Estate Tax Amnesty Philippines: Deadlines, CAR Requirements, and Extra-Judicial Settlement

Estate Tax Amnesty in the Philippines: Deadlines, CAR Requirements, and Extra-Judicial Settlement

Introduction

In the Philippines, estate taxation is governed primarily by the National Internal Revenue Code (NIRC) of 1997, as amended, particularly under Sections 84 to 97. Estate tax is imposed on the transfer of the net estate of every decedent, whether resident or non-resident, to their heirs or beneficiaries. However, to encourage compliance and address historical backlogs in estate settlements, the government has periodically offered estate tax amnesties. These programs allow heirs to settle outstanding estate taxes at reduced rates or with immunity from penalties, surcharges, and interests.

The most recent significant estate tax amnesty was introduced under Republic Act (RA) No. 11213, the Tax Amnesty Act of 2019, and further amended by RA No. 11569 in 2021. This amnesty targets unsettled estates of decedents who passed away on or before specified dates, providing a window for heirs to regularize transfers without the burden of accumulated penalties. Key aspects include deadlines for availing the amnesty, requirements for obtaining a Certificate Authorizing Registration (CAR), and the role of extra-judicial settlements (EJS) in facilitating the process. This article explores these elements in detail, drawing from relevant laws, Bureau of Internal Revenue (BIR) regulations, and judicial interpretations.

Historical Context and Legal Basis

Estate tax amnesty programs in the Philippines have evolved to address issues such as delayed filings due to disputes among heirs, lack of documentation, or financial constraints. Prior amnesties include those under RA No. 9225 (2004) and RA No. 9480 (2007), but the current framework stems from RA 11213, signed into law on February 14, 2019. This law provided a two-year amnesty period for estate taxes, covering decedents who died on or before December 31, 2017.

RA 11569, enacted on June 30, 2021, extended the coverage to decedents who died on or before May 31, 2021, and prolonged the availing period. The amnesty offers a flat 6% tax rate on the net estate, computed based on the fair market value at the time of death, with full waiver of penalties, surcharges, and interests. It also provides immunity from civil, criminal, or administrative liabilities related to non-payment of estate taxes, provided the amnesty is properly availed.

Subsequent BIR issuances, such as Revenue Regulations (RR) No. 6-2019 and RR No. 12-2021, detail the implementation, forms, and procedures. Court rulings, like those from the Supreme Court in cases involving estate settlements (e.g., Heirs of Gamboa v. Teves, G.R. No. 176579), emphasize the importance of timely compliance to avoid complications in property transfers.

Eligibility for Estate Tax Amnesty

To qualify for the amnesty:

1. Decedent's Death Date: The decedent must have died on or before May 31, 2021 (as per the extension under RA 11569). Estates of decedents dying after this date are subject to regular estate tax rules under the TRAIN Law (RA 10963), which imposes a 6% flat rate but without amnesty benefits.

2. Unsettled Estates: The estate must have unpaid estate taxes, including those where no return was filed, returns were filed but taxes unpaid, or deficiencies exist due to audits.

3. Exclusions: The amnesty does not cover:

   • Estates already under final and executory court judgments.
   • Properties involved in pending tax evasion cases.
   • Estates where taxes were paid under protest or with pending refund claims.
   • Non-resident decedents with no Philippine-situs properties (though resident aliens and citizens are fully covered).

Heirs, executors, or administrators can avail on behalf of the estate. In cases of multiple heirs, a designated representative (often via a deed of extra-judicial settlement) must file the application.

Deadlines for Availing the Amnesty

Deadlines are critical, as missing them forfeits the amnesty benefits, subjecting the estate to regular taxes plus penalties (up to 25% surcharge, 20% interest per annum, and compromise penalties).

• Original Deadline under RA 11213: The amnesty was available from June 15, 2019, to June 14, 2021.
• Extended Deadline under RA 11569: The availing period was extended to June 14, 2023. This extension was intended to accommodate pandemic-related delays.
• Payment Deadline: The amnesty tax must be paid within two years from the filing of the Estate Tax Amnesty Return (ETAR), but not later than the overall amnesty deadline.
• Post-Amnesty Filings: For estates missing the deadline, regular estate tax filing is required within six months from death (extendable to 30 months under certain conditions), with penalties applying.

BIR may issue extensions via revenue memoranda during extraordinary circumstances, such as natural disasters or public health crises. As of the latest known implementations, no further legislative extensions beyond 2023 have been enacted, though heirs should monitor BIR announcements for any administrative relief.

Procedure for Availing the Amnesty

The process involves several steps:

1. Filing the Estate Tax Amnesty Return (ETAR): Use BIR Form No. 2118-E, filed electronically via the BIR's eAFS system or manually at the Revenue District Office (RDO) where the decedent was registered or resided.

2. Computation of Amnesty Tax: 6% of the net estate (gross estate minus allowable deductions like funeral expenses, judicial expenses, claims against the estate, and standard deductions of PHP 5 million under TRAIN Law).

3. Payment: Pay the computed tax at authorized agent banks or BIR collection offices. Proof of payment is attached to the ETAR.

4. Submission of Documents: Include death certificate, inventory of properties, deeds of transfer, and proof of deductions.

5. Issuance of Acceptance Payment Form (APF): Upon verification, BIR issues the APF, confirming amnesty availment.

6. Electronic Certificate Authorizing Registration (eCAR): Issued after APF, necessary for transferring properties.

Failure in any step may result in denial, with appeals possible via the BIR's administrative remedies or Court of Tax Appeals.

Certificate Authorizing Registration (CAR) Requirements

The CAR, now electronic (eCAR) under RR No. 12-2018, is a prerequisite for registering property transfers with the Registry of Deeds (RD) or transferring shares with the Corporate Secretary. It certifies that estate taxes have been paid or settled via amnesty.

Key Requirements for Obtaining CAR:

1. Amnesty Context:

   • Submit the APF from the amnesty availment.
   • Provide the ETAR with payment proof.

2. General Documents:

   • Certified true copy of the death certificate.
   • Taxpayer Identification Number (TIN) of the estate and heirs.
   • Deed of Extra-Judicial Settlement (EJS) or Judicial Settlement if applicable.
   • Original titles or certificates of shares.
   • Appraisals or zonal valuations for real properties.
   • Proof of deductions (e.g., medical bills, loan documents).

3. For Real Properties:

   • Tax Declaration from the Assessor's Office.
   • Clearance from the local government unit (LGU) for real property taxes.
   • If agricultural, clearance from the Department of Agrarian Reform (DAR).

4. For Personal Properties:

   • Bank certifications for deposits.
   • Stock certificates and corporate resolutions for shares.

5. Processing Time: Typically 5-15 working days, but delays occur if documents are incomplete. Under the amnesty, expedited processing is encouraged.

6. Validity: eCAR is valid for one year from issuance, after which re-application may be needed.

Without a CAR, property transfers are invalid, leading to potential BIR assessments or holds on titles. In amnesty cases, the CAR explicitly notes the amnesty settlement to clear any prior liens.

Extra-Judicial Settlement (EJS) in Estate Tax Amnesty

Extra-Judicial Settlement is a non-court method for dividing the estate among heirs, governed by Section 1, Rule 74 of the Rules of Court. It is particularly useful in amnesty availment as it simplifies documentation and designates a representative.

Requirements for EJS:

1. Agreement Among Heirs: All heirs must be of legal age, capacitated, and agree unanimously. If minors are involved, court approval is needed, converting it to a judicial process.

2. No Will or Debts: Applicable only if the decedent left no will and no outstanding debts (or debts are settled).

3. Documents:

   • Deed of EJS, notarized and published in a newspaper of general circulation once a week for three weeks.
   • Affidavit of publication.
   • Bond equivalent to the value of personal property (waived for real property-only estates under certain conditions).
   • Inventory and partition of properties.

4. Integration with Amnesty:

   • The EJS must be submitted with the ETAR to identify heirs and property shares.
   • Estate tax is computed on the undivided estate, but partition via EJS facilitates individual CARs for each heir's share.
   • If disputes arise post-EJS, it can be contested within two years, potentially affecting amnesty benefits.

5. Tax Implications: Donor’s tax may apply if partitions are unequal, treated as donations. Capital gains tax (6%) and documentary stamp tax (1.5%) are due on transfers.

6. Advantages: Faster and cheaper than judicial settlement; aligns with amnesty's goal of quick regularization.

7. Limitations: Not suitable for contested estates or those with creditors' claims. Violation can lead to perjury charges or invalidation.

In practice, many amnesty applications rely on EJS to streamline processes, especially for small estates. Supreme Court decisions, such as Heirs of Reyes v. Reyes (G.R. No. 150913), underscore that EJS binds heirs but does not extinguish third-party claims.

Challenges and Considerations

Common issues include incomplete documentation, valuation disputes (BIR vs. heir appraisals), and overlapping claims from illegitimate heirs. Heirs should consult tax lawyers or accountants to ensure compliance. Post-amnesty, regular monitoring of BIR circulars is advised for any retroactive adjustments.

Conclusion

The estate tax amnesty in the Philippines represents a pragmatic approach to resolving long-standing estate issues, promoting efficient property transfers through simplified taxation and waived penalties. By adhering to deadlines, fulfilling CAR requirements, and utilizing extra-judicial settlements, heirs can secure clear titles and avoid future liabilities. This framework not only aids individual families but also contributes to broader economic stability by unlocking assets for productive use. For specific cases, professional legal advice is essential to navigate nuances.