DONOR’S TAX

RON ANGELO ALCORANO

Lead Presenter
 01
Similarities and Differences of Estate Tax vs Donor’s Tax
What are the differences of estate and gift?

02
Components of Gross Gift
What are the components of gross gift and its valuation?

CONTENTS 03
Political Contributions
What if you donate politically?

04
Allowable Deductions from Gross Gift
What are the deductions from Gross Gift?

05
Sample Computation
TEST YOUR KNOWLEDGE!
 01
ESTATE TAX VS DONOR’S TAX
What are the differences of estate and gift?

1. Differences of Estate Tax and Donor’s Tax

2. Similarities of Estate Tax and Donor’s Tax

DIFFERENCES OF ESTATE TAX VS DONOR’S TAX
ESTATE TAX DONOR’S TAX
Tax imposition Privilege of an heir to receive decedent’s Privilege of a donor to give.
estate
Concept involved Succession Gift or donation
Donation mortis causa Donation inter vivos
Elements 1. Death of decedent 1. Capacity of donor.
2. Heir or successor is alive 2. Donative intent of donor.
3. Estate or inheritance 3. Delivery of donated property.
4. Acceptance by donee.
Accrual period Upon death of decedent Upon completion of the donation
Tax rate 6% of net taxable estate 6% of net taxable gifts in excess of
P250,000.
Filing and • BIR Form 1801 • BIR Form 1800
Payment • Within one year from death • Within 30 days from donation
• Extension to file: within 30 days • No extension to file.
• Pay as you file • Pay as you file.
• With extension to pay: • No extension for payment.
 2 years (extrajudicial)
 5 years ( judicial)
Who pays Administrator or executor of estate, heir Donor
SIMILARITIES OF ESTATE TAX VS DONOR’S TAX

1. Valuation of gross estate / gift

2. Scope of taxation
a. Citizen or resident – Taxable globally
b. Non-resident alien – Taxable only within the Philippines (with or
without reciprocity)
 02
COMPONENTS OF GROSS GIFT
What are the components of gross gift and its valuation?

1. Inclusions on Gross Gift

INCLUSIONS ON GROSS GIFT

1. Direct gifts (donor to donee)

2. Gifts through creation of a trust
3. Transfer for insufficient consideration
4. Condonation of debt/obligation (debt forgiveness)
5. Repudiation (cancellation) of inheritance, if:
a. Categorically done in favor of identified heir(s); and
b. To the exclusion or disadvantage of other co-heirs
6. Renunciation by the surviving spouse of his/her share in the common property.
7. Transfer of personal properties, provided that it is not in contemplation of death,
revocable transfer, or transfer under GPA, otherwise it will be subject to estate
tax.
 03
POLITICAL CONTRIBUTIONS
What if you donate politically?

1. Is donation to any political environment taxable?

TAXABILITY OF POLITICAL CONTRIBUTIONS

• As a rule, any contributions given to candidates, political parties, or

coalition of parties are not subject to donor’s tax, only if the following
requisites are met:
 The contribution is solely for campaign purposes;
 The donation is duly reported to COMELEC.

• Also, on the part of the donee, the contribution is exempt from income
tax only if the contribution is utilized only for campaign purposes and if it
is filed to COMELEC under the Statement of Expenditures.
 04
DEDUCTIONS FROM GROSS GIFT
What are the deductions from Gross Gift?

1. What are some items that can be claimed as a deduction

from gross gift?
ALLOWABLE DEDUCTIONS FROM GROSS GIFT

1. Gifts to National Government or to any of its political subdivision.

2. Gifts in favor of educational, charitable, religious, cultural, and social
welfare institutions, provided that 30% of the gifts are not for
administrative purposes.
3. Mortgages, obligations, and other encumbrances on property donated.
4. Diminution in the value of property as a result of a condition.
5. P250,000 standard deduction.
6. Donations exempted from donor’s tax under special laws.

Deductions 1-4 must be included in the gross gift for it to be claimed as a

deduction.
 05
DONOR’S TAX COMPUTATION
Let’s compute for Donor’s Tax!

Ready to test your knowledge?

PRO-FORMA COMPUTATION OF DONOR’S TAX

Gross gift, current month XXX

Less: Allowable deductions, current month (XXX)
Net gift, current month XXX
Add: Net gifts from prior months XXX
Total net gifts XXX
Less: Exemption threshold (250,000)
Taxable net gifts XXX
Multiplied by: Donor’s Tax Rate 6%
Donor’s Tax Due XXX
Less: Donor’s Tax previously paid for net gifts
from prior months (XXX)
Less: Tax credit (XXX)
Donor’s Tax Due and Payable XXX
SAMPLE COMPUTATION #1
Phoenix, a resident citizen, married, made the following donations of his exclusive properties during the
year.

• March 1 – To Chamber, his brother, P200,000, on account of his marriage with Viper that happened on
January 1, 2021.
• May 30 – To Neon, his athlete friend, a parcel of land worth P500,000, subject to the condition that
Neon would assume the mortgage indebtedness in the amount of P100,000.
• On June 30 – P300,000 cash to his wife, Raze.
• On July 31 – P200,000 cash to Bantay Bata.
• On September 30, a house and lot worth P3,000,000 to Sova and Sage, on account of their scheduled
marriage on December 25, 2021. A mortgage of P600,000 will be assumed by the donees.

REQUIRED: Determine the tax payable on March 1, May 30, June 30, July 31, September 30, and December
31, 2021.
SOLUTION TO SAMPLE COMPUTATION #1

March 1 May 30 June 30 July 1 September December

30 31
Gross gift, current month 200,000 500,000 VOID 200,000 3,000,000 -
Less: Allowable deductions, current month - (100,000) - - (600,000) -
Net gift, current month 200,000 400,000 - 200,000 2,400,000 -
Add: Net gifts from prior months - 200,000 600,000 600,000 800,000 -
Total net gifts 200,000 600,000 600,000 800,000 3,200,000 3,200,000
Less: Exemption threshold (250,000) (250,000) (250,000) (250,000) (250,000) (250,000)
Taxable net gifts - 350,000 350,000 550,000 2,950,000 2,950,000
Multiplied by: Donor’s Tax Rate 6% 6% 6% 6% 6% 6%
Donor’s Tax Due - 21,000 21,000 33,000 177,000 177,000
Less: Donor’s Tax previously paid for net gifts from prior
months - - (21,000) (21,000) (33,000) (177,000)
Donor’s Tax Due and Payable - 21,000 - 12,000 144,000 -
SAMPLE COMPUTATION #2
A donor made the following donations during the year:

• To Bronya, a car worth P800,000

• To Seele, a condominium unit worth P3,000,000 in Macau.
• To Gepard, Astral Company shares (domestic corp.) amounting to P250,000.
• To Serval, P100,000 worth of shares of stock of a resident foreign corporation where 90% of its operation is in
the Philippines.
• To Jingyuan, a building in Singapore valued at P5,000,000 mortgaged for P2,000,000 assumed by the donee.
• To Guinaifen, a parcel of land in Isabela, P1,500,000.
• To Jingliu, P100,000 bank deposit in BPI.
• To Acheron, P100,000 bank deposit in Metrobank USA branch.
• To Aventurine, P500,000 cash

REQUIRED: Compute for the gross gift assuming the donor is:
a. Resident citizen
b. Non-resident alien with reciprocity
c. Non-resident alien without reciprocity
SOLUTION TO SAMPLE COMPUTATION #2
Item Resident Citizen Non-resident alien with Non-resident alien without
reciprocity reciprocity
Car to Bronya 800,000 800,000 800,000
Condo unit to Seele 3,000,000
Astral Co. shares to Gepard 250,000 250,000 250,000
RFC shares to Serval 100,000 100,000
Building in Singapore to
Jingyuan 5,000,000
Land in Isabela to Guinaifen 1,500,000 1,500,000 1,500,000
Bank deposit to Jingliu 100,000 100,000
USA bank deposit to Acheron 100,000
Cash to Aventurine 500,000 500,000 500,000
TOTAL GROSS GIFT 11,350,000 3,050,000 3,250,000
SAMPLE COMPUTATION #3
Aether and Ayaka, married citizens, made the following donations of conjugal funds and properties in 2021
as follows:

• February 14 – To Itto, a legitimate son, a brand new motor vehicle with a FMV of P200,000 on account
of Itto’s graduation from college.
• May 17 – To Shinobu, a legitimate daughter, on account of Shinobu’s marriage to be celebrated on
September 25, 2021, a house and lot with a FMV of P3,000,000.
• June 14 – To Ayato, Ayaka’s brother, P900,000 cash with a condition that Ayato must give P250,000 to
the local government for the purchase of necessary materials for COVID-19.
• December 25 – To Lumine, Aether’s twin sister, a residential house and lot with FMV of P1,200,000 but
subject to mortgage of P400,000 that Lumine must assume.

REQUIRED: Compute for the donor’s tax due and payable each by Aether and Ayaka by the end of 2021.
SOLUTION TO SAMPLE COMPUTATION #3

February 17 May 17 June 14 December 25

Gross gift, current month 100,000 1,500,000 450,000 600,000
Less: Allowable deductions, current month - - (125,000) (200,000)
Net gift, current month 100,000 1,500,000 325,000 400,000
Add: Net gifts from prior months - 100,000 1,600,000 1,925,000
Total net gifts 100,000 1,600,000 1,925,000 2,325,000
Less: Exemption threshold (250,000) (250,000) (250,000) (250,000)
Taxable net gifts - 1,350,000 1,675,000 2,075,000
Multiplied by: Donor’s Tax Rate 6% 6% 6% 6%
Donor’s Tax Due - 81,000 100,500 124,500
Less: Donor’s Tax previously paid for net gifts from prior months - - (81,000) (100,500)
Donor’s Tax Due and Payable for each of the spouses - 81,000 19,500 24,000
THANK YOU