Estate Tax Amnesty & the “Vehicle Franchise Tax” Issue in the Philippines
A comprehensive legal-practice note (updated as of July 10 2025)
1. Why this topic matters
- Decades-old estates—particularly of transport operators—often remain unsettled because the heirs cannot raise the cash to pay surcharges, interest, and penalties that dwarf the basic estate tax.
- Those estates usually contain income-producing franchises (Certificates of Public Convenience, or CPCs) for buses, jeepneys, UV express, trucking fleets, and even telecom-cable operators.
- Local Government Units (LGUs) levy a local franchise tax on the gross receipts of every person “enjoying a franchise” within their territory (Local Government Code [LGC] §§ 137, 151).
- Until the estate is settled and the CPC formally transferred, LGUs continue to assess the estate (not the heirs) for back franchise taxes—creating a vicious cycle: transfer is blocked until taxes are paid, but taxes accumulate because the transfer is blocked.
The 2019 Estate Tax Amnesty Act was conceived as a policy vehicle to break that stalemate; hence the phrase “Estate Tax Amnesty as a vehicle for the franchise-tax issue.”
2. Legislative timeline at a glance
| Date | Law / Issuance | Key Points |
|---|---|---|
| 14 Feb 2019 | Republic Act (RA) 11213 – Tax Amnesty Act | Title II created a one-time Estate Tax Amnesty, covering decedents who died on or before 31 Dec 2017; fixed rate 6 % of the net estate; deadline 15 June 2021. |
| 24 Jun 2019 | BIR Rev. Regs. (RR) 6-2019 | Implementing rules, Estate Tax Amnesty Return (BIR Form 2118-E), Acceptance Payment Form (APF), issuance of Certificate of Availment & electronic Certificate Authorizing Registration (eCAR). |
| 11 Jun 2021 | RA 11569 | Extended the availment period by two (2) years to 15 June 2023. |
| 30 Aug 2021 | RR 17-2021 | Implemented the first extension; allowed pre-evaluation by BIR Estate Tax Amnesty Task Forces. |
| 05 Aug 2023 | RA 11956 | Further extended availment to 14 June 2025 and moved the cut-off date of death to 31 Dec 2021. |
| 08 Nov 2023 | RR 10-2023 | Aligned forms/procedures with RA 11956; clarified electronic filing & payment options. |
| 14 Jun 2025 | Statutory deadline lapsed | Estate Tax Amnesty period officially closed (no new extension as of 10 Jul 2025). |
Practice tip: Although the filing window closed on 14 June 2025, applications filed on or before that date remain valid while under BIR evaluation. Heirs should monitor any Notice of Denial and submit required supplements within 60 days under RR 6-2019 § 7(C).
3. Core mechanics of the Estate Tax Amnesty
| Item | Details |
|---|---|
| Who may avail | Executor, administrator, legal heirs, transferees, or beneficiaries of estates of persons who died on or before 31 Dec 2021, whether with or without previously issued Assessment Notices. |
| Rate | 6 % of the net estate (fair market value less allowable deductions under the 1997 Tax Code Title III, Ch. I), OR P5,000 per estate when no valuation documents are available. |
| Penalties waived | All surcharges, interest, and compromise penalties on the estate tax. |
| Immunities | Availing party and the estate are immune from civil, criminal, and administrative cases under the 1997 Tax Code for the covered estate tax, and information disclosed cannot be used in other cases (RA 11213 § 6). |
| Exclusions | (a) Assets pending litis pendentia in cases involving tax evasion or unexplained wealth; (b) Estate tax cases that have become final and executory before 2018 (only the penalties—but not the basic tax—may be compromised under existing rules). |
| Remaining obligations | Not covered by the amnesty: (i) Documentary Stamp Tax on the Deed of Extra-Judicial Settlement; (ii) Transfer taxes (LGU level); (iii) Local franchise taxes already accrued; (iv) Business permit fees and regulatory charges (e.g., LTFRB filing fees, LTO registration). |
4. Anatomy of a “Vehicle Franchise Tax” assessment after death
Nature of the tax
- Under LGC § 137, provinces may impose “a tax on businesses enjoying a franchise,” computed as ≤ 50 % of 1 % of gross annual receipts; cities may impose the tax under LGC § 151.
- The Supreme Court (e.g., Cagayan Electric v. City of Cagayan de Oro, G.R. No. 191761, 2021) characterizes it as an excise tax on the privilege of operating under a franchise, independent of the national franchise tax or VAT.
Accrual after the franchisee’s death
- The estate itself becomes a juridical person (Civil Code Art. 777). Income earned by the franchise after death belongs to the estate; franchise tax liability therefore shifts to the executor or heirs in their fiduciary capacity.
- LGUs typically require a Mayor’s/Business Permit renewal—even for an “estate of the late ___”—and will assess back franchise taxes (plus 25 % surcharge & 2 %/month interest under LGC § 255) before releasing the permit.
Transfer block
LTFRB will not issue a CPC Transfer Decision unless the transferee shows:
- eCAR for the underlying estate asset (vehicle unit + franchise), and
- Tax clearance from the LGU where the principal garage is located.
Result: heirs cannot earn lawful income from the franchise nor dispose of it, yet unpaid LGU franchise taxes keep piling up.
5. Does the Estate Tax Amnesty erase local franchise tax?
| Question | Short answer | Legal basis & explanation |
|---|---|---|
| Are franchise taxes “estate taxes” for purposes of RA 11213? | No. | RA 11213 Title II covers only tax imposed under Title III, Ch. I of the 1997 NIRC (i.e., the national estate tax). LGU franchise taxes arise from LGC §§ 137, 151—outside NIRC Title III. |
| Does the amnesty provide blanket immunity from all taxes of the estate? | No. | Immunity is limited to the covered estate tax and any civil/criminal liability “arising therefrom.” The House/Senate deliberations (Journal, 22 Aug 2018) explicitly rejected proposals to include local tax amnesty. |
| Can LGUs still assess franchise tax incurred before the estate availed of the amnesty? | Yes. | LGUs’ power to tax under the Constitution & LGC is co-equal with BIR authority; RA 11213 did not curtail that power. |
| What if the LGU refuses to accept payment of franchise tax until the CPC is transferred? | Heirs may tender payment under protest (LGC § 252) and pursue administrative appeal with the Local Board of Assessment Appeals (LBAA), then the Central Board (CBAA), within 30 days. | |
| Any jurisprudence? | City of Davao v. Telekom Filipinas, G.R. No. 243980 (12 Apr 2022): SC held that an amnesty granted by Congress for national franchise tax did not prevent LGUs from collecting local franchise tax, absent express language to that effect. Same principle applies mutatis mutandis to estate tax amnesty. |
Bottom line: The Estate Tax Amnesty unlocks the transfer of the franchise by clearing the estate tax lien at the national level, but does not wipe out LGU franchise-tax assessments. A separate settlement with the LGU is still required.
6. Practical workflow for estates with PUV/telecom franchises
| Step | Typical documentary requirements | Time-saving tips |
|---|---|---|
| 1. Docket the estate | Death Certificate, TIN of decedent & heirs, list of assets (incl. CPC details, plate numbers), BIR Form 1904 (for estates without existing TIN). | Obtain LTFRB Certification of Franchise Status early; it substitutes for OR/CR valuation when vehicles are sold/retired. |
| 2. File the Estate Tax Amnesty Return (ETAR) | ETAR (Form 2118-E) + Sworn Statement of Assets & Liabilities; proof of value (zonal or assessed); SPA if filed by counsel. | Under RR 10-2023, estates ≤ ₱5 million may use zonal values or LGU tax declarations, whichever is lower. |
| 3. Pay 6 % amnesty tax | Acceptance Payment Form (APF) generated by BIR; payment at AAB or via e-payment portals. | For small provincial AABs, ask for Manager’s signature on a certified copy of APF to avoid later “lost APF” issues. |
| 4. Secure eCAR & Certificate of Availment | ETAR stamped “FILED,” proof of payment, APF, acknowledgment receipt. | Follow up with BIR-RDO “Issuance Division”; processing time averages 30-60 days if complete. |
| 5. Settle LGU franchise tax & obtain tax clearance | Past Mayor’s Permits, audited gross-receipt schedules, proof of zero-rating (if VAT-registered entity), demand letter (if any). | Many cities now allow installment under LGU Amnesty Ordinances (e.g., Quezon City Ord. SP-3166, S-2023). |
| 6. Apply for CPC transfer at LTFRB | Petition for Transfer/Extension of Validity, eCAR, LGU tax clearance, DTI/SEC docs of transferee, proof of financial capacity, drug-test, vehicle inspection. | LTFRB Memorandum Circular 2024-005 allows eCAR in digital PDF, eliminating the prior “red ribbon” requirement. |
| 7. Register vehicles at LTO under new owner | LTFRB Decision/Order; new CPC; Deed of Sale or Deed of Assignment; eCAR; CTPL insurance. | Pay only current-year MVUC & penalties; back MVUCs remain the estate’s liability but LTO now issues “Conditional Permit” valid for transfer. |
7. Open policy questions (as of 2025)
Will Congress pass a Local Tax Amnesty to complement RA 11213?
- Senate Bill 3235 (17th Congress) and House Bill 1383 (19th Congress) both propose condoning local business & franchise tax penalties, but remain pending at committee level.
Should the BIR issue a uniform valuation table for CPCs?
- Presently, RDOs accept either the book value submitted by heirs or the LTFRB “sale price” in prior transfers, leading to inconsistent assessments.
Need for electronic inter-agency linkage
- LTFRB’s DOTr-CoASTS system links to LTO for plate verification, but not yet to BIR or LGUs. A real-time lien check could cut settlement time by months.
8. Key take-aways for practitioners
| Heirs & Executors | Tax Counsels / Accountants | LGUs & Regulatory Agencies |
|---|---|---|
| • File complete ETAR before the statutory deadline (now closed). • Budget separately for LGU franchise tax—not covered by the amnesty. • Keep receipts; eCAR is indispensable for any title or CPC transfer. • Consider forming a corporation to receive the CPC, streamlining future succession. |
• Reconcile gross receipts vs. LGU assessments; mismatches trigger surcharges. • Advise on installment vs. compromise under LGC § 195. • For estates past the deadline, explore BIR compromise & abatement (Tax Code § 204). |
• Issue clear guidelines on conditional permits while eCAR is in process. • Adopt local amnesty ordinances to clear vintage liabilities and incentivize formalization. • Coordinate electronically with BIR & LTFRB to avoid redundant paperwork. |
9. Conclusion
The Estate Tax Amnesty program—enacted via RA 11213 and twice extended—succeeded in unlocking billions of pesos’ worth of dormant assets, including the transfer of public-utility vehicle and telecom franchises. By wiping out crippling national estate-tax penalties, it provided the first key to probate.
Yet the “vehicle franchise tax issue” reminds us that tax administration is multi-layered. LGUs, constitutionally empowered to levy franchise taxes, are not bound by the amnesty unless Congress says so expressly. For heirs (and their counsel), the practical path is therefore a two-step dance:
- Use the estate-tax amnesty as the gateway to transfer; and
- Negotiate or litigate local franchise-tax liabilities on their own merits.
Until an aligned local-tax amnesty or an integrated inter-agency clearance system emerges, practitioners must navigate both worlds—national and local—to finally lay vintage estates, and their rolling fleets, to rest.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Always consult the latest statutes, regulations, and local ordinances, and seek professional counsel for specific cases.