By: Atty. Jeremy O. Panganiban
The Tax Reform for Acceleration and Inclusion Act (TRAIN, for brevity) took effect on January 1, 2018, instituting further reforms and amendments to the Tax Reform Code of 1997, as amended. The taxes that were improved and simplified include estate tax.
Specifically,
estate tax is now at a flat rate of 6% based on the amount in excess of P5,000,000.00 for decedents who died on or
after the effectivity date of the new law.
The
allowable deductions to the estate in order to get the net estate of a citizen
or resident are, to wit: (1) P5 million
as standard deduction; and (2) P10,000,000.00
as deduction for the family home.
It bears stressing that funeral expenses and medical expenses incurred by the decedent were removed as allowable deductions. What is more, the requirement to secure a certification from the Punong Barangay for the decedent’s home so as to be considered as a family home for estate tax purposes has been deleted.
In
contrast, for deductions allowed to non-resident estates, there is a standard
deduction of P500,000.00; and a
proportionate deduction on: (a) claims against the estate; (b) claims of the
decedent against insolvent persons; and (c) for unpaid mortgages upon or any
debt/outstanding obligation relative to the property.
Futhermore,
the new law has increased the gross value of an estate, for which a return is required
to be filed, to P5 million. This must be
supported by a statement duly attested to by a Certified Public Accountant. In
addition, the time for filing an estate tax return is now one year from the
time of the decedent’s death. The requisite notice of death to be submitted to
the Bureau of Internal Revenue has been removed.
However, an estate, consisting of registrable property like stocks, real property, motor vehicle or other similar property is still required to have an estate tax return, regardless of value.
Likewise, under the new law, payment by installment on the estate tax due is allowed subject to the following requisites: (a) there is insufficient cash to pay the total estate tax due; (b) payment by installment must be made within 2 years from the statutory date; and (c) it is not subject to civil penalty and interest. Finally, unlike in the old tax law, bank deposits are now withdrawable. To be sure, the funds from the decedent’s bank account can now be withdrawn subject to the automatic deduction of 6% withholding tax, and the same funds shall be excluded from the gross estate for purposes of computing the estate tax.