Republic Act (RA) No. 11213 or the “Tax Amnesty Act”
On 14 February 2019, President Rodrigo Roa Duterte signed into law the Tax Amnesty Act, providing for the settlement of estate tax obligations, and the settlement of tax delinquencies, through an amnesty program. The President likewise vetoed an entire portion of the law which would have provided for a general tax amnesty.
The estate tax amnesty allows a one-time opportunity to settle estate tax obligations, with the objective of giving reasonable tax relief to estates with deficiency estate taxes. On the other hand, the tax amnesty on delinquencies focuses on minimizing administrative costs in pursuing tax cases and decloging the dockets of the Bureau of Internal Revenue (BIR) and the courts.
Estate Tax Amnesty
Estates of decedents who died on or before 31 December 2017, with or without assessments duly issued therefor, whose estate taxes have remained unpaid or accrued as of 31 December 2017 are qualified for the estate tax amnesty. The exceptions are estate tax cases which shall have become final and executory, and to properties involved in cases pending in appropriate courts:
1. Falling under the jurisdiction of the Presidential Commission on Good Government (PCGG);
2. Involving unexplained or unlawfully acquired wealth under RA No. 3019, or the Anti-Graft and Corrupt Practices Act, and RA No. 7080, or an Act Defining and Penalizing the Crime of Plunder;
3. Involving violations of RA No. 9160 or the Anti-Money Laundering Act, as amended;
4. Involving tax evasion and other criminal offenses under Chapter II, Title X, Tax Code;
5. Involving felonies of frauds, illegal exactions and transactions, malversation of public funds and property under Chapters III and IV of Title VII of the Revised Penal Code (RPC)
The law uses the current estate tax rate of six percent (6%) to be paid as estate amnesty tax, based on the decedent’s total net estate at the time of death. If an estate tax return was previously filed with the BIR, the 6% shall be based on the net undeclared estate. Should the allowable deductions applicable at the time of death of the decedent exceed the value of the gross estate, the heirs, executors, or administrators can still avail of the estate tax amnesty by paying the minimum estate tax amnesty of Php5,000.00. It must be noted that the provisions of the Tax Code, or the applicable law prevailing at the time of death of the decedent, on valuation, manner of computation, and other related matters shall apply suppletorily at the time of the entitlement.
The executor or administrator, or the legal heirs, transferees or beneficiaries shall have within two (2) years from the effectivity of the Implementing Rules and Regulations (IRR) to file with the Revenue District Office (RDO) having jurisdiction over the last resident of the decedent the Sworn Estate Tax Amnesty Return (ETAR) with payment. For nonresidents, RDO No. 39 (South Quezon City) or any other RDO as may be indicated in the IRR. The acceptance payment form (APF) shall be issued by the RDO to accept the payment. Proof of judicial or extrajudicial settlement of the estate shall be attached to the ETAR in order to verify the mode of transfer and the proper recipients.
A Certificate of Availment of the Estate Tax Amnesty shall be issued by the BIR within 15 calendar days from submission to the BIR of the APF and the ETAR. Otherwise, the duplicate copies of the APF, stamped as received, and ETAR shall be deemed as sufficient proof of availment.
Availment of the estate tax amnesty does not imply any admission of criminal, civil or administrative liability on the part of the availing estate. Estates covered by the Estate Tax Amnesty, which have fully complied with all the conditions set forth of the Act, including payment of the estate amnesty tax, shall be immune from the payment of all estate taxes, as well as any increments and additions thereto, arising from the failure to pay any and all estate taxes for taxable year 2017 and prior years, and from all appurtenant civil, criminal, and administrative cases and penalties under the Tax Code. The tax amnesty granted shall be final and irrevocable.
The President vetoed 2 provisions relating to estate tax amnesty, specifically:
1. The use of just 1 ETAR to cover estates which have properties which are still in the name of other decedents or donors, and the payment of the estate amnesty tax based on the total net estate at the time of death of the last decedent covering all accrued taxes arising from the transfer of said estate from all prior decedents or donors through which the properties comprising the estate shall pass; and
2. The presumption of correctness, truth and finality of the ETARs upon filing, and that the ETAR shall be deemed complete upon full payment of the estate amnesty tax.
Tax Amnesty on Delinquencies
The tax amnesty on delinquencies covers all national internal revenue taxes such as but not limited to, income tax, withholding tax, capital gains tax, donor’s tax, other percentage taxes, excise tax and documentary stamp tax collected by the BIR, including value-added tax and excise tax collected by the Bureau of Customs (BoC) for taxable year 2017 and prior years. Specifically:
1. Delinquencies and assessments, which have become final and executory including delinquent tax account, where the application for compromise is requested on the basis of: (a) the doubtful validity of the assessment; or (b) financial incapacity of the taxpayer, but the same was denied by the Regional Evaluation Board (REB) or the National Evaluation Board (NEB), as the case may be, on or before the IRR take effect;
2. Pending criminal cases with the Department of Justice (DOJ) or the courts for tax evasion and other criminal offenses under Chapter II of Title X of the Tax Code, with or without assessment duly issued, and Section 275, Tax Code;
3. Tax cases subject of final and executory judgment by the Courts on or before the IRR take effect; and
4. Withholding tax agents who withheld taxes but failed to remit the same to the BIR.
The tax rates shall be as follows:
Nature of Delinquency
a. Delinquencies and assessments which have become final and executory
40% of the basic tax assessed
b. Tax cases subject of final and executory judgment
50% of the basic tax assessed
c. Pending criminal cases with criminal information filed with the DOJ or the courts for tax evasion and other criminal offenses, under Chapter II of Title X and Section 275 of the Tax Code, with assessments duly issued and otherwise excluded
60% of the basic tax assessed
d. Withholding agents who withheld taxes but failed to remit the same to the BIR
100% of the basic tax assessed
The law provides that availment of the tax amnesty on delinquencies does not imply any admission of criminal, civil or administrative liability on the part of the availing taxpayer. Any person, natural or juridical shall file within one (1) year from the effectivity of the IRR with the appropriate office of the BIR which has jurisdiction over the residence or principal place of business of the taxpayer a Sworn Tax Amnesty on Delinquencies Return (TADR) with Certificate of Delinquencies with payment. The acceptance payment form shall be issued by the RDO to accept the payment.
The tax delinquencies of those who availed of the tax amnesty on delinquencies and have fully complied with all the conditions in the Act and upon payment of the amnesty tax shall be considered settled and the criminal case and its corresponding civil or administrative case, if applicable, shall be terminated. The taxpayer shall then be immune from all suits or actions, including the payment of said delinquency or assessment, as well as additions thereto, and from all appurtenant civil, criminal, and administrative cases and penalties under Tax Code, as such relate to the taxpayer’s assets, liabilities, networth, and internal revenue taxes that are subject of the tax amnesty. Any notices of levy, attachment and/or warrants of garnishment issued against the taxpayer shall be set aside pursuant to a lifting of notice of levy/garnishment duly issued by the BIR.
The Authority to Cancel Assessment (ATCA) shall be issued by the BIR within fifteen (15) calendar days from submission to the BIR of the APF and the TADR.
Confidentiality and non-use of information and data in the ETAR and SALN
The Tax Amnesty Act states that any information or data contained in, derived from or provided by a taxpayer in the tax amnesty return, ETAR or SALN, as the case may be and appurtenant documents shall be confidential in nature and shall not be used in any investigation or prosecution before any judicial, quasi-judicial and administrative bodies.
It shall be unlawful for any person having knowledge of the Tax Amnesty Return and appurtenant documents to disclose any information relative thereto, and any violation thereof shall be penalized by a fine of one hundred fifty thousand (P150,000.00) and imprisonment of not less than six (6) years but not more than ten (10) years. If the offender is an officer or employee of the BIR or any government entity, the penalty under Section 270 of the Tax Code shall apply and the additional penalty of perpetual disqualification to hold public office.
The implement rules and regulations shall be promulgated and published by the Secretary of Finance in coordination with the Commissioner of Internal Revenue within ninety (90) days from the effectivity of this Act.
Veto of the General Tax Amnesty
The major veto of the President covers the entire title (Title III) on general tax amnesty. In effect, Sections 2(b), 3(d) and (e), and Sections 10 to 16 of the Tax Amnesty Act were vetoed, removing the availability of the general tax amnesty.
In addition to the veto, the President has asked Congress to pass another general tax amnesty bill that would include the lifting of bank secrecy for fraud cases, the inclusion of automatic exchange of information, and safeguards to ensure that the assets or net worth declarations would be truthful.
Attached is the copy of RA No. 11213, and the corresponding veto message.
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