A.A. Amador Associates

February 5, 2007 BIR RULING [DA-067-07] BIR Ruling No. 39-99 Sec. 85, NIRC, Sec. 6, RA 6246, Sec. 1, PD 1246 A.A. Amador Associates 1612 Tower One, Ayala Avenue Makati City Attention: Atty. Kenneth Paul Que Gentlemen : This refers to your letter dated November 2, 2006 requesting for a ruling on whether or not a foreign currency deposit account left in the Philippines by a non-resident alien decedent is subject to estate tax pursuant to Republic Act (RA) No. 6426. It is represented that Mr. Jurgen Martin Cohler, a non-resident alien, died intestate in Manila on December 26, 1990, leaving as his only asset, a dollar account with the Bank of America. Mr. Cohler's heirs, both being non-resident aliens, were not made aware of this dollar account until recently. Upon learning of the account's existence, they communicated with the Bank of America which issued them a certification to the effect that as of 2005, there existed a bank account under Mr. Cohler's name. The heirs then engaged your firm to meet the requirements of the Bank of America in order for the latter to release the account to them. You now request this Office to confirm your opinion that based on BIR Ruling No. 39-99, foreign currency deposits of a non-resident alien decedent including interest and other income or earnings of such deposits are exempt from estate and all other taxes whatsoever, as long as the deposits are eligible or allowed under RA 6426, as amended. In reply, please be informed that pursuant to Section 85 of the Tax Code of 1997, 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 non-resident 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. In this regard, Section 6 of RA 6246 provides that: "Section 6. Tax exemption . All foreign currency deposits made under this Act, as amended by P.D. No. 1035, as well as foreign currency deposits authorized under P.D. No. 1034 , including interest and all other income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or nonresidents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of nonresidents, irrespective of whether or not they are engaged in trade or business in the Philippines ."(emphasis ours) In addition, it must be noted that Section 1 of Presidential Decree (PD) No. 1246, amending Section 6 of R.A. 6426, reiterates that all foreign currency deposits made under the said Act as amended by Presidential Decree No. 1035, as well as foreign currency deposits authorized under Presidential Decree No. 1034, including interest and all other income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or non-residents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of non-residents, irrespective of whether or not they are engaged in trade or business in the Philippines. Based on the foregoing, this Office is of the opinion that the dollar account of Mr. Jurgen Martin Cohler with the Bank of America, including interest and all other income or earnings of such deposit is exempt from estate and all other taxes whatsoever as long as the deposit is eligible or allowed under Section 6 of R.A. No. 6426, as amended. HAaECD 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service