DONOR’S TAX

Donor’s Tax

 It is a tax on the voluntary transfer of

property without consideration, between
2 or more persons who are living at the
time of the transfer, which property was
delivered and accepted by donee.
Kinds of Donation
 Donation Mortis Causa – one which takes
effect upon death of the donor. It partakes the
nature of a testamentary disposition and is
equivalent to a transfer in contemplation of
death. This is subject to Estate Tax.
 Donation Inter Vivos – one made between
living persons and which is perfected from
the moment the donor knows of the
acceptance of the donation by the donee. It is
subject to gift/donor’s tax.
Distinctions Between Donor’s
Tax and Estate Tax
1. The first is a tax on the privilege to transmit property
during life, while the second on the privilege to transmit
property upon one’s death;
2. In the first, the exemption is P250,000, while in the
second, there is none.
3. In the first, extension of payment is not provided, while
in the second, an extension may be granted by the
Commissioner of Internal Revenue.
Requisites of a Donation:

a) Capacity of the donor

b) Donative intent, or intent on the part of
the donor to make a gift
c) Delivery, whether actual or constructive,
of the subject matter of the gift
d) Acceptance of the gift by the donee
Important Reminders:
 Every donation between husband and
wife during the marriage is declared void
by law. If the donation is void, there is no
gift tax.
 Gift of conjugal property made by both
spouses is taxable, ½ to each spouse.
The gift tax should be considered as
having been made ½ by the husband and
the other by the wife.
Important Reminders:

 A sale, exchange, or other transfer made

in the ordinary course of business (bona
fide, at arm’s length, and free from any
donative intent transaction) shall be
considered as made for an adequate
and full consideration.
Composition of Gross Gift
(According to Kinds of Taxpayers)

 A. In the case of a resident or citizen donor

1. Real properties located in the Philippines or abroad
2. Tangible personal properties located in the Philippines or
abroad
3. Intangible personal properties located in the Philippines or
abroad

 B. In the case of a non-resident donor, not a citizen of the

Philippines
1. Real property located in the Philippines
2. Tangible personal property located in the Philippines
3. Intangible personal properties located in the Philippines
(subject to rule on reciprocity)
Tax Payable by Donor if
Donee is a Stranger???
 When the donee or beneficiary is a stranger, the
tax payable by the donor shall be 30% of the net
gift. For the purpose of this tax, a stranger is a
person who is not a:
1. Brother, sister, spouse, ancestor and lineal

descendent
2. A relative by consanguinity in the collateral
line within the fourth degree of relationship
Tax Payable by Donor if
Donee is a Stranger
 Example of beyond the fourth degree
relationship is the child of the first cousin
of the donor which is at the fifth degree
relationship.
 Another which is beyond the fourth degree
are those relatives by affinity of the donor
like father-in-law; sister in law or if either
the donor or the donee is a juridical person.
 A legally adopted child is considered a
legitimate child for purposes of the donor’s
tax.
Tax Payable by Donor if
Donee is a Stranger
Rates and Computation of Donor’s Tax as Provided in Section
99A of the Tax Code, but under TRAIN LAW Flat 6%:

OF THE
OVER BUT NOT THE TAX PLUS EXCESS
OVER SHALL BE OVER
100,000.00 EXEMPT

100,000.00 200,000.00 -0- 2% 100,000.00

200,000.00 500,000.00 2,000.00 4% 200,000.00

500,000.00 1,000,000.00 14,000.00 6% 500,000.00

1,000,000.00 3,000,000.00 44,000.00 8% 1,000,000.00

3,000,000.00 5,000,000.00 204,000.00 10% 3,000,000.00

5,000,000.00 10,000,000.00 404,000.00 12% 5,000,000.00

10,000,000.00 1,004,000.00 15% 10,000,000.00

Donor’s tax rate
fixed at 6% based
on annual net gifts,
regardless of
whether the donee
is a stranger or
not.
Place of Filing and
Payment
 Authorized agent bank
 RDO, Revenue Collection Officer or duly authorized
Treasurer of the city or municipality where the donor
was domiciled at the time of the transfer
 If there be no legal residence then with the office of
the CIR
 In case gift was made by a non-resident donor, the
return may be filed with the Philippine Embassy or
Consulate in the country where he is domiciled at the
time of the transfer or directly with the Office of the
Commissioner
Surcharges in Connection
with Filing of Return
 25% - for late filing of return and failure
to pay the tax shown on the return on
time
 25% - for not filing the proper return
 50% - for filing false or fraudulent return
BIR TAX FORMS

 FORM 1800 –
DONOR’s TAX
RETURN
Allowable Deductions from
Gross Gift (Resident Donor)
 Dowries or gifts by parents on account of marriage
Requisites:
 The gift must be on account of marriage.
 Donor must be the natural or adopting parents of the donee.
 Gift must be made before the marriage or within one (1) year
 Donee must be legitimate, recognized natural or legally adopted child of the
donor.
 Exemptions of dowry is only up to the extent of the first P10,000
whether the property is conjugal or exclusive.
 The gift to each child is considered a separate and distinct gift
and each gift is entitled to an exemption to the extent of the first
P10,000.
 A gift of conjugal property to the children by both spouses is to
be considered that each spouse is a donor of his or her interest
in the property donated, each spouse, therefore, claiming
exemption.
Allowable Deduction from Gross Gift
(Both Resident and Non-resident Donor)

 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.
 Gifts in favor of an educational and/or charitable, religious,
cultural, or social welfare corporation, institution, accredited non-
government organization, trust or philanthropic organization or
research institution or organization. Provided, however that not
more than 30% of said gifts shall be used by such donee for
administrative purposes.
 Encumbrance on the property donated if assumed by the donee is
also deductible. Those specifically provided by the donor as a
diminution from the property donated are also deductible.
Exemptions from Donor’s
Tax under Special Laws:
 Donation to the IRRI
 Donations made to the Philippine-American Cultural Foundation
 Donations to the Ramon Magsaysay Award Foundation
 Donation to Philippine Inventor Commission
 Donation to Integrated Bar Association
 Donation to the Development Academy of the Philippines
 Donation to the Agricultural department of the South East Asia
Fisheries Development Center
 Donation to the National Social Act
 Donation to the Task Force of Human Settlement
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.
Donor’s Tax Credit
 Only donors who are citizens or residents of
the Philippines are allowed for a donor’s tax
credit. Credit may be taken against the
Philippine donor’s tax for a foreign donor’s tax
paid. Philippine donor’s tax on the net gifts less
computed tax credit equals Philippine donor’s
tax still due. The tax credit whichever is lower
of the foreign donor’s tax paid, or the amount
arrived at with the use of the formula: Net gift
foreign country divided by the net gifts world;
multiplied by the Philippine’s donor’s tax. This
is called limitation A.
Donor’s Tax Credit
 When there were two or more foreign countries
to which donor’s taxes were paid, tax credit for
the foreign donor’s tax shall be computed per
country using limitation A. Another computation
shall be made that is known as limitation B,
using a formula: Net gifts outside the
Philippines divided by world net gifts; multiplied
by the Philippine’s donor’s tax. The tax credit to
apply shall be that under limitation A or that
under limitation B, whichever is lower.
QUESTIONS?