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DONOR’S TAXATION

Definition–DONATION is an act of liberality whereby a person disposes gratuitously of a thing or a

right in favor of another who accepts it.

Donor’s tax is a tax on the privilege to transmit property between two or more persons who are
living at the time of the donation; tax shall apply whether the transfer is in trust or otherwise,
whether the gift is direct or indirect.

Formula in computing Donor’s Tax:

First donation during the year:

Gross Gift Pxx

Less: Deduction xx
Net gift xx
Less: Exemption 250,000
Taxable xx
x Tax rate 6%
Donor’s tax due xx

Succeeding donations during same year:

Gross Gift Pxx

Less: Deduction xx
Present net gift xx
Add: Prior net gifts during the year xx
Total net gifts xx
Less: Exemption 250,000
Taxable amount xx
x Tax rate 6%
Donor’s tax due xx
Less: Tax/es paid during the year xx
Donor’s tax payable xx

Composition of gross gifts (same with estate taxation)

Properties classified as intangibles within (same with estate taxation)

Deductions from gross gifts

1. Mortgage on the property donated assumed by the donee.
2. Amount specifically provided by the donor as diminution on the property donated.

Exemptions from gross gifts

1. Gifts made to the national government or any entity created by any of its agencies which is not
conducted for profit, or any political subdivision.
2. Gifts in favor of the following non-profit institutions:
a. Educational
b. Charitable
c. Religious
d. Cultural
e. Social welfare
f. Accredited NGO
g. Trust or philanthropic organization
h. Research institution
Requisites:
1. Provided, that not more than 30% of said gifts shall be used for administration purposes;

2. The non-profit institutions must be accredited by the Philippine Council for NGO Certification
(PCNC).

A non-profit institution is one which is:

a. organized as a non-stock entity;
b. paying no dividends;
c. governed by trustees who receive no compensation; and
d. devoting all income whether students’ fees or gifts, donation subsidies or other forms of
philanthropy, to the accomplishment of the purposes enumerated in its Articles of
Incorporation.

3. P250,000 per year

Exempt under special law – Donation to

1. Rural Farm School
2. People’s Television Network, Inc.
3. People’s Survival Fund
4. Aurora Pacific Economic Zone and Freeport Authority
5. Girl Scouts of the Philippines
6. Philippine Red Cross
7. Tubbataha Reefs Natural Park
8. National Commission for Culture and the Arts
9. Philippine Normal University
10. University of the Philippines
11. National Water Quality Management Fund
12. Philippine Investors Commission
13. Ramon Magsaysay Award Foundation
14. Philippine-American Cultural Foundation
15. International Rice Research Institute
16. Task Force on Human Settlements
17. National Social Action Council
18. Aquaculture Department of the Southeast Asian Fisheries Development Center
19. Development Academy of the Philippines
20. Integrated Bar of the Philippines

RATE OF TAX: 6% computed on the basis of total gifts in excess of P250,000 exempt gift made
 during the calendar year.

Donations made by spouses

In case of donation made by husband and wife out of conjugal or community funds:
1. Each is donor to the extent of 1/2 of the value of the donation.
2. If only one spouse signed the deed of donation, there is only one donor for donor’s tax
purposes, without prejudice to the right of the other spouse to question the validity of the
donation.

Donation to several donees

If the donor had made several donations to different persons on the same date, the total net gift
shall be computed together and contained in one donor’s tax return only.

Transfer for less than adequate consideration

Where property, other than real property (capital asset) is transferred for less than adequate
consideration in money or money’s worth, the amount by which the fair market value exceeded
the value of consideration shall be deemed a gift subject to donor’s tax.

A sale, exchange, or other transfer of property made in the ordinary course of business (a
transaction which is bona fide, at arm’s length, and free from any donative intent) will be
considered as made for an adequate and full consideration in money or money’s worth).

Valuation of property – at fair market value at the time of gift (see estate tax).

OTHER MATTERS:
1. Renunciation of inheritance - A renunciation of inheritance by surviving spouse or an heir in
favor of:
a. Co-heir - not a donation
b. Not a co-heir – there is donation subject to donor’s tax
c. Renunciation by 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 – subject to donor’s tax

2. Donations between spouses - Every donation or grant of gratuitous advantage, direct or

indirect, between the spouses during the marriage shall be void, except moderate gifts which
the spouses may give each other on the occasion of any family rejoicing.
The prohibition shall also apply to persons living together as husband and wife without a valid
marriage.
3. Other persons who cannot donate property to each other (Void donations)
a. Those made between persons who were guilty of adultery or concubinage at the time of
donation.
b. Those made between persons found guilty of the same criminal offense in consideration
thereof; and
c. Those made to a public officer or his wife, descendants and ascendants, by reason of his
office.
Tax credit for donor’s tax paid to a foreign country.
1. Who can claim? Only citizen or resident alien donor.
2. Limitations on tax credit:
1st limitation
Net gift per foreign country
Total net gift x Phil tax

nd
2 limitation
Net gift all foreign countries
Total net gift x Phil tax

Filing and payment

1. Filing and payment – within 30 days from date of gift, either manually or electronically.
Except in cases where the Commissioner otherwise permits, the return shall be filed and the
tax paid, either electronically or manually, with any authorized agent bank, Revenue District
Office through Revenue Collection Officer or authorized tax software provider.
Surcharges (ad valorem penalty)

50%False or fraudulent return is willfully

filed.
Willful neglect to file the return on time.
25%Failure to file any return and pay the tax
due thereon.
If the return is not filed with the proper
internal revenue officer.
Failure to pay on time the deficiency tax
shown in the notice of assessment.

Interest for failure to pay tax per return on time

RATE – 12% per annum, or such higher rate as may be prescribed by rules and regulations,
computed from the date prescribed for payment until the amount is fully paid.
Attachments
1. Proof of claimed tax credit, if applicable
2. Certified true copies of OCT/TCT/CCT (front and back pages) of the donated property, if
applicable.
3. Certified true copies of the latest tax declaration of lot and/or improvement, if applicable.
4. “Certificate of No Improvement” issued by the Assessor’s Office where the donated real
property/ies have no declared improvements, if applicable.
5. Proof of valuation of shares of stocks at the time of donation, if applicable.
6. Proof of valuation of other types of personal properties, if applicable.
7. Proof of claimed deductions, if applicable.
8. Copy of tax debit memo used as payment, if applicable.