DOF eyes raising exemption ceiling on family home estate tax

To improve land transfer efficiency and ease the burden on tax settlement of low-value estates, the Department of Finance (DOF) is proposing to adjust the taxable assessment of houses and lots to be exempted from estate taxes.

"The family home exemption should be at P3 million an improvement from the maximum rate of P1 million and standard deduction of P1 million," Assistant Secretary for Revenue Operations Group Mark Dennis Joven said during a hearing by Senate Ways and Means Committee.

"Basically, someone with a net estate of four million or lower will not be subjected to the proposed 6 percent estate tax. We consider him or her not rich enough to be subject to effects of the estate tax," Joven noted.

Under the Family Code, the family home refers to the dwelling house, including the land on which it is situated, where the husband and wife, or a head of the family, and members of their family reside, as certified by the barangay captain.

The determination of the family home value will be determined by comparing fair market and the zonal valuation by the local government assessor, Bureau of Internal Revenue (BIR) Deputy Commissioner Nestor Valeroso noted.

"We compute it based on whichever is higher," Valeroso said.

Under the proposed Tax Reform for Acceleration and Inclusion, the DOF is also pushing for simplifying the estate tax rates from a graduated 5 percent to 20 percent to a single 6 percent.

"BIR supports the position of the DOF on the law of reducing estate tax," BIR Commissioner Caesar Dulay said during the same Senate hearing.

For her part, National Tax Research Council Executive Director Trinidad Rodriguez said that a flat estate tax rate is simpler and easier to understand.

Estate tax is a tax on the right of the deceased person to transmit his or her estate to his or her lawful heirs and beneficiaries at the time of death and on certain transfers, which is made by law as equivalent to testamentary disposition, according to the BIR. — VDS, GMA News