Last June 30, 2021, President Duterte signed Republic Act (R.A.) No. 11569, extending the estate tax amnesty (RA 11213) by another two years till June 14, 2023. The news was received with a collective sigh of relief. Many who had been working on their amnesty application but were affected by the pandemic were given a new opportunity to do so.
The original deadline based on the Tax Amnesty Act (RA 11213) was June 14, 2021 but the pandemic resulted in a low turnout of people availing of the amnesty. Rep. Joey Salceda, chairman of the House Ways & Means Committee, noted that out of the targeted PhP 6 billion in taxes from the amnesty program, only about PhP 1.362 billion was collected.
The Lower House had earlier passed a bill extending the deadline to December 31, 2021 but it was the Senate bill (extending it by two years) that eventually got passed. The lower House decided to adopt the Senate’s version, which eliminated the need to call a bicameral session. As of this writing, we are awaiting the Implementing Rules and Regulations (IRR) from the Bureau of Internal Revenue (BIR).
If you were not aware of such an amnesty, this is the time to make sure you avail of it because 1) we do not know when another such amnesty will be offered again and 2) by availing of the amnesty, you will save yourself a lot of money and problems down the road.
Let me familiarize you with some aspects of the estate tax amnesty. I will update this post if there is anything in the new IRR that may change some of what I will discuss.
What is estate tax?
When a loved one dies, the lawful heirs inherit his or her properties but need to pay the estate tax before they can legally inherit such properties. Whoever is the designated estate administrator of the deceased has to file the estate tax and settle taxes within one year from the death of the deceased. An extension can be requested but it is at the discretion of the BIR and is only a 30-day extension.
What is an estate tax amnesty?
Of all the internal revenue taxes, the estate tax is often the one neglected. It is not uncommon to see this tax left unpaid for many years by the lawful heirs until they see the need to transfer the property to themselves. The economic benefit to the government is then left unutilized. In order to encourage these heirs to settle estate tax sooner than later, the tax amnesty provides a one-time opportunity for them to pay the estate tax at a lower tax rate and without the usual penalties and charges that go with late filing.
In particular, RA 11213 imposes only a flat rate of 6% on the decedent’s net estate, without penalties. Even those who already filed and paid the estate tax but subsequently discovered additional properties that were not included in the original computation can avail of the amnesty.
Who can avail of the estate tax amnesty under RA 11213?
Heirs of a decedent, who died on or before December 31, 2017, and who are not covered by exceptions under Sec. 3 of RR No. 6-2019 dated May 29, 2019, are qualified to avail of tax amnesty.
What are these exceptions under Sec. 3 of RR No. 6-2019?
These are the exceptions that cannot avail of the amnesty:
- Delinquent estate tax liabilities which have become final and executory and those covered by Tax Amnesty on Delinquencies; and
- Properties involved in cases pending in appropriate courts (see the actual RR No. 6-2019 for this enumeration)
Why should I avail of the tax amnesty?
You cannot escape paying estate tax. At some future time, when you want to sell or transfer your inherited properties, you would still have to first settle the estate tax, have the property/ies transferred to the legal heirs before the heirs can dispose of, or transfer, the properties.
The tax amnesty rate is a flat 6% while the normal tax rate in the case of decedents who died between 1998 and 2017 is a graduated estate tax rate of 5% to 20%. That, in itself, saves you money already, especially if the total estate value of the decedent will fall in the upper tax brackets.
There is also no reason to delay settling the estate tax unless there are pressing reasons because, after the 1-year filing period, penalties and late charges start accumulating. The longer you delay payment, the larger these charges are and these can run into the thousands or hundreds of thousands if left unpaid for more than a decade. By applying for amnesty now, all the penalties that you ran up in the past will be waived. All you need to pay is 6% of net taxable estate.
What is the estate tax amnesty rate?
It will be a flat rate of 6% based on the decedent’s total net taxable estate at the time of death and will be imposed at every stage of succession. However, the minimum amount that can be paid under this amnesty is Five Thousand Pesos (PhP 5,000) per decedent.
What does “every stage of succession” mean?
Let’s say one parent died and a few years later, another parent died. The 6% estate tax will be computed on properties on the first succession — from the first deceased parent to the legal heirs, including the other parent. Then a second estate tax computation will be made on properties on the next succession — properties of the second deceased parent to the legal heirs. And so on.
In other words, even if both parents are deceased, you cannot just do one computation and file only one Estate Tax Amnesty Return (ETAR). You will have to do two separate computations and file two ETARs.
Can I file for amnesty on the last day, June 14, 2023?
You can but I do not recommend it. First of all, your amnesty application needs to be examined by the BIR RDO responsible for accepting your application. They need to check the completeness of your documents and make sure the calculation of the tax you need to pay is accurate. Only after they have finished their examination and payment has been made will you be considered to have complied. You need to complete all these steps BEFORE the last day, June 14, 2023.
Another reason for filing earlier than later is this: Sometimes you need to correct the application. Some heirs may have missed out on including certain properties that they may not have been aware of when they first prepared their amnesty application. You can file to amend your amnesty application (without penalties) and add more properties during the amnesty period at the same flat rate of 6%. Filing early on will give you time to make any corrections or revisions and still avail of the amnesty benefits.
To be on the safe side, plan to file your amnesty application at the earliest date and no later than 2-3 months before the last day.
Don’t procrastinate! While you still have a good two years due to the extension, it is better to start today. You do not know what issues you may encounter along the way that could cause some delay and you will not want to file too close to the deadline either because I don’t think the new deadline will be extended again.
For more FAQs, check out Revenue Memorandum Circular No. 68-2019.