TRANSFER & BUSINESS TAXATION

12
Gross Gift

GROSS GIFT

Resident Citizen, Non-Resident Citizen and

Resident Alien Donors. The gross gift of a
resident citizen, a non-resident citizen or a
resident alien donor shall include all his
property wherever situated. The following shall comprise his gross gift:
Real or immovable property. These consist of land, building or
anything attached to
the soil with permanence.

2. Tangible personal property. Personal property that can be seen and touched.

3. Intangible personal property. Personal property that cannot be seen and touched.
This includes:

a. Franchise which must be exercised in the Philippines;

b. Shares, obligations, or bonds issued by corporation or sociedad anonima
any

organized or constituted in the Philippines in accordance with its laws;

C. Shares, obligations or bonds issued by any foreign corporation 85% of the

business of which is located in the Philippines;

d. Shares, obligations, or bonds issued by any foreign corporation is such shares,

obligations or bonds have acquired a business situs in the Philippines;
and

e. Shares or rights in any partnership, business or industry established in the

Philippines.

to final
asset subject
Where property, other than real property classified as capital consideration in
capital gains tax, is transferred for less than an adequate and full
of the
money or money's worth, then the amount by which the fairDeed
market vaue
of Sale which is
of the Contract to Sell or
property-at the time of execution or actual
not preceded by a Contract to
Sell-exceeded the value of the agreed
be deemed a gift.
consideration or selling price shall
made in the ordinary
other transfer of property free from
at arm's length, and
or
However, a sale, exchange,
which is a bona fide,
Course of business (a transaction
 any donative intent), will be considered as made for an adequate and full

consideration in money or money's worth (Rev. Reg. 12-2018; Sec. 100, TRAIN).
Gain
Gift
Selling Price P185,000
Fair Market Value P250,000
Less: Cost 125,000
Less: Consideration 185,000
Deemed Gift 65,000 Gain
P 60,000

The jewelry is a personal property classified as capital asset. The difference

between the fair market value of the jewelry sold and the consideration
received by Cindy of P65,000 is deemed donation or gift. In this case, seller
Cindy is the donor while buyer Faye the donee. The donation is subject to
donor's tax.

For income tax purposes, only 50% of the gain of P60,000 shall be taken into
consideration because the seller is an individual and assuming the capital
asset has been held for more than 12 months.

Non-Resident Alien Donor. If the donor was a non-resident alien, only his
property
located in the Philippines shall form part of his gross gift.

The inclusion of intangible personal property located in the Philippines in the gross gift
ofa non-resident alien donor
is subject to reciprocity rule. Such intangible personal
property shall not be included in the following cases:

1. If the donor at the time of his donation was a resident

of a foreign country which at the
time of donation did not
impose transfer tax of
character in respect of intangible
any
personal property of citizens of the Philippines not
residing in that foreign country; or
2. If the laws of the
foreign country of which the donor was a resident at the time of
donation allow a
similar exemption from transfer taxes or death taxes of
every
character in respect of intangible personal property owned
by citizens of the Philippines
not residing in that foreign country.

Non-Resident Foreign Corporation Donor. If the donor was a non-resident foreign

corporation, its real or personal property so transferred which
are situated outside the
Philippines shall not be included as part of its gross gift.

Illustration.
Source: BIR Ruling 115-99, Aug. 6, 1999

Quisumbing Torres and Evangelista, Attorneys at Law wrote the BIR

on June
on the tax consequence of a proposed donation 19, 1998 requesting for a ruling
domestic corporation,
of cash money by non-resident foreign corporation to a
to be held in trust for the
benefit of
two (2) resident Filipino minors; and the
subsequent transfer of the trust assets from the trustee to the beneficiaries.
The BIR replied:
Pursuant to Section 104 of
the Tax Code of 1997, where the donor is a non-resident foreign
corporation, it's real or personal property so transferred which are outside the not be
included as part of
its gross gift. The proposed Philippines shall
assets from the trustee cash donation and the subsequent transfer of the trust
tothe beneficiaries shall not be subject to any Philippine tax.

188 Transfer and Business Taxation 2022 Edition by

Prof. WIN Ballada and Susan Ballada
Valuation
If the gift is made in
property, the fair market value thereof at the time of the gift shall
be considered the amount of the gift; in case of real property, whichever is the higher
amount
between the fair market value as determined by the Commissioner, or the fair
market value as
shown in the schedule of values fixed by the Provincial and City
Assessors. The
reckoning point for valuation shall be the date when the donation is
made (Rev. Reg. 17-2018).

illustration: On the occasion of

his daughter's graduation day, Mr. Kata gifted her with
the following:

House and lot in the

Philippines P1,500,000
Car in the Philippines 500,000
Bank deposit in Japan 800,000
Shares of stock in Japan 300,000
Copyright used in the Philippines 400,000

Compute for the gross gift of Mr. Kata if he is a:

1. Filipino residing in the Philippines.

2. Japanese residing in Japan, with reciprocity.
3. Japanese residing in China.

1. The gross gift of Mr. Kata being a resident citizen of the Philippines consists of all his
property wherever situated, or a total of P3,500,000.

House and Lot in the Philippines P1,500,000

Car in the Philippines 500,000

800,000
Bank Deposit in Japan
300,000
Shares of Stock in China
400,000
Copyright Used in the Philippines
P3,500,000
Total

a non-resident citizen, his gross gift will be the same as

if he were a
If Mr. Kata were
if Mr. Kata were a resident alien, his gross gift will also be the
resident citizen. And

same as if he were a resident citizen.

being a Japanese residing in Japan (non-resident alien in

2. The gross gift of Mr. Kata, in shall consist only of his property
Japan)
the Philippines but resident citizen
situated in the Philippines.
donation
in this case because Mr. Kata at the time of
The reciprocity rule may apply and has intangible personal property located in the
of Japan
is a resident and citizen
When there is reciprocity, the transfer of intangible personal property
Philippines.

Donor's Tax 189

 s not subject
alien donor
to
tax
of a non-resident is shown
below:
located in the Philippines gross gift
Kata's
Accordingly, thecomputation of Mr.
P1,500,000
House and Lot in the Philippines 500,000
Car in the Philippines®
P2,000,000
Total

China (non-resident alien

his
3.
property

situated in the Philippines.

The reciprocity rule cannot apply

in this case because Mr. Kata, although a non.
resident alien in the Philippines is
not a resident and citizen of one foreign country.
be resident and
So that the reciprocity rule may apply, the non-resident alien must
a

time of donation.
citizen of one particular foreign country at the

When there is no reciprocity, the transfer of intangible personal property located in

the Philippines of a non-resident alien donor is subject to tax.

Accordingly, the computation of Mr. Kata's gross gift is shown below:

House and Lot in the Philippines P1,500,000

Car in the Philippines 500,000
Copyright Used in the Philippines 400,000
Total P2,400,000

190 Transfer and Business Taxation 2022 Edition by Prof. WIN

Ballada and Susan
Ballada
[ NAME: SCORE:
SECTION: PROFESSOR:

or False
True

The reckoning point for valuation

1. shall be the date when the donation is made.

A bona fide transfer

2. of property in the ordinary course of business is considered as
made for an adequate and full
consideration in money or money's worth.
When there
no reciprocity, the transfer of intangible personal property located in
is
3.
the Philippines of a non-resident alien donor is not subject to tax.

The gross gift of a resident citizen, a non-resident citizen or a resident alien donor
shall include all his property wherever situated.

5. Where a property, other than real property classified as capital asset subject to final
capital gains tax, is transferred for less than adequate and full consideration in
money or money's worth, fair market value less consideration is deemed a
gift.

the donor was a non-resident alien, only his property located in the Philippines
If

shall form part of his gross gift.

Philippines in the gross

7. The inclusion of intangible personal property located in the
donor is subject to reciprocity rule.
gift of a non-resident alien

not be included in the gross gift if the laws of the

8. Intangible personal property shall the time of donation do not
which the donor was a resident at
foreign country of taxes or death taxes
of every character
in

allow a similar exemption from transfer by citizens of the Philippines not

property owned
respect of intangible personal
residing in that foreign country.
market value
thereof at the time of the gift
in property, the fair
9. If the gift is made
the amount of the gift.
shall be considered
the
value shall be whichever is
fair market
of real property, the the Commissioner,
If the gift consists as determined by
thefair market value
10.
the Provincial
between schedule of values fixed by
higher amount value as shown
in the

or the fair market

and City Assessors. located in the

personal property
the transferof intangibleto tax.
11. When there is reciprocity, subject
alien donor is
Philippines of a non-resident
Donor's Tax 191
 a resident
12. So that the reciprocity rule may apply, the non-resident alien must be and
of donation.
citizen of one
Particular foreign country at the time
one donation
13. A gift made by spouses of conjugal property is considered

192 Transfer and Business Taxation 2022 Edition by Prof. WIN

Ballada and Susan Ballada
NAME:
SCORE:
SECTION:
PROFESSOR:

Multiple Choice
Problems

Mr. & Mrs. Samonte gifted their son Rudy with a BMW on account of his forthcoming
marriage to
Cara. The luxury car has a fair market value of P2 million at the time of
donation.

1. How much must be included as part of Mr. Samonte's gross gift?

a. P4 million b. P2 million C. P1 million d. PO

2. How much must be included as part of Mrs. Samonte's gross gift?

P4 million b. P2 million C. P1 million d. PO

Don Escudero wanted the painting hanging on the wall of his living room replaced with a
new one. He was able to sell it to his friend,' Don Antonio, at a very low price of

P500,000. Its fair market value is P800,000. Three years ago, he bought the painting at
an exhibit held in Paris for P350,000.

3: What is the gain from sale?

c. P150,000 d. PO
P450,000 b. P300,000

4. How much shall be deemed gift?

C. P150,000 d. PO
P450,000 b. P300,000
a.

only son placed first in the recent

Dona Consolacion is beaming with pride because his
As a reward, she gifted him with the following:
CPA licensure examinations.
P1,875,000
Fish Pond in
the Philippines
625,000
Van in the Philippines 500,000
the Philippines
Patent Exercised in 1,000,000
Time Deposit in Burma 375,000
Burma
Shares of Stock in
the Philippines, how much is her gross
were a resident citizen of
5. If Dona Consolacion
gift?
C. P4,375,000 d. PO
b. P3,000,000
a. P2,500,000

Donor's Tax 193

 greater shallher gross gift be
alien, how much
6. if Dona Consolacion were a resident
over thatif she were a resident citizen? d. PO

P2,500,000 b. P3,000,000 c. P4,375,000

a.
rule
and reciprocity applies,
of Burma
7. IfDonaConsolacion were a resident citizen
how much shall be her gross gift?
d. PO
a. P2,500,000 b. P3,000,000 C. P4,375,000
how much shall be her
citizen of Burma,
8. If Dona Consolacion were a non-resident

gross gift?

d. PO
a. P2,500,000 b. P3,000,000 c. P4,375,000

194 Transfer and Business Taxation 2022 Edition by Prof. WIN Balled.