Are Foreign Currency Deposits Still Taxed After Death? The Supreme Court Says No.

Let’s talk about something that affects everyone:

The death of a loved one, and the taxes that come with settling their estate.

Now, here’s the twist:

If your loved one leaves behind a dollar account in a Philippine bank, is it still subject to estate tax?

The answer:

In CIR v. Estate of Charles Marvin Romig (G.R. No. 262092, Oct. 9, 2024):

Mr. Romig, an American, passed away in the Philippines. He left behind a U.S. dollar savings account in HSBC.

His sole heir wanted to claim it.

The estate did the right thing: filed an estate tax return, paid the taxes, and even paid millions more in a later amended return. (Php 4,565,349.07)

But then, they asked for a refund. Why?

Because they believed that foreign currency deposits are not supposed to be taxed.

The BIR disagreed. They insisted that the exemption was already repealed.

So the case went all the way to the Supreme Court.

The Supreme Court’s Answer:

Foreign currency deposits in the Philippines are EXEMPT from estate tax.

Here’s why:

1. The law is still in place.
   Republic Act No. 6426, the Foreign Currency Deposit Act, clearly says in Section 6 that deposits made under this system, including interest and earnings, are exempt from ALL taxes, even after death.
2. No repeal.
   The Court said the newer Tax Code (NIRC) doesn’t explicitly repeal this exemption. And when a special law (like RA 6426) and a general law (like the NIRC) conflict, the special law prevails.
3. Legislative intent is clear.
   The reason RA 6426 exists is to attract foreign currency into the Philippines.

As a side note, some historical trivia:

Back in the 1970s, the Philippines desperately needed foreign currency.

The country was bleeding dollars, and the government needed a solution.

Their answer?

Republic Act No. 6426

A law that made foreign currency deposits attractive by exempting them from taxes, including estate tax.

What This Means

If someone has dollar account or other foreign currency deposit in a Philippine bank under the Expanded Foreign Currency Deposit System (EFCDS), think of USD, EUR, JPY, and other foreign currency accounts:

• It’s not included in the estate tax computation upon death.
• It could be a way to protect a portion of the estate from taxation.

But There’s a Catch

These accounts are confidential. Only the account holder, or after death, the proper court-appointed executor or administrator can access them. So while they’re tax-free, they’re not easily accessible.

If you plan to include foreign currency deposits in your estate plan:

• Document everything.
• Talk to your heirs.
• Review your overall estate planning strategy.