“The fear of death follows from the fear of life. A man who lives fully is prepared to die at any time.”
– Mark Twain, American Author
An increasing number of people are thinking and searching for information on how to settle the estate of a deceased relative (parent, grandparent, aunt or uncle) who left a valuable piece or pieces of real property.
The motives of these people range from (1) wanting a closure on the issue of an unsettled estate; (2) being wary of the enormous penalties that the BIR will charge if the estate of the deceased remains unsettled; or (3) wanting to sell the property and cash in on a possible windfall due to increasing value of real properties at this time of Philippine economic resurgence.
The death of a loved one is a painful emotional experience. But often times, this emotional pain is exacerbated by financial pain when the heirs have no capacity to pay for estate taxes. This is the reason why oftentimes the payment of estate tax (or the settlement of the estate) is relegated to the least priority to do after the loss of a loved one.
But, whether you have the means now to pay the estate tax or not, what is the first and foremost thing that the heirs have to do in settling the estate of their deceased loved one in the Philippines?
For both judicial and extrajudicial settlement the first thing you have to do is to notify the BIR of the fact of death of the decedent. According to Section 89 of Republic Act 8242 (Tax Reform Act of 1997, any of the legal heirs shall give a written notice of the death to the BIR within two (2) months after the decedent’s death.
What if you don’t notify the BIR of the fact of death within the 2 month period stated in the law or did not submit a notice at all? In my experience, the BIR will penalize you in the amount of P5,000.00 to P10,000.00 for non-submission of the notice of death. This is assessed at the time of the presentation of all documentary requirements for the settlement of the estate tax with the BIR.
So how do you comply with the provision of Section 89? I will share my experience on this in a case that I handled way back in 2012. Within the period allowed by law, I wrote a letter addressed to the RDO informing the BIR of the fact of death of my client with the intention to pay the estate tax within the 6 month period allowed by the Tax Code. I attached the copy of the death certificate issued by the Local Civil Registrar to the letter. I had it stamped received by the RDO.
At the time of filing the estate tax return, I was surprised that the Officer of the Day in ONETT did not consider my letter (duly received by the RDO). I was informed that it was not in the proper form. But, there is no form mandated by any RMO or RMC issued by the BIR.
In the end, rather than debate the issue with a non-lawyer, my clients ended up paying a penalty for non-submission of the Notice of Death. This experience of mine was duplicated in other RDOs several more times.
Now, what have I done to prevent the BIR from assessing penalty for non-submission of Notice of Death within the prescribed time? I have applied for a TIN of the estate of the deceased individual within the 2-month period of submitting the Notice of Death.
Remember Step 1 of the 6 Steps in Settling the Estate of a Dead Person in the Philippines? I now use BIR Form 1904 [Application for Registration] as my Notice of Death required to be submitted to BIR pursuant to Section 89. I do this because the Application for Registration requires that the copy of the death certificate be attached to it.
So far, I have not had any problem with the ONETT Officer of the Day when I argue that the application serves as the notice of death required by the tax code to be filed within the prescribed period. You can use the same strategy to save your client or your relatives the penalty that BIR will impose for late filing or non-filing at all.
For a step-by-step procedure on how to fill up BIR Form 1904, go and read 6 Steps in Settling the Estate of a Dead Person in the Philippines.
We have written several articles about the settlement of the estate of a deceased Filipino to guide and familiarize the readers about the process that they will undergo with the BIR. We like writing articles that give valuable information to our subscribers and visitors of our website.
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Meanwhile, if you want to know how RA 10963 (otherwise known as the Tax Reform for Acceleration and Inclusion) affected the provision of estate taxes in our Tax Code, you can read our latest article entitled “7 Important Changes TRAIN Did for Estate Taxation.”