Donor’s Tax
Donation
It is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it (Art. 725 of the Civil
Code).
Although the law used the term “act”, the law considers donation as a contract, the fact that it requires acceptance and rules on
obligations and the contract applies to its suppletory law (Art. 732 of the Civil Code).
Note: If there is no acceptance of the property then there is no donation.
Classification of Donor’s Tax
1. Simple - the cause is pure liberality.
2. Renumeratory - donations made due to past services rendered or future services or charges and burdens. Consequently, renumeratory
donations are not really donations in substance. The cause is not gratuitous, hence, not subject to donor’s tax.
3. Modal – consideration is less than the value of the thing donated.
Nature of Donor’s Tax
o There is a transfer of properties (real or personal, tangible or intangible) directly or indirectly in trust or otherwise.
o The transfer is gratuitous (without consideration).
o The donation is made inter-vivos.
Donor’s Tax
It is a tax imposed on the gratuitous transfer of property by gift between the donor and the donee who is living at the time of the transfer.
It shall apply whether the transfer is in trust (it is still held in trust for the benefit of certain individuals especially if the donee is
incapacitated or minor to receive the gifts, temporarily, the gift is administered by a trustee for the benefit of the incapacitated donee) or
otherwise, whether the gift is direct (gifts given directly to the done) or indirect (implied donations which we or the law applies to some
sale particularly for insufficient consideration) and whether the property is real or personal. It also applies to both natural and juridical
persons.
It is a direct tax because the tax is imposed on the donor and determined with reference to all the donor’s gifts.
Purpose of Donor’s Tax
o To prevent avoidance of estate tax.
o To prevent or compensate for the loss of the progressive taxes rate of income tax when the large estates are split up by gifts to
numerous donee.
Important Considerations
o The donor's tax return (BIR Form 1800) (tax form for estate taxes) is filed, and the donor's tax is paid to the BIR for the purpose of
acquiring an electronic Certificate Authorizing Registration (e-CAR) (the clearance from the BOR indicating that you have already
paid the taxes of the transfer and already complied with submission of the documentary evidence). The e-CAR is proof that appropriate
taxes were paid.
The government agencies or any other companies for shares of stocks for example, register for deeds for the lot, house, and lot,
municipal assessor or city assessor are not allowed to transfer the property from the transferor to the transferee if they fail to present a
Certificate Authorizing Registration.
o Donor's tax is one of the one-time transactions (ONETT) (because it is only paid once, at the time of donation) under BIR rules.
o Contributions to election campaigns are governed by the Omnibus Election Code. There are some contributions to election campaigns
exempted from taxes, generally, they are exempted from tax donations, if the donor reports it to the COMELEC and at the same time
the donee or the candidate for election campaign reports the donation received in the statement of campaign expenses.
o Computation of donor's tax is on a cumulative basis over a period of one calendar year.
o Under the TRAIN law, donation of real property is subject to documentary stamp tax (P15.00/P1,000 plus P15 on fraction)
