Foreign currency deposit accounts are not subject to estate tax, the Supreme Court (SC) has ruled.
In a decision, the SC First Division upheld the claim for an estate tax refund filed by the estate of an American man in Puerto Galera, Oriental Mindoro who died in the Philippines in November 2011 without leaving a will.
According to the court, the decedent’s sole heir and representative of the estate transferred ownership of his properties to herself, including a dollar deposit with the HSBC Makati Branch.
She initially excluded the dollar deposit account from the estate tax computation but later paid an additional P4.56 million to cover it. She later sought a refund, arguing that foreign currency deposit accounts are exempt from estate tax under Section 6 of Republic Act 6426 (Foreign Currency Deposit Act of the Philippines).
However, the Commissioner of Internal Revenue (CIR) denied her claim, saying that tax exemption on dollar deposit accounts was revoked by the 1997 National Internal Revenue Code (NIRC).
Meanwhile, the Court of Tax Appeals ruled in the estate’s favor and ordered the CIR to refund or issue a tax credit certificate in favor of the estate.
The CIR brought the matter to the SC, which found the petition to be without merit.
The SC said that the NIRC, a general law, did not repeal the specific tax exemption granted under the Foreign Currency Deposit Act of the Philippines, which is a special law.
“It is a fundamental rule in statutory construction that between a general law and a special law, the latter prevails because a special law reveals the legislative intent more clearly than a general law does,” the SC said.
“Moreover, a special law cannot be repealed or modified by a subsequently enacted general law in the absence of any express provision in the latter law to that effect.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,” it added.
The SC said that there is no express repeal of the grant of tax exemption for foreign currency deposits under the 1997 NIRC.
The decision, penned by Associate Justice Ramon Hernando, was promulgated in October 2024 but published only in January 2025. — VBL, GMA Integrated News
