnesty, qualified taxpayers can avail of the reprieve and instead pay six percent based on the decedent’s total net estate, if no estate tax return was filed or on the net undeclared estate if a return had been filed.
For delinquency in value-added and excise taxes, qualified corporate parties will have to pay five percent of total net worth or a minimum tax depending on their subscribed capital to avail of the amnesty.

Tax amnesty bill bags 2nd reading House approval

[ bworldonline.com ]

tax collector

THE HOUSE of Representatives on Wednesday approved on second reading a proposed general tax amnesty covering liabilities until 2017, a day after the Senate did the same.

“This bill gives a chance to erring tax payers to come forward, start with a clean slate and be 100% tax compliant in the future,” House Ways and Means Committee chairperson Estrellita B. Suansing of Nueva Ecija’s second district said in her sponsorship speech.

“The last amnesty we had in this country was in 2007 under Republic Act No. 9480, when there were about 25,017 applicants, which resulted in a collection that amounted to P7.2 billion, translating to .07% of gross domestic product,” she recalled, noting that the latest proposal could bring in an additional P114.8-billion revenues.

House Bill No. 8554, the proposed Tax Amnesty Act of 2018, consists of a local estate tax amnesty, a general tax amnesty covering national levies and a separate offer for those with cases.

Under the estate tax amnesty, legal heirs may avail of a tax rate of six percent of net estate value.

The bill also provides a two percent general tax amnesty rate based on total assets as of Dec. 2017 that will cover unpaid national internal revenue taxes. The bill defines total assets as the “amount of aggregate assets whether within or without the Philippines, real or personal, tangible or intangible, or ordinary or capital.”

Amnesty will be denied if declared estate value and statement of total assets were found to be understated by at least 30%.

The bill also provides an amnesty rate of 40% of the basic tax in case delinquencies and assessments have become final and executory; 50% of the basic tax for cases subject to final and executory judgment by courts and 60% of basic tax for ongoing tax evasion cases. — Charmaine A. Tadalan

Two more tax reforms move towards final House OK

tax filing
By Charmaine A. Tadalan Reporter

THE HOUSE of Representatives on Wednesday night approved on second reading a proposed reform that will give the government a bigger share in miners’ revenues and will standardize real property valuation and assessment by local governments. 

The chamber approved House Bill (HB) No. 8400, An Act Establishing the Fiscal Regime for the Mining Industry, which will raise the effective tax rate (ETR) on the industry to 24.33% from 21.48% currently that is already among the highest in Asia.

“[The] existing [ETR] is 21.48%, DoF (Department of Finance) is 29.18%. These numbers, including [the] HB ETR, are based on the FS (financial statements) of 55 large taxpayers of BIR (Bureau of Internal Revenue),” DoF Director Elsa P. Agustin explained in a mobile phone message on Thursday.

House Ways and Means committee chairperson Rep. Estrellita B. Suansing of Nueva Ecija’s 1st district said the bill will be taken up on third reading as soon as lawmakers return from their Oct. 12-Nov. 11 break.

“Third-reading for mining tax is when we resume in November,” Ms. Suansing said in a text message, adding that the plenary will likely shift its attention afterwards to the proposed general tax amnesty bill which her committee approved in September.

“Next… priority bill is the tax amnesty bill.”

The proposed mining tax reform will cut the royalty on large-scale mining operations in mineral reservations to three percent from the current five percent based on gross output, as opposed to the DoF proposal to impose a five percent royalty based on gross output across all mining operations, large and small.

It will also impose a 1-5% margin-based royalty on all large-scale mining companies outside mineral reserves, specifically: one percent for mining companies with 1-10% margin; 1.5% for mining firms with above 10% to 20% margin; two percent for those with above 20% to 30% margin; 2.5% for those with above 30% to 40% margin; three percent for firms with above 40% to 50% margin; 3.5% for those with above 50% to 60% margin; four percent for those with above 60% to 70% margin and five percent for miners with margins beyond 70%.
Small-scale miners, meanwhile, will be levied a royalty equivalent to one-tenth of one percent of gross output, whether the contractor operates within or outside mineral reservations.

The bill defined margin as “the ratio of income from mining operations before corporate income tax to gross output” and gross output as “the actual market value of minerals or mineral products from each mine or mineral land operated as a separate entity, without any deduction for mining, processing, refining, transporting, handling, marketing or any other expenses.”

The royalty will be imposed on top of other taxes, such as the corporate income tax, excise tax which the Tax Reforms Acceleration and Inclusion Act (TRAIN) doubled to four percent, the royalty to indigenous communities, and local business tax among others.

Moreover, the proposed measure will also introduce a 1-10% margin-based windfall profit tax on income before the corporate income tax: a one percent windfall profit tax on mining businesses with over 35% to 40% margin; two percent if over 40% to 45% margin; three percent if over 45% to 50% margin; four percent if over 50% to 55% margin; five percent if over 55% to 60% margin; six percent if over 60% to 65% margin; seven percent if over 65% to 70% margin; eight percent if over 70% to 75% margin; nine percent if over 75% to 80% margin; and 10% if over 80% margin.

The measure also introduced a provision disallowing deduction of interest expense once a miner records a 3:1 debt-to-equity ratio, which reflects how much a company is financed by debt.

Also on Wednesday, the chamber approved on second reading HB 8453, or the proposed Real Property Valuation and Assessment Reform Act.

It will mandate the Finance department’s Bureau of Local Government and Finance (BLGF) to develop and maintain a uniform valuation standard, consistent with international standards, which will guide local government appraisers and assessors in preparing their schedules of market value (SMV).

SMVs will be submitted to the regional offices of the BLGF and the Bureau of Internal Revenue for review.

Reviewed SMVs will then be subject to approval of the Finance Secretary.

“The approved SMV shall be used as basis for the determination of real property-related taxes of national and local governments,” the bill explained.

General tax amnesty awaits plenary action in the Senate

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SENATOR Juan Edgardo M. Angara, chairman of the Senate Ways and Means committee, on Tuesday submitted a general tax amnesty bill for plenary action.

Senate Bill No. 2059, or the proposed Tax Amnesty Act of 2018, covers tax obligations for years up to 2017 with or without assessments in three major areas: estate taxes, general taxes and delinquent accounts.

“We push for a general tax amnesty today not just to give taxpayers a chance to adjust to the new rules that were put in place last year but also to lighten the load of an overburdened BIR (Bureau of Internal Revenue) in the hopes that they can now focus on their main mandate of collection,” he said in his sponsorship speech.

“We envision that with this amnesty, all parties involved may be absolved and unburdened of the sins of the past.”

On estate tax amnesty, Mr. Angara said qualified taxpayers can avail of the reprieve and instead pay six percent based on the decedent’s total net estate, if no estate tax return was filed, or on net undeclared estate if a return had been filed.

On the amnesty for delinquency in value-added and excise taxes, qualified corporate parties will have to pay five percent of total net worth or a minimum tax depending on their subscribed capital will be collected.

On amnesty for delinquent accounts, taxpayers can avail of the following rates:

• 40% of the basic tax for delinquency assessments which have become final and executory;
• 50% of the basic tax for those subject of pending criminal cases with criminal information filed in court for tax evasion and other criminal offense and pending cases involving fraud, illegal exaction and transactions, and malversation of public funds and property;
• 60% of the basic tax for cases subject to final and executory judgement by the court.

Mr. Angara said those who will avail of the tax amnesty program will be immune from civil, criminal, and administrative cases and penalties under the National Internal Revenue Code as amended.

The same measure also puts in place an information management system and automatic exchange between the Bureau of Internal Revenue and its foreign counterparts to validate tax declarations and subsequent compliance of those availing of the amnesty offer.

Senate Majority Leader Juan Miguel F. Zubiri told reporters that the Senate hopes to approve the measure between November and January next year. “We committed to pass it — if not next month — hopefully by January, we can approve the tax amnesty measure,” he said.

The measure forms part of a wide-ranging tax reform program of the administration of President Rodrigo R. Duterte that aims to shift the tax burden more on to those who can afford to pay, besides raising more cash to finance bigger state spending on infrastructure. — Camille A. Aquinaldo

BIR sets 12% interest rate for delinquent, deficient tax payments

By: - Reporter / @bendeveraINQ
/ 05:28 AM September 18, 2018
The Bureau of Internal Revenue (BIR) has issued rules mandating a lower delinquency and deficiency interest rate of 12 percent under the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

Revenue Regulations No. 21-2018 issued by Finance Secretary Carlos G. Dominguez III and Internal Revenue Commissioner Caesar R. Dulay on Sept. 14 noted that under Republic Act No. 10963 or the TRAIN law, unpaid taxes were to be slapped interest “double the effective legal interest rate for loans or forbearance of any money in the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas from the date prescribed for payment until the amount is fully paid.”

The BSP set the interest rate at 6 percent, hence the rules doubled it at 12 percent.

BIR Deputy Commissioner Marissa O. Cabreros told reporters that prior to the TRAIN law, the interest on unpaid taxes was at 20 percent a year.

The BIR defined the deficiency interest as that “imposed on any deficiency tax due, which interest shall be assessed and collected from the date prescribed for its payment until: full payment thereof, or upon issuance of a notice and demand by the commissioner or his authorized representative, whichever comes first.”

Delinquency interest is that imposed on a taxpayer for failure to pay the amount of the tax due on any return to be filed, or for which no return is required.

Also, a delinquency interest is imposed on “a deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the [BIR] commissioner or his authorized representative until the amount is fully paid, which interest shall form part of the tax.”

Under the TRAIN law, there must be no double imposition of interest, the BIR said.

Cabreros said that while the TRAIN law kept both the deficiency and delinquency interests, they must be slapped separately and not simultaneously.


Property firms developing ‘student-friendly’ condos

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Property firms developing ‘student-friendly’ condos
FEDERAL LAND, INC. is developing Quantum Residences along Taft Avenue in Manila. — WWW.FEDERAL-LAND.COM
MORE REAL estate companies are developing residential condominiums near educational institutions, as they see growing demand for quality housing for students.

DMCI Homes, Inc. will be launching a P2.8-billion condominium near the St. Scholastica’s College in Malate, Manila in the second half of this year.

May bago kaming format. Karamihan kasi ng ginagawa namin designed for the family, ngayon ito designed for students (We have a new format. Most of what we do are designed for the family, but now this is designed for students),” DMCI Homes Chairman Isidro A. Consunji said during an Aug. 13 briefing.

DMCI Homes President Alfredo R. Austria said the new project will be launched within two to three months.

“This is a dormitory designed for family and students… Para siyang condominium na i-bebenta sa property buyers pero ang features niya ay sa dormitory (It’s like a condominium that we sell to property buyers but the features are like that of a dormitory). We’re developing at a lower price point,” he said during the same briefing.

Mr. Austria said the Malate condominium will stand 30 storeys tall with unit sizes starting at 24 square meters each and prices starting at P3 million.

The new project is part of the P40 billion worth of projects DMCI Homes targets to launch this year.

The Consunji-led property company also plans to unveil a 40-storey building in Matina, Davao City within the second half. The residential condominium will be a joint venture partnership with the developer of New City Commercial Corp. (NCCC) Mall.

Meanwhile, the property unit of GT Capital Holdings, Inc. also launched the first tower of Quantum Residences along Taft Avenue, Manila this month.

Federal Land, Inc.’s new project is located near several schools such as the De La Salle University, De La Salle College of Saint Benilde, St. Scholastica’s College, Philippine Women’s University, and Arellano University.

“The dormitory is for sale. It’s used as a dormitory, but it’s actually units for sale that’s designed for students. That will mostly be studio types,” GT Capital President Carmelo Maria Luza Bautista told reporters after a media briefing in Makati last Aug. 13.

Mr. Bautista said the company will launch another tower for Quantum Residences during the second half of the year, noting that 35% of units in the first tower were sold within a month after its launch.

Quantum Residences will consist of three towers with 35 floors each standing on a single podium. The first five floors are the podium levels, while the remaining 30 floors will house the residential units. The entire project stands on a 5,960-sq.m. property.

Unit sizes range from 21.5 sq.m. for studio units, 30.5 sq.m. for a one-bedroom unit with balcony, and 49 sq.m. for a two-bedroom unit.

Amenities in the Quantum Residences include a hobby room, fitness gym, conference room, study lounge, function room, and game room. — Arra B. Francia

EO prescribes uniform real property tax rates for power projects

By Myrna M. Velasco

A new Executive Order (EO) issued by President Rodrigo R. Duterte renders a uniform assessment rate on real property taxes (RPT) to be levied to power plant projects; while also condoning interest charges on unsettled real property taxes of project developers.

EO 60, which was issued by Malacañang on July 25 this year, effectively reduced the assessment rate level of real property taxes of power projects to 15-percent of the fair market value of specified property, machinery and equipment.

That was basically trimmed down from the 40 to 80-percent assessment rates that most local government unit-hosts of power projects have opted to apply in their calculation of RPT dues of the generation companies (GenCos) and independent power producers (IPPs).

For more than two decades, the RPT assessment levels and settlements had been that “P40 billion to P80 billion unresolved headache” of almost all players in the power industry – and it is just being addressed this time by the Duterte administration.

In the Duterte-sanctioned EO, it was likewise prescribed that the RPT payments of power companies be allowed a 2.0-percent depreciation rate per annum, and “less any amounts already paid by the IPPs.”

The EO further directed that “all interests on deficiency real property tax liabilities are also hereby condoned and the concerned IPPs are hereby relieved from payment thereof.”

The Palace order similarly stated that “all real property tax payments made by the IPPs over and above the reduced amount shall be applied to their real property tax liabilities for the succeeding years.”

The EO thus stipulated that “all concerned departments, agencies and instrumentalities of the government, including relevant government-owned and controlled corporations (GOCCs) and LGUs are hereby ordered to strictly comply with this Order.”

In the build-operate-transfer (BOT) deals with IPPs that have power supply deals underwritten then by state-run National Power Corporation, it was expressly provided that RPT payments shall be to its account or its successor-firm Power Sector Assets and Liabilities Management Corporation.

And while it was rendered under the Local Government Code that GOCC-contracted IPPs be extended a special assessment rate of 10-percent, it had been manifest that many LGU-host communities had not been adhering to that prescription.

Given the accumulation of such tax liabilities then, even the national government fears that this will adversely affect the State’s fiscal consolidation initiatives, hence, the Department of Finance (DOF) batted for a uniform RPT assessment rates for power projects.

The EO chiefly acknowledged that “since a substantial portion of real property taxes being charged have been contractually assumed by NPC/PSALM and carry the full faith and credit of the national government, the collection of the subject RPT by the LGUs concerned will trigger massive direct liabilities on the part of such GOCCs, thereby threatening their financial stability, the government’s fiscal consolidation efforts, the stability of energy prices and may even trigger further cross-defaults and significant economic losses across all sectors.”

Tax bureau clarifies property valuation


tax collector

By Elijah Joseph C. Tubayan Reporter

THE BUREAU of Internal Revenue (BIR) recently amended rules on the valuation of real property gifts for the computation of the donor’s tax in order to ease compliance.

Revenue Regulation (RR) 17-2018, signed by Finance Secretary Carlos G. Dominguez III on July 24 but published last week, said that “the valuation of gifts in the form of property shall follow the rules set forth in Section 5,” from Section 6 previously, provided that “the reckoning point for valuation shall be the date when the donation is made.”

This means that payment of tax on such properties are now based on gross estate value according to their fair market value at the time of the decedent’s death.

Previously under RR 12-2018 — the consolidated implementing rules and regulations on imposing estate and donors taxes — the value of such property was determined by deducting claims against the estate; claims of the deceased against insolvent persons; unpaid mortgages, taxes and casualty losses; property previously taxed; transfers for public use; current fair market value of the decedent’s family home; amount received by heirs and the net share of the surviving spouse in the conjugal partnership or community property.

BIR Deputy Commissioner Marissa O. Cabreros said in a mobile phone message yesterday that the new regulation “provided ease in compliance.”

Sought for comment, Tax Management Association of the Philippines President Raymund S. Gallardo said the previous rule had “nothing to do with valuation.”

“Under RR12 -2018, valuation of properties subject to Donor’s Tax made reference to Sec. 6 which is about the computation of the net estate, which has nothing to do with valuation. Sec. 5 of RR 12-2018 is about valuation of properties included in the gross estate of a decedent,” Mr. Gallardo explained in a mobile phone message over the weekend.

“Valuation of properties subject of gratuitous transfers such as donation and inheritance follow the same principle of valuation, such that the valuation of real properties in computing the estate or donor’s tax is the higher of the fair market value (FMV) as determined by the Commissioner (which is normally the zonal value) or the FMV as shown in the values fixed by provincial or city assessors at the time of death of the decedent or date when the gift was made,” he added.

Republic Act No 10963, or the Tax Reform for Acceleration and Inclusion law, simplified estate and donor’s taxes at fixed rate of six percent.

“For the purposes of prescribing real property values, the Commissioner is authorized to divide the Philippines into different zones or areas shall, upon consultation with competent appraisers, both from the private and public sectors, determine the fair market value of real properties located in each zone or area,” read the regulation.

Revenue Regulations No. 17-2018 amends Section 13 of Revenue Regulations No. 12-2018 particularly on the valuation of gifts made in property.


RR No. 17-2018 Amends Section 13 of Revenue Regulations No. 12-2018 particularly on the valuation of gifts made in property
(Published in Manila Bulletin on August 1, 2018)
Digest | Full Text
July 30, 2018

Revised schedule of zonal values of real properties. 2018/2017

Revised schedule of zonal values of real properties.  

Please click on link ZONAL VALUES above to go to BIR ZONAL VALUES

Revised schedule of zonal values of real properties within Province of Benguet

 Revised schedule of zonal values of real properties.  


TRAIN: ‘til death are we taxed – softening the imposition of estate tax

  - Rafael Roberto Carmona (The Philippine Star) - July 17, 2018 - 12:00am
It is difficult to accept the death of a loved one. The lifetime bonds that were formed with them make it all the more difficult to come to terms after they pass away. The emotional scars left behind from losing a loved one cuts deep, and adding to that the various administrative and financial burdens that ensue after they pass away only cause further distress to the already grieving relatives.

Naturally, our loved ones tend to look out for us even after death, leaving behind any and all fortunes they may have accumulated during their lifetime. In many cases, this is to ensure that the decedent’s family may continue to be financially supported. However, under our Tax Code, the inheritance received by heirs of the decedent is considered as a transfer or a flow of wealth, thus making it subject to tax, specifically estate tax. Prior to the changes brought about by the Tax Reform for Acceleration and Inclusion (TRAIN), the estate to be inherited by the heirs was subject to a substantial rate of estate tax. TRAIN primarily aims to relieve much of this tax burden, as well as provide a greater measure of ease in administrative compliance.

Under the provisions of our Tax Code, prior to the amendments implemented by TRAIN, the computation of estate tax is done using a graduated rate, similar to that used in computing the personal income tax. The estate is subject to a flat amount of tax, plus five percent to 20 percent, increasing based on a graduated tax bracket. Now under TRAIN, much of the tax burden from the decedent’s estate is alleviated by lowering – and effectively, simplifying – the computation of estate tax, and increasing the amount of deductions that may be claimed to lower the taxable estate. Further, several administrative provisions were also changed, providing more ease in filing the estate tax return.

The most notable change under TRAIN, in relation to estate taxes, is the change in the estate tax rate from five percent to 20 percent graduated rate, to a flat six percent tax rate. The change is straightforward but significant in that it simplifies the computation of the estate tax due, and for some lowers the amount of tax that is imposed on the net estate of the decedent, leaving more for the heirs to benefit from. This is further complemented by the increase in allowable deductions that may be claimed in computing the net taxable estate.

Under our Tax Code, as amended by TRAIN, the standard deduction allowed to resident and citizen decedents has increased from P1,000,000 to P5,000,000. Further, the limit on the family home deduction that may be claimed by resident or citizen decedents has increased as well from P1,000,000 to P10,000,000. However, in a slight contrast to the above, funeral expenses, judicial expenses, losses, and indebtedness (i.e. ELITE) related to that of the decedent are no longer allowed as deduction from the estate. Nonetheless, these amendments make it more convenient to compute for the estate tax in favor of the decedent. It is inarguably easier to apply and claim the standard deduction than it is to substantiate the ELITE deductions to be claimed by the estate. Incidentally, the increases in the standard deduction and the family home deduction also makes claiming the ELITE deduction unnecessary since it starkly overshadows the amount that may be deducted from the estate.

Now aside from the changes in the estate tax computation brought by TRAIN, this was also accompanied by amendments to certain administrative provisions. This is to give taxpayers more ease in the filing and payment requirements of the estate tax return and the estate tax. In particular, Section 25 of TRAIN extends the deadline of filing of the estate tax return from six months from the time of the decedent’s death to one year from that date. This not only allows more time for the family to grieve their loss, but also provides more time for the administrative proceedings to be properly and fully accomplished. In a sense, it is an extension of courtesy and respect towards the family of the deceased by providing them with the time they surely need to cope with the death of their loved one. 

As for the payment of the estate taxes, Section 25 of TRAIN provides that the estate tax due thereon may now be paid on installment within two years of the statutory deadline of its due date, giving more time that may be needed to compute and settle any agreements among the inheriting parties, or to give more time to liquidate any non-cash assets that may be used to pay the estate tax due. Accompanying this is Section 26 of TRAIN which now allows banks to authorize withdrawal of the deposits held solely or jointly by a decedent prior to the payment of estate taxes, provided that they are aware of that person’s death and that the cash withdrawn from the account be subjected to six percent withholding tax. This amendment then frees up the cash of the decedent which may then be used by the family for immediate daily sustenance and needs without having to require outside assistance.

To close, the amendments to the estate tax provisions are a refreshing splash of cool water for taxpayers, especially now when they are experiencing heat from the other changes brought about by TRAIN. These amendments are righteous in a sense that it gives proper consideration to the hard work that we endure during our lifetime. Coupled with our drive to ensure the survival and comfort of the loved ones we would eventually leave behind, and the uncertainty as to when that time may come, then the sense of security that these amendments to the Tax Code provide is invaluable.

Rafael Roberto Carmona is an associate from the tax group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice, Tier 1 transfer pricing practice, Tier 1 leading tax transactional firm and the 2016 National Transfer Pricing Firm of the Year in the Philippines by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-inquiry@kpmg.com or rgmanabat@kpmg.com.

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