ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 41 Ÿ May 2021 CPA Licensure Examination Ÿ Weeks 2 - 3

TAXATION A. Tamayo Ÿ G. Caiga Ÿ C. Lim Ÿ K. Manuel Ÿ E. Buen

TX-201: DONOR’S TAX

A. Donor’s Tax Return (BIR Form No. 1800) See actual Donor’s Tax Return

B. Donor’ Tax Rates

1. Under TRAIN (Effective January 1, 2018 )
The tax for each calendar year shall be six percent (6%) computed on the basis of the total gifts in
excess of Two hundred fifty thousand pesos (P250,000) exempt gift made during the calendar year.

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, as amended.

C. Composition of Gross Gifts

Resident or citizen donor Non-Resident Alien Donor
Personal properties Wherever situated Situated in the Philippines
Real properties Wherever situated Situated in the Philippines

D. Rule of Reciprocity
Properties covered Intangible personal properties situated in the Philippines given as gifts by non-
by the rule resident alien donor.
Basic rules: a. When there is reciprocity – The intangible personal properties situated in the
Philippines given as gifts by a non-resident alien donor are not subject to donor’s tax.

b. When there is no reciprocity – The intangible personal properties situated in the

Philippines given as gifts by a non-resident alien donor are subject to donor’s tax.

E. Transfer for Less Than Adequate and Full Consideration

1. The rule: Where property, other than a real property that has been subjected to the final capital gains tax,
is transferred for less than an adequate and full consideration in money or money’s worth, then the amount
by which the fair market value of the property at the time of the execution of the Contract to Sell or
execution of the Deed of Sale which is not preceded by a Contract to Sell exceeded the value of the agreed
or actual consideration or selling price shall be deemed a gift, and shall be included in computing the
amount of gifts made during the calendar year.
Personal properties Real properties
Ordinary assets Subject to donor’s tax Subject to donor’s tax
Capital assets Subject to donor’s tax Not subject to donor’s tax
2. A sale, exchange, or other transfer of property made in the ordinary course of business (a transaction
which is a 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.”

F. Valuation of Gifts Made in Property

Property Donated Valuation
Gift is made in property Fair market value at the time of the gift
Real property Provisions in estate tax shall apply to the valuation of said real property.

G. Exemptions of Certain Gifts/Deductions from Gross Gifts

1. Found in the Tax Code Under TRAIN (Effective January 1, 2018)
Resident/citizen Non-resident alien
donor donor
a. 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 Allowed as deduction
b. 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. Allowed as deduction

Notes:
1) In case of gifts made to certain institutions (no. 1 c above), in order to be exempt, not more than 30% of
said gifts shall be used by such donee for administration purposes.
2) For the purpose of the exemption, a 'non-profit educational and/or charitable corporation, institution,
accredited nongovernment organization, trust or philanthropic organization and/or research institution or
organization' is a school, college or university and/or charitable corporation, accredited nongovernment
organization, trust or philanthropic organization and/or research institution or organization, incorporated as
a nonstock entity, paying no dividends, governed by trustees who receive no compensation, and devoting

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 ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TX-201
Weeks 2-3: DONOR’S TAX

all its income, whether students' fees or gifts, donation, subsidies or other forms of philanthropy, to the
accomplishment and promotion of the purposes enumerated in its Articles of Incorporation.

2. Other deductions
Resident or Non-Resident
Citizen Donor Alien Donor
a. Encumbrance on the property donated if assumed by the donee Allowed Allowed
b. Those specifically provided by the donor as a diminution from the
property donated Allowed Allowed

3. Exercise
Gross gift Deduction
a) Real property donated valued at P1,500,000 with unpaid mortgage
of P300,000 assumed by the donee
b) Real property donated valued at P1,200,000 with unpaid real
estate tax of P150,000 not assumed by the donee
c) Real property donated valued at P1,500,000, the donee agreed to
assume the applicable donor’s tax of P450,000
d) Personal property donated valued at P100,000, the donor provided
that P10,000 of the property donated be transferred by the donee
to a social welfare organization

4. Exempt Donations Under Special Laws. – Donations to:

a. International Rice Research Institute (IRRI);
b. Philippine American Cultural Foundation;
c. Ramon Magsaysay Award Foundation;
d. Philippine Inventors Commission;
e. Integrated Bar of the Philippines (IBP);
f. Development Academy of the Philippines (DAP);
g. National Social Action Council;
h. Aquaculture Department of Southeast Asian Fisheries Development Center of the Philippines (SEAFDEC).

H. The Law That Governs The Imposition Of Donor’s Tax

1. 1. The donor’s tax is not a property tax, but is a tax imposed on the transfer of property by way of gift inter
vivos.
2. 2. The donor’s tax shall not apply unless and until there is a completed gift.
3. The transfer of property by gift is perfected from the moment the donor knows of the acceptance by the
donee; it is completed by the delivery, either actually or constructively, of the donated property to the
donee.
4. In order that the donation of an immovable may be valid:
a. It must be made in a public document specifying therein the property donated.
b. The acceptance may be made in the same Deed of Donation or in a separate public document, but it
shall not take effect unless it is done during the lifetime of the donor.
c. If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic
form, and this step shall be noted in both instruments.
5. A gift that is incomplete because of reserved powers, becomes complete when either:
(1) the donor renounces the power; or
(2) his right to exercise the reserved power ceases because of the happening of some event or
contingency or the fulfilment of some condition, other than because of the donor’s death.
6. Renunciation by 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 or any other person/s is
subject to donor’s tax.
7. 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, unless specifically and categorically done in favor of
identified heir/s to the exclusion or disadvantage of the other co-heirs in the hereditary estate.
8. The law in force at the time of the completion of the donation shall govern the imposition of donor’s tax.
9. For purposes of the donor’s tax, “NET GIFT” shall mean the net economic benefit from the transfer that
accrues to the donee.
10. Accordingly, if a mortgaged property is transferred as a gift, but imposing upon the donee the obligation
to pay the mortgage liability, then the net gift is measured by deducting from the fair market value of the
property the amount of mortgage assumed.

I. Computation of Taxable Net Gift and the Donor’s Tax Due

1. Donations made on or after January I, 1998 shall be subject to the donor’s tax computed in accordance
with the amended schedule of rates prescribed under Section 99 of the National Internal Revenue Code of
1997 (R.A. No. 8424).
2. Donations made on or after January 1, 2018 shall be subject to the donor’s tax under TRAIN (R.A. No.
10963).
3. The computation of the donor’s tax is on a cumulative basis over a period of one calendar year.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TX-201
Weeks 2-3: DONOR’S TAX

4. Husband and wife are considered as separate and distinct taxpayers for purposes of donor’s tax.
5. If what was donated is a conjugal or community property and only the husband signed the deed of
donation, there is only one donor for donor’s tax purposes, without prejudice to the right of the wife to
question the validity of the donation without her consent pursuant to the pertinent provisions of the Civil
Code of the Philippines and the Family Code of the Philippines.
6. With the exception of moderate donations for charity or on occasions of family rejoicing, neither spouse
may donate any community property or conjugal property without the consent of the other.
7. Every donation between the spouses during the marriage shall be void except for moderate gifts, which
the spouse may give each other on the occasion of any family rejoicing, and donation mortis causa.
8. Any provision of law to the contrary notwithstanding, any contribution in cash or in kind to any candidate,
political party or coalition of parties for campaign purposes, duly reported to the commission (COMELEC)
shall not be subject to the payment of any gift tax (Sec. 13 R.A. No. 7166).

Exercise: Determine whether or not the following is subject to donor’s tax (Y/N):
a. Husband donated conjugal property with the consent of the wife to charity event (charitable
institution’s administration expenses exceed 30% of the gifts)
b. Wife donated community property without the consent of the husband on occasion of their
legitimate child’s birthday (amount of gift is moderate)
c. Husband gifted his wife a diamond ring on occasion of her birthday
d. Wife gifted her husband a branded shirt of account of his birthday (amount is moderate)
e. Husband transferred some of his exclusive property to his wife, transfer to take effect after his
death
f. Surviving spouse renounced his share in the conjugal partnership in favor of the heirs of the
deceased spouse
g. An heir renounced his share in the hereditary estate in favor of no one in particular
h. Taxpayer donated to the campaign fund of a candidate, duly reported to the COMELEC
i. Donee failed to indicate his acceptances of the donation before the transferor died
j. Donee signified his acceptance of the donated property known to the donor before he died,
delivery of the donated property done after the transferor died

J. Tax Credit for Donor’s Taxes Paid to a Foreign Country

1. One foreign Limit
country Net gift, foreign X Philippine donor’s tax due
Total net gifts xxx
Actual foreign donor’s tax xxx
Allowed (lower between actual and limit) xxx
2. Two or more Limit (a) – By country xxx
foreign Limit (b) – By total xxx
countries Limit [lower between limits (a) and (b)] xxx
Actual total foreign donor’s taxes xxx
Allowed tax credit (lower between allowed limit and actual total foreign donor’s taxes)
xxx

Exercise
Micha is a citizen and resident of the Philippines. On July 8, 2018, she made donations to Queenie, a friend, of
properties in Australia and USA. Donor’s taxes paid in Australia and USA amounted to P95,000 and P50,000,
respectively. The property in Australia had a fair market value of P300,000 while the property in US had a
market value of P200,000.

How much was the donor’s tax still due after credit for foreign donor’s taxes?

K. Filing of Return and Payment of Tax

1. Requirement Any individual who makes any transfer by gift (except those which are exempt from
donor’s tax) shall, for the purpose of donor’s tax, make a return under oath at least in
duplicate (triplicate per BIR Form No. 1800)
2. Contents of the The return shall set forth:
donor’s tax a. Each gift made during the calendar year which is to be included in computing net
return gifts;
b. The deductions claimed and allowable;
c. Any previous net gifts made during the same calendar year;
d. The name of the donee; and
e. Such other information as may be required by rules and regulations made pursuant
to law.

3. Time for filing of The donor’s tax return shall be filed within thirty (30) days after the date the gift is
return made or completed.
4. Payment of The donor’s tax due shall be paid at the same time that the return is filed.
donor’s tax
5. Modes of 1) Payment through Authorized Agent Bank (AAB)

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TX-201
Weeks 2-3: DONOR’S TAX

payment (a) Over-the-counter cash payment – Maximum amount per tax payment not to
exceed P10,000.00
(b) Bank debit system – taxpayer has bank account with AAB
(c) Checks – indicate “PAY TO THE ORDER OF:
1)Presenting/collecting bank or the bank where the payment is to be coursed and
2)FAO (for account of) Bureau or Internal Revenue as payee; and
3)Under the “ACCOUNT NAME” of the taxpayer identification number (TIN)
Notes: i. Accommodation checks, second endorsed checks, stale checks, postdated
checks, unsigned checks and checks with alterations/erasures are not
acceptable.
ii. Checks to cover one tax type for one return period only
2) Payment through Tax Debit Memo (TDM) (not acceptable as payments for
withholding taxes, fringe benefit tax, and for taxes, fees and charges collected under
special schemes or procedures or programs of the Government or BIR)
3) Payment through E-Payment System
4) Payment directly to the BIR
5) Payment through creditable withholding taxes
6. Place of filing of a. In case of resident donors:
return 1) Authorized agent bank;
2) Revenue District Officer;
3) Revenue Collection Officer;
4) Duly authorized Treasurer of the city or municipality where the donor was
domiciled at the time of the transfer.
b. In case of non-resident donors:
1) Philippine Embassy or Consulate where he is domiciled at the time of the transfer,
or
2) Office of the Commissioner (RDO No. 39 –South Quezon City)

Note: Returns filed with Philippine Embassy or Consulate shall be paid thereat.
7. Notice of The donor engaged in business shall give a notice of donation on every donation worth
donation by a at least P50,000 to the RDO which has jurisdiction over his place of business within 30
donor engaged days after receipt of the qualified donee institution’s duly issued Certificate of Donation,
in business which shall be attached to the said Notice of Donation, stating that not more than 30%
of the said donations/gifts for the taxable year shall be used for administration
purposes.

L. Accomplishing Tax Returns and Forms

1. Separate return 1) A separate return shall be filed by each donor for each gift (donation) made on
different dates during the year reflecting therein any previous net gifts made in the
same calendar year.
2) Only one return shall be filed for several gifts (donations) by a donor to the different
donees on the same date.
3) If the gift (donation) involves conjugal/community property, each spouse shall file
separate return corresponding to his/her share in the conjugal/community property.
This rule shall likewise apply in the case of co-ownership over the property being
donated.
2. Payment and 1) Upon filing of Donor’s Tax Return, the total amount payable shall be paid to the
issuance of Authorized Agent Bank (AAB) where the return is filed.
Revenue Official 2) In places where there are no AABs, payment shall be made directly to the Revenue
Receipt Collection Officer or duly authorized City or Municipal Treasurer who shall issue
Revenue Official Receipt (BIR No. 2524).
3) Where the return is filed with an AAB, the lower portion of the return must be
properly machine-validated and stamped by AAB to serve as the receipt of payment.
4) The machine validation shall reflect the date of payment, amount paid and
transaction code, and the stamp mark shall show the name of the bank, branch code,
teller’s name and teller’s initial.
5) The AAB shall also issue an official receipt or bank debit advice or credit document,
whichever is applicable, as additional proof of payment.

(Problems in the next page)

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY TX-201
Weeks 2-3: DONOR’S TAX

Cases
1. A resident alien donor donated to a Philippine domestic corporation a property located abroad valued at
P500,000. The foreign donor’s tax on the donation was P100,000. A donation earlier within the same
calendar year, was donated to a legitimate daughter, a property valued at P300,000.

How much was the tax payable?

2. Mr. Rodolfo Felix made the following gifts on December 14, 2018. Mr. Felix’s TIN is 143-345-678-900. His
registered address is 18 R. Papa Street, Sampaloc, Manila (Zip Code 1008). His telephone number is 02-
734-39-89. Sampaloc is under RDO 32.
a. P250,000 cash to Ana, TIN 143-770-553-003, his acknowledged natural daughter on account of
her marriage celebrated on January 2, 2018.
b. Residential house and lot in Sampaloc, Manila (300 sq. m.) with fair market value per BIR of
P2,500,000 (TCT No. 123456) to the same donee. Fair market value per Tax Declaration was
P3,000,000 (TD No. 134990). Unpaid mortgage of P500,000, the donor imposed upon the donee
the obligation to pay the mortgage liability which the latter did.

Previous to December 14, 2018, he donated the following:

April 15, 2018: Sold his residential house and lot (500 sq. m. with TCT No. 111012) to his brother for
P1,500,000. The fair market value per BIR of the residential house and lot at the time of sale was
P2,000,000. Fair market value per Tax Declaration was P1,500,000 Tax Declaration No. 143441).
June 20, 2018: Sold personal car to Boy, his friend, for P500,000, value of the car at the time of sale
was P900,000
July 15, 2018: P300,000 campaign contribution to a close friend who plans to run for an elective
office
Nov. 20, 2018: P800,000 cash donation to a legitimate daughter and P500,000 cash donation to a
corporation he controls
Dec. 10, 2018: P320,000 cash donation to the Hospicio de San Jose, a charitable institution.

Prepare a Donor’s Tax Return and answer the following:

1 – How much are the total previous net gifts for year 2018?
2 - How much is the taxable gift on December 14, 2018?
3 - How much is the donor’s tax due for the gift made on December 14, 2018?
4 – When is the last day for filing the return for gifts made in 2018?
5 - Where shall the return be filed?
6 – How many returns shall be filed?

3. On January 15, 2018, Daisy gave a piece of land to her brother-in-law who is getting married on February
14, 2018. The assessed value and zonal value of the land were P750,000 and P1,000,000 respectively.
The land had an unpaid mortgage of P200,000, which was not assumed by the donee and an unpaid realty
tax of P10,000 which was assumed by the donee.

Question
1 – What value shall be reflected in the gross gift?
2 - How much shall be the total deductions?
3 – How much was the taxable gift?
4 - How much was the donor’s tax due?
5 - When shall be the due date for the filing of donor’s tax return?

4. A foreign corporation donated its own shares of stock in favor of resident employee in the Philippines. The
value of the shares of stock was P500,000.

Questions
1 - Was the donation subject to Philippine donor’s tax? Why?
2 – How much was the donor’s tax due?
3 – Assuming the foreign shares have acquired business situs in the Philippines, was the donation subject
to Philippine donor’s tax? Why?

END

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