Streamlining the Procedures in the Payment of Estate Tax and Related Taxes of Agrarian Reform Covered Lands

April 18, 2013 JOINT DAR-DOF-DOJ-LBP ADMINISTRATIVE ORDER NO. 01-13 SUBJECT : Streamlining the Procedures in the Payment of Estate Tax and Related Taxes of Agrarian Reform Covered Lands PREFATORY STATEMENTS WHEREAS, Section 1 of Article 12 of the 1987 Constitution mandates that the state shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the lands and taking into account Section 9, Article III, which provides that private property shall not be taken for public use without just compensation; WHEREAS, the Department of Agrarian Reform (DAR) leads the implementation of the Comprehensive Agrarian Reform Program (CARP) as enacted pursuant to Presidential Decree (PD) 27, Executive Order (EO) 228, EO 229 and Republic Act (RA) No. 6657, as amended by RA No. 9700, through land tenure improvement, agrarian justice, and coordinated delivery of essential support services to client-beneficiaries; WHEREAS, under Section 5 of EO No. 129, Series of 1987, the DAR is authorized to call upon any government agency to extend full support and cooperation to program implementation; WHEREAS, under Section 4 of EO No. 129, Series of 1987, the DAR is mandated to facilitate the compensation of landowners covered by agrarian reform; WHEREAS, the Land Bank of the Philippines (LBP) shall be the dominant financial institution in the countryside development committed towards the highest standards of ethics and excellence in the service of the Filipino people, and shall continue to provide technical support to farmers and fisher folks and other priority sectors; WHEREAS, the Department of Finance (DOF), being a government institution that formulates fiscal policy and carries out its basic function of revenue generation to ensure adequate financing for the needs of the country has an important role in the implementation of the Comprehensive Agrarian Reform Program (CARP), together with the Bureaus, Agencies and Government Corporations under it; WHEREAS, Section 2 of the National Internal Revenue Code (NIRC) of 1997 mandates the Bureau of Internal Revenue (BIR) to assess and collect all national internal revenue taxes, fees and charges, and to enforce all forfeitures, penalties and fines connected therewith, including the execution of judgements in all cases decided in its favour by the Court of Tax Appeals and the ordinary courts; WHEREAS, EO No. 127, Series of 1987 mandates the Bureau of Local Government Finance (BLGF) to assist in the formulation and implementation of policies on local government revenue administration and fund management; exercise administrative, technical supervision and coordination over the treasury and assessment operations of local government and to perform such other tasks or functions as may be assigned by the Secretary of Finance or the Undersecretary for Domestic Finance Group of the DOF; WHEREAS, the Land Registration Authority (LRA) is mandated to issue decrees of registration and certificates of titles and register documents, patents and other land transactions for the benefit of landowners, Agrarian Reform beneficiaries and the registering public, in general; to provide a secure, stable and trustworthy record of land ownership and recorded interests therein so as to promote social and economic well-being and contribute to national development; WHEREAS, in the almost thirty eight (38) years of agrarian reform implementation, DAR has encountered a number of serious legal and technical problems in its effort to facilitate the expeditious payment of landowners' just compensation; WHEREAS, the landowners whose landholdings were placed under agrarian reform have long-pending land compensation claims as there was inadequate existing measures to address the non-payment of estate tax/inheritance tax, real property and other related taxes, penalties and surcharges; and as such, resulted to the huge backlog of unclaimed landowners' compensation; WHEREAS, one of the perennial problems of the heirs of deceased landowners of CARP-covered lands is the imposition of an estate tax, real estate tax and related taxes as a pre-condition for the transfer to the heirs the proceeds/compensation of the CARP covered lands; WHEREAS, a substantial amount of appropriated funds by Congress earmarked for Landowners Compensation which are being held by the LBP and the Bureau of Treasury (BTr) remain unclaimed/uncollected by the landowners; NOW, THEREFORE, RESOLVED, AS IT IS HEREBY RESOLVED, that the DAR, DOF thru the BIR, BLGF and LBP shall formulate policies and procedures to facilitate the release of land compensation claims on agrarian reform covered agricultural lands without sacrificing revenue collection efforts, to wit: 1. That the LBP, BLGF and the BIR shall execute a Joint Memorandum Circular within thirty (30) days from the effectivity of this J.A.O. for the establishment of a mechanism and process flow on the payment of estate and real property tax on agrarian reform covered agricultural lands of deceased landowners and allowing the release of the said land valuation claims;. 2. That the DAR shall provide the BIR and the BLGF which shall be tasked to disseminate to all LGUs through their local Treasurers, with a nationwide listing of the names of all deceased landowners and the location of their agrarian reform-covered landholdings, with pending claims with the LBP for subsequent processing of the land valuation claims from the respective DAR Provincial Office, Local Government Units (LGUs) and BIR Revenue District Offices. 3. The BIR and the LGU concerned shall assess the corresponding estate tax (with penalties and surcharges waived) and real property tax due the agrarian reform-covered landholding belonging to the deceased landowners' estate and provide a listing to the LBP for payment of said taxes due without penalties and surcharges for delinquent real property taxes due from 1988 to present. 4. Within two (2) working days upon receipt from the BIR and LGUs concerned of the listing of landowners' estate and/or real property tax liabilities, the LBP shall request the heirs of the deceased landowners to submit the required documents ( e.g., death certificate of landowner, certified true copy of title and tax declaration, extrajudicial partition or deed of adjudication) and to sign an undertaking to pay the aforesaid taxes; 5. Upon receipt of the heirs' undertaking to pay the computed estate tax and real property tax due, the LBP shall deduct the same from the landowner's compensation and remit said taxes immediately to the BIR and the LGUs concerned. Within five (5) working days from receipt of complete documents from the LBP ( e.g., proof of tax remittance, certified true copies of titles and tax declarations, etc . ), the BIR shall issue the necessary clearance addressed to the LRA and the Local Treasurer of the concerned LGU shall also issue the Real Property Tax Clearance Certificate, for the registration of a document transmitting ownership of the Landowner's Compensation to the heirs in compliance with Rule 74 on the Summary Settlement of Estate of the Rules of Court to protect the interest of excluded heirs and creditors; 6. The LBP shall adopt strict guidelines, through the "heirs' undertakings", to ensure deduction and payment of tax liabilities sourced from the landowner's compensation held by the LBP and the BTr. 7. The above policies shall not apply if there is a pending just compensation case filed by the heirs of the deceased landowner before the DARAB, Special Agrarian Court or a higher court having jurisdiction. All Orders, Circulars and similar issuances inconsistent herewith are hereby revoked, amended or modified accordingly. This Joint Administrative Order takes effect after fifteen (15) days following publication in two (2) national newspapers of general circulation. April 18, 2013, Quezon City, Philippines. (SGD.) CESAR V. PURISIMA Secretary Department of Finance (SGD.) VIRGILIO R. DE LOS REYES Secretary Department of Agrarian Reform Conforme: (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue (SGD.) GILDA E. PICO President Land Bank of the Phils. (SGD.) EULALIO DIAZ III Administrator Land Registration Authority (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director BLGF Published in The Philippine Star on April 22, 2013.