Estate Tax

June 10, 2021

Are you a property owner? Or any member of your family perhaps?

Then you must read this till the end. Please note that this is only applicable for the residents of the Philippines.

My parents bought a piece of land sometime in the late 1980s somewhere in Pagsabungan, a hilly part of Mandaue City, Cebu. At that time the place was so undeveloped. I remember going there with my father, we brought with us any biodegradable item that we might use as landfill as our lot slopes down from the road before going up the hill.

Sometime in the 1990s they sold the lot due to financial needs. They made a profit of 100% of the cost they bought the land. Me and my siblings were very young then and have no idea on transfer of title of the land, more so taxes to be paid.

We don’t know what is the agreement between my parents and the buyer as to who will process the certificate of transfer for the land title.

Come year 2000, my father died. Even though at this time me and my siblings are already adults and are working, we still don’t have any idea about land titles. We also have no idea about the land title of  Pagsubangan lot not being transferred to the buyer’s name yet.

Just recently, somebody came to the house. She is the broker of the Pagasabungan lot buyer. She is processing the transfer of the land title. She said that she just came from the Bureau of Internal Reveunue (BIR) office to start the processing of the land title transfer and it was found out that we have to pay Estate Tax on all our properties as our father died and the title of our properties has to be transferred to the name of just my mother and not Sps. Dad and Mom.

So what is estate tax?

Per BIR, Estate Tax is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death.

It is not a tax on property.

It is a tax imposed on the privilege of transmitting property upon the death of the owner.

The estate tax has to be filed within the year from the date of the decedent’s death.

In our case, no estate tax has been filed since my father’s death in 2000. This means we have to pay the estate tax plus the penalty and compromise dues.

Because of the current processing of title transfer of the Pagsabungan lot, BIR was able to dig up also all our parent’s other properties and all of which has no estate tax filed or paid yet. Can you imagine the amount of penalties and compromise dues that we have to pay?

Good news is that the government is giving tax amnesty for its citizen to comply until June 14, 2021 and has extended the deadline for another 2 years due to the pandemic.

The estate tax amnesty allows the heirs to settle the unpaid estate taxes at the rate of 6% without penalty and compromise dues. This is applicable to estates of decedents who died on or before Dec. 31, 2017.

Currently, I am getting the services of the broker to process and file for our estate tax.

This is a perfect example of "ignorance of the law excuses no one”. Yes we were ignorant about these laws when we were children but we are now paying the consequences of our ignorance.

Hope this information helps. File that estate tax now while there is still time to enjoy the zero penalty.

Thanks for dropping by.

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Lead image by Unsplash