DONOR’S TAX

Definition and Concepts:

Donation is an act of liberality whereby a person disposes gratuitously of a

thing or right in favor of another, who accepts it. For tax purposes, this extends to
sales, exchanges or other transfers for less than an adequate and full
considerations in money or money’s worth.

Kinds of Donations
1. Donation inter vivos – one made between living persons, and which is
perfected from the moment the donor knows of the acceptance of the
donee. It is subject to donor’s tax.
2. Donation mortis causa – one which is to take effect upon the death of
the donor and therefore, partakes of the nature of testamentary
disposition. It is subject to estate tax.

Formal requisites of donation

1. Movable – the donation of a movable may be made orally or in writing. An
oral donation requires the simultaneous delivery of the thing of the
document representing the right donated.

If the value of the personal property donated exceeds P5,000, the

donation and the acceptance shall be made in writing. Otherwise, the
donation shall be void and, therefore, not taxable.

2. Immovable – In order that a donation of an immovable may be valid, it

must be made in a public document specifying therein the property
donated and the value of the charges which the donee must satisfy.

The acceptance may be made in the same deed of donation or in a

separate public instrument but it shall not take effect unless it is done
during the lifetime of the donor.

If the acceptance is made in a separate instrument, the donor shall be

notified thereof in authentic form, and this step shall be noted in both
instruments.
Nature of gift tax
Gift tax is an excise on the transfer by a living person to another of money
or other property without consideration. It is not a property tax but an excise tax
imposed on the privilege of the donor to give or on the privilege of the donee to
receive.

Kinds of gift tax

1. Donor’s gift tax – tax levied on the act of giving; it supplements the
estate tax.
2. Donee’s gift tax – tax levied on the act of receiving; it was the
counterpart of the inheritance tax which has been incorporated into
the estate tax.
3.
Rates of Tax Payable by Donor.

(A) In General. - The tax for each calendar year shall be computed on the
basis of the total net gifts made during the calendar year in accordance with
the following schedule:

If the net gift is:

Over But Not Over The Tax Shall Plus Of the Excess
be Over

P 100,000 Exempt

P 100,000 200,000 0 2% P100,000

200,000 500,000 2,000 4% 200,000

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

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

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

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

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

(B) Tax Payable by Donor if Donee is a Stranger. - When the donee or
beneficiary is stranger, the tax payable by the donor shall be thirty percent
(30%) of the net gifts. For the purpose of this tax, a 'stranger,' is a person
who is not a:
(1) Brother, sister (whether by whole or half-blood), spouse, ancestor
and lineal descendant; or

(2) Relative by consanguinity in the collateral line within the fourth

degree of relationship.

(C) 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, as amended.

Who are required to file the Donor’s Tax Return?

Every person, whether natural or juridical, resident or non-resident, who

transfers or causes to transfer property by gift, whether in trust or otherwise,
whether the gift is direct or indirect and whether the property is real or
personal, tangible or intangible.

What are the procedures in filing the Donor’s Tax return?

File the return in triplicate (two copies for the BIR and one copy for the
taxpayer) with any Authorized Agent Bank (AAB) of the RDO having
jurisdiction over the place of the domicile of the donor at the time of the
transfer. In places where there are no AAB, the return will be filed directly
with the Revenue Collection Officer or duly Authorized City or Municipal
Treasurer where the donor was domiciled at the time of the transfer, or if
there is no legal residence in the Philippines, with Revenue District No. 39 -
South Quezon City.

In the case of gifts made by a non-resident alien, the return may be filed
with Revenue District No. 39 - South Quezon City, or with the Philippine
Embassy or Consulate in the country where donor is domiciled at the time of
the transfer.

Submit all documentary requirements and proof of payment to the Revenue

District Office having jurisdiction over the place of residence of the donor.
What donations are tax exempt?

• Dowries or donations made on account of marriage before its celebration

or within one year thereafter, by parents to each of their legitimate,
recognized natural, or adopted children to the extent of the first P10,000
• 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 philantrophic organization or research institution or
organization, provided not more than 30% of said gifts will be used by
such donee for administration purposes
• Encumbrances on the property donated if assumed by the donee in the
deed of donation
• Donations made to the following entities as exempted under special laws:
- Aquaculture Department of the Southeast Asian Fisheries Development
Center of the Philippines
- Development Academy of the Philippines
- Integrated Bar of the Philippines
- International Rice Research Institute
- National Social Action Council
- Ramon Magsaysay Foundation
- Philippine Inventor’s Commission
- Philippine American Cultural Foundation
- Task Force on Human Settlement on the donation of equipment,
materials and services

What are the bases in the valuation of property?

If the gift is made in property, the fair market value at that time will be
considered the amount of gift

In case of real property, the taxable base is the fair market value as
determined by the Commissioner of Internal Revenue (Zonal Value) or fair
market value as shown in the latest schedule of values of the provincial and
city assessor (MV per Tax Declaration), whichever is higher

If there is no zonal value, the taxable base is the fair market value that
appears in the latest tax declaration

If there is an improvement, the value of improvement is the construction

cost per building permit and or occupancy permit plus 10% per year after
year of construction, or the market value per latest tax declaration.