BIR Ruling [DA-338-06]

May 25, 2006 BIR RULING [DA-338-06] Secs. 84, 85 & 86 Ms. Mary Jane Pula-Tagal No. 42 N. Parias St., Bahay Toro Quezon City M a d a m : This refers to your letter dated March 13, 2006 requesting in effect for an exemption from the payment of the estate tax on the estate of the late Martin William Rogers, a British national who died on November 19, 2002 a resident of Pasay City. By virtue of an Affidavit executed by Andrew John Rogers on May 31, 2005 before Solicitor Helen Timson, mfg solicitors, Edgbaston House, Walker Street, Wellington, Telfor TFIIHF, you were appointed as the authorized representative of the estate of the late Martin William Rogers. Martin William Rogers was granted by the Bureau of Immigration and Deportation (BID) a Special Resident Retiree's Visa on December 5, 2001. He was a member of the Retirement Program of the Philippine Retirement Authority (PRA) which membership was cancelled in view of his demise. He was not gainfully employed nor did he own any real property in the Philippines. However, he maintained a bank account at Metrobank-Head Office, Metrobank Plaza Annex Bldg., Sen. Gil J. Puyat, Makati City. From the foregoing, you are requesting to the effect that the estate of the decedent be exempt from the imposition of the estate tax and that a tax clearance be issued in your favor. In reply, please be informed that under Section 84 of the Tax Code of 1997, as amended, there shall be levied, collected and paid upon the transfer of the net estate as determined in accordance with Section 85 and 86 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 following schedule: If the net estate is: Over But Not Over The Tax Shall Be Plus Of the Excess Over P200,000 Exempt P200,000 500,000 0 5% P200,000 50,000 2,000,000 P15,000 8% 500,000 2,000,000 5,000,000 135,000 11% 2,000,000 5,000,000 10,000,000 465,000 15% 5,000,000 10,000,000 And Over 1,215,000 20% 122 10,000,000 Section 85 of the same Code provides that 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. aDSAEI On the other hand, Section 86(A) of the same Code provides for the computation of the net estate of a citizen or a resident. Thus, among the items allowed as deductions to the value of the gross estate of a citizen or a resident decedent, which items of deductions are common, are the following, (1) expenses funeral expenses (maximum of P200,000.00) & medical expensed (maximum of P500,000.00), (2) indebtedness claims against the estate, and (3) standard deduction in the fixed amount of P1M. Considering that the late Martin William Rogers is a resident decedent, the items of deductions enumerated in Section 86(A) of the Tax Code, as amended, shall be allowed for purposes of computing his net estate. Thus, if after deducting the allowable items of deductions enumerated in Section 86(A) from his gross estate, the remainder appearing is not more than P200,000.00, then his net estate is exempt from estate tax. On the other hand, if the value of his net estate exceeds P200,000.00, the excess shall be subject to the estate tax as computed under Section 84 of the same Tax Code. 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