Rarely does the State intentionally overlook violations of a revenue or tax law, or give a tax evader a chance to start with a clean slate. So, why miss it?
For the proper transfer of ownership of the properties of a person who has died, a process called estate settlement is important. The term estate refers to the properties left behind by the deceased. The decedent is a deceased person whose property is transmitted to his heirs following his death.
If the decedent made a last will and testament, a petition before the court is necessary as the estate may only be settled judicially.
Extrajudicial settlement (EJS) is the way to go if the decedent left no will and no debts, and the heirs are all of legal age or the minors are properly represented by their judicial or legal representatives. A sole heir must execute an affidavit adjudicating the entire estate to himself. If there are several heirs, they may agree among themselves to divide the estate by means of a notarized deed of extrajudicial settlement.
Once the requisite newspaper publication is completed and all documents prepared, the estate tax must be paid. Ordinarily, the estate tax return should be filed with the BIR within one year from decedent’s death. Beyond this period, hefty penalties may be imposed.
Thankfully, for the estate of a decedent who died on or before May 31, 2022, Republic Act No. 11956 (amending RA 11569) or the Tax Amnesty Act grants certain immunities and privileges. Estates covered by the tax amnesty need to pay only the estate amnesty tax at the rate of six percent (6%) based on the decedent’s total net estate at the time of death. No interests or surcharges will be charged for failure to pay estate taxes for all prior years. The estate shall also be free from all appurtenant civil, criminal, and administrative cases and penalties under the Tax Code.
Note, though, that the immunities and privileges of the amnesty must be availed of within two (2) years from June 14, 2023 (OR UNTIL JUNE 14, 2025).
After tax payment, the BIR will issue a Certificate Authorizing Registration (CAR). With the CAR, the process of selling your inherited property or transferring it under your name will be easier.
Some dread the paper work and the tax burden involved in estate settlement. With the proper guidance of professionals, the process of extrajudicial settlement is simple and fast. Given the estate tax amnesty, it is also substantially cheaper.
There are remaining narrow months to avail of it. Make it count.