Republic of the Philippines

DEPARTMENT OF FINANCE
NATIONAL TAX RESEARCH CENTER
3rd Floor, Palacio del Gobernador Condominium
Gen. Luna St. cor. A. Soriano Jr. Ave.
Intramuros , Manila

Estate Tax Amnesty

Objectives

1. To give an overview of the proposed estate

tax amnesty program of the government; and

2. To present and compare the features of the

tax amnesty program measures of other
countries.
Description

• Estate Tax is a tax on the right of the deceased person to transmit

his/her estate to his/her lawful heirs and beneficiaries at the time of
death and on certain transfers, which are made by law as equivalent
to testamentary disposition. It is not a tax on property. It is a tax
imposed on the privilege of transmitting property upon the death of
the owner. The Estate Tax is based on the laws in force at the time
of death notwithstanding the postponement of the actual possession
or enjoyment of the estate by the beneficiary.

• The transfer of the net estate of every decedent, whether resident or

non-resident is subject to estate tax.
Transfer Taxes

• Transfer taxes are those taxes imposed upon

the privilege granted by the state to the taxpayer
so that he may transfer properties, real or
personal, without consideration.
Nature of Transfer Taxes

• Transfer taxes are excise or privilege taxes that

are imposed on the act of passing ownership of
property and not taxes on the property
transferred.
Basis on the imposition of Estate Tax

• Estate tax is imposed upon the basis of the net

estate of the decedent, considered as a unit,
regardless of the number of shares into which it
may be divided or the relationship of the
beneficiaries.
The Law that shall Govern the Imposition of Estate Tax

• RR 02-2003 reiterates the well-settled rule that

estate taxation is governed by the statute in
force at the time of the death of the decedent.
When the Estate Tax Accrues

• It accrues upon the death of the decedent.

Purposes for Imposing Estate Tax

• To generate additional revenue for the

government.

• To reduce the concentration of wealth.

History of Estate Tax
Background Information
• From the beginning, the estate tax system of the Philippines
featured two (2) components, the inheritance tax and the estate tax.
The inheritance tax which was a tax imposed on the heirs of the
decedent was first imposed by Act No. 2601 which took effect on
July 1, 1916, and through re-enactments, remained in force for quite
some time. Section 86 of Commonwealth Act (CA) No. 4662
provided that in addition to the estate tax, there shall be levied,
assessed, collected and paid an inheritance tax equal to the sum of
the percentage of the value of the individual shares of each heir or
beneficiary in the net estate, after deducting the amount of the
estate tax, of every decedent, whether a resident or non-resident of
the Philippines.
Background Information
• The inheritance tax was, however, repealed effective January 1,
1973 under Presidential Decree No. 69 and integrated into the
estate tax for practical administrative reasons.4 The difficulty in
administering the inheritance tax arises particularly when the will of
the testator provides for contingent future interests, with the result
that the heirs who will take the amount they will receive remain
uncertain for many years after the decedent’s death; or the heirs
may also be undetermined for a considerable number of years when
the will of the decedent is being contested as in the case of several
heirs. This leads to difficulties of valuation and collection and loss of
or at least a lag in the realization of revenue on the part of the
government.
Background Information
• The estate tax was first imposed by Sec. 85 of CA No. 466 which
was approved on June 15, 1939 and became effective on July 1,
1939.
• Reduction in the number of tax brackets and increases in rates were
effected under Section 85 by R.A. No. 579 which became effective
on September 15, 1950.
• Subsequently, Presidential Decree (PD) No. 69, amending certain
sections of the NIRC was issued on November 24, 1972 and
became effective on January 1, 1973.
• Later on, Section 77 of the NIRC, as amended by RA 7499
approved on May 18, 1992 restructured the estate tax structure by
reducing the then existing 16 schedular rates (3%-60%) to only six
(6) (5%-35%).
Background Information
• The latest amendment to the estate tax before RA 10963 was introduced by
RA No. 8424 approved on December 11, 1997 and became effective on
January 1, 1998.

• In sum, the highest 19 tax brackets were recorded in the history of estate
tax rates under CA 466 on July 1, 1939. This was followed by 16 tax
brackets on January 1, 1973 and 10 tax brackets on September 15, 1950.
At present, the NIRC provides for only six (6) tax brackets with marginal
rates ranging from 5% to 20%. It must be noted that at the outset of the
legislation on death taxes, no exemption was provided by the Tax Code but
subsequently, PD 69 granted an exemption of P10,000. This amount was
correspondingly adjusted to the present exempt amount of P200,000.

• The latest amendment is the passage of Republic Act 10963 or the Tax
Reform for Acceleration and Inclusion (TRAIN).
List of Laws amending the
Estate Tax
Pertinent Bills

• Senate Bill No. 867 – AN ACT INSTITUTING

ESTATE TAX REFORM, AMENDING FOR THIS
PURPOSE SECTIONS 84, 86 (A), 89, 90 AND
97 OF THE NATIONAL INTERNAL REVENUE
CODE OF 1997, AS AMENDED, AND FOR
OTHER PURPOSES.
Pertinent Bills

• Senate Bill No. 107 - AN ACT REPEALING THE

ESTATE TAX UNDER REPUBLIC ACT NO.
8424, OR THE NATIONAL INTERNAL
REVENUE CODE OF 1997, AS AMENDED.
Pertinent Bills

• Senate Bill No. 980 - AN ACT AMENDING

SECTIONS 84, 86, 89 AND 97 OF TITLE III,
CHAPTER I, ESTATE TAX OF THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AS
AMENDED.
Pertinent Bills

• Senate Bill No. 769 - AN ACT INCREASING

THE ESTATE TAX EXEMPTION, AMENDING
FOR THE PURPOSE SECTION 84, CHAPTER
1, ESTATE TAX, TITLE III OF THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AS
AMENDED.
Pertinent Bills

• Senate Bill No. 293 - AN ACT DECLARING A

ONE-TIME AMNESTY ON ESTATE TAX,
INCLUSIVE OF FINES, INTEREST,
PENALTIES, SURCHARGES AND OTHER
ADDITIONS THERETO, AND FOR OTHER
PURPOSES.
Pertinent Bills

• Senate Bill 294 - AN ACT AMENDING

SECTION 84 OF CHAPTER I, TITLE III OF THE
NATIONAL REVENUE CODE OF 1997 AS
AMENDED, AND FOR OTHER PURPOSES.
Pertinent Bills

• House Bill No. 39 - AN ACT CREATING A MORE

EQUITABLE, PROGRESSIVE AND JUST TAX SYSTEM,
BY ADJUSTING THE LEVEL OF NET TAXABLE
INCOME AND NOMINAL TAX RATES OF THE
INDIVIDUAL INCOME TAX, AMENDING FOR THE
PURPOSE SECTION 24 (A) (1) OF REPUBLIC ACT
NO. 8424, OTHERWISE KNOWN AS THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AS AMENDED
BY REPUBLIC ACT NO. 9504, AND FOR OTHER
PURPOSES.
Pertinent Bills

• House Bill No. 4881 - AN ACT GRANTING

EXEMPTION TO ESTATE TAX TO THE ESTATE OF
DECEASED MEMBERS OF THE ARMED FORCES OF
THE PHILIPPINES AND THE PHILIPPINE NATIONAL
POLICE WHO DIE IN SERVICE AND AMENDING FOR
THIS PURPOSE THE PROVISIONS OF RA 8424.
Pertinent Bills

• House Bill No. 4814 - AN ACT GRANTING AMNESTY

IN THE PAYMENT OF ESTATE TAX.
Pertinent Bills

• House Bill No. 4815 - AN ACT SIMPLIFYING THE

ESTATE TAX RATE AMENDING FOR THE PURPOSE
SECTION 84 OF THE NATIONAL INTERNAL REVENUE
CODE OF 1997, AS AMENDED.
Adjustments in estate taxation
 On estate tax rate
NIRC of 1997 R.A. No. 10963
Over But not This tax Plus Of the
over shall be Excess
Over
• Estate tax is fixed at 6%.
PhP200,000
Exempt

PhP200,000 PhP200,000
500,000 0 5%

500,000 2,000,000 PhP15,000 8% 500,000

2,000,000 5,000,000 135,000 11% 2,000,000

5,000,000 10,000,000 456,000 15% 5,000,000

10,000,000 And 1,215,000 20% 10,000,000

over

Source: www.pwc.com/ph/en/tax-alerts/assets/pwcph_tax-alert-34.pdf; viewed on: January 11, 2018

Allowed Deductions
NIRC of 1997 R.A. No. 10963
Sec. 86 (A) Citizens or residents are allowed the •Removed the allowance for deductions of funeral
following deductions, among others: expenses, judicial expenses, and medical expenses.

• Expenses, losses, indebtedness, and taxes (among • Increased allowance for deduction of family home to
others, funeral expenses not to exceed PHP200,000 PHP10m.
and judicial expenses)
• Family home not to exceed PHP1m • Increased the standard deduction to PHP5m.
• Standard deduction of PHP1m
• Medical expenses not to exceed PHP500,000
Sec. 86 (B) A nonresident not a citizen of the • Removed allowance for deduction of expenses,
Philippines is allowed the following deductions, among losses, indebtedness, and taxes.
others:
• Provides for a standard deduction of PHP500,000.
• Expenses, losses, indebtedness, and taxes (among
others, funeral expenses not to exceed PHP200,000 • Provides that a proportion of the claims against the
and judicial expenses) estate, claims against insolvent persons, and unpaid
• Property previously taxed mortgages may be claimed as a deduction from the
• Transfers for public use estate.
Sec. 86 (D) An Individual who is a nonresident not Repealed
citizen of the Philippines shall not be allowed to claim
any deduction unless the value of the nonresident’s
gross estate situated outside the Philippines is
included in the return filed.
Filing a notice of death

NIRC of 1997 R.A. No. 10963

• Sec. 89 Written notice of • Repealed

death required for gross
estates exceeding
PHP20,000.
Estate Tax Returns
NIRC of 1997 R.A. No. 10963

Sec. 90 (A) (1) All transfers subject to estate
tax or those, though exempt from tax, have
gross values exceeding PHP200,000, or
regardless of the gross value of the estate
where the said estate consists of registered or
registrable property shall file an estate tax
return.
All transfers subject to estate tax, or regardless
of the gross value of the estate where the said
estate consists of registered or registrable
property shall file an estate tax return.
Estate tax returns showing a gross value
exceeding PHP5m must be certified by a CPA.

(A) (3) Estate tax returns showing a gross

value exceeding PHP2,000,000 must be
The estate tax return must be filed within one
certified by a Certified Public Accountant
year from the decedent’s death.
(“CPA”).

Sec. 90 (B) The estate tax return must be filed

within six months from the decedent’s death.
Payment of state taxes

NIRC of 1997 R.A. No. 10963

• Sec. 91 Payment of • Additional provision:

estate tax. An estate with insufficient
cash is allowed to pay the
estate tax due by installment
within two years from the
statutory date for its payment
without civil penalty and
interest.
 Payment of tax antecedent to the
transfer of shares, bonds, or rights

NIRC of 1997 R.A. No. 10963

• Sec. 97 A bank shall not allow
withdrawal from a decedent’s bank
account without the Commissioner
certifying that taxes imposed thereon
have already been paid.
• Banks, which has knowledge of the
death of the person, shall allow
withdrawals from a decedent’s
deposit account subject to a 6% final
withholding tax.

The administrator of the estate or

any one of the heirs may, when
authorized by the Commissioner,
withdraw an amount not exceeding
PHP20,000 even without the
certification from the Commissioner
that the estate taxes have been paid.
Tax Amnesty in Asian
Countries
 Bangladesh
• Bangladesh is a country which experiences an acute poverty.
Therefore, the tax burden is only shared by a limited number of
individuals and corporations or only ≤1% of its 133 million
population.

• There is only a dearth of studies which discuss the duration of the

tax amnesty implementation in Bangladesh. Bangladesh has
launched 18 times of tax amnesty between 1971 until 2013. The tax
amnesty program in Bangladesh has created a detrimental effect on
the country economy. The taxpayers who join the tax amnesty
program was protected by the government even though they only
reported 1% of their black money as they got a license of whitening
some black money.

Source: www.econjournals.com/index.php/ijefi/article/view/4358/pdf; viewed on: January 11, 2018

India
• India has conducted repeated tax amnesty program: In 1951, 1965, 1975, 1975, 1980, 1985,
1986, 1991, 1997, 2013 and the most recently is in 2016. The 1997 tax amnesty or called as the
Voluntary Disclosure of Income Scheme (VDIS) was proposed to reduce black economy.

• The program was targeted to the corporate and individuals that set the 35% rate and 30% rate of
tax for each party to legitimize their assets without any retrospective penalties. The 1997 tax
amnesty program succeeded in raising the 3.6% of the gross domestic product from 3% or less in
the previous 5 years. The VDIS was able to attract more than 350.000 individuals and few
companies to disclose their undisclosed income. Despite its significant success, a Public Interest
Litigation was filed in the Supreme Court in 1997 debating that the tax amnesty program penalized
obedience and genuine taxpayers and at the same time encouraged errant tax evaders. The
Supreme Court then ruling that the Indian government is not allowed to offers tax amnesty
scheme after 1997.

• The second most recent tax amnesty which was introduced on June-September 2016 had been
succeeded in attracting attracted 64,275 declarations which resulted in Rs. 294 billion in
government revenue. The taxpayer is only required to pay a 31% tax against 45% tax stipulated in
the Income Declaration Scheme 2016. The Indian government then launched the last resort tax
amnesty which lasts from December 2016 until March 2017. The taxpayer who declared their
undeclared income should pay the tax, surcharge, and penalty totaling in all to 49.9%.
Indonesia
• Similar to India, Indonesia experience a very serious tax problem. Indonesia had
launched tax amnesty program in 1964, 1984 and 2008 but all of those tax amnesty
programs were fail due to the weak legal issue. The third tax amnesty was able to
collect 7.46 trillion rupiahs from 5,635,128 individuals but the amount collected was
lower than the amount targeted by the tax office service.

• After the three tax amnesties program launched in 1964, 1984 and 2008, Indonesia
has launched another tax amnesty on 1 July 2016 until March 2017.

• The 2016 tax amnesty program in Indonesia is quite successful as it able to break the
world records (Jakarta Globe, 2016). In its first round of tax amnesty (July-September
2016), the Indonesian government was able to collect IDR 2,963 trillion ($229 billion)
or nearly 74% or IDR 4,000 trillion of the government target. The tax amnesty
collected by Indonesian government beats Italy’s 2009 tax amnesty program which
only able to collect IDR 1,179 trillion. Until the end of December, the government was
able to collect IDR 4,043.66 trillion (US$311 billion) from by 512,315 taxpayers.
Kazakhstan
• Kazakhstan had approved the tax amnesty program in
connection with the legalization of the property for three
times. The first campaign was held in 2001 and
succeeded in legalized $480 million only in one month.
The second legalization was conducted in 2006-2007
resulting in $6.8 billion of tax revenue from both capital
and property tax (OECD 2014). The third tax amnesty
program was quite successful as it was able to collect
5.7 trillio tenges (around $17 billion) from more than
140.000 taxpayers.
Malaysia
• There is very limited information available either from the scholarly
database or from the popular sources regarding the tax amnesty program in
Malaysia.

• Historically, there was only one-time full-scale tax amnesty given to tax
evaders in the 1960s. In 2015, Malaysian Inland Revenue Board launched
tax amnesty program for a short period only until 30 November 2015. The
tax amnesty program was then extended from 1 March 2016 until16
December 2016. The aim of the tax amnesty program was to boost
voluntary disclosures and early settlement of tax debts among taxpayers.

• While the majority of the countries that applies tax amnesty in the world
covers the repatriation of the offshore property and the whitening of the
black money, the Malaysian tax amnesty does not cover both issues due to
the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of
Unlawful Activities Act 2001.
Thailand

• Thailand offers a range of new tax rate

reductions and exemptions to the
corporation through its latest tax amnesty
in 2016. The tax amnesty only held for 2.5
months from 1 January 2016 to 15 March
2016 (Richter, 2016). The 2.5 month’s tax
amnesty program had accumulated more
than 40,000 companies.
Implementation of tax amnesty in 9 countries

Frequency of Most recent Amount

Country tax amnesty tax amnesty Duration collected
(bn)
Bangladesh 18 2013-2014 2 years $2.2
India 11 2016 4 months $9.8
Indonesia 4 2016 9 months $365
Kazakhstan 3 2014-2016 16 months $17
Malaysia N/A 2016 8.5 months N/A
Pakistan N/A 2016 1 month 0.0004
Philippines 2007-2008 Until March 2008 0.1117
Sri Lanka 11 2003 N/A N/A
Thailand 2006 2.5 months N/A

Source: www.econjournals.com/index.php/ijefi/article/view/4358/pdf; viewed on: January 11, 2018

THANK YOU!