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Donors Tax Notes2
Donors Tax Notes2
In determining the book value of common shares, appraisal surplus shall not be considered as well as the value
assigned to preferred shares, if there are any. On this note, the valuation of unlisted shares shall be exempt from the
provisions of RR No. 6-2013, as amended.
For shares which are listed in the stock exchanges, the fair market value shall be the arithmetic mean between the
highest and lowest quotation at a date nearest the date of donation, if none is available on the date of donation.
The fair market value of units of participation in any association, recreation or amusement club (such as golf, polo,
or similar clubs), shall be the bid price nearest the date of donation published in any newspaper or publication of
general circulation.
To determine the value of the right to usufruct, use or habitation, as well as that of annuity, there shall be taken into
account the probable life of the beneficiary in accordance with the latest basic standard mortality table, to be
approved by the Secretary of Finance, upon recommendation of the Insurance Commissioner. (Sec. 2, RR No. 17-
2018 and Sec. 5 of RR No. 12-2018)
3. For purposes of Donor’s Tax, what does the term “Net Gift” mean?
For purposes of the donor’s tax, “net gift” shall mean the net economic benefit from the transfer that accrues to the
donee. Accordingly, if a mortgaged property is transferred as a gift, but imposing upon the donee the
obligation to pay the mortgage liability, then the net gift is measured by deducting from the fair market value
of the property the amount of mortgage assumed. (Sec. 12 of RR No. 12-2018)
4. Under R.A. No.10963 (TRAIN Law), is any contribution in cash or in kind to any candidate or political party or
coalition of parties for campaign purposes subject to the payment of donor’s tax?
Sec. 28 (B) of RA No. 10963 (TRAIN Law) states that any contribution in cash or in kind to any candidate, political
party or coalition of parties for campaign purposes shall be governed by the Election Code, as amended.”
6. For purposes of Donor’s Tax, are donations between businesses considered donations made between
strangers?
Donation made between business organizations and those made between an individual and a business organization
shall be considered as donation made to a stranger. (sec. 10, RR No. 2-2003). However, with the passage of RA No.
10963 (TRAIN Law), effective on January 1, 2018, the relationship between the donor and donee(s) is no longer
considered in in the computation of donor’s tax.
8. Is an onerous donation or donation in exchange for goods, services or use or lease of properties to
Homeowners’ Association subject to Donor’s Tax?
Pursuant to RMC No. 9-2013, associations are subject to the corresponding internal revenue taxes imposed under
the Tax Code of 1997 on their income of whatever kind and character. In this regard, contributions to associations in
exchange for goods, services and use of properties constitute as other assessments/charges from activity in exchange
for the performance of a service, use of properties or delivery of an object. As such, these fees are income on the
part of the associations that are subject to income tax under Section 27 of the Tax Code, as amended. (Section III,
RMC No. 53-2013)
9. What is the proper treatment for transactions involving transfer of property other than real property
referred to in Section 24 (D) for less than adequate and full consideration?
Where property, other than real property referred to in Section 24(D) of the NIRC, as amended, is transferred for
less than an adequate and full consideration in money or money's worth, then the amount by which the fair market
value of the property exceeded the value of the consideration shall, for the purpose of the tax imposed by this
Chapter (Donor’s Tax), be deemed a gift, and shall be included in computing the amount of gifts made during the
calendar year: Provided, however, that a sale, exchange, or other transfer of property made in the ordinary course of
business (a transaction which is a bona fide, at arm’s length, and free from any donative intent) will be considered as
made for an adequate and full consideration in money or money’s worth. (Sec. 16, RR No. 12-2018)
10. What entities are considered exempted from Donor’s Tax under special laws?
The list below consists of entities considered Donor’s Tax exempt under special laws including, but not limited to
the following:
· Rural Farm School (Sec. 14, R.A. No. 10618)
· People’s Television Network, Incorporated (Sec. 15, R.A. No. 10390)
· People’s Survival Fund (Sec. 13, R.A. No. 10174)
· Aurora Pacific Economic Zone and Freeport Authority (Sec. 7, R.A. No. 10083)
· Girl Scouts of the Philippines (Sec. 11, R.A. No. 10073)
· Philippine Red Cross (Sec. 5, R.A. No. 10072)
· Tubbataha Reefs Natural Park (Sec. 17, R.A. No. 10067)
· National Commission for Culture and the Arts (Sec. 35, R.A. No. 10066)
· Philippine Normal University (Sec. 7, R.A. No. 9647)
· University of the Philippines (Sec. 25, R.A. No. 9500)
· National Water Quality Management Fund (Sec. 9, R.A. No. 9275)
· Philippine Investors Commission (Sec. 9, R.A. No. 3850)
· Ramon Magsaysay Award Foundation (Sec. 2, R.A. 3676)
· Philippine-American Cultural Foundation (Sec. 4, P.D. 3062)
· International Rice Research Institute (Art. 5(2), PD 1620)
· Task Force on Human Settlements (Sec. 3(b)(8), E.O. 419)
· National Social Action Council (Sec. 4, P.D. 294)
· Aquaculture Department of the Southeast Asian Fisheries Development Center (Sec. 2, P.D. 292)
· Development Academy of the Philippines (Sec. 12, PD 205)
· Integrated Bar of the Philippines (Sec. 3, PD 181)