BIR Ruling [DA-503-03]

December 15, 2003 BIR RULING [DA-503-03] R.A. 6426, as amended by P.D. 1246; 039-99 Follosco Morallos & Herce Suite 1506, 15/F, 88 Corporate Center 141 Valero Street Corner Sedeo Street Salcedo Village, Makati City Attention: Atty. Rachel P. Follosco Gentlemen : This refers to your letter dated June 9, 2003 stating that Mr. Teng Sing Yum, a holder of Hong Kong Identity Card No. A426957 died a resident of the Philippines on August 27, 1997; that he was a holder of a Special Resident Retiree's Visa. ("SRRV") granted by the Bureau of Immigration through the Philippine Retirement Authority ("PRA"), an agency organized pursuant to Executive Order No. 1037 for the purpose of implementing the Philippine retirement program for foreigners and expatriate/overseas-based Filipinos; that in compliance with the requirements of the PRA and his retirement visa application, he deposited the amount of US$50,000 in foreign currency deposit account with the Philippine National Bank ("PNB"), a PRA-accredited bank; that in addition to this, he also maintained two (2) foreign currency deposit accounts with Hongkong Shanghai Banking Corporation ("HSBC") in Makati City; that in view of the foregoing and for purposes of computing the estate tax due on the estate of Mr. Teng Sing Yum, you are requesting for confirmation that all the amounts deposited in foreign currency deposit accounts of Mr. Teng Sing Yum ( i.e ., those with PNB and HSBC) at the time of his death are not subject to estate tax consistent with BIR Ruling No. 039-99 and the provisions of the Foreign Currency Deposit Act [Republic Act (RA) No. 6426, as amended]. In reply, please be informed that pursuant to Section 78 of the 1977 Tax Code, as amended, the law applicable at the time of death of Mr. Teng Sing Yum, 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. It is your opinion, however, that all the amounts deposited by Mr. Teng Sing Yum in foreign currency deposit accounts ( i.e ., those with PNB and HSBC) at the time of his death are not subject to estate tax in accordance with BIR Ruling No. 039-99. Section 1 of Presidential Decree (P.D.) No. 1246, amending Section 6 of R.A. 6426, provides 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. Thus, foreign currency deposits of a resident or non-resident alien decedent including interest and all 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 R.A. No. 6426, as amended. In view thereof, the foreign currency deposit account of the late Teng Sing Yum who died a resident of the Philippines on August 27, 1997, with the PNB and HSBC including interest and all other income or earnings of such deposits are exempt from estate tax and all other taxes as long as the deposits are eligible or allowed under R.A. 6426, as amended. 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. SETAcC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group