To supplement the tax reform program of the Government and raise additional revenues, Congress has passed on third and final reading House Bill 4814, entitled An Act Granting Amnesty in the Payment of Estate Tax, or the Estate Tax Amnesty Law (HB 4814), which is the subject of this Tax Alert.
Further, both Senate and Congress have proposed separate bills on the grant of tax amnesty to cover all types of national internal revenue taxes (e.g., income tax). These bills have been referred to the Committee on Ways and Means and are currently under study.
HB 4814 seeks to grant amnesty in respect of estate tax for taxable year 2016 and prior years, which have remained unpaid as of 31 December 2016.
Under the current provisions of the National Internal Revenue Code of 1997 (NIRC), as amended, the estate tax is imposed at graduated rates of 5% to 20%, depending on the value of the net estate. However, under a separate house bill that is currently under study (i.e., HB 4774), the estate tax is proposed to be reduced to a single rate of 6%.
Failure to pay estate tax will result in exposure to penalties, which include a 25% surcharge and 20% deficiency interest per annum.
HB 4814 seeks to grant amnesty in respect of estate tax, and provides that any person who avails of the estate tax amnesty under the Estate Tax Amnesty Law shall be immune from the payment of estate taxes, and from any civil, criminal, or administrative penalties prescribed under the NIRC, arising from the failure to pay any and all estate taxes for taxable year 2016 and prior years.
The taxpayer shall file with the Bureau of Internal Revenue an Estate Tax Amnesty Return, in such form as may be prescribed in the implementing rules and regulations that will be issued subsequent to the passage into law of HB 4814. Further, in lieu of the payment of the unpaid estate tax at the higher rates of 5% to 20% and any penalties that have accrued thereon, the taxpayer shall pay the tax at the reduced rate of 6% of the decedent’s net estate, valued as of the date of death.
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HB 4814 has not passed into law. However, the Government committed to expedite its passage.
HB 4814 was transmitted to the Senate, for concurrence, on 15 February 2017, and read on first reading and referred to the Senate Committee on Ways and Means on 20 February 2017.