UNPACKING THE ESTATE TAX AMNESTY PROCEDURE
By: Samantha L. Poblacion on July 5, 2019
In pursuit of its mandate to enact the implementing rules and regulations (IRR) of the Tax Amnesty Act (otherwise known as Republic Act 11213), the Bureau of Internal Revenue (BIR) released the IRRs for availment of amnesty on estate and delinquent taxes.
The IRR for amnesty on delinquency taxes took effect on April 9, 2019, while the IRR for the amnesty on estate tax became effective on May 31, 2019.
Operationalizing the tax amnesty program is an interesting exercise in coordination and perspective. While the IRRs themselves have provided guidance to some of the questions raised in the reading of the law, some issues remained outstanding – as acknowledged by the BIR itself when it created an email hotline for stakeholders to get across their questions, comments and suggestions to the bureau.
During its monthly general meeting on June 26, 2019, the Tax Managers Association of the Philippines (TMAP) invited two keynote speakers from the bureau who have been intimately involved with the development of the IRRs. One of the speakers, Ms. Rosanna San Vicente, officer-in-charge head revenue executive assistant of the BIR’s Collection Services discussed Revenue Memorandum Circular No. 57-2019 (RMC 57-2019) which “Clarifies Certain Issues on Tax Amnesty on Delinquencies Under Revenue Regulations No. 4-2019”. RMC 57-2019 consists of 37 questions on delinquency tax amnesty distilled from the frequently asked questions sent to the bureau’s email hotline.
We understand that the BIR is slated to release the memorandum circular on the estate tax amnesty which will hopefully clarify further the issues which may hinder its implementation.
In view of this, we discuss below, in no particular order, three important issues from the perspective of professionals who handle estate settlements, which will hopefully be addressed by the BIR in the estate tax amnesty revenue memorandum circular.
First. Is an electronic Certificate Authorizing Registration (eCAR) required for every real property of the estate under settlement? Or, is one eCAR issued per decedent?
In an ordinary estate settlement, the eCAR is issued per decedent, and this eCAR encompasses all the real properties and their division among the heirs, as indicated by the estate settlement document (i.e., an affidavit of self-adjudication, an extra judicial settlement or, in case the estate is settled judicially, a court order), and the applicable laws. The confusion stems from Section 13 of RR 4-2019 which states that “1) eCAR shall be issued per real property including the improvements, if any, covered by Original Certificate of Title/Transfer Certificate of Title/Condominium Certificate of Title or Tax Declaration for untitled properties”. This needs to be clarified by the BIR especially in cases where the properties of an estate needed to be settled multiple times because of multiple decedents (a filing allowed by the Tax Amnesty Act).
A piece of real estate, originating from the unsettled estate of a great-grandmother, passed down to the grandmother, then to the mother, would necessarily have three transfers, and thus, also three eCARs indicating the division of the property in each estate transfer. If one eCAR is issued per real property, does this imply that only one eCAR shall be issued for all estate settlements that the property went through? Or, will this property be included in the eCAR issued to each estate settlement, per decedent which includes all the other assets being transferred?
Second. Will the BIR be requiring the estate settlement document before granting the certificate of availment of estate tax amnesty? As mentioned, the BIR generally requires the submission of an affidavit of self-adjudication, an extra judicial settlement or, a court order. It generally takes time to have these documents available or agreed upon by the heirs.
The BIR’s answer to the question is yes, an estate settlement document is required. The concern is understandable. Estate settlement involving multiple heirs is a cooperation game. All the heirs must agree to a settlement plan, which will then be presented to the bureau for the payment of taxes and issuance of the CAR. In an estate settlement, the CAR issued contains the division of properties as indicated in the estate settlement document; hence, all the heirs are expected to have agreed and signed off on this property division.
Because the estate tax amnesty only runs for two years beginning May 31, 2019, there is a risk that the heirs will run out of time and thus, not be able to avail of the amnesty. For instance, if the estate is undergoing a judicial settlement, or, some of the heirs cannot be located, or the heirs are hostile to one another, the two-year period could lapse without an agreement being reached. As a remedy, it was proposed to the BIR that estate tax amnesty be availed of even without the submission of the estate settlement document to allow the estate to settle its internal revenue obligations. The issuance of the CAR can be deferred until the estate can submit the complete requirements, which includes a duly-executed estate settlement document.
Third. In the event of multiple estate settlements, whether the settlements are vertical (from ascendant to descendant) or horizontal (sibling to sibling), will the BIR be requiring an eCAR for each level of estate settlement or each decedent, before accepting the application for estate tax amnesty for the subsequent estate transfer?
Under the current system, eCARs take months, sometimes even years to be issued. If each estate settlement is required to wait for eCAR then at the most, only one estate may avail of the estate tax amnesty due to the two-year period restriction. Since both the law and regulations are silent in this regard, this was another frequently-asked question during the TMAP lecture. Atty. Venus Gaticales, the other TMAP speaker, explained that the BIR might possibly include the eCAR with the issuance of the certificate of availment of estate tax amnesty. This is important because under RR 4-2019, the certificate of availment is required to be issued within 15 days from the filing of a complete application for estate tax amnesty. In this regard, the bureau will also be required to issue the eCAR within 15 days. If this will be implemented, this will certainly enable the multiple settlement of estates within the two-year period. However, this must be clearly stated in a subsequent revenue issuance for clarity purposes.
From the The Manila Times website on July 5, 2019