DONOR’S TAX
Donation Donor’s Tax (Gift Tax)
An act of liberality A tax levied, assessed, collected & paid upon the
transfer by any person, resident or nonresident
One person disposes gratuitously of a thing or of the property by gift.
right for another, who accepts it.
Imposed on the exercise of the donor’s right
Law consider it as a “contract”, because it during lifetime to transfer property
requires acceptance
It is an excise tax imposed on the transfer of
It is a formal contract property by way of gift inter-vivos
Perfected when donor knows of the acceptance by A direct tax
the donee.
Applies to both natural & judicial persons
Completed by delivery
Elements of Donation
Capacity to make Donation Donative intent or intent Delivery Acceptance
to make gift on the part
Legal competence of of the donor Donor’s tax applies There is “meeting of
donor to enter into a to a completed gift. minds”
contract. Proper declaration
of the legal owner to Perfected when donor Delivery &
Also have the transfer ownership knows of the acceptance is
capacity to dispose to another w/out acceptance by the required to
consideration donee. consummate donation.
Capacity is
determined at the Required only in a Completed by Acceptance must be
perfection of the direct gifts delivery made during the
donation. lifetime of the donor
& the donee.
INCOMPLETE GIFTS Purpose of Donor’s Tax
A gift that is incomplete because of reserved power a) To Prevent Avoidance of Estate Tax
becomes complete when either:
b) To Prevent or Compensate for the loss of the
1. Donor renounces the power, or progressive rate of income tax when large estates
are split up by gifts to numerous donees.
2. The donor’s right to exercise the power ceases.
Characteristics of Donor’s Tax
1. An Excise tax 2. A contract
Imposed on the “right” or 3. Perfected when donor knows of
“privilege” to transfer the acceptance by the donee.
property by way of gift Completed by delivery, either
inter-vivos actual or constructively
4. A Direct Tax 5. Renunciation by the surviving 6. General renunciation by heir of
spouse of his/her sahre in the his/her share in the hereditary
Imposed on the donor, and conjugal partnership or absolute estate is NOT subject to tax.
community after the dissolution of
Determined with reference to Unless specifically &
the marriage is subject to donor’s
all the donor’s gift categorically done in favor of
tax.
identified heirs to the
exclusion/disadvantage of the
other co-heir.
Classification of Donation
As to Motive or Purpose As to Time of Taking Effect (Perfection)
1. Simple - cause is pure liberality
2. Renumeratory - donation made due to past services 1. Donation Inter-vivos
rendered or future services or charges or
burdens. 2. Donation Mortis Causa
Not really donations in substance
Cause is not gratuitous
Not subject to donor’s tax
3. Modal - consideration is than the value of the
thing donated.
DONOR’S TAX
Donation of Movable Property Donation of Immovable Property
It can be made orally or in writing Must be in public document
Oral donation required the simultaneous delivery If does not comply with the formalities required
by law it is deemed VOID.
Personal property donated does exceed P5,000: it
must be in writing, otherwise it is VOID
SUMMARY OF FORMAL REQUIREMENTS
Personal Property Real or Registrable Property
Amount ≤ P5,000 > P5,000 Regardless of amount it should be
in a PUBLIC INSTRUMENT
Form of Donation Oral/Writing In writing
GROSS GIFTS
Valuation of Gross Gifts
As a Rule: Donor’s tax should be based on the FMV Stock & Bonds
of the property donated at the time the donation
is perfected. Traded in the Stock Exchange: FMV is mean between
the highest & the lowest quoted selling price on
the valuation date.
Real Property: valued based on the higher amount Not Traded in the Stock Exchange:
between:
a) Ordinary shares: MV shall be the book value or the
1. FMV by CIR security on valuation date, or on the date nearest
to valuation date
2. FMV by Provincial assessor
b) Preferred shares: MV is the par value
Composition of Gross Gifts
Property Citizen/Resident Alien Nonresident Alien
Property w/in (personal or real) Included Included
Property w/out (personal or real) Included Excluded
Intangible property within Included Included**
Intangible w/out Included Excluded
**Reciprocity Rule applies to donations by a nonresident alien when the properties are intangible properties
which are located within the Philippines
Intangible Personal Properties Located w/in the Philippines
1. Franchise which must be exercised w/in the Philippines
2. Shares, obligations or bonds issued by any corporation/sociedad anonima organized in the Philippines
3. Shares, obligations or bonds issued by any foreign corporation 85% of the business of which is located
in the Philippines
4. Shares, obligations or bonds issued by foreign corporation if such have acquired business situs in
the Philippines, and
5. Share or rights in any partnership, business or industry established in the Philippines
Computation of Taxable Net Gift Format of Computation
GROSS GIFTS First Donation of the Year
1. Direct Gifts P xx Gross Gift P xx
2. Gifts through creation of trust Exemption/deductions (xx)
3. Transfer for insufficient consideration P xx
4. Repudiation of inheritance Tax Exempt Gift (250T)
5. Renunciation by the surviving spouse Net Taxable Gift P xx
Of his/her share in the common property Multiply by: 6%
6. Condonation of debt Donor’s Tax P xx
DEDUCTIONS ( xx) Tax Credit (if applicable) (xx)
DONOR’S TAX
1. Encumbrances Donor’s Tax Payable P xx
2. Diminution
3. Gov’t., charitable/educational, etc. Second & Subsequent Donation w/in the year
Less: Exempt Gift (TRAIN LAW) (250K) Gross Gift current P xx
TAXABLE NET GIFTS P xx Exemption/deductions (xx)
P xx
Donations made on or after January 1, 2018 Add: Prior Gift(s) xx
Regardless of the relationship of the donor and Total P xx
donee, the donor’s tax rate is 6% in excess of
P250,000 exempt gifts. Tax Exempt Gift (250T)
Net Taxable Gift P xx
Multiply by: 6%
Donor’s Tax due P xx
Tax paid - prior gifts (xx)
Tax Credit (if applicable) (xx)
Donor’s Tax Payable P xx
For Donations Made Prior to January 1, 2018
If given to relatives
Over But Not Over The Tax shall be
- P100,000 Exempt
P100,000 200,000 2% of the excess over P100,000
200,000 500,000 P2,000 + 4% of the excess over P200,000
500,000 1M P14,000 + 6% of the excess over P500,000
1M 3M P44,000 + 8% of the excess over P1M
3M 5M P204,000 + 10% of the excess over P3M
5M 10M P404,000 + 12% of the excess over P5M
10M P1,004,000 + 15% of the excess over P10M
If given to Strangers - 30%
Contribution for Election Campaign Donations Made by a Foreign Corporation
Shall be governed by the Election Code, not It is subject to donor’s tax is the property
subject to donor’s tax. donated is located in the Philippines.
If 85% of the business of the foreign corporation
is located in the Philippines, the donation may
Splitting Gift be taxed in the Philippines subject to the rule
of reciprocity.
A tax minimization scheme
Done by spreading the gifts over numerous
calendar years to avoid higher tax due
DEDUCTIONS FROM THE GROSS GIFTS
Exempt Gifts Deductions from the Gross Gifts
Not treated as exclusions from the gross gifts Same with the enumeration for exempt gifts
of the donor.
Deductible from the gross gifts in order to
Deductible from the gross gifts in order to arrive at taxable net gifts
arrive at taxable net gifts.
Same amount shall be presented in the gross gifts
of the donor.
