DONOR’S TAX

Donation Acceptance

Definition:
1. Movables exceeding P5,000
 Acceptance shall be in writing (Art 748, CC)
- Act2.of liberality whereby
Immovables a person
(Art 749, CC) disposes gratuitously of a
thing or rightin favor of another, who accepts
Must be in the same deed of it
donation; or
 In a separate public document provided that the
donor has knowledge Purpose of Donor’s Tax

1. To prevent avoidance of estate tax

Characteristics of Donor’s Tax
2. To prevent or compensate for the loss of the progressive
rates of income tax when large estates are split up by gifts to
1. Excise
numerous Tax
donees
 Imposed on the right or privilege to transfer
property by way of gift inter vivos
2. Contract Requisites of Complete and Valid Donation
 Does not apply unless there is a completed gift
1. Donative Intent offrom
3. Perfected the Donor
the moment the donor knows of the
 acceptance
Proper declaration of the legal owner of a property
of the donee
4. Direct
or right
tax to transfer ownership to another without
consideration
 Imposed on the donor and determined with
2. Capacity of the Donorreference to all the donor’s gift
 Condition and legal competence of the donor to
enter into contract
Kinds of Donation
 Determined at the perfection of donation
 Example of incapacitated person:
1. Direct
 Spouses
 Donor to donee
 Person under civil interdiction
2. Indirect
 Minors
 Donor to done but managed by a third person
3. Delivery
3. Revocable
 Donor’s tax applies to completed gift
 Not subject to donor’s tax
 A gift is completed when it is delivered whether
actual orOwnership
 can be revoked by the donor
constructively
4. Irrevocable
 Incomplete Gift becomes complete when either:
 Ownership is irrevocable once transferred
Donor renounces the reserved power to the
donee
 Donor’s right to exercise power ceases
because of the happening of some event
other than death of the donor
Void Donation
4. Acceptance
 Acceptance is not from the time the donee accepts
1. Donation between spouses, except minor gifts
the thing but from the time the donor has
knowledge that the donee has accepted the thing 2. Donation between persons who were guilty of adultery or
 Must be made during the lifetime of the donor and concubinage at the time of donation
of the done 3. Donation between persons found guilty of the same criminal
5. In Proper Form offenses in consideration thereof
 Movable Property 4. Donation to public officer or his wife, descendants or
 Less than or equal to P5,000 ascendants by reason of his office (bribery)
o Orally or in writing 5. Donation to incapacitated person
 More than P5,000 6. Donations of future property
o In writing 7. Donation by a person who has no legal title to the property
 Immovable property 8. Oral or written donation of real property or intangible
 In public document (notarized) property
o For it not to prove that 9. Donation refused by the donee
donation is genuine
 Intangible Personal Property
 In public instrument
 GROSS GIFT INCLUSIONS IN GROSS GIFT

1. Direct Gifts - Real and personal property, whether tangible or intangible,

2. Gifts through creation of a trust or mixed, wherever situated
3. Transfer for insufficient consideration - RC/NRC/RA
4. Condonation of debt  Taxable world
5. Repudiation of inheritance - RA
6. Renunciation by the surviving spouse of his/her share in the  Taxable without
common property  Subject to reciprocity rule
 Intangible personal property in the Phil.
Transfer for Insufficient Consideration
Exempt Gifts
- Difference between the consideration and FMV of the
1. Donationproperty
to exempt willdonees under
be subject toNIRC andtax
donor’s special laws
2. Donations
- for election campaign
Only for properties other than those subject to CGT (capital
3. Transfer assets)
for insufficient consideration involving real property
classified
- Ifasconsideration
capital assetsis fictitious
4. General renunciation
 of inheritance
Include entire FMV of the property
5. Donation with reserved powers
 Revocable donation
6. Donation to government for public use Condonation or Cancellation of Indebtedness
7. Donation to accredited non-profit institution
8. Quasi-transfer - Act of liberality, by virtue of which the creditor, without
9. Void donation receiving any equivalent, renounces the enforcement of the
10. Foreign donation for RA donors obligation which is extinguished in its entirety or in that part
11. Donation of property exempt under reciprocity or aspect of the same to which the remission refers
- Cases where there is no condonation:
a. Condonation is due to the rendition of service
b. Condonation was made by a corporation in favor
Donation for Election Campaign of its shareholders

- Any contribution in cash or in kind to any candidate, Repudiation of Inheritance

political party, or coalition of parties for campaign purposes
shall- be governed by the Election
General renunciation Code,
by an heir,asincluding
amendedthe surviving
- Not automatic
spouse,exemption
of his or her share in the hereditary estate left by
 the
Must be reported to COMELEC through SOSE
decedent
- Excess
- donation
GENERAL shall be subject to income tax on the part
RULE:
of the politician
 Not subject to donor’s tax
- EXCEPTION:
 The renunciation was categorically done in favor
DEDUCTIONS FROMheir(s);
of identified GROSS andGIFT
 To the exclusion or disadvantage of other co-
heir(s) 1. Donations not exceeding P250,000
2. Gifts made to or for the use of National Government or any
entity created by any of its agencies which is not conducted
for profit
3. Gifts in favor of non-profit educational and/or charitable,
religious, cultural, or social welfare corporation, institution,
accredited NGO, trust, or philanthropic organization, or
research institution
 Not more than 30% of said gifts shall be used by
such done for administration purposes
 COMPUTATION OF DONOR’S TAX

First Donation of the Year

Gross Gift xx
Allowable Deduction (xx)
Net Gift xx
Less: Tax Exempt Donation (P250,000)
Net Taxable Gift xx
Donor's Tax Rate 6%
Donor's Tax Due xx
Less: Donor's Tax Credit (xx)
Donor's Tax Payable xx

Subsequent Donations during the calendar year

Gross Gift, current xx
Allowable Deduction, current (xx)
Net Gift, current xx
Add: Prior Net Gift xx
Total Net Gift (cumulative) xx
Less: Tax Exempt Donation (P250,000)
Total Net Taxable Gift xx
Donor's Tax Rate 6%
Donor's Tax Due xx
Less: Donor's Tax Credit (xx)
Less: Donor's Tax Paid - prior gifts (xx)
Donor's Tax Payable xx

Donations made by Spouses

- Gift from Common Property

 Gift is taxable one-half to each donor spouse
- Donation between husband and wife during marriage
 GENERAL RULE:
 Void
 EXCEPTION:
 Moderate gifts

Donor’s Tax Return

- Any person making a donation (whether direct or indirect)

unless the donation is specifically exempt under NIRC or
other special laws, is REQURIED, for every donation, to
accomplish under oath a donor’s tax return in duplicate
 Consolidated at year-end
- Shall be filed within 30 days after the date the gift is made or
completed and the tax due thereon shall be paid at the same
time the return is filed