Understanding RA 11956: The Extended Estate Tax Amnesty Act

By Nicolle Dela Peña

RA 11956 An act further amending Republic Act 11213 otherwise known as the Tax Amnesty Act as amended by Republic Act 11569 by extending the period of availment of the estate tax amnesty until June 14, 2025, and for other purposes.

The Bureau of Internal Revenue (BIR) states that an estate tax is a tax levied on the dead person’s right to transfer his estate to his beneficiary or heir at the time of his death. National Tax Research Center also states that the estate tax is computed based on the fair market value of the property at the time of the death of the owner and not the original price the owner paid for the property during the time he acquired it.

It is imperative, however, to understand that an estate tax is not a tax on the property itself thus it is different from real estate tax. The rate of estate tax is based on laws that are in force during the time of death of the decedent, notwithstanding the postponement of the beneficiary’s acquisition of the estate. The payment of the tax must first be completed before the distribution of the estate proceeds and the heirs can legally acquire the asset.

Prior to the enactment of these Republic Acts that are now governing estate tax, the tax rate was based on the National Internal Revenue Code (NIRC) section 84 which is rated at a fixed 6% of the net estate of the decedent. Net Estate is computed as the difference between the gross estate and allowable deductions depending on the residency of the decedent.

As for Philippine residents, a decedent’s tax estate is computed based on all his properties, be it real or personal, tangible or intangible, wherever situated. The value of these properties shall be determined at the time of the decedent’s death while for non-Philippine residents, only their estates situated in the Philippines are computed for their estate tax.

Under the NIRC, there is a five million (5,000,000.00) standard deduction and an allowable deduction for claims against the estate filed by those who are owed by the decedent, provided that the debt instrument is duly notarized and is contracted within 3 years before the death of the decedent. The decedent’s heir should also file proper documentation of the loan’s disposition. In a situation where the decedent is claiming money from insolvent persons, the same amount is added to his gross estate. Additionally, properties not affected by any unpaid mortgage or loans are included in his gross estate while any income taxes on money received after the decedent’s passing, any property taxes that had not accrued before his passing, and any estate taxes are excluded.

Losses from fire, storm, shipwreck, casualties, robbery, theft, or embezzlement that were incurred not later than the last day of estate tax payment, that are not covered by insurance, and when at the time of filing of return for losses have not been claimed as a deduction for income tax, shall also be deducted.

In instances where the decedent received by gift, inheritance, bequest, or devise, a property from another decedent, there shall be a corresponding deduction in his gross estate so as to avoid double taxation of the property provided that the prior estate tax was already settled and paid by or on behalf of the prior decedent. If there are properties that are transferred for public use, such properties shall not be included in the gross estate of the decedent.

A maximum of ten million (10,000,000.00) worth of family home is also provided as an allowable deduction. However, if the fair market value exceeds the maximum, the excess shall be subjected to estate tax. In any case that the decedent’s heir received any amount from the decedent’s employer, the same should be included as an allowable deduction provided that it is declared in the gross estate of the decedent.

For non-residents, there are specified allowable deductions such that the standard allowable deduction is only five hundred thousand (500,000.00). The same deduction applies to non-residents when it comes to claims against the estate, for claims against insolvent persons, and for unpaid mortgages and loans as well as for properties received by the deceased from another decedent, and properties transferred for public usage.

If the decedent has a spouse, the net estate of the decedent is reduced by the net share of his spouse in the conjugal partnership property as reduced by the obligations reasonably charged to the property.

However, the NIRC Section 85 was amended by Commonwealth Act No. 466 Section 85 amending the tax rate from 1% to 10% depending on the amount of the net estate. According to this Act, the gross estate is computed by deducting expenses, losses, indebtedness, and taxes such as funeral expenses not exceeding 5% of the gross estate, judicial expenses of the testamentary or intestate proceedings, claims against the estate, and claims against insolvent persons.

As amended by this Act, no deduction shall be allowed for non-residents unless the heir includes a return under oath detailing the value of the decedent’s property outside the Philippines at the time of his death as part of his gross estate.

In an effort to enhance the revenue administration and collection and ensure that the country’s tax system is more equitable, the government enacted Republic Act 11213 also known as the Tax Amnesty Act which aims to grant amnesty on all unpaid internal revenue taxes for the year 2017 and prior years for estate tax, other internal revenue taxes, and tax on delinquencies.  This act also simplifies the tax compliance requirements by providing a one-time opportunity to settle estate taxes. This act covers all decedents who died on or before December 31, 2017 whose estate taxes are still unpaid or have accrued on the same date. The act also provides a fixed 6% estate tax based on the decedent’s net estate at the time of his death.

For residents, in any case that the allowable deduction exceeds the gross estate, the heirs may avail the benefits of tax amnesty and pay a minimum of five thousand pesos (5,000.00) estate tax. The heir who wishes to avail the estate tax amnesty shall file a sworn estate tax amnesty return with the BIR on the last residence of the deceased within 2 years of the effectivity of this act’s implementing rules and regulations. The heir must submit the tax return and proceed with the payment after filing. For non-residents, the estate tax amnesty return shall be filed with the indicated Revenue District Office that is implemented in the IRR of this act.

On June 30, 2021, Congress passed Republic Act 11569 to amend section 6 of RA 11213. According to RA 11569, heirs who wishes to avail the tax amnesty shall file a sworn estate tax amnesty return with the Revenue District Office of the BIR which has jurisdiction over the last residence of the deceased from June 15, 2021 until June 24, 2023. For non-resident decedents, their tax return shall be filed and paid in accordance with what is prescribed in the IRR. The RDO shall issue an acceptance form of the tax amnesty payment in accordance with the prescribed form of IRR to the partner bank, revenue collection agent, or municipal treasurer. It must be remembered that availing the tax amnesty and issuance of the acceptance form does not imply any criminal, civil, or administrative liability.

Last August 05, 2023, another extension lapsed into law as President Ferdinand Marcos Jr. failed to sign the House Bill 7909. RA 11956 is an act further amending RA 11213 as amended by RA 11569. According to Section 1 of the new RA, decedents who died on or before May 31, 2022 with unpaid or have accrued estate taxes as of May 31, 2022 can still avail of the estate tax amnesty. Section 2 also amended Section 6 of RA 11213 extending the date of availing the tax amnesty from June 15, 2023, until June 14, 2025. The heir can avail the amnesty tax by filing electronically or manually with any authorized channels. Provided that these authorized channels also issue an acceptance form in accordance with the IRR.

RA 11956 also provided the requirements of availing the estate tax amnesty as follows:

  • Certified True Copy of Death Certificate. If not available, the certificate of no record of death from the Philippine Statistics Authority (PSA) and any valid secondary requirements as such as those that are issued by any government agency or office as long as it suffices to establish the fact of death of the decedent;
  • Tax Identification Number (TIN) of both the decedent and the heirs;
  • Notarized promissory note for claims against the estate;
  • Proof of the claimed “property recently taxed”;
  • Proof of the claimed “transfer for public use”;
  • At least one government identification card of the heir, or authorized representative.

If the decedent has any real property, the requirements are as follows:

  • Certified True Copy of Transfer Original Condominium Certificate of title of real property;
  • Certified True Copy of the tax declaration of the real property. If untitled, including the improvements made at the time of death or the succeeding available tax declaration issued nearest to the time of death of the decedent, if none is available at the time of death;
  • Where declared properties have no improvement, certificate of no improvement issued by the assessor’s office at the time of death of the decedent.

If the decedent has any personal property, the requirements are as follows:

  • Certificate of Investment/deposit /indebtedness owned by the decedent alone or decedent with surviving spouse, or decedent jointly with others;
  • Certificate of registration of vehicles and other proofs showing the correct value of the same;
  • Certificate of stocks;
  • Proof of valuation that shares of stock at the time of death

If an authorized representative is processing the availing of Estate Tax Amnesty, he must present a duly notarized special power of attorney (SPA). If the document is executed abroad, a certificate from the Philippine Consulate or apostille must be submitted. A location plan or vicinity map is warranted in case zonal value cannot be readily determined from the documents submitted.