BIR Ruling [DA-192-06]

March 28, 2006 BIR RULING [DA-192-06] 94 & 98; DA-093-2004 Rene Q. Aguas 491 Kayumanggi Street Mandaluyong City S i r : This refers to your letter dated March 14, 2006 requesting for a ruling as to whether repudiation of inheritance is subject to donor's tax. It is represented that sometime in February 23, 2005, your wife, Asuncion D. Aguas died intestate, leaving certain undivided conjugal property more particularly described in Transfer Certificates of Title Nos. T-209158, T-171875, T-171876, T-178413, T-171865, T-158647, T-157505, T-157510, T-157511, T-157512, T-157513, T-97583, T-36358 and T-201408; that Asuncion left two (2) heirs namely Rene D. Aguas, spouse, and Arnel D. Aguas, only son; and that in the Extrajudicial Settlement with Waiver of Rights", Rene and Arnel repudiated their rights over the inheritance in favor of Michelle Laurice C. Aguas and Michael Joseph A. Aguas, the grandchildren of Asuncion and Rene. In reply, please be informed that as a rule, when a person renounces/repudiates his part of the inheritance, the right of accretion takes place and the same is added or incorporated to that of his co-heirs, co-devisees or co-legatees. The share of the renouncer shall accrue to his co-heirs in the same proportion that they inherit pursuant to Articles 1018 and 1019 of the New Civil Code of the Philippines. In legal succession, accretion takes place in case of repudiation among heirs of the same degree. This is because there is no right of representation. The co-heirs in legal succession are co-owners of the inheritance, for which reason there is always right of accretion among them, unlike in testamentary succession where there may or may not be a right of accretion. (Arts. 1018, 977 and 969, New Civil Code) In the instant case, when Rene and Arnel waived their shares in the inheritance in favor of the former's grandchildren, accretion had effectively taken place in the latter's favor. Undoubtedly, when both Rene and Arnel renounced their shares in the inheritance, they did not donate the property which had never become theirs. Such being the case, the renunciation is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997. aSTAIH In view of the foregoing, this Office holds that the renunciation or waiver by Rene Q. Aguas and Arnel D. Aguas of their shares in the estate of Asuncion D. Aguas, in favor of the former's grandchildren, Michelle and Michael, is not subject to donor's tax pursuant to Articles 1018, 1019 and 1021 of the Civil Code of the Philippines. (BIR Ruling Nos. DA-093-2004 dated March 1, 2004 and DA-251-99 dated April 23, 1999) 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.) PABLO M. BASTES, JR. OIC Head Revenue Executive Assistant Legal Service