DONOR’S TAX

Based on our Tax Code, donations made during the calendar year in excess of two
hundred fifty thousand pesos (P250,000) shall be subject to six percent (6%) donor’s
tax, which the donor is required to pay to the Bureau of Internal Revenue (BIR) within
thirty (30) days from the date of donation. Recall that under the Train Law, the uniform
rate of six percent (6%) donor’s tax shall now apply whether the recipient of the
donations are relatives of the donor or strangers.

If the donations made during the calendar year do not exceed two hundred fifty
thousand pesos (P250,000), the donations are exempt from the imposition of donor’s
tax. But even if the amount of donations during the year exceed two hundred fifty
thousand pesos (P250,000), the donations may still be exempt from donor’s tax if the
same is given to qualified government institution or to qualified non-government donee
institution.

To qualify for exemption from donor’s tax, the donations to the government must be
made to or for the use of the National Government and qualified government
institutions and any entity created by any of its agencies which is not conducted for
profit, or to any political subdivision of the said Government.

The exemptions shall also apply if the donations are made 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, provided that not more than thirty percent (30%) of said gifts shall be
used by such donee for administration purposes. Donations made to certain institutions
are likewise exempt from the imposition of donor’s tax by virtue of express provision
provided under the charter creating such institutions such as the Philippine Red Cross,
International Rice Research Institute and the People’s Survival Fund, among others.

As the law provides, the exemption from donor’s tax is dependent on the status of the
donee or the recipient of the donation. Hence, to determine whether the donation is
exempt from donor’s tax or not, it is necessary to take into consideration the status of
the donee. If the donee falls under any of the qualified exempt donee institutions as
enumerated in the Tax Code or under special laws, then, the donation shall be exempt
from donor’s tax.

Thus, if the donation intended to be given, whether in the form of cash or in kind,
exceeds two hundred fifty thousand pesos (P250,000), it would be best to course
through said donation to a qualified donee institution in order to qualify for exemption
from donor’s tax. If the donations are directly given by the donor to the victims, the
exemption may not apply, no matter how noble the donor’s intention may be. More so,
if the donations are coursed through an accredited donee institution, the donor shall
likewise be entitled to the full deductibility of the donations made, subject only to
certain conditions.

True, the government recognizes the liberality of donor’s by way of giving tax benefits.
However, certain conditions must be taken into consideration in order for the donor to
avail of the full tax benefits provided under the law.

What is the Donor’s Tax Train Law?

When a person transfers property to anyone without consideration during his
lifetime, the act of transfer is subject to a tax called the donor’s tax. Donor’s
 tax is not a tax on properties, but on the action of transmission or by way of a
gift. For more updates visit the BIR homepage!
Have you given any gifts or donations to someone? Have you experienced
difficulties in filing the donor’s tax in the Philippines before? Interestingly, the
new rulings in the Philippines made it simpler and more comfortable to
compute. Do you know why? Before you give gifts or transfer properties, you
should know these facts about the new donor’s tax in the Philippines under
this train tax law.

What are the Requisites of Valid Donations?

This shall not take effect if the donation is not completed. The transfer of
property is completed/perfected if the following elements are met:

1. Acceptance of the donee or recipient

2. There is actual or constructive delivery of properties

If the property donated is immovable, it must be in public document

specifying therein the property given. Deed of Donation or in a separate
public record could be enough, but it shall not take effect after the
completion during the lifetime of the donor.

What is the Donor’s Tax Rate?

Under the old regulation of the donor’s tax, the transfer of properties is taxed
based on the donor. Under the TRAIN law, it makes the computation simpler
and easier to understand and to remember. All transfer of properties during
the lifetime of the donor will be subject to six percent (6%) more than two
hundred fifty pesos (250,000) during the calendar year.

The new tax rate is 6% for any donations which is more than
250,000 regardless the relationship of the giver and the recipient.
However, any contributions/gifts in cash or kind to any political party or
coalition of parties, candidate for campaign purposes shall be governed by the
Election Code, as amended.

What are the Exempted Donations

In general, all donations in the amount of 250, 000 or less within the calendar
year will not subject to donor’s tax.

There are some gifts or transfers of properties that are exempted by nature
or by law. Here are some of those donations:

Transfer for less Than Adequate Consideration

Any property transferred other than real estates for a less than an adequate
amount and full consideration in money by which the fair market value of the
said property exceeded the value received; then any excess will be considered
as part of the total gifts to be subjected to donor’s tax.

However, any property transfer made in the ordinary course of business or

arm’s length transaction and there is no donative intent will be considered as
sale and be exempted from transfer tax but rather a business tax.

Transfer for Public Use (TPU)

Gifts made to the government for public purposes and to any entity created
any of its agencies which non-profit organization is not subject to tax.

Gifts made to educational, charitable, religious, cultural or social welfare

corporation, trust or philanthropic organization or research institutions be
exempted provided that more than thirty percent (30%) said donations
should be for administrative purposes.

Donations Made to Your Spouse

Donations or gifts given between marriage are is not subject to donor’s tax.
Therefore, any transactions between spouses are considered marital
properties. So it means that you can’t transfer properties without ownership.

How to Claim Exemptions?

If the donor is engaged in business donated at least fifty thousand (50,000)
and wanted to be exempted from donor’s tax and to claim a full deduction of
the gifts given, a notice of donation by a donor should be given to the
Revenue District Office (RDO) within 30 days after the receipt of the donee’s
duly issued Certificate of Donation.

This certificate should be attached to the Notice of Donation and should state
that not more than thirty percent (30%) of the donations will be used for
administrative purposes.
What are the Valuations of Donations?
General rule: Every property of the decedent is appraised according to their
fair market value at the time of his death.
Real Property
Any real property is to be valued at the fair market value as determined by
the Commissioner or the fair market value (appraise value) by an assessor
whichever is higher.

Shares of Stocks
The market value of the stocks will depend on whether listed or non-listed in
the stock exchanges. If the shares are listed, the fair market value is equal to
the mean between the highest and lowest cost at the date of death, unless
otherwise market value at the time of his death.

Those stocks that are unlisted are based on their book value while preferred
stocks are valued at par value. In computing the book value of the ordinary
shares, the surplus shall not be included the same as to proffered stocks, if
there is.

Annuity, Habitation, or Right to Usufruct

In determining the values, the probable life of the beneficiary with the latest
basic standard mortality table must be considered.

For computing the NET GIFT, if there is a mortgaged property transferred as

a gift and transfer also the obligation to pay, then the mortgage payable
should be deducted to compute the net gifts.

If the donation is complete because of reserved powers. This transfer can be

done if the donor renounces the power or his right to exercise the reserved
power stops because of the fulfillment of some conditions other than death.

Is Donation during Election Campaign subject to

Donor’s Tax in Philippines?
Contributions given during election campaign are not subject to
donor’s tax.However, campaign contributions net of the candidate’s
campaign expenditures, shall be considered as subject to income
tax of the political candidate.

 In addition to that, campaign expenditures shall be subject to a

five (5%) Creditable Withholding Tax (CWT).

How is Donor’s Tax in Philippines Computed?

Below is the sample of how Donor’s Tax is computed.

 When and Where is the Time and Place of filing

and payment of Donor’s Tax in Philippines
The donor’s tax return shall be filed and paid within thirty (30) days
after the date the gift is made or completed.

The return shall be filed and paid at the AAB or RDO having
jurisdiction over the place where the donor is domiciled at the time of
transfer.

In case the gifts made by a non-resident, the return may filed with
the Philippine Embassy or Consulate in the country where he is
domiciled at the time of the transfer or directly with the RDO No. 39
– South Quezon City.

The following are exempt from donor’s tax:

1. Gifts made to or for the use of the National Government.

 

2. 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 organization. Provided that,
a. Not more than thirty (30%) of said gifts shall be used
by such done for administration purposes.
b. The non-stock entity shall pay no dividend,
c. Governed by trustees who receive no compensation, and
d. Devoting all its income to the accomplishment and
promotion of the purposes enumerated in its Articles of
Incorporation.

 In order to be exempt from donor’s tax and to claim full deduction
given to qualified-donee institutions duly accredited,

1. The donor engaged in business shall give Notice of

Donation on every donation worth at least Fifty Thousand
Pesos (P50,000)t
2. to the Revenue District Office (RDO) which has jurisdiction over
the place of business within 30 days after receipt of the
qualified donee of the Certificate of Donation,
3. Which shall be attached to the said Notice of Donation, stating
that not more the thrity (30%) of the said donation/gifts for
the taxable year shall be used for administration purpose.