BSA 2105 Atty. F. R.

Soriano

DONOR’S TAX CREDIT

Who are allowed to claim donor’s tax credit

Only citizens (whether residing in the Philippines or not at the time of the donation) or resident
aliens are allowed to claim donor’s tax credit for donor’s tax paid in a foreign country.

Procedure in computing donor’s tax credit for donor’s taxes paid to a foreign country
The procedure in computing donor’s tax credit is the same as the procedure in computing estate tax
credit.

Illustration of donor’s tax credit

Mr. A, a Filipino residing in Manila made the following donations in 2019: To B, his brother, a
parcel of land located in Manila with a FMV of P2,500,000.00, with the condition that B shall assumed the
mortgage thereon amounting to P500,000.00; to C his sister, a parcel of land located in California, USA,
with a FMV of P3,000,000.00 for which Mr. A paid a donor’s tax of P180,000 ; and to D, his brother in
Thailand, shares of stock with a FMV of P1,000,000.00, and for which Mr. A paid donor’s tax of P55,000.
Net gifts – Philippines (P2,500,000-500,000) P 2,000,000
Net gifts – USA 3,000,000
Net gifts – Thailand 1. 1,000,000

Aggregate net gifts 6,000,000

Less: Exempt gifts 250,000

Taxable gifts P 5,750,000

Donor’s tax on taxable gifts (P5,750,000 x .06) P 345,000

Less: Donor’s tax credit (Schedule 1) 227,500
Donor’s tax still due P 117,500

Note: Deduct from the donor’s tax based on the last taxable gifts during the year any donor’s
taxes paid on prior gifts, if there is any, aside from the donor’s tax credit for the donor’s taxes paid
in foreign countries.

Schedule 1
Limitation by country:
USA
Limitation
P3,000,000/P6,000,000 x P345,000 = P 172,500
Actual donor’s tax paid – USA 180,000
Allowed P 172,500

Thailand
Limitation
P1,000,000/P6,000,000 x P345,000 = P 57,500
Actual donor’s tax paid - Thailand 55,000
Allowed 55,000

Total – Limitation by country (A) P 227,500

Limitation by total:
Limitation
P4,000,000/P6,000,000 x P345,000 = P 230,000
Actual donor’s taxes paid in USA and Thailand 235,000
Allowed (B) P 235,000

Tax credit (lower between A and B) P 227,500

BSA2105-FS2021-DONOR’STAX-DA012 Page |1