MODULE 1: DONOR’S TAXATION

OVERVIEW:

SEC. 98. Imposition of Tax. –

(A) There shall be levied, assessed, collected and paid upon the transfer by any person, resident
or nonresident, of the property by gift, a tax, computed as provided in Section 99.
(B) The tax 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, tangible or intangible.
Donor’s Tax is a tax on a donation or gift and is 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, tangible or intangible
On this module, we will discuss the fundamental concepts of donation and provisions on
donor’s taxation under the Old and New Tax Code of the Philippines. Provided also in this module
are the procedures for filing and payment of donor’s tax due to BIR which includes the: Date and
place of filing, payment of donor’s tax return, BIR form for donor’s tax and others.

MODULE OBJECTIVES:
After successful Completion of this module, you should be able to:

1. Be able to know the provisions per Tax Code, as amended, on Donor’s taxation.
2. To understand definition, elements / requisites, classes and prescribed form of Donation.
3. To determine the persons required to file Donor’s Tax return, contents of Donor’s Tax
return and its attachments, date and place of filing, payment of donor tax due and
penalties/surcharge to assessed tax, delinquency and deficiency.
4. To compute the taxable net gift and the corresponding donor’s tax due based on the Old
Tax Code and New Tax Code.
5. To compute the taxable net gift and the corresponding donor’s tax still due based on the
Old Tax Code and new Tax Code.
6. To compute the limitations on Donor’s Tax Credit for donor’s tax paid on foreign country
by a resident or citizen donor.
7. Identify the transactions (donations / gift) that are part of Gross gift and Allowed
deductions.
8. Identify transactions that are exempted and excluded from Donor’s tax.

Course Materials:
Under this module, the topic Donor’s Taxation is subdivided into five (5) lessons as follows:
Lesson 1; Administrative Provisions and Fundamental Concepts of Donor’s Taxation
Lesson 2: Laws / Rules on Taxable Net Gift and Computation of Donor’s tax due
Lesson 3: Donor’s Tax Credit and Donor’s Tax Return
Lesson 4: Laws / Rules on Gross Gift
Lesson 5: Laws / Rules on Allowed Deduction from Gross Gift
MODULE 1: DONOR’S TAXATION
Lesson 1 – Administrative Provisions and Fundamental Concepts of Donor’s Taxation

Overview:

Donor’s Tax is a tax on a donation or gift and is 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, tangible or intangible.

There are two types of donation namely; Donation Inter-vivos and Donation Mortis-causa.
The former is a type of donation that take effect during the lifetime of the donor and thus, subject
to donor’s tax. The latter type is subject to estate tax.

National Internal revenue Code (NIRC) or RA 8424, as amended, is the law governing the
donor’s taxation in the Philippines. The tax code was amended by TRAIN law or RA 10963, thus
resulting to Old and New tax code of the Philippines. The tax code of the Philippines provide
provision on who are required to file donors tax return, procedures on filing, computations of
donors tax due and other provisions related to donor’s taxation.

Module Objectives:
After successful Completion of this module, you should be able to:

1. Be able to know the provisions per NIRC, as amended, on Donor’s taxation.

2. Define and explain donor’s tax.
3. To understand definition, elements / requisites and prescribed form donation.
4. To know the kinds of Donation and the classes of Donors and Donee.
5. Enumerate the classification and purpose of Donor’s taxation.
6. To determine the persons required to file Donor’s Tax return, contents of Donor’s Tax
return and its attachments, date and place of filing, payment of donor tax due and
penalties/surcharge to assessed tax, delinquency and deficiency.

Course Materials:
Donor’s tax refers to a transfer tax imposed upon persons exercising his right to
transmit his property, during his lifetime, to another person without considerations or gratuitously.
Donor’s tax is not a property tax, but it is a tax imposed on the right to transfer
property by way of gift inter vivo. The donor’s tax shall not apply unless and until there is a
competed gift. The transfer of property by gift is perfected from the moment the donor knows of
the acceptance of done. It is completed by the delivery, either actually or constructively, of the
donated property to the done.
Thus, the law in force at the time of perfection / completion of the donation shall govern the
imposition of donor’s tax.

Kinds of Donation as to Tax Liability:

1. Donation Inter vivos: refers to gift made and intended by donor to take effect during
his lifetime. This gift is subject to donor’s tax.
 2. Donation Mortis causa: refers to gifts made during lifetime of donor but is intended by
donor to take effect upon his death. This property transfer partakes the nature of
testamentary disposition and is governed by law on succession; hence this property is
subject to estate tax.
Requisites of Valid Donation:
1. Donative intent of donor.
2. Capacity or authority of donor
3. Delivery of donated property
4. Acceptance of Donee
5. Donation is in prescribed forms
Prescribed Forms:
1. Donation of personal property- if value of property is more than P 5,000 then donation and
acceptance must be in writing; otherwise, the donation and acceptance may be made orally.
2. Donation of real property- It must be in writing and in a public document.

Purpose of Donor’s Tax:

1. To complement the estate tax by preventing the tax free depletion of donor’s estate
during his lifetime.
2. To raise revenue in order to support the government by funding the cost of its
operations.

PROCEDURES

Who Shall File

The Donor’s Tax Return (BIR Form No. 1800) shall be filed in triplicate by any person,
natural or juridical, resident or non-resident, who transfers or causes to transfer property by gift,
whether in trust or otherwise, whether the gift is direct or indirect and whether the property is real
or personal, tangible or intangible.

Taxpayers who are filing BIR Form no. 1800 are excluded in the mandatory coverage from
using the eBlRForms (Section 2 of RR No. 9-2016)

When and Where to File and Pay

The Donor’s Tax Return (BIR Form No. 1800) shall be filed within thirty (30) days after the
date the gift (donation) is made.

The return shall be filed with any Authorized Agent Bank (AAB) of the Revenue District
Office having jurisdiction over the place of domicile of the donor at the time of the donation, or if
there is no legal residence in the Philippines, with the Office of the Commissioner of Internal
Revenue, (Revenue District Office No. 39, South Quezon City). In case of gifts made by a non-
resident alien, the return may be filed with RDO No. 39, or with the Philippine Embassy or
Consulate in the country where he is domiciled at the time of donation.

A separate return shall be filed by each donor for each gift (donation) made on different
dates during the year reflecting therein any previous net gifts made in the same calendar year.
Only one return shall be filed for several gifts (donations) by a donor to the different donees on
the same date.

If the gift (donation) involves conjugal/community property, each spouse shall file separate
return corresponding to his/her respective share in the conjugal/community property
donated. This rule shall likewise apply in the case of co-ownership over the property being
donated.

When the return is filed with an AAB, taxpayer must accomplish and submit BIR-
prescribed deposit slip, which the bank teller shall machine validate as evidence that payment
was received by the AAB. The AAB receiving the tax return shall stamp mark the word “Received”
on the return and also machine validate the return as proof of filing the return and payment of the
tax by the taxpayer, respectively. The machine validation shall reflect the date of payment, amount
paid and transactions code, the name of the bank, branch code, teller’s code and teller’s initial.
Bank debit memo number and date should be indicated in the return for taxpayers paying under
the bank debit system.

Tax Form

BIR Form 1800 – Donor’s Tax Return

Donor’s Tax Return

Description

This return shall be filed in triplicate by any person, natural or juridical, resident or non-
resident, who transfers or causes to transfer property by gift, whether in trust or otherwise,
whether the gift is direct or indirect and whether the property is real or personal, tangible or
intangible.

Contents of Donors tax return:

 Each gift made during the calendar year which is to be included in computing the net gifts
 The deductions claimed and allowable
 Any previous net gift made during the calendar year.
 The name of Donee
 Relationship of donor and one
 Such further information required by rules and regulations made pursuant to law.

Filing Date

The return shall be filed within thirty (30) days after the gift (donation) is made. A separate
return is filed for each gift (donation) made on different dates during the year reflecting therein
any previous net gifts made in the same calendar year. Only one return shall be filed for several
gifts (donations) by the donor to the different donees on the same date. If the gift (donation)
involves conjugal/community property, each spouse shall file separate return corresponding to
his/her respective share in the conjugal/community property. This shall likewise apply in the case
of co-ownership over the property being donated.
Penalty / Additions to the Basic Assessed tax or Deficiency tax
1. Surcharge of 25% in cases of:
a. Failure to file any tax return and pay the tax due on the required date as prescribed
b. Unless otherwise authorized by BIR Commissioner, filing a tax return with internal
revenue officer other than those whom the return is required to be filed.
c. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of
assessment and demand.
d. Failure to pay the full or part of amount of tax shown on nay tax return required to be
filed. 2.Surcharge of 50% in cases of;
a. In case of willful neglect to file tax return within the period prescribed by law and regulations.
b. In case of false or fraudulent tax return is willfully made.
3. Interest of 20% per annum (Old tax law) / 12% per annum under the NEW tax Code.

Illustration:
Computations to determine the penalties / additions to tax:
Case 1; In 2016; Correct tax due is P 150,000 while the Payment of tax made is P 100,000
only. The unpaid tax is overdue for 3 months. Assuming there is no fraud nor willful neglect
to file and pay the correct tax due.
Delinquent tax is 50,000 (150,000 less
100,000) Surcharge is 25% of P 50,000 or
12,500*
Interest** is 20% of 50,000 for 3 months OR 2,500 (50,000x .2 x 3/12)
Total amount due per BIR demand will be: 65,000 (50,000+
12,500+2,500)
*Use 50% surcharge when there is fraud or willful neglect to file and pay the tax due.
**Use 12% rate per annum starting Jan 1, 2018 and so on.