DONOR’S TAX Immovable - Donation must be in public

(Regardless of its instrument specifying:

DONATION value) o The property donated
- An act of liberality o The value of the charges
- a person disposes gratuitously of a thing or a right which the done must
in favor of another, who accepts it. satisfy
- The acceptance by the done
Kinds of Donation must also be in a public
Donation Definition Tax applicable instrument either in same
Mortis causa Upon the death of Estate tax deed of donation or separate
the donor public document.
Inter vivos Donation made Donor’s tax - Acceptance shall only take
between living effect during the lifetime of
persons, during the the donor.
lifetime of the Noncompliance = void
donor
DONOR’S TAX
Elements of Donation - A transfer tax levied, assessed, collected and paid upon
a) Reduction of the patrimony of the donor the transfer of any person, resident or non-resident of
b) The increase in the patrimony of the done the property by gift inter vivos.
c) Animus donandi - the intent to do an act of - Excise tax on the privilege of donor to give or on the
liberality, to give gratuitously transfer of property by way of gift inter vivos.
- The law in force at the time of the
Essential Requisites (in order to be valid) perfection/completion of the donation shall govern the
1. Capacity The donor must have the capacity to imposition of the donor’s tax.
of the donate at the time of making the - Shall NOT apply unless and until there is a completed
Donor donation. gift.
All persons who may contract and
dispose their property may make a Purpose
donation - Supplements the estate tax by preventing the avoidance
2. Donative GR: Necessary only in cases of direct of the latter though the device of donating the property
Intent gift during the lifetime of the deceased.
ETR: Indirect gifts: - It also prevents avoidance of income taxes
- Sale
- Exchange TRANSFERS AND TRANSACTIONS CONSTITUTING
- In cases of transfers for less DONATION
than adequate and full
1. Campaign Contributions during campaign period
consideration
- Governed by the Election Code
3. Acceptanc The transfer of property by gift is
GR: Any contribution to any candidate or political party for
e of the perfected from the moment the donor
campaign purposes duly reported to the Commission on
Donee knows of the acceptance of the
Elections (COMELEC) is EXEMPT from donor’s tax
donee.
Donations spent during Exempt
4. Delivery of Whether 1) Actual or 2) Constructive
campaign period
the Gift of the donated property to the done
Donations utilized before Subject to Donor’s tax, not
completes the donation
or after the campaign deductible as political
period contribution on the part of
Formality – Donation is a formal contract
the donor
Kind of property Form
Movable GR: Orally or in writing
2. Cancellation of Indebtedness
Note: Oral donation requires
- Forgiveness of indebtedness may amount to:
simultaneous delivery of the thing
a) Payment of income
or document representing the right
b) A gift – if a creditor merely desires to benefit
donated
a debtor
ETR: Properties exceeding P5,000
c) Capital transactions
shall be in writing
Otherwise, void
3. Special Renunciation of Inheritance - The Donor is the statutory taxpayer of donor’s tax
Type of renunciation Effect - The TRAIN law does not anymore distinguish who the
a. General Not a subject to donor’s tax done is and a flat rate of six percent (6%) applies both
Renunciation: refusal to a relative and stranger.
to receive inheritance - The six percent (6%) donor’s tax rate is in excess of
in favor of no specially P250,000 net gift (the first P250,000 is exempt)
identified heir.
b. Special Subject to Donor’s tax CLASSIFICATION OF DONOR
Renunciation: refusal o May either be a natural or a juridical person.
to receive inheritance
in favor of identified
heir to the exclusion of
other co-heirs

4. Renunciation of the Surviving spouse of the share in

the Conjugal Partnership or absolute community
- Regardless of the type of renunciation, subject to
donor’s tax.
- After the dissolution of marriage due to death, the
surviving spouse may choose to receive or
renounce his/her share in the conjugal partnership
or absolute community.
- Renunciation in favor of the heirs of the deceased
spouse or any other person/s is subject to donor’s
tax. VALUATION OF GROSS GIFT
o Properties comprising the gross gift are valued
5. Transfer for less than adequate and full based on their fair market value at the date when
consideration the donation is made.
- An indirect donation where donative intent is not Property Valuation
necessary. Cash Face Amount
- If FMV > Actual consideration = deemed as a gift Personal property FMV at the time of gift
- ETR: bona fide sale Real property Whichever between:
a) Zonal Value (CIR)
Summary of Taxable Transfers: b) Assessed Value (Assessors)
1. Campaign Contributions used during campaign Shares of stock Listed in the Stock Exchange:
period a) Quoted price at the date of
2. Cancellation of Indebtedness if the creditor merely death.
desires to benefit debtor b) Arithmetic mean between the
highest and lowest quotation
3. Special Renunciation of Inheritance by an heir
at a date nearest the date of
4. Renunciation of the Surviving spouse of the share death.
in the Conjugal Partnership or absolute community Not listed in the Stock Exchange:
regardless of kind Common shares - book value
5. Transfer for less than adequate and full Preferred shares - par value
consideration
EXCLUSION IN GROSS GIFT AND EXEMPT
DONOR’S TAX LIABILITY DONATIONS (Residents and Non Resident Aliens only)

I. Donations made by a Resident to

a) Use of the National Government, not-for-profit
agencies, and any political subdivision.

b) An Education and/or charitable, religious, cultural,

or social welfare corporation, institution, accredited
nongovernment organization, trust or philanthropic
organization, research institution or organization:
i. School
 ii. Non-stock entity wife can still challenge the donation's validity if she didn't
iii. Paying no dividends consent, according to relevant laws.
iv. Governed by trustees who receive no
compensation TAX CREDIT FOR DONOR’S TAXES PAID IN A
v. Devoting all its income to the FOREIGN COUNTRY
accomplishment and promotion of the - Citizens and residents only
purposes in it AOI.
Limitations on Tax Credit
NOTE: the donee must not use more than 30% of the gifts a. The credit for tax paid to any country can't be more than
for administration purposes. the proportion of tax on gifts in that country to the total
gifts
c) REPEALED by Train law: Dowries and gift made b. The credit can't exceed the proportion of tax on gifts
on account of marriage and before its celebration or outside the Philippines to the total gifts.
within one year thereafter by parents to each their
children (L: P10,000 per parent per child basis)

II. Donations made by a Non-resident Alien

a) Use of the National Government, not-for-profit
agencies, and any political subdivision.
b) An Education and/or charitable, religious, cultural,
or social welfare corporation, institution, accredited
nongovernment organization, trust or philanthropic
organization, research institution or organization
provided that the donee must not use more than
30% of the gifts for administration purposes.

III. Donations to the following entities exempted by virtue

of special laws
a) Integrated Bar of the Philippines
b) International Rice Research Institute
c) Philippine Red Cross
d) Ramon Magsaysay Award Foundation
e) University of the Philuppines DONOR’S TAX ADMINISTRATION
f) Philippine Normal University Filing of Returns and Payment of Taxes
g) Development Academy of the Philippines - Donor’s tax return is filed for every donation
h) Girls Scout of the Philippines - Must be filed within 30 days after the date the gift is
i) Boy Scout of the Philippines made or completed
j) National Commission for Culture and the Arts - The donor’s tax return shall contain the ff:
a. Each gift made during the calendar year which is to
DEDUCTIONS ALLOWED be included in computing the net gifts
- deducted to get the net economic benefit that accrued b. The deductions claimed and allowable
to the done: c. Any previous net gifts made during the same
1. Encumbrance assumed by the donee calendar year
2. Diminutions – reductions on the donations d. The name of the donee
given by the donor upon his specific e. Relationship of the donor to the donee – removed
instruction. f. Such further information as their commissioner
may require
COMPUTATION OF DONOR’S TAX
- On a cumulative basis over a period of one year.
- For every donation, the previous donation/s made in the
same calendar year are included in the computation of
donor’s tax liability of the donor.

DONATIONS BETWEEN HUSBAND AND WIFE

GR: Husband and wife is considered as separate and distinct
taxpayers for purposes of the donor’s tax
ETR: If marital property was donated and only the husband
signed the deed, he's the sole donor for tax purposes. But the