I Finally Found It ...... Thank God (Estate Tax Issues)

[Mike S]

Sometime back I put part of this info on the board along with a idea on how to keep my asawa from having to pay this ...... simply keep cash ...... someone disagreed with me and wanted to know where I had gotten my information (or as he put it THE LAW) as HIS bank manager told him his asawa could with draw all the money without having to pay the 20% ...... well I finally found the news article and as best as my pea brain can figure out it says that heirs (I asume that would mean your asawa) has to pay the 20% estate tax on monies held by the bank ..... I can't respond to him as he has left the board ...... but just thought I should post this for others who might have wondered if I was ever going to find the article ...... sorry I have no link to the site ..... but I'm sure you can look it up if you want to ..... :thumbsup:

Finance chief to go after heirs avoiding payment of 20% estate tax

By Ronnel Domingo

Philippine Daily Inquirer

First Posted 01:49:00 03/31/2011

Filed Under: State Budget & Taxes, Family, Banking, Crime

MANILA, Philippines—Finance Secretary Cesar V. Purisima has vowed that the government will go after bank managers who allow heirs to draw down on the accounts of deceased depositors, enabling them to avoid paying the 20-percent estate tax.

Purisima said the move got the backing of the Department of Justice and Justice Secretary Leila de Lima agreed that such a practice “is a crime that we can pursue.”

“Tax evasion cannot happen without the cooperation of someone in the private sector such as an accountant or a manager in a bank,” he said.

“Our collection of estate taxes is so low because all these branch managers allow the family to withdraw the money on the day of the death of the clients, it’s part of their service,” he added.

Purisima also said tax cheats have also been getting help from credit officers who would use second sets of books in considering loan applications.

Even when freshly re-installed as finance chief in 2010, Purisima had talked about going after heirs to substantial estates who have not been paying the proper tax.

He said the government’s collection of the estate tax reached only about P1 billion, an amount to small when considering that some 400,000 people die yearly.

This put the average estate tax paid at P2,500, a figure that should be higher considering that “there were many people who passed away but to whom large amounts of wealth were attributed to.”

In February 2010, then Internal Revenue Commissioner Joel L. Tan-Torres said the Bureau of Internal Revenue expected to collect an additional P10.7 billion in estate taxes through a campaign he dubbed

“Project RIP.”

Tan-Torres said the campaign was also meant to intensify assessment and maximize collection of estate tax by increasing awareness of the public on its proper payment.

The BIR under Tan-Torres year issued Revenue Memorandum Order No. 10-2010, which has mandated BIR offices to work with public and private institutions to access information about heirs, including civil registers, hospitals, memorial parks, cemeteries, funeral parlors, crematoriums, judicial clerks of courts, newspapers (obituaries), life insurance firms and other financial entities.

Edited June 10, 2012 by Jake

[JJReyes]

The Philippine Bureau of Internal Revenue (BIR) website has a schedule for inheritance taxes. The 20% applies to any taxable assets that exceeds P10 million. These are net assets after subtracting liability. If the money deposited in the bank is a joint account, 50% belongs to the deceased spouse and 50% to the living spouse. The difficulty for the revenue collectors is bank secrecy does not permit branch managers to disclose how much is in the account or even if the decease has an account with them. The BIR needs a court order, which the bank lawyers will fight all the way to the Supreme Court. Oops! I forgot. They found out recently that the Chief Justice had millions in his accounts.

Wealthy families also don't keep their cash in Philippine banks. The money is parked in off-shore accounts. You can "borrow" up to 95% of the money deposited from the Philippine subsidiary of your off-shore bank. If you die, that "borrowed" money is a liability, which is deductible. This is known as a Dutch Sandwich. It is only one of many examples.

Here's the interesting part. Most heirs don't even bother to report to the BIR about a death. It is up to the BIR to find out if someone died. "Revenue Memorandum Order No. 10-2010, which has mandated BIR offices to work with public and private institutions to access information about heirs, including civil registers, hospitals, memorial parks, cemeteries, funeral parlors, crematoriums, judicial clerks of courts, newspapers (obituaries), life insurance firms and other financial entities."

Manila Bulletin used to be where all Manila families purchased obituary ads. The more prominent families would even buy full page ads. That is, until it was discovered that BIR agents also know how to read. They would show up at the family wake like vultures waiting to collect inheritance taxes. Those were the guys in the back of the room who were salivating.

Edited June 10, 2012 by JJR