The Bureau of Internal Revenue (BIR) recently issued Revenue Regulations (RR) No. 12-2018 or the Consolidated Revenue Regulations on estate tax and donor’s tax incorporating the amendment pursuant to RA 10963 (TRAIN Law), which introduced several amendments.

First, the said RR uniformly fixed the rate of estate tax, as well as donor’s tax, at six percent. This effectively amended the provisions of National Internal Revenue Code on the graduated tax schedules. Note that the taxes and procedures prescribed under the regulations shall govern the estate of the decedent who died on or after the effectivity of TRAIN Law.

To illustrate, Mr. A passed away leaving properties with a gross estate amounting to P5.5 million. If he died on January 15, 2017, the value of the estate tax due would be P540,000. On the other hand, if he died on January 15, 2018 the tax due would amount to P330,000.

Second, RR No. 12-2018 increased the allowable deductions from the deceased’s gross estate. The standard deduction for a resident is now P5 million and P500,000 for non-resident, plus claims against the unpaid debt and mortgages. The tax exemption for the estate of family home has also been increased from P1 million to P10 million.

Third, RR No. 12-2018 likewise changed the filing of the estate tax returns. Previously, the returns must be filed within six months from the decedent’s death. Under the new law, the heirs have one year from the decedent’s death to file a return. Also, a certification from a certified public accountant is now required for gross estate exceeding P5 million instead of P2 million.

Finally, RR No. 12-2018 allows the heirs to withdraw the bank deposits of the deceased, but subject to six percent final withholding tax, whereas in the old law, a certification from the Commissioner is required before one may withdraw an amount exceeding P20,000.

With the new and fixed rate of 6 percent, it is easier for people to estimate the total tax due to settle the estate of the ones who went ahead.

Manila Times Source

ATTY. PEACHES ARANAS

Managing Partner LMA LAW