All the Things You Need to Know About an Estate Tax

By: Crown Asia
All the Things You Need to Know About an Estate Tax

People nowadays are so busy that they sometimes tend to forget to pay attention to other important and serious things like adulting stuff– insurance, investments, taxes, and many more that people are not that ready to discuss because of the stress and hassle that are incorporated with these kinds of matters. However, do not fret! Because things like these are completely normal and there will always be a point in anyone’s life that adulting stuff should be practiced and handled in order to make wiser decisions and create bigger moves.

Estate-taxes

Philippine Estate tax

One of the relevant things that a person must be informed about estate taxes is that it discusses what are the right practices and applicable processes in this kind of matter simply because it is a tax on the right of the deceased person to transfer heirs and beneficiaries such as money and properties which include a and lot for sale or anything that a person can inherit. According to Delatina, M. J. (2022), “In the Philippines, we cannot transfer personal or real properties to heirs without filing an estate tax return and paying the estate tax due. The imposition of Philippine estate tax or Philippine inheritance tax arises from the privilege of conveying the properties of an individual to lawful heirs or beneficiaries upon the former’s death.” This is a great explanation of why estate tax is important to know and normally discusses with people who are not knowledgeable enough about this kind of tax.

Every inheritance corresponds with numerous responsibilities and it will not be that easy to understand if details are incomplete so to discuss estate tax further, here are some important details to analyze and deliberate over.

People who can file an estate tax return

Listed here are the people who can file the estate tax return: the administrator, executor, or any of the remaining legal heirs, whether or not those who no longer reside in the Philippines, or when there is no executor or administrator appointed, qualified and acting within the Philippines, then any person in actual or constructive possession of any property of the decedent must file the return. However, the property will not be transferred to heirs or beneficiaries unless the estate tax is already settled and paid. To compute estate tax, all you need is to determine the net estate and then subtract the allowable deductions.

Law-and-taxes

According to Pinoy Attorney (2017), here are the lists of significant details to know:

What is included in gross estate?

  • Resident alien decedents/citizens: a.) Real or immovable property, wherever located. b.) Tangible personal property, wherever located. c) Intangible personal property, wherever located.
  • Non-resident decedent/nin-citizens: a.) Real or immovable property located in the Philippines. b.) Tangible personal property located in the Philippines. c.) Intangible personal property.

What is excluded from the gross estate?

  • GSIS proceeds/ benefits, Accruals from SSS, Proceeds of life insurance where the beneficiary is irrevocably appointed, Proceeds of life insurance under group insurance taken by the employer (not taken out upon his life), War damage payments, Transfer by way of bona fide sales, Transfer of property to the National Government or to any of its political subdivisions, Separate property of the surviving spouse, Merger of usufruct in the owner of the naked title, Properties held in trust by the decedent, and Acquisition and/or transfer expressly declared as not taxable.

Deadlines and considerations

There is also a deadline to be considered for filing and payment of the tax which must be settled within a year from the decedent’s death, susceptible to a filing extension that cannot go longer than 30 days if approved by the Bureau of Internal Revenue. It is filed with the revenue district office. In case the cash of the estate is insufficient to pay the total tax due, installment payments may be allowed within two years from the payment’s statutory date, without penalty and interest, upon the BIR’s approval. In meritorious cases, it may be extended depending on whether it is settled through the courts, or extra-judicially in accordance with Yap, H. (2022).

You need also to consider the current fair market value when it comes to the valuation. If it’s over a certain amount, taxes are imposed. You also need to hire a certified public accountant to handle such things.

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There is a lot to digest when discussing estate tax and all the information is not easy to understand. However, since estate tax is all about the inheritance of properties and money, it is also good to put into consideration things such as quality investment and solid property investment which Crown Asia can easily offer and provide since they are one of the best and most reputable developers in the Philippines building premium properties such as a house and lot for sale and lot only for sale that are all strategically located. It is a solid property investment that can be inherited. Furthermore, this kind of inheritance holds a lot of value since it cannot be destroyed easily nor disappear in a snap. It is something a person can keep for so long since properties like houses may contain beautiful memories to be cherished and remembered all over again.

Moreover, going back to the discussion of real estate, there are also penalties like surcharges of 25 percent shall be imposed if there is a failure to file the return or make the corresponding settlement for the tax on the due date, and a 50 percent on the filing of fraudulent returns. Yap, H. (2022) also stated that “unpaid taxes shall be assessed interest for deficiency (insufficient amount paid) and/or delinquency (no payment made) of 20 percent per annum prior to the TRAIN Law’s effectivity, or 12 percent per year after the TRAIN Law’s effectivity, from the payment date prescribed until the amount is fully paid.”

Filing-taxes

The former president of the Philippines, President Rodrigo Duterte signed RA 11213, or the Estate Tax Amnesty Program which grants taxpayers an opportunity to settle tax obligations through this estate amnesty program. The availment period of Estate Tax Amnesty is extended until June 14, 2023. With that, this tax amnesty act will help the people to settle all their unsettled estate tax liabilities.

Estate tax only proves that any people who will inherit real estate in the Philippines are required to follow the law and pay an estate tax to formally transfer their names in whatever property may it be. In addition, the estate tax can be paid in installments. What will happen if the estate tax is unpaid? Then the property cannot be transferred to the heir’s name nor can it be sold since there will be no certification that will confirm that the heir has the right of ownership. 

Read more: How to Pay Your Property Taxes in the Philippines