We’ve been consulted on a number of real estate transactions that had to be shelved because of unsettled estate taxes. It’s not because the owners — who inherited the properties — have the intention of evading taxes; it’s just that a lot of people do not know about, or do not give much importance to, the settlement of estate taxes immediately after the death of the original owner. The rule is: if a real estate owner dies, the heirs (spouse, children, etc.) must file the appropriate tax return with the Bureau of Internal Revenue (BIR) and pay the corresponding estate taxes. Unless the estate tax is paid and the BIR issues a Certificate Authorizing Registration (CAR), the Register of Deeds will not allow the transfer of the title to the real estate. The difficiculty of complying with this requirement discourages transactions involving the property, like partition among the heirs and sale of the property itself. There are estate taxes that remain unpaid after decades, with the basic tax, plus interest, penalties and surcharges, potentially exceeding the value of the property.
The good news is, there are proposals currently pending at the House of Representatives, seeking to grant an amnesty for all unpaid estate taxes (see full text of House Bill No. 1889 and House Bill No. 3010 below). As noted in the Explanatory Note accompanying the proposed law, the amnesty will “free-up property of unsettled estates, so that they may be made subjects of business transactions. Such properties after settlement may be sold, leased, subject to joint venture agreements, or such transactions that will have tax consequences, and result in increased tax collection for the government.” House Bill No. 1889 (“Estate Tax Amnesty Law”) was introduced by Representative Arthur R. Defensor, Jr. and House Bill No. 3010 (also, “Estate Tax Amnesty Law”) was introduced by Representative Romero “Miro S. Quimbo.
The House Bills cover the period prior to the effectivity of the enaced law and a certain period thereafter (3 or 5 years, depending which House Bill is considered). The proposals also provide for lower estate taxes, as well as the immunities provided under the previous amnesty law (Republic Act No. 9480):
1. The taxpayer is immune from the payment of taxes, as well as civil, criminal or administrative penalties arising from the failure to pay estate taxes for the years covered by the amnesty.
2. The taxpayer’s Tax Amnesty Returns shall not be admissible as evidence in all proceedings insofar as such proceedings relate to estate taxes, and these documents shall not be examined, inquired or looked into by any person or government office.
3. The books of accounts and other records of the taxpayer for the years covered by the tax amnesty availed of shall not be examined.
This proposed law, in my opinion, should be passed. If you agree, you may want to reach out to your House representatives and convince them to support the passage of these House Bills, reproduced in full below.
House Bill No. 3010
(“Estate Tax Amnesty Law” — Representative Romero “Miro S. Quimbo)House Bill No. 3010 Estate Tax Amnesty Law
House Bill No. 1889 (full text)
(“Estate Tax Amnesty Law” — Representative Romero “Miro S. Quimbo)House Bill 1889 An Act Granting Amnesty in Estate Tax