by Dean Nilo Divina
“The TRAIN law reduced the estate tax to 6 percent.”
We continue with our series of articles on estate and donor’s taxes.
The Bureau of Internal Revenue (BIR) has issued Revenue Regulations
12-2018 (Rev. Regs. 12-2018) dated 25 January 2018 on estate and donor’s
tax as has been modified by Republic Act 10963 (the TRAIN law).
Congress and the government have reduced the tax cost of a loved one
passing or for a person/entity acting benevolently. The TRAIN law
reduced the estate tax to 6 percent from a scheduler rate with a high of
20 percent and donor’s tax also reduced to 6 percent from a scheduler
rate with a high of 15 percent or 30 percent if the donation was made to
a relative or to a stranger, respectively. The following are some of
the equally important points of Rev. Regs 12-2018 implementing the
amendments of the TRAIN law on estate and donor’s tax:
• The standard deduction for citizen or resident has been increased
to P5 million from P1 million. The standard deduction for the estate in
the case of a non-resident alien is P500,000.00.
• The maximum deductible amount in the case of one’s Family Home has
been increased to P10 million from P1 million of the fair market value.
Though the TRAIN law removed the requirement, the revenue regulations
maintained the requirement in obtaining a certification from the
barangay of the locality that the family home is the actual residential
home of the decedent and his family at the time of the decedent’s death.
• Obtaining a Tax Identification Number for the estate is still
required, but there is no longer a requirement to file a Notice of
Death.
• The time of filing and payment of estate tax is one year from the decedent’s death. This was six months before the TRAIN law.
• With prior approval of the bureau, the payment of estate tax may be
extended up to five years if the estate is settled through the Courts,
or up to two years in the case of extra-judicial settlement. Payment
after the one-year period but within the approved extension period will
be subject to interest but not to surcharge penalty.
• With prior approval by the bureau, the estate tax may be paid by
installment. The estate tax return shall still be filed within the
one-year period from the date of decedent’s death, indicating the
frequency (i.e., monthly, quarterly, semi-annually or annually), the
deadline and the amount of each installment. The cash installments shall
be made within two years from the date of filing of the estate tax
return. Should two years have lapsed without the payment of the entire
tax due, the remaining balance shall be due and demandable subject to
the applicable penalties and interest reckoned from the prescribed
deadline for filing of the return and payment of the estate tax.
• With prior approval by the bureau, the estate may opt for the
partial disposition of estate to be able to use its proceeds to pay the
estate tax due. Specifically, this is a disposition of certain property
of the estate, whether real, personal or intangible property, for the
payment of estate tax. The estate shall pay the proportionate estate tax
due of the property intended to be disposed of and an electronic
Certificate Authorizing Registration (eCAR) shall be issued.
• The revenue regulations clarified that a general renunciation by an
heir of his/her share in the inheritance is not subject to donor’s tax
unless specifically and categorically done in favor of identified heir
or heirs to the exclusion of the other co-heirs in the hereditary
estate.
• The filing and payment of donor’s tax is within 30 days after the
gift has been made, but the computation of donor’s tax is cumulative
over a period of one calendar year.
We will update our readers as these regulations or jurisprudence on estate and donor’s tax develop over time.
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