MANILA, Philippines — The Supreme Court (SC) has ruled that foreign currency deposit accounts are exempt from estate tax under Republic Act No. 6426 (RA 6426), or 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 estate tax refund claim of Maricel Narciso Romig, the sole heir of American national Charles Marvin Romig, who resided in Puerto Galera, Oriental Mindoro.

Charles passed away in 2011 without leaving a will. Maricel, through an Affidavit of Self-Adjudication, transferred ownership of his assets to herself, including a dollar deposit account with the Hongkong and Shanghai Banking Corporation (HSBC) Limited Makati Branch.

Initially, she excluded the deposit from the estate tax computation but later paid an additional P.56 million to cover it. She later sought a refund, arguing that under Section 6 of RA 6426, foreign currency deposits are tax-exempt.

The Bureau of Internal Revenue (BIR), through the Commission on Internal Revenue (CIR), denied her claim, contending that the 1997 National Internal Revenue Code (NIRC) revoked the exemption. 

However, the Court of Tax Appeals ruled in her favor.

The SC affirmed the tax court’s ruling, stressing that RA 6426, as a special law, prevails over the NIRC, a general tax law. 

It clarified that a general law cannot repeal a special law unless an explicit provision states otherwise.

RA 6426, enacted in 1974, was designed to encourage foreign investments by exempting foreign currency deposits from all taxes. 

Meanwhile, the NIRC, which was passed in 1997, governs the country’s tax system but only contains a general repealing clause, which the SC ruled insufficient to override RA 6426’s tax exemption.