Helen E. Evelyn, ContributorDR. OMAR Davies, Minister of Finance of Planning, in a speech in Parliament on June 14, reminded the House that in his opening budget presentation he had announced a new and more simplified system of taxation on estates, effective June 1, 2005, which would result in the first $100,000 of the net value of an estate being exempt from payment while the remaining balance would attract tax at rate of 7.5 per cent.
It is generally accepted that, not only was the old system of taxation more complicated and onerous, but it also resulted in many persons not being able to pay, and consequently delaying, the application for grants of representation (whether probate or letters of administration) and/or the completion of the administration and winding up of the assets of their loved ones, because they could not afford to settle the estate's transfer tax liability as well as pay the legal fees and expenses of finalising the estate.
The minister conceded that, were the relevant provisions of the Transfer Tax Act to be strictly applied, the estates of persons who died before June 1, 2005 would not benefit from the reduced rates of tax.
'LEGAL OBSTACLE'
Since one of the main objectives of the new system is to reduce the backlog of unsettled estates and consequently, to promote more efficiency in the processing of current cases, the minister announced an amnesty in an effort to circumvent what he described as 'legal obstacle'.
This amnesty will allow the estates of those persons who died before June 1, 2005 to also benefit from and pay the new rates of transfer tax on death. The period of amnesty began on June 1, 2005 and ends on December 31, 2005.
The minister made it clear that as long as persons take advantage of the amnesty offered and pay outstanding transfer tax on death during the six month period referred to above, he will exercise his powers under the Transfer Tax Act to waive the tax which would normally have been payable.
It must also be emphasised that where outstanding liability for payment in deceased person's estates is not settled during the stipulated period, the liability will revert to the transfer tax on death which was payable prior to the reduction in the rates, (being approximately 15 per cent of the net value of the estate) as well as the interest thereon at six per cent per annum which is due and payable from one year after death.
GREAT BENEFIT
This amnesty will be of great benefit to the estates of persons who have died prior to June 1, 2005 as well as estates where, as at July 1, 2005:
(a) The liability for payment of Transfer tax on death has been partially settled;
(b) Revenue affidavits have been filed with the Stamp Duty and Transfer Tax Department but no assessments have been done by that department; and
(c)Revenue affidavits have not yet been filed with the department.
It must also be noted that this amnesty will not be granted automatically.
Consequently, the personal representative(s) of each estate or the surviving joint or co-owner wishing to benefit therefrom must first submit a written application to the Commissioner of the Taxpayer Audit and Assessment Department indicating a desire to take advantage of the amnesty.
Once this application is received, the following process takes place:
(1) The transfer tax liability is calculated at the rate of 7.5 per cent as well as interest thereon at six per cent per annum (if applicable).
(2) A Notice of Estate Assessment indicating the tax liability will be prepared and sent to the applicant or his attorneys-at-law.
(3) After the liability is settled, the Stamp Commissioner's certificate and transfer tax certificate will be prepared and any other relevant documents endorsed confirming this settlement.
'SPECIAL ARRANGEMENT'
The minister indicated that under this 'special arrangement', no refunds in those estates where the transfer tax on death has already been paid, either partially or in full, will be allowed.
He also advised that since those matters have been finalised and are considered settled, no applications for refunds will be entertained.
It goes without saying that this period of amnesty is a 'win-win' situation for both the taxpayer and the tax authorities and the opportunity to take advantage of this amnesty is still open.
Helen E. Evelyn is an attorney-at-law and partner at DunnCox, 48 Duke Street, Kingston. You may contact her at: Helen.Evelyn@dunncox.com
Taken from the Financial Gleaner, Friday, December 9, 2005.
