The Supreme Court (SC) has ruled that foreign currency deposits are exempt from estate tax under Republic Act No. 6426, the 1974 Foreign Currency Deposit Act of the Philippines.
In a decision, the SC pointed out that while the National Internal Revenue Code (NIRC) was passed in 1997 that mandated imposition of taxes, including estate tax, the internal revenue law did not specifically amend the provision under RA 6426.
In a decision written by Associate Justice Ramon Paul L. Hernando, the SC said:
“It is a fundamental rule in statutory construction that between a general law (1997 NIRC) and a special law (RA 6426), the latter prevails because a special law reveals the legislative intent more clearly than a general law does.
“Moreover, a special law cannot be repealed or modified by a subsequent enacted general law in the absence of any express provision in the latter law to that effect.
“A special law must be interpreted to constitute an exception to the general law in the absence of special circumstances warranting a contrary conclusion.
“A perusal of the provisions of the 1997 NIRC would reveal that there is no express repeal of the grant of tax exemption for foreign currency deposits found in Republic Act No. 6426.”
With the ruling, the SC affirmed the decision of the Court of Tax Appeals (CTA) which upheld the claim for an estate tax refund filed by the estate of Charles Marvin Romig, an American national who resided in Puerto Galera, Oriental Mindoro.
Case records showed that Charles passed away in 2011 without leaving a will. His sole heir and estate representative Maricel Narciso Romig transferred to her, through an affidavit of self-adjudication, the ownership of the properties left, including a dollar deposit account with the Hongkong and Shanghai Banking Corporation (HSBC) Limited Makati Branch.
On May 18, 2012, Charles’ estate filed an estate tax return and paid P26,152 in taxes.
Three years later in 2015, the estate amended the estate tax return and paid an additional estate tax of P4,565,349.07 on the HSBC dollar account deposits.
Thereafter, Maricel sought a refund of the more than P4.5 million paid for taxes on dollar account deposits. She pointed out that the dollar account deposits of Charles are exempt from estate tax under Section 6 of RA 6426.
The Bureau of Internal Revenue (BIR) denied her claim as it asserted that the tax exemption on dollar deposits had been revoked by the 1997 NIRC.
On Maricel’s appeal, the Court of Tax Appeals’ (CTA) second division ruled in her favor and ordered the refund of the erroneously paid estate tax amounting to more than P4.5 million.
The CTA, as a full court, affirmed its division’s ruling on the refund. The BIR, through the Office of the Solicitor General, elevated the case to the SC.
Resolving the issued, the SC said: “… it then becomes apparent that the decedent’s HSBC USD Savings Account is governed by the provisions of Republic Act No.6426 and is therefore exempt from any and all taxes, including estate tax.
“Hence, the Court upholds the ruling of the CTA en banc that the estate has the right to recover the amount of P4,565,349.07 representing the estate tax that it had erroneously paid to the government,” the SC ruled.