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and

 It is a direct tax since it is

imposed on the donor with
reference to all the donor’s
gift.
 The tax is imposed to the
transfer of property:
• By gift
• Whether gift is direct or
indirect
• Whether property is
real or personal,
tangible or intangible
• Whether transfer is in
trust or otherwise.

ELEMENTS OF
DONATION

1. Capacity of the donor to make

donation
• legal competence of donor to enter
into a contract
• the capacity to dispose

Note: Give illustrative examples.

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ELEMENTS OF
DONATION

2. Donative intent or intent to make a

gift on the part of the donor
• proper declaration as legal owner of
a property
• right to transfer ownership to
another without consideration
• it is only required in a direct gifts.

ELEMENTS OF
DONATION

3. Delivery
• transfer is perfected/completed from
the moment the donor knows of
the acceptance by the donee

4. Acceptance
• donation is perfected not from the
time of acceptance but from the
time of knowledge of the donor
that the donee has accepted the
same

Determine whether the transaction is

subject to donor’s tax or not.
C
A
S 1.Transfer of property/assets of a
NOT
E corporation to its subsidiary.
A
N 2. Cancellation of debt by the creditor YES
A without any consideration.
L
Y 3. Cancellation of debt by the creditor
S
I with consideration. NOT
S
4. A corporation cancels the debt of its
1
debtor-shareholder due to a good
NOT
thing done to the former.

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PURPOSE OF
DONOR’S TAX

1. To prevent avoidance of estate 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 numerous
donees.

DONATION OF PROPERTY

1. Movable property
When the value of the personal property
donated exceeds P5,000, the donation and
acceptance must be made in writing,
otherwise the donation shall be void.

2. Immovable property
The donation must be made in a public
document otherwise, it shall be void.

CHARACTERISTICS
OF DONOR’S TAX

1. It is an excise tax not a property tax

and is imposed on the “right” or
“privilege” to transfer property by way
of gift inter-vivos.

2. Being a contract, it does not apply

unless and until there is completed gift

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CHARACTERISTICS
OF DONOR’S TAX

3. The transfer is perfected from the

moment the donor knows of the
acceptance of the donee.

4. It is a direct tax because the tax

imposed on the donor and determined
with reference to all the donor’s gifts.

CHARACTERISTICS
OF DONOR’S TAX

5. Renunciation by the surviving spouse

of his/her share in the conjugal
partnership or absolute community
after the dissolution of the marriage is
subject to donor’s tax

6. General renunciation by an heir,

including the surviving spouse of
his/her share in the hereditary estate is
not subject to tax unless otherwise
categorically stated.

CLASSIFICATION OF
DONATION

As to Motive or Purpose
1. Simple. The cause is pure liberality.
2. Renumeratory. The cause is not
gratuitous hence, not subject to
donor’s tax
3. Modal. The consideration is less than
the value of the thing donated.

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CLASSIFICATION OF
DONATION

As to Time of Taking Effect

(Perfection)
1. Donation Inter-vivos.
2. Donation mortis-causa

VALUATION OF
GROSS GIFTS

 As a rule , donor’s tax should be based

on the fair market value (FMV) of the
property donated at the time the
donation is perfected.
Donation of Real Property

• Shall be valued based on the higher

amount between the FMV (BIR) and
the FMV (fixed by the Assessors’
Office)

VALUATION OF
GROSS GIFTS
Stocks, bonds and Other Securities
a) If traded in the stock exchange, shall be
the MEAN between the highest and the
lowest quoted selling prices of the
securities on the valuation date.
b) If not traded in the stock exchange,
- For Common stocks, the market value shall be
the book value at valuation date or date
nearest valuation date
- For Preferred stocks, the market value shall be
the par value of the security

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COMPOSITION OF
GROSS GIFTS

D O N O R
PROPERTY CITIZEN/RA NRA
Prop w/in (Pers/Real) Included Included
Prop w/out (Pers/Real) Included Excluded
Intangible
Property w/in Included Included *
Intangible
Property w/out Included Excluded

* Subject to reciprocity

RECIPROCITY RULE

 The donor, at the time of the donation was a

citizen and resident of a foreign country
which at the time of the donation did not
impose a transfer tax on intangible personal
of the citizens of the Philippines not residing
in that foreign country.
 The foreign country described in the
preceding paragraph allows a similar
exemption from transfer taxes of every
character or description in respect of
intangible personal property owned by
citizens of the Philippines not residing in that
foreign country.

INTANGIBLE PERSONAL
PROPERTY IN THE
PHILIPPINES

1. Franchise which must be exercised

within the Philippines
2. Shares, obligations or bonds issued by
any corporation organized in the
Philippines
3. Shares, obligations or bonds issued by
any foreign corporation 85% of
business is located in the Philippines

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INTANGIBLE PERSONAL
PROPERTY IN THE
PHILIPPINES

4. Shares, obligations or bonds issued by

a foreign corporation if such shares,
obligations or bonds have acquired a
business situs in the Philippines.
5. Shares or rights in any partnership,
business or industry established in the
Philippines.

CUMULATIVE BASIS OF
COMPUTING THE NET
TAXABLE GIFTS

 Cumulative rule under the TRAIN

Law is applicable regardless of the
relationship of the donor and the
donee, but only limited to gifts
made within the same calendar
year.

A resident citizen donor made the following

C
donations as follows:
A • On March 30, 2019 : P100,000 to a
S friend as a wedding gift
E
• On May 25, 2019: P200,000 to their
A church for the Flores de Mayo
N
A celebration
L
Y
S Determine the donor’s tax payable on:
I 1. March 30, 2019
S
2. May 25, 2019
2

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TRANSFER FOR
INSUFFICIENT
CONSIDERATION

1. Personal property sold which is below

the fair market value of the property
at the time of sale.

Value of donation (FMV less SP) xxx

Less: Exempt gifts 250,000
Taxable gift xxx
Donor’s tax rate 6%
Donor’s tax due xxx

TRANSFER FOR
INSUFFICIENT
CONSIDERATION

2. Real property sold was classified as

ordinary asset.

Value of donation (FMV less SP) xxx

Less: Exempt gifts 250,000
Taxable gift xxx
Donor’s tax rate 6%
Donor’s tax due xxx

TRANSFER FOR
INSUFFICIENT
CONSIDERATION

3. Sold was a real property classified as

capital asset.
• The transaction is not subject to
donor’s tax but to 6% capital gains
tax based on the higher amount
between the consideration received
and FMV at the time of transfer.

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TRANSFER FOR
INSUFFICIENT
CONSIDERATION

4. Donated a real property classified as

capital asset. The FMV of the property
at the time of donation was P3 million
• The transaction is a clear
“donation” and not a sale hence,
not subject to capital gains tax but
rather donor’s tax.

TRANSFER FOR
INSUFFICIENT
CONSIDERATION

5. Sale of tangible properties such as

machinery where discount were
granted.
• The transaction is not subject to
donor’s tax despite the
consideration received is considered
insufficient. The transaction is a
valid sales.

TRANSFER FOR
INSUFFICIENT
CONSIDERATION

6. Sale of real properties such as land

where the amount of consideration
received is considered fictitious.
• When the consideration received is
fictitious, under the law, the entire
amount shall be subject to donor’s
tax.

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TRANSFER FOR
INSUFFICIENT
C
CONSIDERATION
A
S
E 7. Sale of shares of stock not traded in the
A
stock exchange are sold for less than its
N fair value.
A
L Example:
Y
S
I Selling price-direct sales 1,000,000
S FMV at time of sale 1,500,000
Purchase price of the shares 900,000
3
 Capital Gains  Donor’s Tax ?
Tax ?

RENUNCIATION OF SHARE IN
COMMON PROPERTY BY
SURVIVING SPOUSE

 Renunciation of the surviving spouse of

his/her share in the conjugal partnership
or absolute community after the
dissolution of the marriage in favor of the
heirs of the deceased spouse is subject
to donor’s tax.

Note: General renunciation by an heir including

the surviving spouse of their share in the
hereditary estate is not subject to donor’s tax.
See page 176

CONDONATION OR CANCELLATION
OF INDEBTEDNESS

 Condonation or remission of debt is a

mode of extinguishing an obligation,
which is an act of liberality and is subject
to donor’s tax except as follows:
- condonation is due to the rendition of
service, the effect of payment of
compensation, hence subject to
income tax;
- condonation was made by a
corporation in favor of its
shareholders, an effect of payment
of dividend. See page 177

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CONTRIBUTION FOR
ELECTION CAMPAIGN

 Any contribution in cash or in kind to any

candidate, political party or coalition of
parties for campaign purposes, shall be
governed by the Election Code, hence,
not subject to donor’s tax.

SPLITTING
OF GIFTS

 The splitting of gifts is a tax minimization

scheme which is done by spreading the
gifts over several calendar years instead
of adding it to the donations made during
the same calendar year. This scheme
avoid a higher tax due to higher tax base.

DONATIONS MADE BY A
FOREIGN CORPORATION

 Foreign corporations effecting a donation

are subject to donor’s tax only if the
property donated is located in the
Philippines. Donation of the foreign
corporation’s own shares of stock is also
not subject to donor’s tax except when its
business has 85% located in the
Philippines or the shares donated have
acquired business situs in the Philippines.

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VOID
DONATIONS

Under Art 739 of the New Civil Code, the

following donations shall be void as follows:
1. Those donations made between persons
who were guilty of adultery or
concubinage at the time of donation
2. Those made between persons guilty of
the same criminal offense
3. Those made to a public officer or his
wife, descendants and ascendants

DEDUCTIONS FROM THE

GROSS GIFTS

 The items of deductions from the

gross gifts are the same with the
enumeration for exempt gifts.

EXCLUSIONS/DEDUCTIONS
FROM THE GROSS GIFTS

1. Gifts made to or for the use of the

National Government or to any political
subdivision of said government.
2. Gifts in favor of non-profit educational
and/or charitable, religious, cultural or
social welfare corporation, institution
and NGOs provided that no more than
30% of said gifts shall be used by such
donee for administration purposes.

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EXCLUSIONS/DEDUCTIONS
FROM THE GROSS GIFTS

3. Encumbrances on the property donated

if assumed by donee.
4. Donations not exceeding P250,000 in
one year.
5. Donations made to entities as
exempted under special laws. (a-n)

TAX CREDIT FOR

FOREIGN DONOR’S TAX
(1 Foreign Country)
The donor is allowed to claim the gift tax
paid in foreign country as a tax credit
against the gift tax paid in the Philippines
computed as follows:
Net gifts, foreign country Phil Donor’s =
X Limit
Net gifts, world Tax due

VS

Actual tax paid, foreign country = Actual

Allowed Tax Credit (Lower amount) = Tax Credit

TAX CREDIT FOR

FOREIGN DONOR’S TAX
(MORE THAN 1 Foreign Country)

Net gifts, ALL foreign country Phil Donor’s =

X Limit
Net gifts, world Tax due
VS

Actual tax paid, ALL foreign country = Actual

Limit 2 (Lower amount) = Tax Credit

STEP 1 – compute limit 1 per foreign country

STEP 2 – compute limit 2 include all foreign country

STEP 3 – choose the lower amount between Limit 1 and 2

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ADMINISTRATIVE
PROVISIONS

 The return is filed and paid within 30

days after the date the gift is made or
completed. Payment is based on the
“Pay-as-you-file system”
 The return shall be filed and the tax
paid to:
a) an authorized agent bank
b) RDO
c) Revenue Collection Officer

CIVIL PENALTIES
AND INTEREST

1. Penalty of 25% if there is no false or

fraudulent intent on the taxpayer
2. Penalty of 50% if there is false,
malice or fraudulent intent on the
taxpayer
3. Interest on the unpaid amount of
tax from the date computed until
fully paid.

Textbook Exercises
P 6.1 , P 6.2, P 6.3, P 6.4, P 6.5

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