Donors Tax

Donor’s Tax
Atty. Betheena C. Dizon

Principal, International Tax
and Transactions Services (ITTS)
The SGV Purpose

Nurture leaders and enable businesses for a better Philippines. #SGVforABetterPhilippines
What is donor’s tax?
• Donor’s tax or gift tax is imposed on the transfer, without

consideration, of property between two or more persons
who are living at the time the transfer is made.
• 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.
(Lladoc vs. Commissioner of Internal Revenue, L-19201,
June 16, 1965; 14 SCRA, 292)
Page 2 #SGVforABetterPhilippines
Requisites of a taxable gift

• Capacity of donor to make the donation
• Donative intent or intent on the part of the donor to make
a gift
• Delivery, whether actual or constructive, of the gift
• Acceptance of the gift by the donee
• Applies whether the transfer is in trust or otherwise,

whether direct or indirect and whether the property is real
or personal, tangible or intangible.
• It is levied on the total gifts made during the calendar year
in excess of PHP250,000.
• The computation of the donor’s tax is on a cumulative basis
over a period of one calendar year.
Net gift
• Net gift is the total amount of gifts less allowable

deductions.
• It is the net economic benefit from the transfer that
accrues to the donee.
Note: 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 FMV of the property the amount of
mortgage assumed. (Sec. 12, RR No. 12-2018)
Valuation of gifts
• If the gift consists of property/properties:

𝐹𝑀𝑉 𝑎𝑡 𝑡ℎ𝑒 𝑡𝑖𝑚𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑔𝑖𝑓𝑡 = 𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑡ℎ𝑒 𝑔𝑖𝑓𝑡
• In case of gifts made in real property, FMV shall be the

higher of:
a) the FMV determined by the CIR
b) the FMV shown in the schedule of values fixed by the
provincial or city assessors
• Valuation of gifts in the form of property shall follow the
rules on valuation gross estate (Section 13 of RR No. 12-
2018)
Donor’s tax rate
6%
of the total gifts
Special considerations
• Donations of immovable properties to be valid, must be

made in a public document, specifying the property
donated.
• 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.
• 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 (other than the
donor’s death)
Renunciation of surviving spouse

• Of his/her share in the conjugal/absolute properties after
the dissolution of marriage in favor of heirs of the
deceased spouse or any other person is subject to donor’s
tax.
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 done in favor of identified
heirs to the exclusion/ disadvantage of other co-heirs
• Where property, other than real property, is transferred for

less than adequate and full consideration in money or
money’s worth, then the amount by which the FMV of the
property exceeded the value of the consideration or selling
price shall be deemed a gift.
• Provided, however, that 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.
Donor’s tax in share transfers
• In case the FMV of the shares of stock sold, bartered, or

exchanged is greater than the amount of money and/or
fair market value of the property received, the excess of
the fair market value of the shares of stock sold, bartered
or exchanged over the amount of money and the FMV of
the property, if any, received as consideration shall be
deemed a gift subject to the donor’s tax. (RR No. 6-2008)
Note: FMV value of the shares:

• Unlisted common shares – Book value based on latest available financial
statements
• Unlisted preferred shares – liquidation value, which is equal to the
redemption price of the preferred shares, including any premium and
cumulative preferred dividends in arrears
• Listed shares – arithmetic mean between highest and lowest quotation at
the date of the donation
(RR No. 20-2020)
The prescriptive period for deficiency donor’s tax on the
sale of shares is reckoned from filing of CGT return
Urbano L. Velasco vs. Bureau of Internal Revenue
CTA (First Division) Case No. 8497 promulgated May 17, 2016
• BIR assessed Petitioner Urbano Velasco (Velasco) for deficiency

donor’s tax on the sale of his shares of stock in Gervel, Inc.
(Gervel) and Metropolitan Management Corporation (MMC) in
2008.
• The BIR demanded payment of the donor’s tax due based on the
difference between the book value and the selling price of the
shares (selling price is lower than book value).
• BIR issued a PAN assessing donor’s tax. Velasco protested the

assessment.
• On October 14, 2011, BIR issued a FAN. Velasco raised
prescription and argued that since he filed the corresponding
Capital Gains Tax (CGT) Returns on September 24, 2008, the BIR
only had until September 24, 2011 to assess.
• The BIR countered that since Velasco failed to file a donor’s tax
return, it has 10 years to assess the deficiency donor’s tax.
• Is Velasco subject to deficiency donor’s tax?
• No. The right of the BIR to assess Velasco for the deficiency donor’s tax
has prescribed.
• Donor’s tax is imposed upon the transfer by any person of the property by
gift as provided under Section 98 of the Tax Code. The excess in the fair
market value over the consideration received for the stocks sold is deemed
gift subject to donor’s tax.
• However, the CTA ruled that the donor’s tax assessment against Velasco
should be cancelled due to prescription.
• Although the assessment was for donor’s tax, Velasco’s filing of the CGT
Returns constitutes sufficient compliance with the requirement of filing a
tax return under Section 103 of the Tax Code, as amended, for the
purpose of computing prescription covering the transaction. The FAN was
dated October 13, 2011 or more than 3 years after the filing of the CGT
Returns on September 24, 2008.
• Any contribution in cash or in kind to any candidate or

political party or coalition of parties for campaign
purposes, duly reported to the COMELEC, shall not be
subject to the payment of any gift tax (donor’s tax).
(Section 13 of R.A. No. 7166 or the Election Code)
Exempt gifts/donations
1. Gifts made to or for the use 2. Gifts in favor of educational

of: and/or charitable, religious,
a) National Government cultural or social welfare
Or corporation, institution,
b) Any entity created by any of its accredited NGO/foundation,
agencies which is not conducted trust or philanthropic
for profit organization or research
Or institution, provided, that not
c) Any political subdivision of the more than 30% of said gifts
Government shall be used by donee for
administrative purposes
• Rural Farm School (Sec. 14, R.A. No. 10618)

• People’s Television Network, Incorporated (Sec. 15, R.A. No. 10390)
• People’s Survival Fund (Sec. 13, R.A. No. 10174)
• Aurora Pacific Economic Zone and Freeport Authority (Sec. 7, R.A. No. 10083)
• Girl Scouts of the Philippines (Sec. 11, R.A. No. 10073)
• Philippine Red Cross (Sec. 5, R.A. No. 10072)
• Tubbataha Reefs Natural Park (Sec. 17, R.A. No. 10067)
• National Commission for Culture and the Arts (Sec. 35, R.A. No. 10066)
• Philippine Normal University (Sec. 7, R.A. No. 9647)
• University of the Philippines (Sec. 25, R.A. No. 9500)
• National Water Quality Management Fund (Sec. 9, R.A. No. 9275)
• Philippine Investors Commission (Sec. 9, R.A. No. 3850)
• Ramon Magsaysay Award Foundation (Sec. 2, R.A. 3676)
• Philippine-American Cultural Foundation (Sec. 4, P.D. 3062)
• International Rice Research Institute (Art. 5(2), PD 1620)
• Task Force on Human Settlements (Sec. 3(b)(8), E.O. 419)
• National Social Action Council (Sec. 4, P.D. 294)
• Aquaculture Department of the Southeast Asian Fisheries Development Center (Sec. 2, P.D.
292)
• Development Academy of the Philippines (Sec. 12, PD 205)
• Integrated Bar of the Philippines (Sec. 3, PD 181)
Donor’s Tax Return
Administrative Requirements
• A donor is required to accomplish under oath, for every
donation made (except those exempt), a donor’s tax return
which shall set forth:
a) Each gift made during the calendar year which is to be
included in computing net gifts
b) The deductions claimed and allowable
c) Any previous net gifts made during the same calendar year
d) The name of the donee
e) Other information as the CIR may require
Filing and Payment
BIR Form 1800
Filing and payment due date

• Within 30 days after the date the gift is made or completed
Filing and Payment
Filing and payment venue
• AAB, Revenue District Officer, Revenue Collection Officer or
authorized Treasurer of the city or municipality where the donor
was domiciled at the time of transfer, or if there is no legal
residence in the Philippines, with the Office of the CIR (RDO No.
39).
• For non-residents, the return may be filed with the Philippine
Embassy or Consulate in the country where the donor is domiciled
at the time of transfer or directly with the Office of the CIR (RDO
No. 39).
Filing and Payment
Notice of donation
• Given by the donor engaged in business for each donation worth
at least PHP50,000 to be exempted from donor’s tax and to
claim full deduction of donation given to qualified donee
institutions duly accredited by the Philippine Council for NGO
Certification
• Notice shall be submitted to the RDO which has jurisdiction over
the donor’s place of business within 30 days from receipt of donee
institution’s Certificate of Donation, which shall be attached to the
Notice, stating that not more than 30% of the donation for the
taxable year shall be used for administrative purposes
Questions?
Thank you!
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Donors Tax

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Donor’s Tax

Atty. Betheena C. Dizon

The SGV Purpose

• Donor’s tax or gift tax is imposed on the transfer, without

Requisites of a taxable gift

• Applies whether the transfer is in trust or otherwise,

• Net gift is the total amount of gifts less allowable

Note: If a mortgaged property is transferred as a gift, but imposing upon the

• If the gift consists of property/properties:

• In case of gifts made in real property, FMV shall be the

• Donations of immovable properties to be valid, must be

• A gift that is incomplete because of reserved powers,

Renunciation of surviving spouse

General renunciation by an heir

• Where property, other than real property, is transferred for

• In case the FMV of the shares of stock sold, bartered, or

Note: FMV value of the shares:

• BIR assessed Petitioner Urbano Velasco (Velasco) for deficiency

• BIR issued a PAN assessing donor’s tax. Velasco protested the

• Is Velasco subject to deficiency donor’s tax?

• Any contribution in cash or in kind to any candidate or

1. Gifts made to or for the use 2. Gifts in favor of educational

• Rural Farm School (Sec. 14, R.A. No. 10618)

Filing and payment due date

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