How to Transfer Ownership of an Inherited Property (such as Fish Pond)

How to Transfer Ownership of an Inherited Property (such as Fish Pond)
 
In a previous blog post on acquiring fish farm property, I focused on how to buy/sell one in the Philippines (pls. click this).

In that post, I mentioned that aside from lease or purchase, another way to own a fish farm property is through inheritance (legal term is "succession").

Today, we'll talk about inherited properties, including fish ponds.

Let's get started.

If you are an heir or one of the heirs (children) and if one (or both) of your parents died leaving properties behind, what should you do to gain ownership of these properties legally?

This blog post hopes to give inputs on how to settle property left behind by parents. The basic ideas and detailed steps apply to any property, such as ancestral home, vacant lot, or even fish ponds.

A parent(s) passed away without legally transferring their property to their heirs. Most often, parents died “intestate” (legal term for not leaving a will).

This is indeed a common problem here in our farm village in Binmaley, Pangasinan (one of the northern provinces in Region 1, Philippines). Surviving children are in possession of vacant lots, residential properties, or even fish ponds still in the name of deceased parent-owners or grandparent-owners. Adding to the problem, some heirs may have already died too and are survived by their children.

In some cases, surviving children and their families stay in one big residential lot still owned by their parents. They are content with just physically dividing a property, not knowing how to transfer the same legally among themselves. They are intimidated by the perceived high cost of doing so, and the legal and procedural complexities involved.

As mentioned, problems are magnified if a particular heir or some heirs decide to impose his/their will and take over the property - disregarding the legal rights of other compulsory heirs. Or when other parties (other than the heirs) try to stake a claim on the property.

So how should inherited properties be handled? What do you and your siblings do when your parents own a family home and a fish farm and both of them died without transferring their properties to the heirs (you and your siblings)?

Following are the detailed steps to implement extrajudicial settlement of estate.

Note: procedures are based on my own experience on extrajudicial settlement in the Philippines of: (a) my in-laws’ properties among their children, including my wife (completed in 2013), and (b) my own parents’ remaining unpartitioned properties among us siblings (currently ongoing).

Before we move on, let’s get acquainted first with some basics.


A. Overview and Basics of Property Settlement in the Philippines

1. When a property owner passes away and leaves his property behind, such properties, assets, and possessions are collectively called an “estate”. 

Such estate normally includes (a) real property (like residential house where the family lives – so called "ancestral or family home", fish pond, agricultural land, vacant lot, etc.) and (b) personal property (such as cash, bank deposits, stock investments, jewelry, car, etc.).

2. Above property owner dies under two scenarios: (a) he leaves a last will and testament behind to name the specific heirs who will inherit specific properties, or (b) he dies without leaving a will (or “dies intestate” - the legal term).

3. If there’s a last will and testament, the heirs need to go to trial in a court of law where “probate” proceedings will be held. Otherwise, the will cannot be given effect. Real property cannot be transferred to heirs without presenting a court order approving the will.

4. In case the property owner dies “intestate” (very common for the average family in the Philippines), the “compulsory heirs” will have to settle among themselves as to how to divide the property(ies). Compulsory heirs normally refer (for simplicity's sake) to the legitimate children and the deceased’s legal spouse.

This process is called “extrajudicial settlement”, because it’s settlement done outside of court. And it involves a written contract signed by all compulsory heirs.

5. To be valid, the contract (called Deed of Extrajudicial Settlement and Adjudication of Estate)(DEJS) must state that:

· the deceased died intestate

· he has left no outstanding debts

· all signatories are of legal age (or if a minor is properly represented legally)

· all signatories are the surviving compulsory heirs (legitimate children and legal spouse) of the deceased

· the following (list and description of properties to be divided, both real and personal) are enumerated as the only properties left behind by the deceased

· such properties will be divided among heirs as described (show how each property is to divided among which heirs and to what extent)

6. The DEJS must be signed by all compulsory heirs and notarized by a notary public.

In case one of the heirs has already died, then his legitimate children will sign on his behalf (signature of the heir’s spouse is not needed, only the children).

7. When a person dies, he is required by Philippine laws to pay a tax on his “estate”, if any. This is called “estate tax”. It’s a tax on the right to transfer the properties he has left behind to his legal heirs.

8. Estate tax must be paid to the Bureau of Internal Revenue (BIR) within six months from time of death of the deceased, with some exceptions allowed by the BIR. Example is if the payment of the tax will cause undue financial hardship on an heir(s).

Tax is paid on the net value of the estate after allowable deductions. For example if the net value does not exceed 200,000 then the estate is exempt from paying estate tax. In excess of 200,000 the tax rate ranges from 5% to 20% which can be quite substantial. We will talk about the computation in more detail later in this blog post.

9. In case estate tax is not paid on time (that is, within six months from time of death), the heirs will pay following penalties:

· surcharge of 25% of tax due

· interest of 20% per year on the tax due

· compromise penalty (normally for late filing and for non-filing of notice of death)

Note: It’s safe to conclude that the vast majority of families in the Philippines (especially the average ones) fail to settle the estate tax with BIR within the six months deadline. Possible reasons:

· Some property owners who died with properties left in the Philippines are based abroad with their children. No one was able to attend to this matter.

· Most others are not aware that estate tax needs to be paid at all. They come to know of the estate tax when it’s time to settle the properties several years after death.

· Most have limited financial resources which could have been further depleted by hospitalization expenses and burial of the deceased parent(s).

· Surviving spouse (in case only one parent died) is not aware and continues to use the family home and other real properties with the children.

The hefty surcharges, interest charges, and penalties are the reason most properties are still in the name of parents or grandparents. In a way, the properties are in limbo and their values are not fully unlocked so the heirs can't optimize their use. Also they can't just be sold to other parties who may want to develop them.

That’s why today, the Philippine government is thinking of giving amnesty on estate taxes. Hopefully, it can become a law within a few years from this blog post. I’ll talk about this in my next article and how it will impact the ordinary family with properties still unsettled.

Note: In his 2018 State of the Nation Address, President Duterte has promised to sign a Tax Amnesty Law before end of 2018. As of November 14, 2018 Senate has passed its version of the Tax Amnesty Law following the Lower House's passing of its version of the same law. The Department of Finance official statement is that it wants the Tax Amnesty Law (which includes estate tax amnesty) to be implement by April 2019.
 
Meanwhile, let’s get on with the basics.

10. The basis for the valuation of the estate is the value as of the time of death of the "decedent" (legal term for the person who has died). In the case of real property, this is the zonal value (per BIR) or the fair market value (as shown in the schedule of values fixed by the Provincial or City Assessors) whichever is higher. In the case of house structures (improvements), the value used is the fair market value of the improvement provided by the Provincial or City Assessor.

It’s possible that the heirs applied for payment of estate tax after five years from the decedent’s death. In computing the estate tax, use the valuation five years ago (as of time of death), not the valuation as of time of estate tax filing.

10. The heirs are required to send a written notice of death to the BIR district office (which has jurisdiction over decedent's residence) within two months from death, if the gross value of the estate exceeds Php20,000.

11. Thus if the heirs wish to have the property left behind by the deceased parent/spouse legally transferred to them, they need to do two basic things:

· Prepare a Deed of Extrajudical Settlement and Adjudication of Estate, and

· Pay the estate tax to the BIR.

Following are the detailed steps to be taken when transferring properties left behind by the decedent to the heirs.

Note: This blog post draws from my actual experience in 2013. Process took about a year. I did the legwork, research and documentation.

Background details: Decedent died intestate abroad (outside of Philippines). Family is based abroad and all members are former Filipinos. Legal spouse was still alive as of time of death and as of time of extrajudicial settlement of the estate (around 15 years after death). Six legitimate children involved, including one who is a Filipino citizen. Five real property items comprise the estate. No personal properties involved.

Although no formal will was left, decedent has often indicated how he wished to have his property distributed after he dies and to which heir it will go.


B. Detailed Procedures – Filing of Estate Tax Return
 
1. In addition to the basics discussed above, familiarize yourself first with the BIR tax information on Estate Tax.

Go to the www.bir.gov.ph or "google" Estate Tax – Bureau of Internal Revenue and read the detailed information provided. 

2. Use BIR Form 1801 – Estate Tax Return. This is a downloadable eBIR form. The blank form can be downloaded, filled out, corrected, and finalized by the taxpayer offline, and then submitted to the BIR through the Online eBIRForms System.

Note: For those with internet service, you can download the eBIRForm package from the BIR website (http://ebirforms.bir.gov.ph). Or go to one of the BIR RDO e-lounges with your USB flash drive, and copy the eBIRForms package there. After you download same, then exit the BIR website and do the filling up of the form offline.

Note: When I did file the Estate Tax Return in 2013, the eBIRForms system was not yet implemented so everything was done manually. We used a preprinted form, filled it out manually, and submitted the completed form to the BIR Revenue District Office (RDO). Now, everything must be done online, except for a few.

The filing of Estate Tax Return uses BIR Form 1801 which is one of the 36 BIR forms required to use an eBIR form. This requirement by BIR became mandatory effective October 1, 2014 for certain taxpayers, one of which are the one-time transaction (ONETT) taxpayers.

If you’re filing an Estate Tax Return, needless to say, you’re an ONETT taxpayer. As such, you're required to file through the eBIRForms System.

3. In downloading BIR Form 1801, follow the detailed instructions of BIR in using the eBIRForms Offline Package. This involves downloading the package, installing it, opening it, choosing the correct form (in this case the BIR Form 1801), and filling it out by encoding the data.

4. In filling out the form, following are the important data fields:

· Date of death of the deceased

· TIN of the taxpayer. Taxpayer is the “Estate of (Deceased’s Name)”. There is no TIN so, you’ll have to apply for one-time use TIN using BIR Form 1904 at the Revenue District Office having jurisdiction over the domicile of the decedents. You need to submit a copy of the decedent’s death certificate and also your government-issued ID, such as PRC ID or driver’s license or passport.

Based on present ONETT requirement, the BIR Form 1904 will be required to be filled out for all heirs as well as deceased. This means one BIR Form 1904 for each. The heirs will need to indicate their present TIN. The filled out forms are submitted for verification to ONETT. It's possible that a new TIN will be issued and the old one cancelled, for estate tax purposes.

· Taxpayer name – “Estate of (Deceased’s Name)”

· Residence of Deceased at Time of Death. This could be in the Philippines, if based there, or another country where deceased may be a resident and citizen.

· Schedule 1 – List the details of property under the estate. TCT Number, Tax Declaration Number, Location, Class, Area, Zonal Value, Fair Market Value, Conjugal or Exclusive (usually conjugal). Write the higher value under the “conjugal” column. Get the total of all the property values.

· Under Line 17, write the total value of the properties (per Schedule 1) under “Conjugal” in column (b) and also under “Total” in column (c).

· Line 18 is almost never applicable (personal properties like cash, etc. are almost never included since they can be distributed informally or kept by surviving spouse).

Shares of stocks, however, are more common. If the deceased has these, then make sure to have the actual shares of stocks on hand. Get the total number of shares. Get the value of each share of stock as of time of death of the deceased. You will need to get a certification from the Philippine Stock Exchange for this purpose.

· Under Line 19, show the value of the family home, since it’s not included under Line 17.

· Line 20 – not applicable to most

· Line 21 – just add up the items to get Gross Estate

· Schedule 5 – this is the list of Deductions and normally what is shown here is just actual funeral expenses. Allowable is 5% of gross estate but not exceeding Php200,000.

· Line 22 – show here the total in Schedule 5.

· Line 23 – this is Line 21 minus Line 22 (Estate After Deductions)

· Line 24 – show here the value of family home in Line 19.

· Line 25 – show 1 million standard deduction (this is fixed), provided decedent died in 1998 or later.

· Line 26 – show medical expenses incurred prior to decedent’s death (should be duly receipted), but not to exceed Php500,000

· Line 27a – show other deductions, if any, in Line 27a

· Line 27b – add up all items from Lines 24 to 27a

· Line 28 – deduct 27b from Line 23 to get the Net Estate.

· Line 29 – if there is a surviving legal spouse, this Line 28 divided by 2.

· Line 30 – this is the Net Taxable Estate after deducting Line 29.

This Net Taxable Estate (NTE) will determine the amount of Estate Tax to be paid by the heirs to the BIR. It can be zero, if NTE is Php200,000 or less. Or if more, a tax rate of 5 to 20% will be applied using the BIR estate tax table at the end of page 2 of the form.

Important Note: The allowable deductions will vary depending on the law applicable at the time of the decedent’s death. They will also differ depending on the citizenship and resident status of the decedent at time of death.

There’s a set of allowable deductions for Filipino citizens who are residents at their time of death. And another set of allowable deductions (much less) if the decedent is not resident or a non Filipino when he died.

For example Republic Act (RA) 8424 became effective on January 1, 1998. My father in law died December 1998 and when he died he is no longer Filipino citizen and has been residing abroad with his family. As a result, his estate will be entitled to a much fewer allowable deductions under RA 8424 in the computation of estate tax payable for the estate he left in the Philippines.

In contrast, my own parents died as Filipino citizens at our family home where they have lived. As such they are entitled to the full set of deductions under RA 8424. However because they died before 1998, they would not be entitled to some deductions, such as standard deduction of one million.


For details of the allowable deductions, see BIR Estate Tax provisions at the BIR website.

5. When estate tax is paid beyond the 6 months deadline and no extension is granted by BIR, then Line 34 will be filled out (wait for the computation sheet of the the BIR assessor and enter the data shown therein). 

This includes surcharge, interest, and compromise penalty. These items will be added to the amount in Line 30 to get the total amount due the BIR.

Note: Often the ordinary family heirs are so intimidated paying estate taxes thinking that it’s way beyond their means, especially if payment has been delayed for years or decades.

This may be true if the parents have several large properties and the corresponding penalties, interests, surcharges are hefty (especially if the deceased died several decades ago. So they postpone some more. As a result the properties are locked in, remain undeveloped, unsold, or not fully utilized.

However, most average families and typical heirs with just a few or much smaller properties don’t realize that the BIR allows them (if they're Filipino citizen):

· a deduction of their family home,

· a standard deduction of Php 1,000,000,

· a funeral deduction of Php 200,000,

· and medical expenses (if duly receipted) of up to Php500,000

When they take these deductions and remove them from the gross estate, most likely the net taxable estate would be zero. Even if payment is delayed, and surcharge is slapped (25%), surcharge will still be zero, interest would be zero, and only compromise penalty would be paid.

Word of caution: It would be better however, to comply with the BIR's requirement to file estate tax within six months from time of death of the decedent. Also to file a Notice of Death to BIR to report the decedent's death within two months. Any delay beyond the six month period will mean a late filing penalty of P10,000 for estate with gross value of 500,000 to 5 million, even if the net estate tax payable is zero. In addition, non-filing of Notice of Death means an additional penalty of P1,000.

Anyway, to encourage the payment of overdue estate taxes, the Philippine government has this forthcoming amnesty law. Such law, if passed hopefully in the next few years, will become very useful indeed for transferring inherited properties legally to the heirs!

6. After completing the form, verify, edit, make final corrections until you have a finalized copy ready for submission.

7. Click the button FINAL COPY to save a copy of the estate tax return.

8. Go online under the Online eBIRForms System and click the button SUBMIT to electronically submit the completed Estate Tax Return through the use of the online eBIRForms System.

Note: You will be asked to provide a user name and password.

9. You will see a Filing Reference Number (FRN) generated as acknowledgment of the receipt of the Estate Tax Return.

10. Click the CONTINUE button to go to the FRN page where a message “the form has been successfully filed” is displayed. Print the FRN page.

11. In case of unsuccessful submission, click the FINAL COPY button for the alternative mode of electronic submission of your Estate Tax Return. You will receive an email confirmation.


Alternatively, for ordinary taxpayers who don't have access to computers, don't want to fill out the Estate Tax Form, or are not knowledgeable enough to compute their estate tax liabilities, GO to BIR's ONETT office and ASK the BIR assessor for a computation sheet after showing your documents (assuming they're all in order). 

Bring the signed computation sheet to a nearby eBIR stall (normally located just beside the BIR office) and ask for the preparation and printing of the Estate Tax Return, based on the computation sheet. Usual charge is P100.

Go back to the BIR assessor with the printed Estate Tax Return for his and ONETT's supervisor's signature.

Go to Step D-1 for payment of the estate tax.  

12. Within 15 days from date of e-filing, go to the Revenue District Office (RDO) and submit the printed form of the Estate Tax Return and printed Filing Reference Number (FRN) page and the following required attachments:

a. Certified true copy of the Death Certificate of the decedent

b. Notarized Deed of the Extrajudicial Settlement of Estate

c. Certified true copy of the Transfer Certificate(s) of Title (TCT(s)) covering the real properties

d. Certification of the Barangay Captain for the claimed family home

e. For personal properties (if included in the estate), such as shares of stocks, newspaper clippings or certification from the Philippine Stock Exchange as well as photocopy of the shares of stocks

f. Hospital invoices (for the claimed hospitalization expenses, if any)

g. Others that the BIR may require, such as Certification of Landholdings, completed and verified Form 1904 (TIN forms)


C. Preparing a Deed of Extrajudicial Settlement of Estate (EJS)
 
1. Since most of our folks are not familiar with this legal document, you can hire a lawyer to do this for you for a fee of course.

2. However, it’s best to familiarize yourself with the basic concepts and elements behind the EJS document so that you will be able to provide all the inputs to your lawyer.

3. As a guide and to give you an idea, you may go to a website (for legal forms in the Philippines) which can give you a pro-forma of an EJS document. It’s like a template to be used as a starting point, but you need to tailor it to your particular family situation and come up with a suitable EJS that contains all the requisite elements.
 
4. An EJS is a voluntary agreement among the heirs (who are all of age) partitioning the estate (that is free of debts) of the deceased who left no will, duly signed by all heirs and executed before a notary public, and published once a week, for three weeks, in a newspaper of general circulation.

Implied in this agreement is commitment to pay the required estate tax, and compliance with all procedures and administrative matters required by the concerned government agencies.

5. The EJS must contain the following elements:

a. Compliance with all the legal conditions for an extrajudicial settlement (primarily Section 1, Rule 74 of the Revised Rules of Court of the Philippines)

b. Name of the decedent(s) – assuming you’re preparing an EJS where both parents have already died.

c. Name of the compulsory heirs – i.e., surviving spouse, if any, and the children (whether legitimate or illegitimate). Note: an adopted child is considered a compulsory heir if the adoption is legally made. A live-in partner of the deceased is not entitled to inherit from the estate and is not considered a spouse under the law.

d. List and description of the properties under the estate to be extrajudicially settled, both real properties and personal properties, if any, such as shares of stocks. For real properties, description includes title number, lot size, location, technical description.

e. Nature of the property, if conjugal

f. How the properties shall be divided among the heirs

g. Posting of a bond if there are personal properties

h. Publication of the Deed once a week for three consecutive weeks

i. A statement that the partition shall be subject to the provision of Section 4, Rule 74 of the Revised Rules of Court of the Philippines for a period of two years from the date of the Deed of EJS.

6. What if some heirs want to waive their share of the inheritance? If for example, there are 6 children-heirs and both parents have died and 5 children are willing to waive their share of the properties in the Philippines which are being settled. What to do?

Without a waiver from anyone, the estate is normally partitioned in 6 equal shares among the 6 heirs. Other ways of partition are also allowed. But to answer the question in #6 above,

a. The Deed of EJS must now include a provision for Quitclaim or Waiver of Rights to be executed by the compulsory heirs who wish to do a general waiver of their respective rights where such waiver is done gratuitously (i.e., renounced without a price).

b. The document must now be called Deed of Extrajudicial Settlement of Estate and Quitclaim.

c. What happens is that the remaining compulsory heir (who was left in the Philippines) who did not waive her right will automatically become the recipient of the rightful shares waived by her 5 other siblings. The portions renounced shall “devolve” to the remaining heir by virtue of "accretion", as the lawyers will call it.

7. To continue the scenario in #6 above, what if there are four real properties - three will be distributed solely to the remaining sibling who did not waive her share (as a result of the quitclaim or waiver of the others), while the other property is to be sold. What to do?

a. The Deed of EJS and Quitclaim must include a provision for Absolute Sale for the specific real property under the estate that is intended and agreed upon by all heirs to be sold to a specific buyer.

b. The document must now be called a Deed of Extrajudicial Settlement of Estate and Quitclaim with Absolute Sale.

8. The Deed of EJS (or Deed of EJS and Quitclaim with Absolute Sale, if applicable) has to be signed by all the surviving heirs at each page and the end of the document above their respective names.

In case one of the heirs is already deceased, indicate the names of his children as his representative, so that they can sign on his behalf.

Note: Signing is normally at the office of the licensed notary public.

Some notary publics won’t notarize the document unless all signing parties are present and sign the document in his presence. Others, especially those who you deal with regularly, may allow pre-signing as long as you show two government IDs with your signature on them. He will request you to submit a photocopy of the said IDs with the original signature at the side. This is his assurance that the signatories in the notarized documents are indeed the parties named in the contract.

The notary seals and signs the document and stamps the date of notarization. He also indicates at the last page of the document pertinent details (document number, page number, book number, year series) as recorded in his notarial register.

What if some heirs are abroad or already citizens in that country?

In case some heirs are living abroad or are already citizens of another country such as the USA or Canada, please note that the document must go through consular notarization or authentication.

Consular notarization requires personal appearance of the signatory. The notarized document will have a covering page (“Acknowledgment”) with the red ribbon and seal.

If the signatory is not able to personally appear, then consular authentication is done. The document however must first be signed by a Consulate-accredited notary public or signed by a Federal, State, County, City, University, School Official (assuming in the States) within the Consulate’s jurisdiction. The authenticated document will have a covering page (“Authentication”) with the red ribbon and seal. 




Alternatively, the heir who is based abroad may issue a Special Power of Attorney (SPA) designating one of his siblings as his attorney-in-fact to sign the EJS on his behalf. Such SPA executed abroad must also undergo consular notarization before such can be accepted in the Philippines.
 
The above Consular notarized or authenticated EJS or SPA can now be used or presented in the Philippines.

D. Payment of Estate Tax and Obtaining the Certificate Authorizing Registration; Payment of Other Taxes and Fees
 
1. After completing the Filing of the Estate Tax Return (see Step B-10) and submission of the required documents to the Revenue District Office (see Step B-12), pay the amount of estate tax at the Authorized Agent Bank (AAB) of your Revenue District Office (RDO) as indicated in the Estate Tax Return.

2. Go back to the RDO officer concerned and submit the AAB bank receipt for the estate tax. The RDO officer will give you a claim slip which indicates the date when you can claim the Certificate Authorizing Registration (CAR).

3. In case of extrajudicial settlement of estate involving absolute sale of a property, request the RDO for a computation of the capital gains tax (6%) and documentary stamp tax (1.5%). Note that the basis for the computation is the actual price stated in the EJS document or the zonal value of the property, whichever is higher.

Do the following steps:

a. Fill out BIR Form 1706 in triplicate.

b. Make sure you have the following required documents with you. These basic requirements are what appears in the BIR website:

 
· One original and one photocopy of the Deed of EJS and Quitclaim with Absolute Sale

· Photocopy of the TCT

· Certified true copy of the latest TD

· Certificate of No Improvement issued by the Municipal Assessor (if there is no improvement)

. BIR Certificate Authorizing Registration for the estate tax

c. Bring with you the original copy of Acknowledgment Receipt (AR) and one photocopy. The AR is the document that shows the receipt of sales proceeds from the buyer for the sale of the real property.

Although not mentioned in the BIR website, the AR is usually required during tax evaluation to determine the date when the 30 days period required to pay the capital gains tax will start.

d. Also request a vicinity map from the Municipal/City Assessor and have it ready for submission to the BIR, together with the required documents.

The BIR usually conducts an ocular inspection to check the classification of the property (i.e., whether residential or commercial, fishponds, agricultural land, etc.) and its exact location (to determine the specific zonal value to be used for tax computation).

e. Be ready to submit valid government-issued IDs for the one paying the capital gains tax.

4. Apply for payment of the Documentary Stamp Tax (DST) at the same BIR Office. Do the following steps:

· Fill out BIR Form 2000-OT in triplicate

Note that the DST is 1.5% of the selling price or zonal value which ever is higher.

Important note: the DST must be paid within 5 days after the close of the month. Normally you should pay DST together with the capital gains tax at the BIR’s Authorized Agent Bank (AAB) to save time and effort and expenses.

Important Note: Only the property that was the subject of Absolute Sale will be subject to payment of Capital Gains Tax and Documentary Stamp Tax.

5. When all the required documents have been submitted and the required CGT computed, go to the AAB, usually near the BIR Revenue District Office to file the CGT Return (BIR Form 1706) in triplicate. Pay the amount computed by the BIR. Get the Receipt issued by the AAB.

6. Applicable tax rate is 6% of the selling price or zonal value of the property, which ever is higher.

7. Pay within the 30 days deadline set for the payment of the CGT from EJS notarization date and AR date. (Last time I remember, the BIR evaluator said he is basing it on the AR date).

Important reminder: Because you’ll be paying the CGT to the BIR and the DST at the same time during the same trip, make sure that you’re aware of the deadlines of both CGT (within 30 days) and DST (5 days after the close of the month).

Based on the above deadlines, it’s best if you can date your DAS and AR during the first week of the month. You can pay during the second week and both your CGT and DST will be paid way before deadline.

8. In case of failure to meet the 30 days deadline, pay the following:

· Surcharge – 25% for late payment

· Interest – 20% per annum

· Compromise penalty

9. After paying for the CGT and DST, return to the BIR Revenue District Office and show the bank receipts for the CGT and DST.

The BIR will inform the tax payer of the date when he needs to come back to claim the BIR Certificate Authorizing Registration (CAR) for the sale.

10. Upon claiming of the CAR from the BIR, go to the Provincial Treasurer and apply for the payment of the Transfer Tax. Submit the required documents.

Note: The inherited properties (whether kept by the heirs or sold to another party) will be subject to Transfer Tax imposed by the Provincial/City Treasurer where the property(ies) is/are located.

The transfer tax rate is ½ of 1.0% for provinces and ¾ of 1.0% for cities in accordance with the Local Government Code.

Important reminder: The Provincial Treasurer will not accept any application for transfer tax payment without the CAR issued by the BIR. It will be a waste of time to go to the Treasurer’s office if the BIR hasn’t issued the CAR yet.

11. After paying the transfer tax at the Provincial Treasurer and receiving the transfer tax receipt, go to the Register of Deeds (RD) (in our case in Lingayen City) and apply for the transfer of title to the new owner.

The benefitting heir or buyer usually submits the CAR issued by the BIR, a copy of the EJS (with Quitclaim and Absolute Sale), copies of CGT and DST receipts, transfer tax receipt, and other documents that they may require.

Registration fee is usually ¼ of 1.0%.

The RD office usually gives the applicant a claim slip showing the estimated completion date for the new title. You may have to make occasional follow-ups at the RD office. The clerk on duty checks the RD online system to check the latest status of the processing of new title. She will usually give a new claim date after your follow up.

12. Once the new title is claimed, apply for a new TD in the new owner’s name at the municipal assessor’s office. 

Usually the pertinent documents are copies of the new title, copies of tax receipts showing payment of required taxes, and other documents that the assessor may require.

In our case in Binmaley, once the new TD is typed and signed by the municipal assessor, the applicant is requested to take the TD to the Provincial Assessor for approval. A copy of the new signed TD will be given to the new owner. 

Breaking News - On February 14, 2019, Philippine President Duterte approved the Estate Tax Amnesty component of the Tax Amnesty Act (RA 11213) and signed the latter into law. 

Very briefly, you just have to pay 6% tax on the total net estate as of time of death of the decedent. Heirs can avail themselves of the amnesty within 2 years from the effectivity of the Implementing Rules and Regulations being prepared now by the Department of Finance/BIR.

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