BIR Ruling [DA-383-03]

October 22, 2003 BIR RULING [DA-383-03] Sec. 91 (B) Atty. Dennis Esguerra Nabaza 2573 Nakar Street, San Andres Manila S i r : This refers to your letter dated September 18, 2003 requesting on behalf of the legal heirs of the late Miguel G. Esguerra, who died on October 20, 1998, for an extension of time within which to pay the estate tax due on the decedent's estate and for exemption from the imposition of surcharge, penalties and interest thereon. It is represented that the late Miguel G. Esguerra died intestate on October 20, 1998; that prior to the expiration of the period within which to pay the estate tax, or on March 30, 1999, you requested for an exemption from the imposition of surcharge and penalty, anticipating that you will incur delay in paying the same; that as of date, you are still in the process of completing all pertinent documents as some of the properties are in litigation and/or untitled; and that the heirs are trying to raise funds to pay the estate tax due. In reply thereto, please be informed that under Section 90(B) and (C) of the Tax Code of 1997, estate tax return is required to be filed within six (6) months from the decedent's death, and in meritorious cases , a reasonable extension not exceeding thirty (30) days for filing the return may be granted by the Commissioner of Internal Revenue. On the other hand, the payment of the estate tax or any part thereof shall be made upon the filing of the return or on such date as fixed if an extension is granted by the Commissioner, but in no case to exceed five (5) years in case the estate is settled through the courts, or two (2) years in case the estate is settled extrajudicially pursuant to Section 91(B) of the same Code. Based on the foregoing, we regret to inform you that your above request for an extension of time within which to pay the estate tax due on the estate of the late Miguel G. Esguerra, which will be counted from the date of your letter, which is on September 18, 2003, is hereby denied for lack of legal basis. The extension of time to pay the estate tax provided under Section 91(B) of the Tax Code is reckoned from the last day the estate tax return is required to be filed, which is six (6) months from the time of death of the decedent or on the last day of the 30-day extension, if an extension to file the estate tax return is granted by the Commissioner. The duration of the said extension depends on the manner the estate of the decedent is settled, which is either through judicial or extra-judicial proceeding, and in no case to exceed five (5) years if the estate is settled through the courts, or two (2) years if the estate is settled extrajudicially. On the other hand, in your first letter there would have existed a ground which would merit an extension of time to pay. Since in your two (2) letters there was no mention that the estate of herein decedent is to be settled judicially, an extension of time of two (2) years, maximum, would have been observed. Thus, counting two (2) years from the last day the estate tax return of the estate of the late Miguel G. Esguerra was supposedly filed, or from April 18, 1999, the said two-year extension of time to pay would have already lapsed as of April 9, 2001. An extension of time to pay, in effect, would have lessen the total tax liability of the estate of the late Miguel G. Esguerra since the surcharge and penalties for its failure to pay the estate tax due within the prescribed date will be waived as a consequence thereof. However, this condonation of the imposition of the surcharge and penalties is conditioned upon payment of the estate tax due within the two-year extension period. aCSHDI Considering that up to the present you have not yet paid the estate tax due nor filed the corresponding estate tax return for the estate of the late Miguel G. Esguerra, a penalty equivalent to twenty-five percent (25%) of the amount due shall be imposed pursuant to Section 248 of the Tax Code of 1997. In addition thereto, a delinquency interest at the rate of twenty percent (20%) per annum shall be imposed pursuant to Section 249 of the same Code based on the estate tax due beginning April 18, 1999 until such time the said amount is fully paid. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service