If you’ve been following the news recently, you would know that Congress unanimously approved House Bill No 4814 or The Real Estate Tax Amnesty Bill.
Anyone who owns real estate properties will find this significant to them. It is a tax amnesty on real estate taxes.
Before delving into the content of the Real Estate Tax Amnesty Bill, it is noteworthy to explain certain legal concepts.
What is Estate Tax?
Estate tax is the tax on the right to transmit property at death and on certain transfers by the decedent during his lifetime. These are made by the law equivalent of testamentary dispositions.
What is a Tax Amnesty?
Since “Taxes are the lifeblood of the government, and without taxes, the government can neither exist nor endure”, there are only certain instances where the government will forgo the collection of it.
A tax amnesty is a prime example of the government (through the legislature) deciding that it will not pursue the collection of taxes.
It is interesting to note that under our Constitution, it is Congress that wields the power of the purse–thus, it is also fitting that only they have the power to declare a tax amnesty.
The last amnesty in recent memory would be Republic Act No. 9480, which was an amnesty on all unpaid taxes due to the national government from 2005 and prior years. Weirdly enough, Republic Act No. 9480 contained an explicit moratorium with regard to tax amnesty, as found in Section 11 of the law.
However, constitutional law provides that the power of Congress to legislate is plenary–and by nature of that plenary power, non-repealable laws are not allowed to be passed.
Real Estate Tax Amnesty Bill: Sections You Must Be Aware Of
Tax amnesty laws by nature are helpful to the taxpayer; however, as the Latin saying goes: “Timeo Danaos et dona ferentes” (Beware of Greeks bearing gifts), a person applying under tax amnesty laws may possibly lead to other disclosures or possibly onerous conditions.
Sections 4 and 7
Section 4 provides that it covers estate taxes due from 2016 and prior years. This is whether or not an assessment has been made.
Thus, no prior assessment is needed to qualify for the amnesty. However, Section 7 provides that certain persons are excluded from availing the amnesty.
- Persons with pending cases before the Presidential Commission on Good Government;
- Those with cases involving unexplained wealth or under the Anti-Graft and Corrupt Practices Act. Also included are cases involving the Anti-Money Laundering Act;
- Those with tax evasion cases and tax cases already subject to final and executory judgment by the courts.
Section 6 of the bill delineates the benefits of those availing the tax amnesty, which includes immunity from civil and criminal liability arising from the non-payment of estate tax for the years covered.
It also mentions the exclusion of the tax amnesty return from being used as evidence in any estate settlement proceeding before any judicial or quasi-judicial or administrative body.
Books of accounts and other records of the taxpayer for the years covered shall not be examined. However, the tax commissioner may authorize in writing the examination of which for the purposes of any tax refund or tax incentives or tax exemption which may be due.
Another section of note is Section 8. It provides that any unlawful disclosure of the tax amnesty return is punishable by law. This is in relation to the fact that the return is excluded as evidence.
(We wonder how it would affect estate cases where one party grossly undeclared the estate’s size. This happens in cases involving succession–speculation for another day, perhaps.)
Any gross understatement of the properties of the estate which amounts to 30% or more will be subject to penalties of perjury as found in the revised penal code. Furthermore, any immunity or privilege granted is revoked.
The willful failure of the taxpayer to include any property shall be deemed prima facie fraud and will cause the attachment of the property.
Lastly, the House Bill 4814 and its partner bill 4815 provide for a single-tier taxation scheme with regard to estate tax. This is 6% of the estate of the decedent.
This is vastly different to the current system which would tax on a schedular basis. This means that if the estate exceeds certain amount thresholds, the tax due would be higher.
With a flat 6% tax rate, estates Php 200,000 and below (previously tax-exempt), would now have to pay Php 12,000.
But until the Real Estate Tax Amnesty Bill becomes a law, all pertinent discussion about it remains as speculation.
This thoughtpiece is from Atty. Kevin Baldonado, the Chief Legal Counsel of Taxumo (www.taxumo.com), the Philippines’ end-to-end online tax assistance platform that helps solopreneurs, self-employed individuals, freelancers, and licensed professionals file and pay their taxes quickly and easily.