MANILA, Philippines — The Supreme Court has ruled that foreign currency deposit accounts are exempt from estate tax under Republic Act 6426, also known as the Foreign Currency Deposit Act of the Philippines.
In a decision issued on October 9, 2024, the high court's first division affirmed a tax refund claim by the estate of Charles Romig, an American residing in the Philippines, reinforcing the law's intent to attract foreign investments.
The case
After Romig's death in 2011, his heir Maricel Romig transferred ownership of his assets, including a dollar account with HSBC, through an affidavit of self-adjudication.
Though she initially excluded the dollar deposit from estate tax calculations, she later paid P4.56 million in additional tax. Maricel subsequently filed for a refund, citing RA 6426's tax exemption for foreign currency deposits.
The Commissioner of Internal Revenue denied her claim, asserting that the 1997 National Internal Revenue Code (NIRC) had revoked the tax exemption.
This prompted Maricel to seek relief from the Court of Tax Appeals, which ruled in her favor, prompting the internal revenue body to elevate the case to the Supreme Court.
The ruling
The Supreme Court upheld the lower court's decision, emphasizing that the internal revenue code, being a general tax law, cannot implicitly override RA 6426's specific tax exemptions.
"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 high court stated.
“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,” it added.
The court thus affirmed the estate's right to recover the P4,565,349.07 in erroneously paid estate tax.
This ruling reinforces the original purpose of RA 6426, enacted in 1974, to stimulate foreign investments by providing tax exemptions for foreign currency accounts.