A REMINDER TO AVAIL OF TAX AMNESTIES
By: Atty.Aziza Hannah Bacay on October 29,2020.
It has been more than a year since Republic Act 11213, or the “Tax Amnesty Act” (TAA), was enacted. It became effective on March 1, 2019. The TAA originally provided for an estate tax amnesty, a general tax amnesty and a tax amnesty on delinquencies, but President Rodrigo Duterte vetoed the provisions of the second amnesty, among others. Thus, only the first and third kind of amnesties were implemented by the Bureau of Internal Revenue (BIR).
Period of availment
The estate tax amnesty is available for two years from the effectivity of BIR Revenue Regulations (RR) 6-2019, or until June 14, 2021.
The tax amnesty on delinquencies is supposed to be effective within one year from the effectivity of its implementing regulations, RR 4-2019, or until April 23, 2020. But because of the challenges in availing this amnesty during the Covid-19 pandemic, the BIR issued several regulations —RR 5-2020, 11-2020 and 15-2020 — to extend the period of availment. Pursuant to RR 15-2020, the deadline for this tax amnesty is now on Dec. 31, 2020.
No issuance on extending the estate tax amnesty has been released yet. As of today, taxpayers have eight months to avail themselves of it. On the other hand, any taxpayer seeking to avail themselves of the tax amnesty on delinquencies has two months to do so.
Tax amnesty on delinquencies
The tax amnesty on delinquencies is the first of its kind being granted under the law. All previous tax amnesties excluded assessments that have become delinquent. This is because once an assessment becomes delinquent, the BIR can begin collection measures.
A significant feature of this amnesty is the inclusion of withholding tax deficiencies or liabilities. In the past, these deficiencies were excluded because the taxes withheld are actually not the taxes of the taxpayer itself, but of those from whom the taxes are withheld. Also, the nonwithholding of taxes and the nonremittance of taxes withheld are considered grave offenses.
Taxpayers with tax delinquencies should take advantage of this special amnesty. Tax amnesty rates on the basic tax assessed, exclusive of penalties, interests and surcharges, are as follows: delinquent accounts, 40 percent; with pending criminal cases from the Department of Justice or Prosecutor’s Office on tax criminal offenses, 60 percent; with final and executory judgment by the courts, 50 percent; and withholding tax liabilities, 100 percent.
Estate tax amnesty
The estate tax amnesty is also very attractive, as the 6-percent rate payable is much lower than the previous graduated estate tax rates of up to 20 percent. Also, it excludes interest, penalties and surcharges.
In our experience, it could take some time to file an estate tax amnesty application because of family and valuation issues.
Among the documents to be submitted to the BIR is an extrajudicial settlement agreement or affidavit of self-adjudication, which the surviving heir/s must execute to avail themselves of the amnesty. Executing such agreements or documents could take some time because of the failure of the heirs to agree on the partition of the estate. Also, some heirs may be out of the country and would have to execute special powers of attorneys that need to be consularized and/or apostilled.
Furthermore, if there are several decedents involved, estate taxes need to be paid and extrajudicial settlement agreements executed for every stage of transfer of property in accordance with the rules of succession under the New Civil Code.
Obtaining the proper values of the properties may also be challenging, especially if the decedent died many years ago. In general, the value of the properties making up the gross estate of the decedent shall be based on their fair market values at the date of the decedent’s death.
Again, the estate tax amnesty can be currently availed of only until June 14, 2021. After this date, the remaining undeclared properties shall be subject to the estate tax rate applicable at the time of the decedent’s death, with interests and penalties.
It is important to note that, on September 15, the House of Representatives approved on third reading House Bill 7068, which seeks to extend the deadline of availment of estate tax amnesty for four years, instead of two, from the effectivity of the RR. The move aims to accommodate taxpayers who are unable to avail themselves of the amnesty because of the pandemic.
In any case, with only less than two months left for the availment of the tax amnesty on delinquencies and eight months left for the estate tax amnesty, taxpayers are reminded to take advantage of this one-time opportunity to settle these tax obligations once and for all.