RONALD RYAN I.

LACSAMANA
Donation (or gift) is an act of liberality whereby a person (donor)
disposes gratuitously of a thing or right in favor of another (donee) who
accepts it.
(Art.725, Civil Code)
 KINDS OF DONATION

made between living persons , and which is perfected

Donation
from the moment the donor knows of the acceptance of
inter vivos the donee. (Subject to donor's tax)

takes effect upon the death of the donor and, therefore

Donation
partakes of the nature of testamentary disposition.
mortis causa (Subject to estate tax)
 DONOR'S TAX
Also called Gift tax
Imposed on the gratuitous transfer of real or personal, tangible or
Definition:
intangible property
Imposed whether the transfer is in trust or otherwise

To prevent avoidance of estate tax

To compensate for the loss or decrease of income taxes when large
Purpose:
estates are split

Transfer is gratuitous or without consideration. The transfer is made

out of pure generosity of the donor (donative intent)
Purpose:
Both the donor and the donee are living at the time of the transfer
There must be a completed gift.
ESSENTIALS OF A TAXABLE GIFT

Capacity of the donor

Donative intent, or intent on the part of the donor to make a gift

Delivery, whether actual or constructive, of the subject matter of the gift

Acceptance of the gift by the donee

CONTRACT OF DONATION

1. WHEN PERFECTED AND Perfected at the moment the donor knows of the acceptance of the gift
COMPLETED? by the donee. Completed by the delivery to the donee either actually or
constructively of the donated property.

2. WHO CAN BE All persons who may contract and dispose of their property may make
DONORS? a donation

3. WHO CAN BE
All those who are not specially disqualified by law may accept donations.
DONEES?
Minors and others cannot enter into a contract may become donees, but
acceptance shall be done through their parents or legal representatives.

Donations made to conceived and unborn children may be accepted by

those persons who would legally represent them if they were already
born.
GIFT WITH RESERVED POWERS

A gift that is incomplete because of reserved powers, becomes complete when either:

a. the donor renounces the power

b. his right to exercise the reserved power ceases because of the happening of some
event or contingency or the fulfilment of some condition, other than because of the
donor's death.
WHAT DONATIONS SHALL BE
VOID?
1) Between spouses, whether direct or indirect, during marriage, except moderate gifts
which the spouses may give each other on the occasion of any family rejoicing.

Note: Indirect donations to a spouse are void, and include the following donations of a
spouse:
To a stepchild who has no compulsory heirs other than the other spouse at the time of the
donation.
To a common child who has no compulsory heirs other than the other spouse at the time of the
donation.
To the parents of the other spouse.
To the other spouse's adopted child in cases when, at the time of the donation, the only
surviving relatives of the adopted is the adopter-spouse, the illegitimate children of the adopted,
and the surviving spouse of the adopted.
To a common adopted child who has no other surviving heirs.
2) Between persons living together as husband and wife without a valid marriage.

3) Between persons guilty of concubinage or adultery at the time of donation.

4) Between persons found guilty of the same criminal offense, in consideration thereof.

5) Those made to a public officer or his/her spouse, descendants, and ascendants, by

reason of his or her office.

6) Donations made by persons to those who cannot inherit from them:

Donations to the priest who heard the confession of the donor during his last illness, or minister
who extended spiritual aid to him during the same period.
Donations to the relatives of such priest or minister within the 4th degree.
Donations of the church, orderm chapter, community, organizations, or institution to which such
priest or minister belongs.
Those made to a guardian with respect to donations made by a ward before the final accounts of
guardianship have been approved, except when the guardian is the ward's ascendant,
descendant, brother or sister.
Any physician, surgeon, nurse, helath officer, or druggist who took care of the donor during his
last illness.
DONATION OF MOVABLES

1. Donation may be oral or in writing

a. If orally made, it requires the simultaneous delivery of the thing or the

document representing the right donated.
b. If in writing, it does not require simultaneous delivery of the thing donated.

2. Acceptance may be oral, in writing, or tacit

value of movable >5,000 donation may be oral or in writing and the acceptance may
be oral, in writing, or tacit

donation and acceptance must be in writing, otherwise the

value of movable <5,000
donation is void, even if there is simultaneous delivery
DONATION OF IMMOVABLES

Donation must be in writing and in a public instrument ( notarized )

Acceptance may be made in the same deed of dobnation or in a separate

public instrument. The acceptance must be done during the lifetime of the
debtor, and the latter must be notified of the acceptance.
OTHER TRANSACTIONS SUBJECT TO
DONOR'S TAX
I. TRANSFERS FOR INSUFFICIENT CONSIDERATION

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.

Requisites:
a. The property transferred is real or personal property, except real property classified as a capital
asset referred to in Section 21(D) of the Tax Code
b. The transfer is for less than a full price
c. The transfer is inter vivos
Purpose : To prevent escape from the income tax by accepting a lower price for the property.
Tax Consequences:

In Transfer for Insufficient Consideration in the Sale of Domestic Shares of Stock

FMV of shares of stock sold, bartered, or exchanged shall be as follows:

1) If the shares are listed, but are sold, bartered, or exchanged outside the local stock
exchange, the FMV shall be:
a. The closing price on the day the shares are sold, bartered, or exchanged, or
b. The closing price on the day nearest to the date of sale, barter, or exchange if there is no
sales transaction of the shares in the local stock excchange on the day it was sold,
bartered, or exchanged.
2) If the shares are not listed in the local stock exchange, the FMV shall be determined using the
Adjusted Net Asset Value Method. In such methodm all assets and liabilities are adjusted to fair
market values. The net adjusted asset minus the adjsuted liability values is the value of the equity.
For real properties, the FMV shall be the highest of the zonal value, assessor's value, or the
independent appraiser's value.

Exception :

Even if the sale, exchange or other transfer of property is 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.,:
1. A bona fide transaction;
2. At arm’s length; and
3. Free from donative intent.

In such cases, there is no insufficient consideration, and therefore no gift.

 II. CONDONATION OR REMISSION OF DEBT

Where the donor did not render any service in favor of the creditor.

The cancellation and forgiveness of indebtedness may amount to a payment of income, to a gift, or
to a capital transaction, depending on the circumstances:

a. If an individual performs services for a creditor, who in consideration thereof

INCOME
cancels debt, income to that amount is realized by the debtor as compensation for his
TAX
services.

DONOR'S b. If a creditor merely desires to benefit a debtor and without any consideration
TAX therfor cancels the debt, the amount of the debt is a gift from the creditor to the
debtor and need not be included in the latter's gross income.
CAPITAL
TRANSACTION
c. If a corporation to which a stockholder is indebted forgives the debt, the
transaction has the effet of the payment of a dividend.
GROSS GIFT

Coverage of donor's tax depends upon the citizenship and/or residence of the donor:

RESIDENT OR CITIZEN NON-RESIDENT ALIEN

Gifts of real and personal Gifts of real and tangible personal

properties wherever situated at property situated in the
the time of the donation. Philippines, and intangible
personal property with a situs in
the Philippines unless exempted
on the basis of reciprocity at the
time of the donation
SUMMARY

X X X if there is
reciprocity
X
 INTANGIBLE PERSONAL
PROPERTY
Incorporeal property which do not have any physical form, but represent rights and
privileges.

Example:
1. Bank deposits
2. Trademarks
3. Shares of stocks
4. Patents
5. Copyrights
6. Bonds
7. Notes
8. Interest in partnership
 GROSS GIFT OF HUSBAND
AND WIFE
Husband and wife may donate:

The conjugal or community properties. Separate or exclusive property

owned by only one spouse.
Each spouse shall be considered a
separate donor of his or her interest
in the property.
1/2 of the conjugal property
donated being a gift of the husband,
and the other half that of the wife.
VALUATION OF GIFT

Properties shall be valued at the time the gift is made.

In general, the principles of valuation in estate taxation are equally applicable in determining
the value of properties given or received as donations.
 PROPERTY VALUATION

Real Property FMV is the higher of the zonal value or the assessor's value

Personal Property Generally, FAIR MARKET VALUE at the time of the gift

FMV is the average of the highest and lowest quotation on the

Listed Shares of
valuation date (date of gift), or on the date nearest the
Stock
valuation date

common shares = book value on the valuation date (date of gift),

Unlisted Shares of or on the date nearest the valuation date
Stock
preferred shares = at par
 PROPERTY VALUATION

Notes; Accounts FMV is the discounted amount of the unpaid principal plus
Receivable interest

Units of
participation in any FMV is the bid price on the date of gift or nearest the date of
association, gift published in any newspaper or publication of general
recreation, or circulation
amusement club
(propriety shares)

Cash in bank in local The peso value of the balance at the date of gift
or foreign currency
 EXEMPTIONS (EXCLUSIONS)
FROM GROSS GIFT
A) Gifts made to the National Government or to any political subdivision of the National
Government or to any entity created by the government which is not conducted for profit.

B) Gifts made to educational, charitable, religious, cultural, social welfare institutions,

accredited NGOs and trusts, philanthropic organizations, and research institution.

Provided:

1. The non-profit institution is a non-stock entity that pays no dividendsm is governed by

trustees who do not receive any compensation, and devotes all of its income to the
accomplishment of its purpose
2. Not more than 30% of the gifts shall be used for administrative purposes
3. The non-profit institution must be accredited by the designated accrediting government
agency, and registered with the BIR.
C) Campaign contribution in cash or in kind to any candidate which are duly reported to the
COMELEC (R.A. 7166)

However, donations made by corporations in violation of Section 36(9) of the Corporation Code
are subject to donor's tax , and may not be deducted by the donor-corporation.

C) Other donations which are exempted from the donor's tax under special laws:

1. Donation made for the operation of the Dual Traning System under R.A. No. 7686
2. Donations of cooperatives to duly accredited charitable, research, and educational institutions,
and to socio-economic projects within their area of operations
3. Donations of lands certified by the LGU to have been donated for socialized housing purposes.
4. Donation to the Philippine Red Cross
5. Donations to state universities and colleges
DEDUCTIONS FROM GROSS GIFT

Mortgage or encumbrance on the Those specifically provided by the

property which obligation is assumed donor as a dimunition of the
by the donee. property donated

(RR 2-2003)
COMPUTATION OF
DONOR'S TAX
 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 (P250,000) exempt gift made during
the calendar year.

The application of the rates as provided is imposed on donations made on or after the
effectivity date of the TRAIN Law.
The computation of the donor's tax is on a cumulative basis over a period of one (1) calendar
year.

The donor's tax is computed on the net gift of the first donation.

In case there are subsequent donations in the same calendar year, the tax is computed on a
cumulative basis, i.e., the prior gross gifts in the same calendar year are added to the current
gross gift to arrive at the total gross gifts.

The total exemptions or deductions shall be subtracted from the total gross gifts.

The donor's tax shall be based on the total net gifts .

FORMULA
CREDIT FOR FOREIGN DONOR'S
TAXES PAID
Available ONLY to Resident Donors of citizen or resident alien donors
Subject to LIMITS
DONOR'S TAX RETURNS,
FILING, & PAYMENT
1. BIR FORM? 1800 (January 2018 ENCS)

2. TIME OF FILING? Within thirty (30) days from the date the gift is made.

3. WHO FILES? Any individual who makes any transfer by gift.

Notes:
1. No return is requires if the transfer is exempt from donor's tax, like
donations to the National Government or to non-profit institutions
2. A separate return shall be filed by each donor for each gift or
donation made on different dates during the year. Any previous
gifts made in the same calendar year shall be reflected in each
return.
 3. Only one return shall be filed for several gifts or donations by a
donor made on the same date to different donees.
4. If the gift or donation involves conjugal/community property, each
spouse shall file a separate return corresponding to his/her respective
share in the conjugal/community property. This rule shall likewise
apply in the case of co-ownership over the property being donated.

4. WHERE FILED?
5. CONTENTS OF The tax return shall set forth:
DONOR'S
TAX RETURN each gift made during the calendar year which is to be included
in computing net gifts
the deductions claimed and allowable
any previous net gifts made during the same calendar year
the name of the donee
such further information as may be required

6. WHEN PAID? Paid at the time the return is filed (pay as you file)

7. NOTICE OF DONATION In order to be exempted from the donor's tax and to claim full deduction
of the donation given to qualified donee institutions, the donor engaged
in business shall give a Notice of Donation on every donation worth at
least Fifty Thousand Pesos ( P50,000 ) to the RDO which has jurisdiction
over his place of business.
The notice shall be given to the RDO within 30 days after receipt of the
donee's duly issued Certificate of Donation (BIR Form No. 2332). The
same certificate shall be attached to the Notice of Donation, and shall
state that not more than 30% of the donations for the taxable year shall
be used bu such accredited non-stock, non-profit, NGO-donee
institution for administration purposes pursuant to Section 101(A)(3)
and B(2) of tne Tax Code.
DONOR'S TAX TRAIN VS. PRETRAIN

https://docs.google.com/spreadsheets/d/1RWUx5ql_uYW3OLpqRAKnJ-
97M2oFUGji/edit#gid=1932487192
Illustrative
Examples
Illustration I

Aa donated all his properties to his relatives in the Philippines:

Properties Amount
Property A in Baguio to Mr. Bee P1,500,000
Property B in Canada to Mr. Dee 2,500,000
Total P4,000,000

1. If Aa is a resident, how much is the Gross Taxable Donation?

2. If Aa is a non-resident, how much is the Gross Taxable Donation?
Solution:

1. If Aa is a resident:

Property A in Baguio to Mr. Bee P1,500,000

Property B in Canada to Mr. Dee 2,500,000
Total Taxable Donation P4,000,000

2. If Aa is a non-resident:

Total Taxable Donation

Property A in Baguio to Mr. Bee P1,500,000
Illustration II

Mr. and Mrs.Gee, spouses and citizens of the Philippines, donated to their legitimate
daughter the following:

Vacation House (conjugal property - Korea) 1,500,000

Car (conjugal property - Philippines) 750,000
Jewelry (exclusive property of Mrs. Gee) 475,000
Total 2,725,000

Compute for the Gross Gift of the Spouses

Solution:
Illustration III

The following are the donations made by Bee during the year 2018:

Date Amount
January 30, 2018 P2,000,000
March 30, 2018 P1,000,000
August 15, 2018 P500,000

Compute for the Donor's Tax due on the August donation

Solution: