The Supreme Court (SC) ruled that foreign currency deposit accounts are exempt from estate tax under Republic Act No. 6426 (RA 6426), also known as the Foreign Currency Deposit Act of the Philippines.
In a Decision penned by Associate Justice Ramon Paul L. Hernando, the SC’s First Division upheld the claim for an estate tax refund filed by the estate of Charles Marvin Romig (Charles), an American national residing in Puerto Galera, Oriental Mindoro.
Charles passed away in 2011 without leaving a will. His sole heir, Maricel Narciso Romig (Maricel), transferred ownership of his properties to herself, including a dollar deposit account with the Hongkong and Shanghai Banking Corporation (HSBC) Limited Makati Branch, through an Affidavit of Self-Adjudication.
Maricel initially excluded the dollar deposit account from the estate tax computation but later paid an additional PHP 4.56 million to cover it. Subsequently, she sought a refund, arguing that foreign currency deposit accounts are exempt from estate tax under Section 6 of RA 6426.
The Commission on Internal Revenue (CIR) denied her claim, asserting that the tax exemption over dollar deposit accounts was revoked by the 1997 National Internal Revenue Code (NIRC). However, the Court of Tax Appeals ruled in Maricel’s favor.
The SC affirmed these rulings, emphasizing that the NIRC, a general tax law, did not expressly repeal the specific tax exemption granted by RA 6426, a special law. The Court clarified that a general law cannot override or revoke a special law without a clear and explicit repeal provision.
RA 6426, enacted in 1974, was designed to attract foreign investments and deposits by exempting foreign currency accounts from all taxes.
The NIRC, on the other hand, was passed in 1997 to govern the imposition of taxes, including estate tax. It contained only a general repealing clause. Thus, there is no express repeal of the tax exemption in favor of foreign currency deposit accounts. (Courtesy of the SC Office of the Spokesperson)
Originally published by the Supreme Court Public Information Office.
