DEFINITION AND NATURE OF DONATION

ART. 725. DONATION IS AN ACT OF LIBERALITY WHEREBY A PERSON DISPOSES GRATUITOUSLY OF A THING OR RIGHT IN
FAVOR OF ANOTHER, WHO ACCEPTS IT. (618a)

FOR TAX PURPOSES, THE TERM HAS A MUCH WIDER MEANING, IT INCLUDES:

- Any transfer in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or
personal, tangible or intangible. (SEC. 98)
- Any transfer of property by gift, except in forced sales and in the sale of real property which is a capital
asset, for less than and adequate and full consideration in money or money’s worth. (SEC. 100)
- Condonation or remission of debt, where the credit or merely desires to benefit a debtor and without any
consideration therefore cancels the debt.

COMPARISONS BETWEEN ESTATE TAX AND DONOR’S TAX

(NIRC AS AMENDED BY REPUBLIC ACT 10963 OTHERWISE KNOWN AS TRAIN LAW)
ESTATE TAX
CONCEPT INVOLVED SUCCESSION
REQUISITES OR ELEMENTS DONATION MORTIS CAUSA
1. DEATH OF THE DECEDENT
2. HEIR OR SUCCESSOR IS ALIVE
AT THE TIME OF THE
DECEDENT’S DEATH AND IS
NOT DISQUALIFIED TO
INHERENT.
2.1 COMPULSORY HEIR
2.2 VOLUNTARY HEIR
3. ESTATE/INHERITANCE
ACCRUAL PERIOD UPON THE DATE OF DEATH OF THE
DECEDENT
GOVERNING LAW STATUTE IN FORCE AT THE TIME OF
DEATH OF DECEDENT
TAX RATE 6% NET ESTATE
FILING & PAYMENTS  WITHIN ONE (1) YEAR FROM
DEATH
 EXTENSION TO FILE; NOT
MORE THAN 30 DAYS
 PAY AS YOU FILE
 WITH EXTENSION TO PAY; 2
YEARS (EXTRAJUDICIAL) 5
YEARS (IF JUDICIAL)
SCOPE RC, NRC, RA- ON THE ESTATE WITHIN RC, NRC, RA- ON GIFTS WITHIN AND
AND WITHOUT
NRA- ON ESTATE WITHIN
DISTINGUISHED OF ESTATE TAX AND DONOR’S TAX
DONOR’S TAX
GIFT OR DONATION
DONATION INTER VIVOS
1. DONATIVE INTENT OF THE
DONOR;
2. CAPACITY OR AUTHORITY OF
THE DONOR;
3. DELIVERY OF DONATED
PROPERTY;
4. ACCEPTANCE BY THE DONEE;
AT THE TIME THE GIFT OR DONATION
IS MADE OR PERFECTED
STATUTE IN FORCE AT THE TIME OF
THE PERFECTION/COMPLETION OF
DONATION
6% NET GIFTS IN EXCESS OF P250,000
 WITHIN 30 DAYS FROM
DONATION
 NO EXTENSION TO FILE
 PAY AS YOU FILE
 NO EXTENSION FOR
PAYMENT
WITHOUT
NRA- ON GIFTS WITHIN
KINDS OF DONATION

1. DONATION MORTIS CAUSA

• IT BECOMES EFFECTIVE UPON THE DEATH OF THE DONOR

•IT IS CONSIDERED A TESTAMENTARY DISPOSITION AND GOVERNED BY THE LAW ON SUCCESSION.

•THE DONATION IS SUBJECT TO ESTATE TAX

2. DONATION INTER VIVOS

• IT TAKES PLACE DURING THE LIFETIME OF BOTH THE DONOR AND THE DONEE

•THE DONATION IS SUBJECT TO DONOR’S TAX

Two types of inter vivos donation

a. Direct Donation
- Made by donor directly to done
- Common definition
- All the requirements needed are present
- Donation of rights
b. Indirect Donation
- Transfer of property by donor in favor of done but under supervision of another party
- Donation on trust either be:
- a. Revocable- x complete; x taxable
- b. Irrevocable- complete and taxable

3. OTHER FORMS OF DONATIONS

•CANCELLATION OF INDEBTEDNESS – DEBTS CANCELLED BY THE CREDITOR WITHOUT ANY CONSIIDERATION IS A

DONATION AND SUBJECT TO DONOR’S TAX

• TRANSFER OF PROPERTIES FOR LESS THAN ADEQUATE AND FULL CONSIDERATION – PROPERTY TRANSFERRED OTHER
THAN REAL PROPERTY FOR LESS THAN ADEQUATE AND FULL CONSIDERATION, THE AMOUNT BY WHICH THE FAIR
MARKET VALUE EXCEEDDED THE VALUE OF THE CONSIDERATION AS A GIFT, AND SUBJECT TO DONOR’S TAX. WHERE
THE CONSIDERATION IS FICTITIOUS, THE ENTIRE VALUE OF THE PROPERTY TRASNFERRED SHALL BE SUBJECT TO
DONOR’S TAX.

*REAL PROPERTY ARE IMMOVABLE SUCH AS LAND AND BUILDINGS. *

DONOR’S TAX DEFINITION AND NATURE

DONOR’S TAX IS A TAX ON A DONATION OR GIFT AND IS IMPOSED ON THE GRATUITOUS TRASNFER OF PROPERTY
BETWEEN TWO OR MORE PERSONS WHO ARE LIVING AT THE TIME OF THE TRANSFER.

A DONOR’S TAX (OR GIFT TAX) IS A TAX LEVIED, ASSESSED, COLLECTED AND PAID UPON THE TRASNFER BY ANY PERSON,
RESIDENT, OR NON RESIDENT, OF THE PROPERTY BY GIFT.

IT IS A TAX IMPOSED ON THE EXERCISE OF THE DONOR’S RIHT DURING LIFETIME TO TRANSFER OF PROPERTY TO OTHERS
IN THE FORM OF GIFT.

THE DONOR’S TAX IS NOT A PROPERTY TAX BUT IS A TAX IMPOSED ON THE TRANSFER OF THE PROPERTY BY WAY OF
GIFT INTER VIVOS.

•DONOR- IS THE ONE WHO NEEDS TO HAVE THE CAPACITY TO DONATE

•DONEE- CAN BE INCAPACITATED

ELEMENTS OF DONOR’S TAX

1. CAPACITY OF THE DONOR TO MAKE A DONATION- IT IS NOT ENOUGH THAT A PERSON BE CAPACITATED TO
CONTRACT, THEY MUST ALSO HAVE THE CAPACITY TO DISPOSE.

2. DONATIVE INTENT – REQUIRED ONLY IN DIRECT GIFTS

3. ACCEPTANCE – PERFECTION OF THE DONATION; SHALL BE MADE DURING THE LIFETIME OF THE DONOR AND DONEE

4. DELIVERY – THE TIME WHERE THE DONATION IS COMPLETED

CHARACTERISTICS OF DONOR’S TAX

1. EXCISE TAX NOT A PROPERTY TAX – IS A TAX ON THE PRODUCTION, SALE OR CONSUMPTION OF A COMMODITY IN A
COUNTRY.

2. IT IS A CONTRACT – STIPULATED BY TWO PARTIES; UNDER A PUBLIC DOCUMENT AND MUST BE NOTAIZED TO ASSURE
LEGALITY.

3. PERFECTION UPON THE DONOR KNOWING DONEE’S ACCEPTANCE – NECESSARY ELEMENT

4. DIRECT TAX - TAX COLLECTED FROM PERSONNS WHO IS INTENDED TO PAY THE SAME. THIS TAX CANNOT BE SHIFTED
TO ANOTHER PERSON.

5. PRIVILEGE TAX – A TAX IMPOSED ON BUSINESSES FOR THE RIGHT TO CONDUCT BUSINESS IN A GIVEN STATE.

6. PROPORTIONAL TAX OF 6%

7. AD VALOREM – A TAX OF A FIXED PROPORTION IMPOSED UPON THE VALUE OF THE TAX OBJECT.

8. NATIONAL TAX- TAXES THAT COLLECTED BY THE NATIONAL GOVERNMENT

9. REVENUE/FISCAL TAX- TAXES ARE IMPOSED SOLELY FOR THE PURPOSE OF RAISING REVENUE

CLASSIFICATION OF DONATION

1. SIMPLE- THE CAUSE IS PURE LIBERALITY

2. RENUMERATORY DONATIONS – MADE DUE TO PAST SERVICES RENDERED OR FUTURE SERVICES OR CHARGES
AND BURDENS.
3. MODAL- CONSIDERATION IS LESS THAN THE VALUE OF THE THING DONATED.

PURPOSE OF DONOR’S TAX

1. To prevent avoidance of estate tax
2. To prevent of compensate for the loss of the progressive rate of income tax
3. To recoup future loss of income tax revenue

PERSONS WHO MAY GIVE OR RECEIVE THE DONATION

1. GUARDIANS AND TRUSTEES CANNOT DONATE THE PROPERTY ENTRUSTED TO THEM.

2. ALL PEOPLE WHO HAVE THE CAPACITY TO DONATE CAN MAKE A DONATION
3. MINORS AND OTHERS WHO CANNOT ENTER INTO A CONTRACT MAY BEOCME DONEES BUT ACCPETANCE MUST BE
MADE WITH A PARENTS OR REPRESENTATIVES.

4. MOTHER OF CONCEIVED AND UNBORN CHILD CAN LEGALLY ACCEPT ANY DONATIONS FOR THE UNBORN CHILD.

*DONATIONS MADE TO INCAPACITATE PERSONS SHALL BE VOID THOUGH SIMULATED UNDER THE GUISE OF ANOTHER.

FORMAL REQUISITES

THE LAW CONSIDERS DONATION AS A CONTRACT AS SHOWN BY THE FACT THAT IT REQUIRES ACCEPTANCE. REQUIRED
FORM AS SHOWN MUST BE OBSERVED OTHERWISE, VOID.

PERSONAL PROPERTY REAL PROPERTY

AMOUNT OF DONATION P5,000 OR LESS MORE THAN P5,000 REGARDLESS OF THE
AMOUNT
FORM OF DONATION ORAL OR IN WRITING IN WRITING IN PUBLIC DOCUMENT
*NOTARIZED*
VOID DONATIONS

 THOSE MADE BETWEEN PERSONS WHO WERE GUILTY OF ADULTERY OR CONCUBBINAGE AT THE TIME OF THE
DONATION.
 THOSE MADE BETWEEN PERSONS FOUND GUILTY OF THE SAME CRIMINAL OFFENSE IN CONSIDERATION
THEREOF.
 THOSE MADE BETWEEN THE SPOUSES DURING THE MARRIAGE, EXCEPT MODERATE GIFTS WHICH THE SPOUSES
MAY GIVE EACH OTHER ON THE OCCASION OF ANY FAMILY REJOICING.
 THOSE MADE BETWEEN PERSONS LIVING TOGETHER AS HUSBAND AND WIFE WITHOUT A VALID MARRIAGE
 THOSE MADE TO A PUBLIC OFFICER OR HIS WIFE, DESCENDANTS AND ASCENDANTS BY REASON OF HIS OFFICE.

GROSS GIFT - THE TERM GROSS GIFT INCLUDES THE REAL AND PERSONAL PROPERTY, WHETEHER TANGIBLE OR
INTANGIBLE OR MIXED, WHEREVER SITUATED.

COMPOSITION OF GROSS GIFT

THE COMPOSITION OF GROSS GIFT WILL DEPEND ON THE CITIZENSHIP AND/OR RESIDENCE OF THE DONOR. IF RESIDENT
OR CITIZEN, HE IS TAXABLE ON THE DONATION OF REAL, TANGIBLE AND INTANGIBLE PERSONAL PROPERTIES SITUATED
WITHIN AND WITHOUT THE PHILIPPINES. HOWEVER, IF THE DONOR IS A NON-RESIDENT ALIEN, HE SHALL BE SUBJECT TO
TAX ON PROPERTIES DONATED WHICH ARE LOCATED IN THE PHILIPPINES ONLY.

IN THE CASE OF A NON-RESIDENT ALIEN, THE GROSS GIFT MAYBE COMPOSED OF THE FOLLOWING:

 •REAL PROPERTY WITHIN OR WITHOUT

 •TANGIBLE PERSONAL PROPERTY WITHIN
 •INTANGIBLE PERSONAL PROPERTY WTHIN, UNLESS THERE IS A RECIPROCITY IN WHICH CASE IT IS NOT
TAXABLE.

RULE OF RECIPROCITY APPLIES IF THE FOLLOWING REQUISITES ARE PRESENT

1. THE DONOR IS A NON-RESIDENT ALIEN; AND

2. THE PROPERTIES ARE INTANGIBLE PERSONA WHICH ARE LOCATED WITHIN THE PHILIPPINES.

NO DONOR’S TAX SHALL BE COLLECTED IN RESPECT OF INTANGIBLE PERSONAL PROPERTY IN THE FOLLOWING
INSTANCES.
1. IF THE DONOR AT THE TIME OF DONATION WAS A CITIZEN AND A RESIDENT OF A FOREIGN COUNTRY WHICH AT THE
TIME OF THE DONATION DID NOT IMPOSE A TRANSFER TAX ON INTANGIBLE PERSONLA PROPERTY OF THE CITIZENS OF
THE PHILIPPINES NOT RESIDING IN THAT FOREIGN COUNTRY.

2. IF THE LAW OF THE FOREIGN COUNTRY OF WHICH THE DONOR WAS A CITIZEN AND RESIDDENT AT THE TIME OF
DOANTION ALLOWS A SIMILAR EXEMPTION FROM TRANSFER TAXES OF EVERY CAHRACTER OR DESCRIPTION IN RESPECT
OF INTANGIBLE PERSONAL PROPERTY OWNED BY A CITIZEN OF THE PHILIPPINES NOT RESIDING IN THAT FOREIGN
COUNTRY.

SIMPLIFIES THE RULE ON THE DETERMINATION OF WHETHER OR NOT THE PROPERTY SHALL BE INCLUDED IN THE GROSS
GIFT OF THE DONOR.

Splitting of Gift

- Is a tax minimization scheme (Tax avoidance) which is done by spreading the gifts over numerous calendar
years to avoid a higher tax.
- Splitting the gift into several taxable years may result to a lower tax due.

CLASSIFICATION OF RESIDENT OR CITIZEN NON-RESIDENT ALIEN (NO NON-RESIDENT ALIEN

PROPERTY RECIPROCITY) (WITH RECIPROCITY)
REAL PROPERTY
WITHIN YES YES YES
WITHOUT YES NO NO
PERSONAL PROPERTY
TANGIBLE WITHIN YES YES YES
TANGIBLE WITHOUT YES NO NO
INTANGIBLE WITHIN YES YES NO
INTANGIBLE WITHOUT YES NO NO
INTANGIBLE PERSONAL PROPERTY

THE FOLLOWING INTANGIBLE PERSONAL PROPERTIES ARE CONSIDERED WITHIN THE PHILIPPINES:

1. FRANCHISE WHICH MUST BE EXERCISED WITHIN THE PHILIPPINES;

2. SHARES, OBLIGATION OR BONDS ISSUED BY CORPORATION OR SOCIEDAD ANONIMA ORGANIZED OR CONSTITUTED IN

THE PHILIPPINES IN ACCORDANCE WITH ITS LAW;

3. SHARES, OBLIGATIONS OR BONDS ISSUED BY ANY FOREIGN CORPORATION EIGHTY FIVE PERCENT OF THE BUSIENSS
OF WHICH IS LOCATED IN THE PHILIPPINES;

4. SHARES, OBLIGATIONS OR BONDS ISSUED BY A FOREIGN CORPORATION IF SUCH SHARES, OBLIGATION OR BONDS
HAVE ACQUIRED A BUSINESS SITUS IN THE PHILIPPINES; AND

5. SHARES OR RIGHTS IN ANY PARTNERSHIP, BUSINESS OR INDUSTRY ESTABLISHED IN THE PHILIPPINES.

VALUATION OF GIFTS MADE IN PROPERTY

THE VALUATION OF THE PROPERTY DONATED SHALL BE MADE AT THE TIME OF GIFT WHICH IS THE TIME OF THE
TERMINATING EVENT.

IF THE GIFT IS MADE IN PROPERTY, THE FAIR MARKET VALUE THEREOF AT THE TIME OF THE GIFT SHALL BE CONSIDERED
THE AMOUNT OF THE GIFT.

IN CASE OF REAL PROPERTY, THE VALUE SHALL BE WHICHEVER IS HIGHER BETWEEN:

1. THE FAIR MARKET VALUE AS DETERMINED BY THE COMMISSIONER OF INTERNAL REVENUE (ZONAL VALUE) OR,

2. THE FAIR MARKET VALUE AS SHOWN IN THE SCHEDULE OF VALUES FIXED BY THE PROVINCIAL AND CITY ASSESSORS
(ASSESSED VALUE)

*FAIR MAKET VALUE IS DEFINED AS THE PRICE AT WHICH ANY SELLER WILL SELL AND ANY BUYER WILL BUY, BOTH
WILLINGLY WITHOUT ANY FORCE OR INTIMIDATION.

IN CASE OF STOCKS, BONDS OR OTHER SECURITIES, THE FOLLOWING RULES SHALL APPLY:

1. IF LISTED AND TRADED IN THE STOCK EXCHANGE, THE FAIR MARKET VALUE SHALL BE THE MEAN BETWEEN THE
HIGHEST AND THE LOWEST QUOTED SELLING PRICE OD THE SECURITIES ON THE VALUATION DATE. (ADD THE HIGHEST
AND LOWEST AND DIVIDED BY TWO = MEAN VALUE)

2. IF NOT LISTED AND TRADED IN STOCK EXCHNAG, THE FAIR MARKET VALUE SHALL DEPEND ON WHETHER THE STOCKS
ARE PREFERRED OR COMMON. IF THE STOCKS ARE COMMON, TE MARKET VALUE SHALL BE THE BOOK VALUE OF THE
SECURITY ON THE VALUATION DATE OR ON THE DATE NEAREST THE VALUATION DATE. IF STOCKS ARE PREFFERED, THE
FAIR MARRKET VALUE SHALL BE THE PAR VALUE OF THE SECURITY.

SAMPLE PROBLEM:

SAM GAVE THE FOLLOWIN PROPERTIES TO VARIOUS DONEES ON DECEMBER 25, 2018
HOUSE AND LOT IN LONDON P 3,500,000
APARTMENT HOUSE IN NAGA CITY 8,000,000
CAR IN IRIGA CITY 520,000
CAR IN LONDON 900,000
SAVINGS DEPOSIT WITH BPI 50,000
TIME DEPOSIT IN A NEW YORK BANK 120,000
ACCOUNTS RECEIVABLE, DEBTOR RESIDING IN THE PHILIPPINES 140,000
ACCOUNTS RECEIVABLE, DEBTOR RESIDING IN HONGKONG 35,000
FRANCHISE EXERCISED IN NEW YORK 225,000
FRANCHISE EXCERCISED IN THE PHILIPPINES 120,000
INVESTMNET IN GOOD TIME CO. PARTNERSHIP IN HONGKONG 160,000
INVESTMENT IN LOVERS COMPANY, PARTNERSHIP IN PHILIPPINES 125,000
REQUIREMENT: COMPUTE THE GROSS GIFT IF ARA IS:

A. RESIDENT CITIZEN/RESIDENT ALIEN/ NON-RESIDENT CITIZEN

B. NON RESIDENT ALIEN (W/O RECIPROCITY)
C. NON-RESIDENT ALIEN (W/ RECIPROCITY)

ANSWER:

A. RESIDENT CITIZEN/RESIDENT ALIEN/ NON-RESIDENT CITIZEN

HOUSE AND LOT IN LONDON P 3,500,000
APARTMENT HOUSE IN NAGA CITY 8,000,000
CAR IN IRIGA CITY 520,000
CAR IN LONDON 900,000
SAVINGS DEPOSIT WITH BPI 50,000
TIME DEPOSIT IN A NEW YORK BANK 120,000
ACCOUNTS RECEIVABLE, DEBTOR RESIDING IN THE PHILIPPINES 140,000
ACCOUNTS RECEIVABLE, DEBTOR RESIDING IN HONGKONG 35,000
FRANCHISE EXERCISED IN NEW YORK 225,000
FRANCHISE EXCERCISED IN THE PHILIPPINES 120,000
INVESTMENT IN GOOD TIME CO. PARTNERSHIP IN HONGKONG 160,000
INVESTMENT IN LOVERS COMPANY, PARTNERSHIP IN PHILIPPINES 125,000
GROSS GIFT P 13,895,000
B. NON RESIDENT ALIEN (W/O RECIPROCITY)
APARTMENT HOUSE IN NAGA CITY 8,000,000
CAR IN IRIGA CITY 520,000
SAVINGS DEPOSIT WITH BPI 50,000
ACCOUNTS RECEIVABLE, DEBTOR RESIDING IN THE PHILIPPINES 140,000
FRANCHISE EXCERCISED IN THE PHILIPPINES 120,000
INVESTMENT IN LOVERS COMPANY, PARTNERSHIP IN PHILIPPINES 125,000
GROSS GIFT P 8,955,000
C. . NON RESIDENT ALIEN (W/ RECIPROCITY)
APARTMENT HOUSE IN NAGA CITY 8,000,000
CAR IN IRIGA CITY 520,000
GROSS GIFT P 8,520,000

TAX RATES (EFFECTIVE ON JANUARY 1, 2018 AND ONWARDS UNDER R.A. NO, 10963 TRAIN LAW)

RATE - 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 (P 250,000) REDT GIFT MADE DURING THE
CALENDAR YEAR.

NOTE:

1. WHEN THE GIFTS ARE MADE DURING THE SAME CALENDAR YEAR BUT ON DIFFERENT DATES, THE DONOR’S TAX
SHALL BE COMPUTED BASED ON THE TOTAL NET GIFTS DURING THE YEAR.

2. THE RELATIONSHIP BETWEEN THE DONOR AND THE DONEE(S) SHALL NOT BE CONSIDERED. R.A. 10963 TRAIN LAW
DOES NOT DISTINGUISH DONATIONS MADE TO RELATIVES OR DONATIONS MADE TO STRANGERS.

DEDUCTIONS FORM GROSS GIFT

1. GIFTS TO THE NATIONAL GOVERNMENT - ITS POLITICAL SUBDIVISIONS OR ANY ENTITY CREATED BY ANY OF ITS
AGENCIES WHICH IS NOT CONDUCTED FOR PROFIT

2. GIFTS IN FAVOR OF EDUCATION, CHARITABLE, RELIGIOUS. CULTURAL, AND SOCIAL WELFARE INSTITUTIONS, ETC.
(SUBJECT TO 30% RULE) 30% RULE STATES THAT 30% OF THE SAID GIFT SHALL BE USED FOR ADMIN PURPOSES.

3. ENCUMBRANCE ON PROPERTY DONATED ASSSUMED BY THE DONEE (MORTGAGES IF ANY)

4. DIMINUTION IN THE VALUE OF THE PROPERTY. -

EXEMPT DONATIONS UNDER SPECIAL LAWS

 INTERNATIONAL RICE RESEARCH INSTITUTE

 PHILIPPINE-AMERICAN CULTURAL FOUNDATION

 RAMON-MAGSAYSAY AWARD FOUNDATION

 PHILIPPINE INVENTOR’S COMMISSION

 INTEGRATED BAR OF THE PHILIPPINES

 DEVELOPMENT ACADEMY OF THE PHILIPPINES

 AQUACULTURE DEPARTMENT OF THE SOUTHEAST ASIA FISHERIES DEVELOPMETN CENTER OF THE PHILIPPINES

 NATIONAL SOCIAL ACTION COUNCIL

 INTRAMUROS ADMINISTRATION

 SOUTHERN PHILIPPINES DEVELOPMENT FOUNDATION

 NATIONAL MUSEUM

 NATIONAL LIBRARY

 NATIONAL HISTORICAL INSTITUTE

 TASK FORCE ON HUMAN SETTLEMENT CONSISTING OF EQUIPMENT, MATERIALS AND SERVICES

 PUBLIC SCHOOLS IN ACCORDANCE WITH THE ADOPT-A-SCHOOL ACT OF 1998

 PHILIPPINE RED CROSS – SHALL BE EXEMPT FROM PAYMENT OF ALL DIRECT AND INDIRECT TAXES. INCLUDING VAT,
DUTIES FEES AND OTHER CHARGES ON IMPORTATIONS AND PURCHASES FOR ITS EXCLUSIVE USE. TO SUPPORT ITS
PURPOSES AND OBJECTIVES SHALL BE EXEMPT FROM DONORS TAX AND SHALL BE DEDUCTABLE FROM THE GROSS
INCOME OF THE DONOR FOR INCOME TAX PURPOSES OR FROM THE COMPUTATION OF DONOR-DECEDENT’S NET
ESTATE AS A TRANSFER FOR PUBLIC USE FOR ESTATE TAX PURPOSES.

PAYMENT OF LOAN BY THE GUARANTOR

A GUARANTEE AS A RULE IS GRATIOUS UNLESS STATED OTHERWISE, BECAUSE THE GUARANTOR MUST BE INDEMNIFIED
BY THE PRINCIPAL DEBTOR IN CASE THE GUARANTOR PAYS FOR THE DEBT. IN SUCH CASE, PAYMENT BY THE
GUARANTOR IS NOT SUBJECT TO DONOR’S TAX (BIR RULLING NO. DA 006-2005, JANUARY 11.2005)

CONTRIBUTION FOR ELECTION CAMPAIGN

ANY CONTRIBUTION IN CASH OR IN KIND TO ANY CANDIDATE, POLITICAL PARTY OR COALITION OF PARTIES FOR
CAMPAGN PURPOSES, SHALL BE GOVERNED BY THE ELECTION CODE, HENCE NOT SUBJECT TO DONOR’S TAX. (RR-2-
2003)

COMPUTATION OF DONOR’S TAX

ON FIRST DONATION IN THE CALENDAR YEAR:

GROSS GIFT XX
LESS: DEDUCTIONS FROM GROSS GIFT (XX)
NET GIFT XX
LESS: EXEMPT GIFTS (250,000)
TAXABLE NET GIFTS XX
TIMES THE APPLICABLE RATE %
DONOR’S TAX DUE AND PAYABLE XX
LESS: TAX CREDIT (XX)
DONOR’S TAX PAYABLE XX
ON SUBSEQUENT DONATIONS:
GROSS GIFT MADE THIS MONTH XX
LESS: DEDUCTIONS FROM GROSS PROFIT (XX)
NET GIFTS, CURRENT XX
ADD: ALL PRIOR NET GIFT W/IN THE YEAR XX
AGGREGATE NET GIFTS XX
LESS: EXEMPT GIFTS (250,000)
TAXABLE NET GIFTS XX
TIMES APPLICABLE TAX RATE %
DONOR’S TAX DUE XX
LESS: DONOR’S TAX PAID ON PRIOR GIFTS (XX)
LESS: TAX CREDITS (XX)
DONOR’S TAX DUE AND PAYABLE XX

TAX CREDIT FOR DONOR’S TAX PAID TO A FOREIGN COUNTRY

1. WHO CAN CLAIM? ONLY CITIZEN OR RESIDENT ALIEN DECEDENT

2. AMOUNT DEDUCTIBLE, WHICHEVER IS LOWER: A. ACTUAL DONOR’S TAX PAID ABOAD; B. LIMIT

3. LIMITATIONS ON TAX CREDIT

A. ONLY ONE COUNTRY IS INVOLVED

NET GIFT (PER FOREIGN COUNTRY) X PHILIPPINE DONOR’S TAX
TOTAL NET GIFT

B. TWO OR MORE FOREIGN COUNTRY ARE INVOLVED

NET GIFT (PER FOREIGN COUNTRY) X PHILIPPINE DONOR’S TAX

TOTAL NET GIFT
LIMIT 2:
NET GIFT (ALL FOREIGN COUNTRIES) X PHILIPPINE DONOR’S TAX
TOTAL NET GIFT
SAMPLE PROBLEM:

ANACLETO GAVE THE FOLLOWING DONATIONS TO:

02-14-18 – AZUCENA AMOUNTING TO P 190,000

06-01-18 – BRUSCO AMOUNTING TO P 160,000

10-13-18 – CARIZOSA AMOUNTING TO P 180,000

01-15-19 NATIONAL GOVERNMENT LAND DONATED FOR PUBLIC USE WITH FV OF P 700,000

05-1519 – DALMACIO, LAND WITH FMV OF P 1,000,000 BUT MORTGAGE FOR P 100,000 WHICH WAS ASSUMED BY THE
DONEE

REQUIREMENT: COMPUTE FOR THE TAX DUE ON EACH DONATION

02-14-18

GROSS GIFT P 190,000

LESS: EXEMPT GIFT (250,000)
TAXABLE NET GIFT (60,000)
DONOR’S TAX DUE EXEMPT
06-01-18
GROSS GIFT P 160,000
ADD: PRIOR NET GIFT 190,000
AGGREGATE NET GIFT 350,000
LESS: EXEMPT TAX GIFTS (250,000)
TAXABLE NET GIFTS 100,000
X DONOR’S TAX RATES * 6%
DONOR’S TAX DUE 6,000

10-13-18
GROSS GIFT P 180,000
ADD: PRIOR NET GIFT 350,000
AGGREGATE NET GIFT 530,000
LESS: EXEMPT TAX GIFTS (250,000)
TAXABLE NET GIFTS 280,000
X DONOR’S TAX RATES * 6%
DONOR’S TAX DUE 16,800
TAX DUE THEREON 16,800
LESS: TAX DUE ON 6-1-18 6,000
TAX DUE ON 10-13-18 P 10,800
*or simply, 180,000*6%= 10,800
01-15-19
GROSS GIFT 700,000
DEDUCT: GOVT (700,000)
NET GIFT -
05-15-19
GROSS GIFT 1,000,000
LESS: DDT FROM GROSS PROFIT 100,000
NET GIFTS, CURRENT 900,000
ADD: PRIOR NET GIFT W/IN THE YEAR -
AGGREGATE NET GIFTS 900,000
LESS: EXEMPT GIFTS (250,000)
TAXABLE NET GIFTS 650,000
TIMES APPLICABLE TAX RATE 6%
DONOR’S TAX DUE 39,000
LESS: DONOR’S TAX PAID ON PRIOR GIFTS -
LESS: TAX CREDITS -
DONOR’S TAX DUE AND PAYABLE 05-15-19 P 39,000

DONATIONS OF CONJUGAL OR COMMUNITY PROPERTY

CONJUGAL PROPERTY IS PROPERTY THAT BELONGS TO BOTH SPOUSES.

 HUSBAND AND WIFE ARE CONSIDERED TO BE A SEPARATE AND DISTINCT TAXPAYERS

 IF A PROPERTY IS CONJUGAL AND ONLY THE HUSBAND SIGNED THE DEED OF DONATION, ONLY THE PORTION OF THE
PROPERTY OF THE HUSBAND SHALL BE DEEMED DONATED. HOWEVER, DUE TO CONJUGALITY OF THE PROPERTY, THE
WIFE CAN QUESTION THE VALIDITY OF THE DONATION.

 HUSBAND AND WIFE CANNOT DONATE A CONJUGAL PROPERTY WIHTOUT THE CONSENT OF THE OTHER.

 HUSBAND AND WIFE, WITHOUT THE CONSENT OF THE OTHER CAN MAKE MODERATE DONATIONS FOR CHARITY OR
ON OCCASION OF FAMILY REJOICING OR FAMILY DISTRESS

 EACH SPOUSE SHALL BE CONSIDERED A SEPARATE DONOR OF HIS/HER INTEREST TO THE PROPERTY AND ONE-HALF
OF GIFT OF THE HUSBAND AND THE OTHER OF THE WIFE.
*CAPITAL ASSET OR CAPITAL PROPERTY – THE EXCLUSIVE PROPERTY OF THE HUSBAND

*PARAPHERNAL PROPERTY- THE EXCLUSIVE PROPERTY OF THE WIFE

SAMPLE PROBLEM:

MR. & MRS. K MADE THE FOLLOWING DONATIONS

1-25-19 – TO L, THEIR LEGITIMATE SON, A CAR WORTH P 800,000 WITH P200, 000 MORTGAGE, ½ WAS ASSUMED BY THE
DONEE. (SILENT AS TO WHO OWNS THE CAR, CONSIDERED AS CONJUGAL PROPERTY)

5-31-19- TO M, BROTHER OF MR.K, HIS CAPITAL PROPERTY WORTH P 500,000 ON ACCOUNT OF MARRIAGE 6 MOS. AGO

7-15-19- TO N, DAUGHTER OF MRS. K FROM A FORMER MARRIAGE ON ACCOUNT OF HER MARRIAGE 18 MONTHS AGO,
MRS. K’S PARAPHERNAL (EXCLUSIVE PROPERTY) WORTH P 100,000

8-20-19- TO N, ON ACCOUNT OF THE SAME MARRIAGE, CONJUGAL CAR OF THE COUPLE WORTH P 400,000, WITH P
200,000 UNPAID MORTGAGE, ½ WAS ASSUMED BY N. AND P 500,000 WORTH OF LAND TO THEIR FOUR SONS ON
ACCOUNT OF THEIR GRADUATION, 20% OF WHICH WAS OWNED BY THEIR KUMPADRE WHO AGREED TO DONATE HIS
SHARE THRU A PUBLIC DOCUMENT.

SOLUTIONS AND ANSWERS:

1/25/2019 MR.K MRS.K

GROSS GIFT 800,000/2
400,000.00 400,000.00
LESS: DEDUCTIONS 200,000*50%/2
(50,000.00) (50,000.00)
NET GIFT
350,000.00 350,000.00
LESS: EXEMPT GIFT
(250,000.00) (250,000.00)
TAXABLE NET GIFTS
100,000.00 100,000.00
APPLICABLE RATE 6% 6%
DONOR'S TAX DUE AND PAYABLE 1/25/2019
6,000.00 6,000.00

5/31/2019 MR.K
GROSS GIFT
500,000.00
ADD: PRIOR NET GIFT
350,000.00
AGGREGATE NET GIFT
850,000.00
LESS TAX EXEMPT
(250,000.00)
TAXABLE NET GIFT
600,000.00
DONOR'S RATE 6%
DONOR'S TAX DUE AND PAYABLE
36,000.00
TAX DUE THEREON
36,000.00
LESS: TAX DUE ON 1-25-19
(6,000.00)
TAX DUE ON 5-31-19  
30,000.00

7/15/2019 MRS.K
GROSS GIFT
100,000.00
ADD: PRIOR NET GIFT
350,000.00
AGGREGATE NET GIFT
450,000.00
LESS TAX EXEMPT
(250,000.00)
TAXABLE NET GIFT
200,000.00
DONOR'S RATE 6%
DONOR'S TAX DUE AND PAYABLE
12,000.00

TAX DUE THEREON

12,000.00
LESS: TAX DUE ON 1-25-19
(6,000.00)
TAX DUE ON 7-15-19  
6,000.00

8/20/2019 MR.K MRS.K

GROSS GIFT
CAR 400000/2
200,000.00 200,000.00
LAND 500000*80%/2
200,000.00 200,000.00
TOTAL
400,000.00 400,000.00
LESS: MORTGAGE 200,000*.5/2
(50,000.00) (50,000.00)
NET GIFT
350,000.00 350,000.00
ADD: PRIOR NET GIFT
850,000.00 450,000.00
AGGREGATE NET GIFT
1,200,000.00 800,000.00
LESS TAX EXEMPT
(250,000.00) (250,000.00)
TAXABLE NET GIFT
950,000.00 550,000.00
DONOR'S RATE 6% 6%
DONOR'S TAX DUE AND PAYABLE
 57,000.00 33,000.00
LESS PRIOR TAX PAYMENTS
(36,000.00) (12,000.00)
DONOR'S TAX PAYABLE 8-20-19  
21,000.00 21,000.00

8/20/2019 KUMPADRE
GROSS GIFT 500,0000 * 20%
100,000.00
LESS: DEDUCTIONS
-
NET GIFT
100,000.00
LESS: EXEMPT GIFT
(250,000.00)
TAXABLE NET GIFTS
(150,000.00)
DONOR'S TAX DUE AND PAYABLE EXEMPT