DONOR’S TAX

DONOR’S TAX
Secs. 98-104, NIRC
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION

 Concept
It is a tax on donations. Thus, it is a tax on –

1. An act of the donor disposing gratuitously of a thing/right in

favor of a donee; and
2. Sales, exchanges or other transfers of properties, other than
real property (defined in Sec. 24(D)) classified as capital asset
within the Philippines, for less than an adequate and full
consideration in money or money’s worth. [Sec. 100, NIRC]
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION

 Nature of Donor’s Tax

1. Donor’s tax is not a property tax, but a tax imposed on the

transfer of property by way of gift inter vivos (i.e., an excise
tax). [Sec 12, RR 12-2018 citing Lladoc v. CIR, G.R. No. L-19201
(1965)]
2. It is a direct tax imposed on the donor.
3. It applies to both natural and juridical persons.
[AMPONGAN, 2014]
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION

 Object
To prevent avoidance of income tax through the device of
splitting income among numerous donees, who are usually
members of a family, or into many trusts, with the donor
thereby escaping the effect of the progressive rates of income
tax.
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION

 Object
To prevent avoidance of income tax through the device of
splitting income among numerous donees, who are usually
members of a family, or into many trusts, with the donor
thereby escaping the effect of the progressive rates of income
tax.
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION

 Time and Transfer of Properties

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 donee; it is completed by
delivery, either actually or constructively, of the donated property, to
the donee. Thus, the law in force at the time of the
perfection/completion of the donation shall govern the imposition of
the donor’s tax. [Sec. 12, RR 12-2018]
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION

 Requisites of a Valid Donation

Art. 725, NCC. Donation is an act of liberality whereby a person
disposes gratuitously of a thing or right in favor of another, who
accepts it.
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION

 Requisites of a Valid Donation

1. Donative intent of the donor
Donative intent must be present in a direct gift. It is not, however,
required in transfers of property for less than adequate and full
consideration. [MAMALATEO; Sec. 100, NIRC]
2. Capacity of the donor
3. Delivery of the donated property
4. Acceptance of the donee
5. Donation must be in the proper form
a. Movable: orally or in writing if value is equal to or less than
P5,000. Otherwise, it shall be in writing.
b. Immovable: must be made in a public document.
DONOR’S TAX: BASIC PRINCIPLES, CONCEPTS, AND DEFINITION

 Requisites of a Valid Donation

Re: Acceptance [Sec. 12, RR 12-2018]

1. For movables exceeding P5,000 – Acceptance shall be in writing

[Art. 748, Civil Code]
2. For immovable [Art. 749, Civil Code] –
a. Must be in the same deed of donation; OR
b. In a separate public document – the donor shall be notified
thereof in an authentic form, and this step shall be noted in both
instruments

Note: Acceptance shall not take effect unless it is done during the
lifetime of the donor and of the donee [Art. 746, Civil Code].
TRANSFER WHICH MAY BE CONSIDERED AS A DONATION

 Sale, Exchange, or Transfer of Property for Less Than

Adequate and Full Consideration

General rule: Where property, other than real property referred to in

Sec. 24(D), is transferred for less than an adequate and full
consideration, then the amount by which the FMV of the property
exceeded the value of the consideration shall be deemed a gift.

Exception: A transfer of property made in the ordinary course of

business (a transaction which is bona fide, at arm’s length, and free
from any donative intent), will be considered as made for an adequate
and full consideration in money or money’s worth. [Sec. 100, NIRC]
TRANSFER WHICH MAY BE CONSIDERED AS A DONATION

 Sale, Exchange, or Transfer of Property for Less Than

Adequate and Full Consideration

Requisites:
The excess of FMV over the value of the consideration will be
considered a donation and subject to donor’s tax when:

1. The transfer was for less than adequate and full consideration;
2. Such transfer was effective during his lifetime (inter vivos); and
3. It involves property other than real property classified as capital
asset within the Philippines as defined in Sec. 24(D). [Sec. 100, NIRC]

Note: Real property considered as capital assets under the Tax Code are
exempted from this rule because the taxable value taken into account in the
computation of tax is the higher of either the gross selling price or the FMV;
not gain. [Sec. 100 in relation to Sec. 24(D), NIRC]
TRANSFER WHICH MAY BE CONSIDERED AS A DONATION

 Sale, Exchange, or Transfer of Property for Less Than

Adequate and Full Consideration

Note: The absence of donative intent does not exempt the sales of
stock transaction from donor's tax since Sec. 100 of the NIRC
categorically states that the amount by which the fair market value of
the property exceeded the value of the consideration shall be deemed
a gift. [Philam Life v. Secretary of Finance, G.R. No. 210997 (2014)]
TRANSFER WHICH MAY BE CONSIDERED AS A DONATION

 Condonation or Remission of Debt

Condonation or remission of debt is defined as an act of liberality, by
virtue of which, without receiving any equivalent, the creditor
renounces the enforcement of the obligation, which is extinguished in
its entirety or in that part or aspect of the same to which the remission
refers. It is an essential characteristic of remission that it be gratuitous.
[Dizon v. CTA, G.R. No. 140944, (2008)]
TRANSFER WHICH MAY BE CONSIDERED AS A DONATION

 Renunciation of inheritance
Renunciation in favor of other heirs is subject to donor’s tax. [Sec 12,
RR 12-2018]

a. Renunciation by the surviving spouse of his/her share in the

ACP/CPG after the dissolution of the marriage in favor of heirs of the
deceased spouse or any other person/s

b. Renunciation by an heir, specifically and categorically in favor of

identified heir/s to the exclusion or disadvantage of the other co-heirs
in the hereditary estate

However, general renunciation by an heir, including the surviving spouse, of

his/her share in the hereditary estate left by the decedent is NOT subject to
donor’s tax. [Sec 12, RR 12-2018]
CLASSIFICATION OF DONOR

 Donor’s tax applies to individuals and corporations.

Classifications:
1. Residents (RC/RA/DC/RFC)
2. Non-Residents (NRC/NRA/NRFC)

Such classification is important in determining the deductions

from the gross gift of the donor, and in filing the return.

If donor is:

1. RC/NRC/RA/DC/RFC = liable for donor’s tax REGARDLESS of where the gift

was made or where property is located
2. NRA/NRFC = liable for donor’s tax only if the property donated is within the
Philippines
CLASSIFICATION OF DONOR

Situs of Intangible Personal Properties

General Rule: Mobilia Sequuntur Personam Principle: Taxation of

intangible personal properties (such as credits, bills, bank deposits
promissory notes, and corporate stocks) follows the residence/domicile
of owner thereof. Situs is the domicile or residence of the owner.
[Collector v. Fisher, supra.]

Exceptions: When it is inconsistent with express provisions of law

Rule of Reciprocity: Same as in Estate Tax, supra.

NOT SUBJECT TO DONOR’S TAX

 Contributions to a candidate or political party for

campaign purposes duly reported to COMELEC [Sec. 99
(B), NIRC]

Donation to a Political Candidate

Prior to R.A. 7166, a donation for a political candidate was subject to
donor’s tax. [ACCRA v CIR, G.R. No. 120721 (2005)]

Under R.A. 7166, contributions duly reported to the BIR are not subject
to donor’s tax, as long as it is utilized in his campaign.
Unutilized/excess campaign funds, that is, campaign contributions
net of the candidate’s campaign expenditures, shall be considered as
subject to income tax and must be included in the candidate’s taxable
income as stated in his/her ITR [Sec. 2, RR 7-2011]
NOT SUBJECT TO DONOR’S TAX

 Gift to Parish Priest or Church (applies only to real

property tax)

 Onerous donations or donations in exchange for

goods/services (they are subject to income tax)
SUBJECT TO DONOR’S TAX

 Gratuitous Donations to Homeowners’ Association

Valuation of Gifts Made in Property
TAXABLE BASE:
Net gifts - the net economic benefit from the transfer that accrues to the donee
AT THE TIME OF DONATION

1. If gift is personal property = FMV at the time of donation [Sec. 102, NIRC]
2. If gift is real property = whichever is HIGHER
a. FMV as determined by the CIR (Zonal Value) or
b. FMV in the latest schedule of values fixed by the provincial and city
assessor (MV per Tax Declaration) [Sec. 102 in relation to Sec. 88(B), NIRC]
3. If there is an improvement = construction cost per building permit or the FMV
based on the latest tax declaration.
4. If unlisted stocks = Adjusted Net Asset Method shall be used whereby all
assets and liabilities are adjusted to fair market values. The net of adjusted asset
minus the adjusted liability value is the indicated value of the equity. [RR 6-2013]

Note: Where the consideration is fictitious, the entire value of the property shall
be subject to donor’s tax.
Exemptions of Gifts from Donor’s Tax
It is more appropriate to consider these “exemptions” as “deductions” as they are
subtracted from the gross value of the property donated to arrive at the value of
the net gift, which is the tax base for donor’s tax. [DE LEON]

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. [Sec. 101 (A)(1), NIRC]
2. Gifts in favor of an educational and/or charitable, religious, cultural or social
welfare corporation, institution, accredited nongovernment organization, trust or
philanthropic organization or research institution or organization: Provided not
more than 30% of said gifts will be used by such donee for administration
purposes. [Sec. 101 (A)(2), NIRC]
3. Encumbrances on the property donated if assumed by the donee in the deed
of donation.
Exemptions of Gifts from Donor’s Tax
It is more appropriate to consider these “exemptions” as “deductions” as they are
subtracted from the gross value of the property donated to arrive at the value of
the net gift, which is the tax base for donor’s tax. [DE LEON]

4. Donations made to entities exempted under special laws.

a. Aquaculture Department of the Southeast Asian Fisheries Development
Center of the Philippines
b. Development Academy of the Philippines
c. Integrated Bar of the Philippines
d. International Rice Research Institute
e. National Museum
f. National Library
g. National Social Action Council
h. Ramon Magsaysay Foundation
i. Philippine Inventor’s Commission
j. Philippine American Cultural Foundation
k. Task Force on Human Settlement on the donation of equipment, materials
and services
Tax Credit for Donor’s Taxes Paid in a Foreign Country
Donor’s tax credit
The donor’s tax imposed upon a citizen or resident at the time of the
donation shall be credited with the amount of any donor’s tax, of any
character and description, imposed by the authority of a foreign country.
[Sec. 101(C), NIRC]

Who may claim the tax credit: Resident or Citizen: RC, NRC, RA, DC,
RFC (not NRA or NRFC)

Note: The allowable tax credit is the

lower of the tax limit and the actual
tax paid.
Filing of Return and Payment
Persons liable
Every person, whether 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 [Sec. 98, NIRC]

Donor’s tax return

Separate return is filed for each gift made on different dates during the
year reflecting therein any previous net gifts made in the same calendar
year. If the gift involves conjugal/community property, each spouse shall
file separate return with respect to his/her respective share in the said
property.
Filing of Return and Payment
Contents

1. Each gift made during the calendar year which is to be included in

computing net gifts;
2. The deductions claimed and allowable;
3. Any previous net gifts made during the same calendar year;
4. The name of the donee; and
5. Such further information as the CIR may
require. [Sec. 103(A), NIRC]
Filing of Return and Payment
Period for Filing
The return must be filed within 30 days after the date when the gift was
made or completed. The tax due thereon shall be paid at the same time
that the return is filed (pay-as-you-file). [Sec. 103(B), NIRC]

Who will file: Any person who made a gift (whether direct or indirect), is
required to file under oath a donor’s tax return in duplicate [Sec. 103(A),
NIRC]
Filing of Return and Payment
Where to File the Donor’s Tax Return and Pay the Tax Due

1. Residents
Unless the CIR permits otherwise, the return shall be filed and the tax
paid to:
a. AAB
b. Revenue District Officer
c. Revenue Collection Officer
d. duly Authorized City or Municipal Treasurer where the donor was
domiciled at the time of the transfer [Sec. 103(B), NIRC]

2. Non-residents
The Philippine Embassy or Consulate in the country where he is
domiciled at the time of the transfer, or Directly with the Office of the
Commissioner (i.e., Revenue District Office No. 39 – South QC) [Sec.
103(B), NIRC; Sec. 15(B), RR 12- 2018]
Filing of Return and Payment
PAYMENT OF DONOR’S TAX
Payment: “Pay as you file”
The donor’s tax is paid upon filing of the return
[Sec. 103(B), NIRC]
Filing of Return and Payment

Notice of donation to donee institutions duly accredited by the

Philippine Council for NGO Certification, Inc. (PCNC)

Requisites to be exempt from donor’s tax and to claim full deduction:

1. Donor must give notice on every donation worth at least P50,000
2. Notice is given to the RDO which has jurisdiction over donor’s place of
business
3. Notice must be given within 30 days after receipt of the qualified done
institution’s Certificate of Donation
4. Certificate of Donation must be attached to the Notice
5. Notice must state that not more than 30% of the donation for the
taxable year shall be used by the qualified donee institution for
administration purposes [Sec. 15 (C), RR 12-2018 in relation to Sec.
101(A)(2) and (B)(2)]
Filing of Return and Payment

Tax Basis
The tax for each calendar year shall be
computed on the basis of the total gifts in
excess of P250,000 made during the calendar
year.

Tax Rate: FLAT RATE OF 6% [Sec. 99, NIRC]

Filing of Return and Payment
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