Death and taxes

Nothing in this world is certain but death and taxes.

One even outlives the other.

When a person dies, even his right to transmit his property to his heirs is subject to tax.

According to the Bureau of Internal Revenue, the estate tax is not a tax on property, rather it is a tax imposed on the privilege of a deceased person to transmit ownership of his assets to his heirs, whether or not the deceased left a will or last testament.

While the ones who are left behind or the heirs may enjoy use of the property left by the deceased, they cannot transfer title over those property, whether real or personal property, to themselves or to others. This is because the Register of Deeds will require them to present, among others, proof that they had paid the estate tax to the Bureau of Internal Revenue.

But don’t think that you can just go to the BIR and say that you want to pay the estate taxes. There are a number of requirements and clearances that you need to obtain before the BIR issues what is called the certificate authorizing registration (CAR) and the computation sheet of tax due on the estate.

If you are the sole heir and the deceased did not leave debts, then you can execute what is called an affidavit of self-adjudication. If instead there are several heirs of age and the deceased did not execute a will and has no debts, then the heirs can settle the matter of how the properties should be divided among them and execute a deed of extrajudicial settlement of the estate. If self-adjudication or extra-judicial settlement among several heirs is not possible, or if the deceased left a will, then the estate has to be settled judicially in court and this could take years especially if the parties are in disagreement.

If the deceased has bank deposits, the heirs cannot just go to the bank and withdraw the money. They first have to present among others a BIR issued certificate that the estate tax has been paid.

What is the tax rate imposed by law on this privilege of the deceased to transfer his property to his heirs? It depends on the law prevailing at the time of the death of the decedent.

Under the TRAIN Law (RA 10963), beginning Jan. 1, 2018, the tax rate is six percent based on the value of the net estate determined as of the time of the death of the decedent consisting of all properties, real or personal, tangible or intangible less allowable deductions. The new law made computing more simple because a single tax rate is now imposed unlike prior to 2018 when the tax rate was graduated depending on the value of the net estate. Under the old law, the rate can be as high as P1.215 million for the first P10 million value of the net estate plus an additional 20 percent of the excess over P10 million.

But right now, there is an estate tax amnesty and it’s availment has been extended until June 14, 2023.

A lot of questions are now being raised on the supposedly unpaid estate tax on the properties left by former president Ferdinand Marcos and the liability of his heirs to pay the said assessment by the BIR amounting to as high as P203 billion.

As explained to me, it was not the supposed heirs, namely his wife Imelda, or his children, or the administrator of the estate of the deceased, who filed an estate tax return with the BIR.

After their return from exile in Hawaii, a special tax audit team was created to conduct an examination and investigation of the tax liabilities of the late president as well as his associates and cronies. It concluded that the Marcoses failed to write a written notice of the death of the decedent, an estate tax return, as well as several income tax returns.

It was the BIR which identified the properties that should belong to the estate of the late president Marcos and it was the bureau which filed the estate tax return. At that time, it computed the tax at P23 billion. But note that this is within the powers of the BIR commissioner.

Under the law, if the estate tax is not paid, then the BIR can go after the properties belonging to the estate for the satisfaction of the unpaid tax. But the BIR could not levy on these properties because they have been sequestered by the government.

Are the heirs of the former president liable to pay the said estate tax? To be liable, then the properties should first belong to the former president. Ownership of these properties and assets is not automatically passed on to heirs the moment the owner dies. The Civil Code merely provides that it is the right to succeed that is transmitted from the moment of the death of the decedent.

Unfortunately, many of the properties listed on the so-called Marcos estate are not being claimed by his heirs. What properties of the former president were transmitted to the heirs upon his death? And were these properties transmitted? If yes, then the executor or administrator of the estate would be liable to pay the estate tax or if they refuse, then the BIR can go after these properties and sell them. Since the government is the one in possession of these properties, then it would be a case of one agency going after another to satisfy this supposed unpaid taxes.

The BIR, which is being questioned for its alleged inaction in collecting these supposedly unpaid estate taxes, claims that just last December, it sent its latest demand for the Marcos family through the estate administrator, to settle its tax deficiencies.

According to the BIR, the estate tax covers only the properties that were owned and in the possession of the family at the time of the death of the former president and does not include properties sequestered by the government.

It also insists that as held by the Supreme Court, BIR’s assessment of the estate taxes on the Marcos properties was final, executory, and unappealable. Basis for the decision?  The failure of the Marcoses to submit a protest to the estate tax assessment within 30 days from the issuance of the formal assessment to the family in October 1992.

Back then, the tax that was assessed was P23 billion. Because of interests and penalties, BIR claims it has ballooned to over P200 billion.

Critics claim that the amount is enough to buy over 119 million sacks of rice to feed almost 60 million Pinoys for one year. Or a cash aid of almost P50,000 for every Filipino who lost his or her job because of the pandemic.

Election or no election, non payment of taxes should never be condoned. Taxes are the lifeblood of our nation and without taxes, our government would ba paralyzed. Our country needs each and every peso for its economic recovery efforts and for its continuing battle against COVID-19. However, the BIR should only be assessing taxes on those from who these taxes are due.

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