DONOR’S TAX
Donor’s Tax
- Is a tax imposed on the gratuitous transfer between two or more persons who are living at the
time of the transfer. It shall apply whether the transfer is in trust or otherwise, whether the gift
is direct or indirect and whether the property is real or personal
Donation
- is an act of liberality whereby a person disposes graciously of a thing in favor of another, who
accepts it.
Important Considerations:
- Donor’s tax return (BIR From 1800) is filed and donor’s tax is paid to the BIR for the purpose of
acquiring an electronic Certificate Authorizing Registration (e-CAR). The e-CAR is proof that
appropriate taxes was paid.
- Donor’s tax is one of the one-time-transaction (ONETT) under BIR rules.
- Contributions for election campaign are governed by the Omnibus Election Coe
- Computation of donor’s tax is on a cumulative basis over a period of one calendar period.
- Donation of real property is subject to Documentary Stamp tax (P15/P1000 plus P15 on fraction)
Rate of Donor’s Tax
- Beginning January 1, 2018 – The donor’s tax for each calendar year shall be six percent (6%)
computed on the basis of the total gifts in excess of Two Hundred Fifty Thousand Pesos
(Php250,000.00) exempt gift made during the calendar year.
- Net Gift shall mean the economic benefit from the transfer that accrues to the done.
Accordingly, if a mortgaged property is transferred as a gift, but imposing upon the done the
obligation to pay the mortgaged liability, then the net gift is measured by deducting from the
fair market value of the property the amount of mortgaged assumed.
- January 1, 1998 to December 31, 2017 – Graduated tax rates
Governing Law on Imposition of Tax
- The donor’s tax is not a property tax, but is imposed no the transfer of property by way of gift
inter vivos. The donor’s tax shall not apply unless and until there is a completed gift. The transfer
of property by gift is perfected from the moment the donor knows of the acceptance by the
donee; it is completed by delivery, either actually or constructively, of the donated property to
the done. Thus, the law in force at the time of the perfection/completion of the donation shall
govern the imposition of the donor’s tax
Notes:
1. Donation of immovable must be made in public document (Deed of Donation)
2. Acceptance by done may be made in the same Deed or separate public document and
should be done during the lifetime of the donor.
Essential Requisites of Donation (CIDA)
1. Capacity of the donor
2. Intention to Donate – required only in direct donation but not with indirect donation (implied)
as in the case of transfer with insufficient consideration.
3. Donative Act – actual or constructive (i.e.: execution of a public instrument) delivery
4. Acceptance by the donee
Kinds of Donations
Inter vivos – donation between living individuals
Mortis Causa- takes effect upon the death of the donor
Inclusion/Exclusion in Gross Gift
Note: Rule of Reciprocity on Intangible Personal Properties in Estate Tax applies in Donation.
Nature of Donation
- There is a transfer of properties (real or personal, tangible or intangible) directly or indirectly in
trust or otherwise.
- The transfer is gratuitous (without consideration)
- The donation is made inter vivos
Mode of Execution of Donation (Formalities)
- Real or immovable – execution of public instrument
- Personal property
o Tangible
Php 5,000 and below in value – oral is allowed
More than Php 5,000 – donation and acceptance should be in writing (for
validity
o Intangible – execution of public instrument
Valuation of Gross Gift
Transfers Related to Estate
WITH DONOR’S TAX
- Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute
community after the dissolution of the marriage in favor of the heirs of the deceased spouse or
any other person/s is subject to donor’s tax.
- Renunciation of distributive share specifically and categorically done in favor of identified heir/s
to the exclusion or disadvantage of the other co-heirs in the hereditary estate.
WITHOUT DONOR’S TAX
- General renunciation by an heir, including the surviving spouse, of his/her distributive share n
the hereditary estate left by the decedent is not subject to donor’s tax.
Transfer for Less than Adequate and Full Consideration
WITH DONOR’S TAX
- Where property, other than the real property classified as capital asset, is transferred for less
than an adequate/full consideration in money or money’s worth, the amount by which the fair
market value of the property transferred exceeded the value of the consideration received for
such transfer, shall for purpose of donor’s tax, be deemed a gift and included in computing the
amount of gifts made during the year.
WITHOUT DONOR’S TAX
- Object of donation is a real property classified as capital asset
- If the sale, exchange or other transfer of property is even for an insufficient consideration, the
same will still be considered made for adequate and full consideration provided that such
transfer is made in the ordinary course of business, i.e.:
o A bona fide transaction;
o At arm’s length; and
o Free from donative intent.
TAX CREDITS FOR DONOR’S TAX PAID TO A FOREIGN COUNTRY
- Can be claimed only by donors those whose gift are taxable even if made outside the
Philippines:
o Resident citizens
o Non-resident citizens
o Resident aliens
- The allowed creditable donor’s tax paid to a foreign country shall be subject to limit similar to
the limitations in foreign tax credit in income taxation and estate tax.
