“Until death do us part.” This is a standard vow in many traditional wedding ceremonies. This means that only death can end a marriage. It is considered a lifelong commitment, one where only the death of one party can break the bond. Sadly, this is not the case for tax authorities and taxpayers. There is tax even after death.
The transfer of the net estate of a decedent to his heir must be subjected to estate tax. Under the TRAIN Law, otherwise known as Republic Act (RA) 10963, estate tax has been decreased to 6% of the taxable net estate. For estate taxes incurred prior to the TRAIN Law which remain unpaid, Congress passed a law originally granting an estate tax amnesty to allow the heirs to finally settle estate taxes until June 14, 2021. The amnesty covers only the estate of decedents who died on or before Dec. 31, 2017. The estate tax amnesty rate is at the reduced rate of 6% of the decedent’s total net taxable estate at the time of death, but without penalties and surcharges for late payment. Lastly, the minimum estate amnesty tax for the transfer of the estate of each decedent is P5,000.00.
When the pandemic struck in 2020, many taxpayers wanting to avail of the amnesty were not able to file their applications and collate documentary requirements. Fortunately, RA 11569 extended the deadline of the Estate Tax Amnesty until June 14, 2023.
Revenue Regulation (RR) No. 17-2021, which amended RR No. 6-2019, streamlines the requirements and procedures of this one-time opportunity to settle estate tax obligations through the estate tax amnesty program. The main changes that RR No. 17-2021 introduced include the extended deadline and place of filing of the Estate Tax Amnesty Return (ETAR or BIR Form 2118-EA). The ETAR must be filed not later than June 14, 2023 with the Revenue District Office (RDO) having jurisdiction over the last residence of the decedent. For non-resident decedents, the ETAR must be filed with the RDO where the executor/administrator is registered or if not yet registered, at the executor’s/administrator’s legal residence. In cases of non-resident decedents with no executor/administrator in the Philippines, the ETAR must be filed with RDO No. 39 — South Quezon City.
The proof of settlement of the estate, whether judicial or extra-judicial, need not accompany the ETAR if it is not yet available at the time of filing. However, the electronic Certificate Authorizing Registration (eCAR) will not be issued unless such proof is presented and submitted to the concerned RDO. Note that certain properties such as lots, condominiums, and shares of stock will only be transferred to the heirs once the eCAR has been issued by the Bureau of Internal Revenue (BIR).
After payment, the ETAR and Acceptance Payment Form (APF or BIR Form No. 0621-EA), together with the documentary requirements, must be submitted to the concerned RDO. Failure to submit until June 14, 2023 is tantamount to non-availment of the estate tax amnesty. If complied with, a Certificate of Availment of the Estate Tax Amnesty and eCAR of the subject properties will be issued.
The extension of the estate tax amnesty is definitely a welcome development for taxpayers wishing to finally enjoy their inheritance. The road to paying estate taxes is cobbled and entails arduous travel. The list of documentary requirements is long and there are challenges along the way in completing them to beat the deadline.
Securing the certification of the Barangay Captain of the last residence of the decedent and claimed family home while everyone is lining up for the distribution of “ayuda” is a unique experience one would not want to repeat.
Finalizing the Deed of Extra-Judicial Settlement (EJS) of the estate presents its own unique set of challenges. Some heirs are residing outside the country and the process of having documents notarized and apostilled or authenticated may seem insurmountable. Hence, the provision allowing the availment of the amnesty even without the submission of the EJS surely expedited the process. However, without the eCAR, the entire process will be for naught as the objective of most taxpayers is to either have the title transferred in their name or finally be able to sell the property to a third party.
Another major challenge involves properties which were sold to the decedent where the titles have not yet been transferred to the decedent at the time of death. Considering that among the requirements needed are the transfer certificates of title and the tax declaration on the subject properties, the preliminary steps of transferring ownership to the decedent have to be completed first.
Expect also that there would be requirements unique to certain RDOs which are not included in the list of requirements published in the BIR website. One RDO required the submission of a family tree with certified true copies of birth certificates of every family member presumably to establish filiation. Because establishing a family tree is complicated, complying with this requirement was not as simple as filing a request with the National Statistics Office.
The lesson is clear — taxpayers need to anticipate that a substantial amount of time is needed if heirs wish to avail of the estate tax amnesty. Hence, it is important to start gathering and collating documents as soon as possible. Pretty soon, it will be June 14, 2023 and we cannot expect that another extension to be granted by Congress.
It is clear that the death of a taxpayer does not necessarily mean that the applicable taxes on the properties he or she has left behind are also extinguished. For in this case, death only creates another kind of inescapable tax.
Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.
Alexander M. Querido, Jr. is a senior associate of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.