BIR Ruling [DA-035-02]

March 07, 2002 BIR RULING [DA-035-02] 77 to 84; 95-98 Mr. Jose S. Suarez Unit 508B Wack Wack Twin Towers Wack Wack Road Mandaluyong City, M.M. S i r : This refers to your letter dated October 28, 1999 requesting for a certificate of exemption from estate tax. It is represented that you are the husband, the administrator of the estate and the sole heir of Thelma C. Suarez who died intestate in 1991; that at the time of her death, you and Thelma C. Suarez were both U.S. citizens and residents; that you and Thelma at that time did not have any permanent residence in the Philippines; that Thelma C. Suarez left no property in the Philippines except for parcels of land consisting of four (4) memorial lots, the value of which is about P100,000.00; that the Register of Deeds required you to produce a BIR certificate of exemption from estate tax before titles to the memorial lots can be transferred in your name; and that it is your opinion that the said estate is exempt from estate tax. In support of your request you enclosed the following: 1) Deed of Sale; 2) Death Certificate; and 3) Affidavit of Settlement of Estate In reply, please be informed that Republic Act No. 7499 which exempts from estate tax net estate valued at not more than P200,000.00 is not applicable in this case since the same was approved only on May 18, 1992 or after the death of Thelma C. Suarez. The National Internal Revenue Code (NIRC) of 1977, as amended which is the law at the time of the death (1991) of Thelma C. Suarez is the governing law. Section 78 of the same Code provides that "SEC. 78. Gross Estate. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated: Provided, However, That in the case of a nonresident decedent who at the time of his death, was not a citizen of the Philippines, only that part of the entire gross estate which is situated in the Philippines shall be included in his taxable estate." (emphasis provided) For this purpose, the estate tax is based on the value of the net estate regardless of the number of heirs or their relationship to the decedent. Under Section 77 of the Tax Code, as amended, (now Section 84 of the Tax Code of 1997), there shall be levied, assessed, collected and paid upon the transfer of the net estate as determined in accordance with Sections 78 and 79 of the same Code (now Sections 85 and 86 of the Tax Code of 1997), of every decedent, whether resident or nonresident of the Philippines, a tax based on the value of such net estate, as computed in accordance with the schedule found in said Section 77. In this connection, under Section 81 of the Tax Code, as amended, (now Section 88 of the Tax Code of 1997), the estate shall be appraised at its fair market value as of the time of death. However, the appraised value of real property as of the time of death shall either be whichever is higher of (1) the fair market value as determined by the Commissioner, or (2) the fair market value as shown in the schedule of values fixed by the Provincial and City Assessors, and shall be binding upon all concerned for purposes of computing any internal revenue tax based on the value of the property. From the foregoing, the estate of the late Thelma C. Suarez is subject to pay the estate tax imposed under then Section 77 of the Tax Code, as amended, (now Section 84 of the Tax Code of 1997) the law then enforced at the time of her death in 1991, based on the fair market value of the properties at the time of the death of the decedent comprising the net estate of the decedent which is arrived at in accordance with the following formula: Gross Estate (then Sec. 78) x x x Less: Statutory Deductions (then Sec. 79) x x x Gross Conjugal Estate x x x Less: Share of the Surviving Spouse (Sec. 79(c)) x x x Net Estate x x x ==== Furthermore, under then Section 82 of the same Code (now Section 89 of the Tax Code of 1997), in all cases of transfers subject to tax, or where, though exempt from tax, the gross value of the estate exceeds three thousand pesos (P3,000.00), the executor, administrator, or any of the legal heirs, as the case may be, within two (2) months after the decedent's death, or within a like period after qualifying as such executor or administrator, shall give a written notice to the Commissioner of Internal Revenue. Likewise, under then Section 83(b) of the same Code (now Section 90(B) of the Tax Code of 1997), the return required under Section 83(a) of the Tax Code, as amended, (now Section 90(A) of the Tax Code of 1997) shall be filed within ninety (90) days from the decedent's death. The Commissioner of Internal Revenue shall have authority to grant, in meritorious cases, a reasonable extension not exceeding thirty (30) days for filing the return. ASDCaI Finally, pursuant to then Section 84(a) of the Tax Code, as amended, (now Section 91(A) of the Tax Code of 1997), the estate tax imposed under then Section 77 of the same Code (now Section 84 of the Tax Code of 1997), shall be due and payable at the time the return is filed by the executor, administrator, or the heirs to the Revenue District Officer or Collection Agent or duly authorized treasurer of the city or municipality where the decedent was domiciled at the time of death. On the other hand, if the decedent is a non-resident of the Philippines at the time of his death, the said return shall be filed with the Office of the Commissioner of Internal Revenue. When the Commissioner of Internal Revenue finds that the payment on the due date of the estate tax or of any part thereof would impose undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five (5) years, in case the estate is settled through the court or two (2) years in case the estate is settled extrajudicially pursuant to Section 84(b) of the same Code (now Section 91(B) of the Tax Code of 1997). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. (BIR Ruling No. 95-98 dated June 19, 1998) Very truly yours, Commissioner of Internal Revenue (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group