INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE

1st Sem
Department of Accountancy 2020
TRANSFER AND BUSINESS TAXATION

MODULE 3 – DONOR’S TAX

DONATION is an act of liberality whereby a person disposes graciously of a thing or right in favour
of another, who accepts it.

DONOR’S TAX is a tax imposed on the gratuitous transfer of property between two or more
persons who are living at the time of the transfer. It shall apply whether the transfer is in trust or
otherwise, whether the gift is direct or indirect and whether the property is real or personal.

Notes:
1. Donor’s tax return (BIR Form 1800) is filed and donor’s tax is paid to the BIR for the
purpose of acquiring an electronic Certificate Authorizing Registration (e-CAR). The e-CAR
is proof that appropriate taxes was paid.
2. Donor’s tax is one of the one-time-transaction (ONETT) under BIR rules.
3. Contributions for election campaign are governed by the Omnibus Election Code.
4. Computation of donor’s tax is on a cumulative basis over a period of one calendar year.
5. Donation of real property is subject to Documentary stamp tax (P15/P1,000 plus P15 on
fraction.
RATE OF DONOR’S TAX
The donor’s tax for each calendar year shall be six percent (6%) computed on the basis of the total
gifts in excess of Two Hundred Fifty Thousand Pesos (Php 250,000.00) exempt gift made during
the calendar year.

Net Gift shall mean the economic benefit from the transfer that accrues to the done. Accordingly,
if a mortgaged property is transferred as a gift, but imposing upon the done the obligation to pay
the mortgaged liability, then the net gift is measured by deducting from the fair market value of
the property the amount of mortgaged assumed.
THE LAW THAT GOVERNS THE IMPOSITION OF DONOR’S TAX
The donor’s tax is not a property tax, but is imposed on the transfer of property by way of gift inter
vivos. The donor’s tax shall not apply unless and until there is a completed gift. The transfer of
property by gift is perfected from the moment the donor knows of the acceptance by the done; it
is completed by delivery, either actually or constructively, of the donated property to the done.
Thus, the law in force at the time of the perfection/completion of the donation shall govern the
imposition of the donor’s tax.

Notes:
1. Donation of immovable must be made in public document (Deed of Donation)
2. Acceptance by donee may be made in the same Deed or separate public document and
should be done during lifetime of the donor
ESSENTIAL REQUISITES OF DONATION:
1. Capacity of the donor
2. Intention to Donate - required only in direct donation but not with indirect donation (implied)
as in the case of transfer with insufficient consideration.
3. Donative Act – actual or constructive (i.e.: execution of a public instrument) delivery
4. Acceptance by the done
KINDS OF DONATION:
1. Inter Vivos – donation between living individuals
2. Mortis Causa – takes effect upon the death of the donor
TYPES OF DONOR:
Classification of donor was effectively removed under the TRAIn law as all are subject to 6% tax.
INCLUSION/EXCLUSION in Gross Gift

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INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
1st Sem
Department of Accountancy 2020
TRANSFER AND BUSINESS TAXATION

Location of Property RC, NRC, RA NRA

Within the Philippines Include Include
Outside the Philippines Include Exclude
Note: Rule of Reciprocity on Intangible Personal Properties in Estate Tax applies in Donation.
NATURE OF DONATION:
a. There is a transfer of properties (real or personal, tangible or intangible) directly or indirectly in
trust or otherwise.
b. The transfer is gratuitous (without consideration).
c. The donation is made inter-vivos.
MODE OF EXECUTION OF DONATION/FORMALITIES:
A. Real or immovable property – execution of a public instrument (Deed of Donation)
B. Personal property
a. Tangible
i. P5,000 and below in value – oral is allowed
ii. More than P5,000 in value – donation and acceptance should be in writing (for
validity)
b. Intangible – execution of public instrument
VALUATION OF THE GROSS GIFT TRAIN (RR 12-2018)
General Rule: Gross gift Fair Market Value at time of donation
Exceptions: Real property Zonal value or Assessed Value
Shares of stocks UNLISTED-COMMON Book value (appraisal valuation applies)

Shares of stocks UNLISTED-PREFERRED Par Value

Shares of stocks – LISTED G.R. FMV at the time of donation.
Ex: Arithmetic Mean between the highest
and lowest quotation at a date nearest at
the time of donation
CLUB SHARES Bid price nearest the date of donation
published in any newspaper or publication
of general circulation
RIGHT TO USUFRUCT Probable life of the beneficiary will be taken
into consideration in accordance with latest
mortality rate to be approved by Secretary
of DOF upon recommendation of Insurance
Commissioner
TRANSFERS WITH DONOR’S TAX RELATED TO ESTATE
1. Renunciation by the surviving spouse of his/her share in the conjugal partnership or
absolute community after the dissolution of the marriage in favor of the heirs of the
deceased spouse or any other person/s is subject to donor’s tax.
2. Renunciation of distributive share specifically and categorically done in favor of identified
heir/s to the exclusion or disadvantage of the other co-heirs in the hereditary estate.

TRANSFERS WITHOUT DONOR’S TAX RELATED TO ESTATE

General renunciation by an heir, including the surviving spouse, of his/her distributive share in the
hereditary estate left by the decedent is not subject to donor’s tax
TRANSFER FOR LESS THAN ADEQUATE AND FULL CONSIDERATION
1. With Donor’s Tax

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INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
1st Sem
Department of Accountancy 2020
TRANSFER AND BUSINESS TAXATION

Where property, other than the real property classified as capital asset, is transferred for less than
an adequate/full consideration in money or money’s worth, the amount by which the fair market
value of the property transferred exceeded the value of the consideration received for such
transfer, shall for purpose of donor’s tax, be deemed a gift and included in computing the amount
of gifts made during the year.

2. Without Donor’s Tax

a. Object of donation is a real property classified as capital asset
b. If the sale, exchange or other transfer of property is even for an insufficient
consideration, the same will still be considered made for adequate and full
consideration provided that such transfer is made in the ordinary course of
business, i.e.,:
✓ A bona fide transaction;
✓ At arm’s length; and
✓ Free from donative intent.

Exercises: Determine if the transaction is subject to Donor’s tax:

Yes or No
1. Sale of house and lot by an owner where the selling price is Php 2M while
the zonal value is Php 5Million and the Assessed value is Php 3M and the
appraiser valued the same at Php 10M.
2. Sale of house and lot by a realtor where the selling price is Php 2M while
the zonal value is Php 5Million and the Assessed value is Php 3M and the
appraiser valued the same at Php 10M.
3. Sale of cellphone by cellphone company where the selling price is Php
10,000.00 while the value thereof is Php 20,000.00
4. Sale of cellphone by an employee where the selling price is Php 10,000.00
while the value thereof is Php 20,000.00
EXEMPT DONATION UNDER SPECIAL LAWS:
1. Aqua-Culture Department of SouthEast Asia Fisheries Development Center of the Philippines
2. Development Academy of the Philippines
3. Donations in accordance with the R.A. 9003 – Ecological Solid Waste Management Act of 2000.
4. Donations to the Pollution Adjudication Board under R.A. 8749 – The Philippine Clean Air Act
of 1999.
5. Integrated Bar of the Philippines
6. International Rice Research Institute
7. Intramuros Administration
8. Museum of Philippine Costumes
9. National Commission on Indigenous People (R.A. 8371 – The Indigenous People Right Act of
1997)
10. National Health Insurance (R.A. 7875 – National Health Insurance Act of 1995)
11. National Social Action Council
12. Philippine American Cultural Foundation
13. Philippine Inventor’s Commission
14. Ramon Magsaysay Award Foundation
15. Southern Philippines Development Administration
DONATIONS UNDER THE BAYANIHAN TO HEAL AS ONE ACT (RA No. 11469)
Donations to the following:
1. National Government or any entity created by any of its agencies (including public
hospitals) which is not conducted for profit, or to any political subdivision of the
government including fully-owned government corporations

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INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
1st Sem
Department of Accountancy 2020
TRANSFER AND BUSINESS TAXATION

2. Accredited non-stock, non-profit corporations, institutions, foundations, NGO

• Educational
• Charitable
• Religious
• Cultural
• Social welfare
• Trust or philanthropic organizations
• Research institutions or organizations
3. Private hospitals and/or non-stock, non-profit educational and/or charitable, religious,
cultural or social welfare corporation, institution, foundation, non-government
organization (even if non-accredited), trust or philanthropic organization and/or research
institution
4. Local private corporations, civic organizations, and/or international
organizations/institutions* provided that they shall:
• Actually, directly and exclusively distribute and/or transfer said donations/gifts to,
• Partner as conduit/logistical machinery with, accredited NGOs and/or national
government or any entity created by any of its agencies which is NOT conducted for
profit or any political subdivision

TYPE OF DONATIONS:
1. Cash
2. Donations of all critical or needed healthcare equipment or supplies in combatting COVID
3. Relief goods such as, but not limited to food packs (rice, canned goods, noodles, etc.) and
water
4. Use of property, whether real or personal (shuttle service, use of lots/buildings
EXEMPT GIFTS BY RC, NRC, RA, NRA
1. Gifts made to or for the use of the National Government or any entity created by any of its
agencies which is not conducted for profit or to any political subdivision of the said
Government
2. Gifts made to non-profit organization, foundation or trust:
Non-profit organization – an organization that:
a. is organized as a non-stock entity
b. pays no dividends
c. governed by trustees with no compensation
d. and devoting all income to the accomplishment of its purposes

For example: educational, charitable, religious, cultural, social welfare, trust or philanthropic
organization, research institution and accredited non-government organization.

Provided that, not more than 30% of said gifts are used by the above entities for
administrative purposes (i.e.: to be verified by BIR)
TAX CREDIT FOR DONOR’S TAX PAID TO A FOREIGN COUNTRY
- Can be claimed only by donors those whose gift are taxable even if made outside the
Philippines:
a. resident citizens
b. non-resident citizens
c. resident aliens
- The allowed creditable donor’s tax paid to a foreign country shall be subject to limit similar to
the limitations in foreign tax credit in income taxation and estate tax.
FILING OF RETURN AND PAYMENT OF TAX
➢ For every donation, the Donor’s tax return shall be filed by the donor unless the donation is

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INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE
1st Sem
Department of Accountancy 2020
TRANSFER AND BUSINESS TAXATION

specifically exempt under the NIRC or other special laws within 30 days from the date of gift.
The tax due thereon is to be paid at the time of filing the return.
➢ Venue/Place of Filing: General Rule: DOMICILE OF THE DONOR
➢ Exceptions:
1. If donor has no legal residence in the Philippines, venue is with the Office of
Commissioner
2. Donation by non-resident may be filed at Philippine Embassy or Consulate in the
country where donor is domiciled at the time of the transfer OR the Office of the CIR
thru RDO 39-South Quezon City
➢ For donations made by husbands and wife out of their common property, the donation is
deemed made by each; hence, both shall prepare separate Donor’s Tax Return and claim
separate deductions. If what was donated is a conjugal or community property, only the
person who signed the Deed is subject to donor’s tax without prejudice to the right of the
other spouse to question the validity of the donation without her consent.
Filing Requirements:
A return under oath in duplicate which shall set forth the following:
a. each gift made during the calendar year which is to be included in computing net gifts
b. the deductions claimed and allowable
c. any previous net gifts made during the same calendar year
d. the name of the donee; and
e. such further information as may be required by rules and regulations made pursuant to law
Notice of Donation by a person engaged in business –
1. Required in exempt donation and for full deduction for income tax purposes
2. Donation worth at least Php 50,000.00
3. RDO of place of business
4. Within 30 days after receipt of Certificate of Donation from donee institution
ILLUSTRATION 1:
Nicanor donated one of his real properties to Inday. Zonal value is Php 5 Million while Assessed
value is Php 3,000,000.00. Inday accepted the donation.

Compute the donor’s tax and the documentary stamp tax.

Zonal value – Php 5 Million

Assessed value – Php 3 Million

Gross gift (higher of the two) Php 5,000,000.00

Less: Exempt gift 250,000.00
Net Gift Php 5,750,000.00
Rate x 6%
Donor’s Tax Php 285,000.00

Gross gift Php 5,000,000.00

Rate x P15/P1,000.00
Documentary Php 75,000.00

References:
1. National Internal Revenue Code of 1997, as amended
2. R.A. 10963 or the Tax Reform for Acceleration and Inclusion Act
3. Revenue Regulations No. 12-2018
4. Revenue Regulations No. 9-2020
5. Civil Code of the Philippines

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