Atty. Jayson Chan, CPA

29/01/2025

Section 6, Republic Act No. 6426

Tax exemption. – All foreign currency deposits made under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, including interest and all other income or earnings of such deposits, are hereby exempted from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or nonresidents so long as the deposits are eligible or allowed under aforementioned laws and, in the case of nonresidents, irrespective of whether or not they are engaged in trade or business in the Philippines. (As amended by PD No. 1246, prom. Nov. 21, 1977.)

The (SC) has 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 who was a resident of 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, 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The Commission on Internal Revenue denied her claim, asserting that the tax exemption over dollar deposit accounts was revoked by the 1997 𝘕𝘢𝘵𝘪𝘰𝘯𝘢𝘭 𝘐𝘯𝘵𝘦𝘳𝘯𝘢𝘭 𝘙𝘦𝘷𝘦𝘯𝘶𝘦 𝘊𝘰𝘥𝘦 (NIRC).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 (CTA) ruled in Maricel’s favor.

Affirming the CTA, the SC emphasized 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.

Read the full text of the Press Release at https://sc.judiciary.gov.ph/sc-foreign-deposit-accounts-exempt-from-estate-tax/

Read the full text of the Decision at https://sc.judiciary.gov.ph/262092-commissioner-of-internal-revenue-vs-estate-of-mr-charles-marvin-romig-represented-by-its-sole-heir-mrs-maricel-narciso-romig/

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