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TAXATION ATTY. MACMOD, C.P.A.

Donors Tax

LECTURE NOTES
1. Definition and characteristics of the tax. (10) Intramuros Administration

2. Requisites of a valid donation 8. Formula for computation of Taxable net gift gate and gift
a. _____________________ tax due
b. _____________________ 9. Donors tax Credit (Same concept as in estate tax credit)
c. _____________________ 10. Administrative provisions
d. _____________________
e. _____________________ Summary of properties comprising gross gift:
Real Tangible Intangible
3. Classification of Donors and composition of the gross Property Personal Personal
gift: Citizen or
a. Resident or Citizens of the Philippines Resident ALL ALL ALL
_________________________________________ NRA w/ W/in the W/in the NONE
________________ reciprocity Phils., only Phils.,only
b. Not a resident not a citizens of the Phil. (NRA) NRA w/o W/in the W/in the W/in the
Without Reciprocity Law reciprocity Phils., only Phils., only Phils., only
_____________________________________
With Reciprocity Law Summary deductions allowed:
___________________________ Citizen or NRA
resident
4. Other transactions subject to donors tax Dowry Allowed none
a. ______________________________ Gifts to the Natl Govt. Allowed Allowed
b. ______________________________ Gifts to educational, charitable
institution etc. Allowed Allowed
5. Requisites of Transfer with insufficient consideration Mortgage assumed by donee Allowed Allowed
a. _______________________________ Diminution Allowed Allowed
b. _______________________________
c. _______________________________ TAX CREDIT FOR FOREIGN DONORS TAX
In order to minimize or lessen the harsh of effect of
6. Valuation of gross gift taxing the same gift twice, the donor is allowed to claim the
a. Personal Property _________________ gift tax paid in the foreign country as a tax credit against the
b. Real Property _____________________ gift tax paid in the Philippines. It can only be claimed of
Citizen or resident of the Philippines at the time the donation
7. Deduction from the gross gift: was made.
a. Under the Tax Code:
(1) Dowries AMOUNT OF TAX CREDIT
(2) Donations to the government or any of its The tax credit is the amount of donors tax paid to the
agencies or instrumentalities foreign country, but not exceed the limit prescribed by law:
(3) Donations to educational, charitable, religious,
cultural, social welfare institution, accredited LIMIT A:
NGOs, trust on philanthropic organizations, Net gifts (per foreign country)
research institutions, etc. provided that no more ---------------------------------- X Philippine Donor Tax
than 30% of the donation/gift shall be used by Total Net Gifts
the donee institution for its administrative
purposes; Requisites: LIMIT B:
_____________________________________ Net gifts (all foreign countries)
_____________________________________ ----------------------------------- X Philippine Donors Tax
______________________________ Total net gifts

b. Under BIR Rulings: DONORS TAX RATES


(1) Encumbrances on the property donated, if a. In general
assumed by the donee If the net gifts is:
(2) Diminutions on the property donated specifically But not The tax Of excess
provided by the donor Over over shall be Plus over
P 100,000 Exempt
c. Under Special Laws. Donations to the following P100,000 200,000 0 2% P100,000
special non-stock-non-profit institutions duly 200,000 500,000 2,000 4% 200,000
recognized by the government pursuant to a special 500,000 1,000,000 14,000 6% 500,000
law are exempt: 1,000,000 3,000,000 44,000 8% 1,000,000
(1) International Rice Research Institute 3,000,000 5,000,000 204,000 10% 3,000,000
(2) Ramon Magsaysay Award Foundation 5,000,000 10,000,000 404,000 12% 5,000,000
(3) Southern Philippines Development
Administration b. When the donee is stranger, the tax shall be 30% of the
(4) Philippines American Cultural Foundation net gifts.
(5) Integrated Bar of the Philippines
(6) Development Academy of the Philippines A STRANGER is a person who is:
(7) National Social Action Council a. Not a brother or sister (whether by the whole or half
(8) Museum of the Philippine Costumes blood), spouse, ancestor and lineal descendant;
(9) Aqua-culture Department of South East Asia b. Not a relative by consanguinity in the collateral line
Fisheries Development Center of the Philippines within the fourth degree of relationship.
c. Any contribution in cash or in kind to any candidate, 5) Such further information as may be required by
political party or coalition of parties for campaign rules and regulations made pursuant to law.
purpose shall be governed by Election Code, as
amended. b. The donors tax return is filed within 30 days from
date of each donation.
FORMAT OF COMPUTATION c. The tax is paid as the return is files (pay-as-you-
a. FIRST DONATION OF THE YEAR file).
Gross Gift P xxx d. Except in cases where the Commissioner otherwise
Less: Exemption xxx permits, the return shall be filed and the tax paid to:
Taxable Net Gift P xxx 1) An authorized agent bank
2) Revenue District Officer
b. Subsequent donation/s during the same year: 3) Revenue Collection Officer or;
Gross Gifts P xxx 4) Duly authorized Treasurer of the city or
Less: Exemptions (Deductions) xxx municipality
Net gifts P xxx
Add: All prior net gifts Where the donor was domiciled at the time of the transfer,
during the same year xxx or if there be no legal residence in the Philippines, with the
Total (aggregate) net gifts P xxx Office of the Commissioner.
Donors tax on the total net e. In the case of gifts by a non-resident, the return may
gifts P xxx be filed with:
Less: Donors tax on all prior 1) Philippine Embassy or Consulate in the country
net gifts xxx where he is domiciled at the time of the transfer,
Donors tax due or payable P xxx or;
2) Directly with the office of the Commissioner.
ADMINISTRATIVE PROVISIONS:
*FILING AND PAYMENT OF TAX f. Civil penalties and interest
a. Any individual who makes any transfer by gift shall, 1) Penalty of 25% if there is no false or fraudulent
for the purpose of the said tax make a return in intent on the taxpayer.
duplicate. The return shall set forth: 2) Penalty of 50% if there is false, malice or
1) Each gift made during the calendar year which fraudulent intent on the taxpayer.
is to be included in computing net gifts; 3) Interest of 20% on the unpaid amount of tax
2) The deduction claimed and allowable; from the date computed until fully paid.
3) Any previous net gifts made during the same
calendar year;
4) The name of the donees; and
- done

EXERCISE/PROBLEMS

a. In each of the following, determine the allowable deduction


from the Gross Gift: 10. Donation intervivos to son on account of topping the
CPA Exam. Land with FMV, P 500,000 subject to the
1. Dowry of P 100,000 given by grandfather to her condition that a son will pay the donors tax on the said
granddaughter 2 wks. after the marriage. donation.

2. Dowry by a father to his legitimate son B. DONORS TAX: MULTIPLE CHOICE THEORITICAL
Before Marriage P 8,000 1. A privilege tax imposed on onerous transfers inter vivos:
During Marriage 5,000 a. Gift tax c. Income tax
Within 1 yr. thereafter 50,000 b. Estate tax d. Donors tax

3. Dowry by a mother to her daughter 2. An excise tax on gratuitous transfers mortis causa
During the marriage P 5,000 a. Gift tax c. Income tax
15 mos. after the marriage 50,000 b. Estate tax d. Donors tax

4. Dowry by a mother to her daughters during their 3. An excise tax on gratuitous transfer inter vivos:
marriages: a. Donees tax c. Income tax
Alexi P42,000 b. Estate tax d. Donors tax
Maribel 50,000
Maricel 22,000 4. First statement: The donors tax shall apply, whether the
Abegael 55,000 gift is direct or indirect, and whether the property is real or
personal, tangible or intangible, even if the transfer is
5. Dowry out of common property of the couple to their merely in trust.
2 sons; 2 mos. after marriage
Jekky P150,000 Second statement: Any contribution in cash or in kind to
Emong 170,000 any candidate, political party or coalition or parties for
6. Donation to Philippine National Red Cross, P100,000 campaign purposes shall be subject to donors tax.
but 50% was spent for office expenses alone. a. Both statements are correct
b. Both statements are incorrect
7. Donation to Mla. City Hall P 300,000, but 50% was c. Only the first statement is correct
spent for office expenses. d. Only the second statement is correct

8. Land donated w/ FMV of P 2M w/ unpaid real estate


tax of P 400,000, assumed by the donee & unpaid 5. Donors tax is distinguished from the estate tax
mortgage of P 1M, all assumed by the donor. First distinction: The rates for donors tax are lower than
those for estate tax, as a rule.
9. Donation mortis causa of a land with FMV of P 1M left Second distinction: In donors tax, the exemption is
by the decedent and given inter vivos car worth P200,000 while in estate tax it is P 100,000.
p250,000 pledged for p100,000,30% assumed by the a. Both distinctions are correct.
donee. b. Both distinctions are wrong.
c. First distinction is correct, the second is wrong.
d. First distinction is wrong, the second is correct. In the following questions choose:
a. If only the first statement is correct.
6. When the donee or beneficiary is stranger, the tax payable
b. If only the second statement is correct.
by the donor shall be:
c. If both statements are correct.
a. 30% of the gross gifts
d. If both statement are incorrect.
b. 30% of the net gifts
c. Based on the graduated rates with the first P100,000
15. 1st statement: Donative intent as a requisite of a valid
net gift exempt.
donation is absolute.
d. Based on the graduated rates with the first P100,000
2nd statement: An inofficious donation is voidable.
net gift exempt or 30% of the net gifts whichever is
higher.
16. 1st statement: As a general rule all persons who may
7. For donors tax purposes, one of the following is a stranger: contract and dispose of their property
a. Brother or sister c. Uncle may donate.
b. Spouse d. Son-in-law 2nd statement: Minors can be a donor or a donee
8. One of the following is a relative by consanguinity in the 17. 1st statement: A person can donate all his present
collateral line in the third degree of relationship. property unconditionally.
a. Daughter of the donors nephew
2nd statement: No person may receive or give by way of
b. First cousin of the donor
donation more than he may give or
c. Niece of the donor
receive.
d. Second cousin of the donor

9. Three of the following are exempt or excluded from the 18. 1st statement: The pay as you file system is not followed
donors tax. Which is the exception? in donors taxation.
a. P200,000 cash given by a non-resident alien donor to 2nd statement: Donations by juridical persons are
his legitimate son who is getting married in the deemed made by a stranger.
Philippines to a Filipina.
b. P10,000 cash given by a resident alien donor to his 19. 1st statement: Renunciation of ones share in the
legitimate son who is getting married in the legitime is a taxable gift.
Philippines. 2nd statement: Gift splitting is a form of tax evasion.
c. Donation of a condominium in Hongkong to a Filipina
20. 1st statement: Donation of a personal property worth P
by a British national not residing in the Philippines.
50,000 must be notarized.
d. P150,000 donation to a non-profit school.
2nd statement: Donation of a real property is valid if made
10. First statement: Gifts in favor of an educational and/or in writing even if not notarised.
religious organizations are exempt from donors tax.
Second statement: Gifts on account of a persons merits or C. Multiple Choice Problems
services rendered are taxable whether the services are Donors Tax: Multiple Choice Problems
demandable debt or not. Turkina, a Filipina princess made the following donations.
a. Both statements are correct a. To Zaida, a land worth P 450,000 in Cubao.
b. Both statement are incorrect b. To Hejia, jewelry worth P 100,000 in Hongkong.
c. Only first statement is correct c. To Shahida, PLDT shares amounting to P 150,000.
d. Only second statement is correct d. To Haida, a building in Italy P 1,600,000 mortgaged
for P 50,000 assumed by the donee.
11. All of the following except one are exempt from the gift tax e. To Goliath, land in Pampanga worth P 300,000.
under the special laws: f. P 300,000 cash, PNB New York to Charlie
a. Donation to Integrated Bar of the Philippines g. P200,000 receivable,50% condoned by Turkina
b. Donation to Development Academy of the Philippines
c. Donation to Philippine Institute of Certified Public She has also transferred the following properties:
Accountants Selling Price FMV
d. Donation to International Rice Research Institute Car, Makati P 200,000 P 300,000
12. John sold his car to Sam. Johns car cost P300,000 and has Car, USA 300,000 200,000
a fair market value of Res. Land,Mla. 1,000,000 2,000,000

P400,000 at the same time of sale. The car was sold for 21. If she is resident Alien her gross gift is:
P200,000. For donors tax purposes, which of the following a. P 2,100,000 c. P 3,100,000
statements is correct? b. P 1,950,000 d. P 3,000,000
a. There is taxable gift of P300,000.
b. There is a taxable gift of P200,000. 22. If she is a NRA non-resident Egyptian, and there is
c. The transfer is subject to capital gains tax reciprocity law, her gross gift is:
d. The transfer involves a personal property, hence, not a. P 850,000 c. P 1,050,000
a subject to gift tax. b. P 950,000 d. P 700,000

13. One of the following statements is false: Questions 23 to 26 are based on the following data:
a. Contracts of donation between husband and wife are Mr. and Mrs. Lapu-Lapu, made the following donations:
void always. 1/25/2012 To Magellan, their legitimate son, on account of
b. The donation by a businessman to a govt officer in marriage last 1/20/2011, car worth P400,000,
view of his public office is void ab ibnitio. with P 200,000 mortgage, was assumed by
c. Donations between persons guilty of adultery or the donee.
concubinage are void. 5/31/2012 To Napoleon, brother of Mr. Lapu-Lapu, his capital
d. Donations to conceived or unborn children are valid. property worth P 200,000 on account of
14. 1st statement: A donation can be both a part of the gross marriage 6 months ago of Napoleon with a
gift of the donor and a taxable income to the donee. condition that the donee will pay the donors tax
2nd statement: A donation may be exempt from donors tax thereon.
but not necessarily a deduction from the donors gross
income. 7/15/2012 To Donita, daughter of Mrs. Lapu-Lapu by
a. Only the 1st statement is correct. former marriage, on account of her marriage 12
b. Only the 2nd statement is correct. months ago, Mrs. Lapu-Lapus paraphernal
c. Both statements are correct. property worth P 100,000.
d. Both are incorrect.
8/20/12 conjugal car of the couple worth P 400,000, with P a. P 9,600.00 c. P 1,660.63
200,000 unpaid mortgage, assumed by b. P 5,907.00 d. P 4,600.00
Donita. And P 500,000 worth of land to their four 32. Using the data in no. 30. The gift tax payable of the wife
sons on account of their graduation, 20% of is:
which was owned by their kumpare who agreed a. P 1,800.00 c. P 13,200.00
to donate his share thru a public document. b. P 3,600.00 d. P 3,460.63

23. The gift tax due of Mr. Lapu-Lapu as of May 31, 2012 is: 33. On July 18, 2015, Mr. Jecky gave a property with a fair
a. P 8,000 c. P 7,200 market value of P 550,000 to Mikey, a legitimate son, and
b. P 7,000 d. P 6,600 Rose, Mikeys bride, on account of their marriage
celebrated on January 3, 2015. The donors tax payable is:
24. The gift tax of Mrs. Lapu-Lapu as of July 15, 2012 is: a. P 87,100 c. P 84,100
a. P 3,600 c. P 2,800 b. P 38,000 d. P 15,800
b. P 2,600 d. P 4,000
34. Mr. Porontong made the following gifts to his relatives:
25. The gift taxes due of Mr. and Mrs. Lapu-Lapu on August Phils. USA UK Italy
20, 2012: Gross gift P750,000 P500,000 P250,000 P500,000
a. P 69,000 & P 18,800 c. P 54,000 & P 15,800 Deductions 250,000 200,000 150,000 150,000
b. P 17,000 & P 18,800 d. P 54,000 & P 18,800 Tax paid 25,000 12,000 10,000

26. The gift tax due of their kumpare is: The gift tax due after credit is:
a. P 30,000 c. P 45,000 a. P 35,600 c. P 33,520
b. P 10,000 d. P 15,000 b. P 25,600 d. P 39,000

Questions 27 & 28 are based on the following data: 35. In 2014, Maynard made the following gifts:
Mr. Pinya, made the following donations for the year 2012: 1. On June 1, 2014, P150,000 to Karen, his daughter, on
account of her marriage celebrated on May 1, 2010.
April 15 To Natalie, legally adopted child on acct. of 2. On July 10, 2014, a parcel of land worth, P180,000 to
marriage last week, car worth P 710,000 in his father, subject to the condition that the father
Philippines. would assume the mortgage indebtedness of Maynard
To Daylan, his daughter, car in USA worth P in the amount of P40,000.
300,000. They paid $ 200 donors tax in the US 3. On September 30, 2014, P150,000 dowry to his
($1 P 45) daughter Gina, on account of her scheduled marriage
on October 25, 2015, and another wedding gift worth
July 20 To Tiffany niece in Manila, P 200,000 worth of P20,000 on November 23, 2014.
personal property.
To Nora, legitimate daughter on acct. of marriage How much is the total net gifts?
in Cebu, July 18, 2008 car, worth P 400,000 but a. P500,000 c. P430,000
mortgaged for P 200,000, of which was b. P450,000 d. P300,000
assumed by the donee.
36. Who is not subject to the donors tax?
27. The gift tax due after credit on April 15, 2012 is: a. An individual making a donation.
a. P 30,800 c. P 44,000 b. A corporation making a donation.
b. P 35,000 d. P 33,000 c. A partnership making a donation.
d. An employer who pays premiums on the life insurance
28. The gift tax due on July 20, 2012 is: of its employee.
a. P 40,000 c. P 84,000
b. P 36,000 d. P 80,000 37. J. C. gave a property with a fair market value of P200,000,
with unpaid mortgage of P20,000 still assumed by the
29. Mr. Romano donated a total amount P 500,000, 40% to the donor, to Jay his son, and Jays bride Tina, on account of
Quezon City Hall and 60% to a charitable institution her marriage 13 months ago.
TAHANAN NI GLORIA. Upon inquiry, it was verified that the
charitable institutions total receipts from donation The allowable deduction is:
amounted to P 10M and its total administrative expenses a. P10,000 c. P40,000
reached P 4M. Mr. Romano can claim a total deduction / b. P20,000 d. P 0
exemption of:
a. P 300,000 c. P 200,000 38. The donors tax due based on the above problem is:
b. P 500,000 d. P None a. P32,000 c. P 2,000
b. P30,000 d. P31,800
30. During the current year, Mr. and Mrs. Reyes, non-resident
citizens, donated the following:
Sept. 25: To Bea a legitimate child, on account of Whether you know it or not, today you are placing an
marriage, last month a conjugal property order for your tomorrows from the catalogue of the
located in the Philippines, FMV, P 400,000. Universe. Your predominant thoughts and feelings today
To Jessica niece of Mr. Reyes, on account of are creating a frequency that is automatically determining
marriage, a property located in the USA your life tomorrow. Feel good now and for the rest of the
exclusively owned by the husband, FMV, P day, and make your tomorrows magnificent.
150,000 (gift tax in USA, P 5,500)
-The Secrets by Rhonda Byrne
Oct. 9 : To Gail, a legitimate child, conjugal property
in the Philippines, FMV,
P 100,000.

The gift tax payable on the September 25 gifts of the


husband is:
a. P 7,600 c. P 4,247
b. P 2,600 d. P 3,353

31. Using the data in no. 30, the gift tax payable on the
October 9 gift of the husband is: