Press Release
December 6, 2017

Bicam lowers estate tax, hikes deductions, relaxes rules in favor of heirs

The Senate and House conferees to the panel finalizing President Duterte's proposed new taxes have agreed "to cut the rates and the requirements" on the estate tax, which is levied on a deceased person's assets.

Senate President Pro Tempore Ralph Recto said "billions in properties left behind by hundreds of thousands of departed Filipinos" remain in limbo for the failure of their heirs to pay the estate tax, "either for lack of knowledge or lack of money or both."

Under the agreed version which will be sent to the two chambers for ratification, and eventually to Duterte's desk for his signature, the estate tax will be levied a 6 percent flat tax, family homes valued at P10 million will be exempted, and standard deduction hiked to P5 million, among other cuts.

At present, there are six tiers of the estate tax, with assets worth P200,000 exempt, with the highest rate slapped on an estate valued at P10 million and up, which will pay P1.25 million, plus 20 percent in excess of P10 million.

The estate tax on the fourth tier, which covers assets in the P2 million-P5 million range is P135,000 plus 11 percent in excess of P 2 million.

"Dito pa lang, marami nang hindi nakakapagbayad, kaya ang pag-aari kung nakatiwangwang, ay hindi na ililipat ang titulo. Hindi naiuutang sa bangko. Hindi nade-develop," Recto said.

The bicameral conference committee on the so-called TRAIN bill has also agreed to increase the estate tax-exempt value of a family home to P10 million from P1 million.

"We have decided to increase it by ten-fold to reflect real estate realities. The current rates were set 20 years ago when homes were a lot cheaper. Yung P2 million na bahay ngayon, matchbox lang ang laki. Bakit mo bubuwisan pa?" he said.

Recto said the standard allowable deduction has been raised to P5 million. "Kaya sa pag-compute ng estate tax, mayroon kaagad bawas na P5 million sa deductibles."

At present, surviving heirs can claim a maximum of P500,000 for medical expenses and P200,000 for the funeral of the deceased. "Kaya natin itinaas sa P5 million, para sakop na ang mga gastusin na ito."

Another stringent rule relaxed by the TRAIN conferees is the amount which can be withdrawn from the deceased's bank deposits, which are automatically frozen upon the demise of the account holder.

"We have agreed to allow an heir, or executor, or administrator, to make withdrawals, with no limit, for as long as a withholding tax is paid every transaction," Recto said.

"Ang sistema ngayon, hindi maka-withdraw ang mga namatayan sa account niya. Kung kailan kailangan ng perang pambayad ng ospital at palibing, hindi mo magagalaw ang pera sa bangko hanggang hindi nakakapagbayad ng buwis at nasa-submit ang napakaraming papeles at clearances," he said.

"We have also done away with rules that raise the hurdle for compliance," Recto said.

"The filing of the estate tax return shall be extended from six months to one year. Pwede na rin by installment ang bayad, up to two years. Kasi saan ka kukuha ng daan-daang libong piso kaagad?" Recto said.

"Hindi na rin kailangan ng Certified Public Accountant certification kung ang halaga ng ari-arian ay hindi lampas ng P5 million. Pati yung notice of death prior to estate settlement, tinanggal na rin natin," Recto said.

"The overall objective is ease in payment of estate tax at a time when a family is grieving over the loss of a loved one. In their bereavement, they need to be consoled. Pero ang siste ngayon, una pang kukuha ng pera ang gobyerno, una pa ito sa abuloy, kaysa sa namatayan," Recto explained.

Complicated rules have resulted in low payment of estate tax, with only 8 deaths out of 100 making an estate tax filing.

In the present Senate, Recto is the first to file a bill - Senate Bill 897 in July 2016 - reducing and rationalizing estate tax.

Recto praised Senate ways and means committee Sonny Angara, who also authored a bill seeking to reduce estate taxes, for sponsoring and championing the case for lower estate tax.

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