Filing and Payment of the Estate Tax

March 29, 1990 BIR RULING NO. 045-90 78 000-00 045-90 Gentlemen : This refers to your letter dated October 10, 1989 requesting in behalf of your client, Mrs. Rosario U. Ramos, a ruling on the following issues relative to the filing and payment of the estate tax as well as on the extra-judicial settlement of the estate of your said client's deceased husband: 1. Will the gross estate of the Decedent include the agricultural lands owned by him beyond 5 hectares but which are already acquired by the State by operation of law, for purposes of filing the estate tax return? 2. Considering that there can be no extrajudicial partition nor disposition of the estate of the Decedent resulting in the transfer of the properties of the latter to his heirs without the prior payment of the estate tax, can the estate tax not be considered as a tax on land transfer under Section 66 of CARL thus exempting the state-acquired agricultural landholdings of the Decedent in excess of five (5) hectares from estate tax? It is represented that Section 66 of the Comprehensive Agrarian Reform Law of 1988 ("CARL") contains the following provisions: "Sec. 66. Exemptions from Taxes and Fees of Land Transfers . Transactions under this Act involving a transfer of ownership, whether from natural or juridical persons, shall be exempted from taxes arising from capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof: Provided, that all arrearages in real property taxes, without penalty or interest, shall be deductible from the compensation to which the owner may be entitled." that likewise, Section 6 of the same law as implemented by the Department of Agrarian Reform (DAR) Administrative Order Nos. 1 and 2, series of 1989, provides that the agricultural land retention limit of the landowner shall not exceed five (5) hectares; otherwise, any sale, disposition , lease, management contract or transfer of possession of private lands executed by the original landowner (e.g. Decedent) in violation of CARL (i.e., beyond 5 hectares) after June 15, 1988 shall be null and void; and that the aforementioned out-off date marks the effectivity date of CARL. In reply, please be informed that under Section 78 of the Tax Code, as amended, the value of the gross estate of the decedent shall be determined by including the value at the same time of his death of all property, real or personal, tangible or intangible, wherever situated. Such being the case, your queries Nos. 1 & 2 are answered in the negative, however, the equivalent value of said agricultural land beyond five (5) hectares as determined by the Department of Agrarian Reform which is payable to the decedent prior to his death shall form part of his estate for purposes of the estate tax. Moreover, the estate tax cannot be considered as a tax on land transfer under Section 66 of CARL in order to exempt the state-acquired agricultural landholdings of the decedent in excess of five (5) hectares from estate tax since by the very nature of the estate tax, the same is a tax on the privilege to transmit property upon death by the decedent and not on the disposition or conveyance of private agricultural land whether voluntarily or otherwise by the landowner. casia Very truly yours, (SGD.) JOSE U. ONG Commissioner