Donor's Tax

1. Taxation 2 │
DONOR’S TAX
FLABERT VILLASENCIO, CPA
Notre Dame of Dadiangas University

2. Donation
oAn act of gratuitously transferring property
or rights motivated by the liberality of the
giver in favor of the receiver
oThe transfer includes not only the transfer of
ownership but also the passage of control
over the economic benefits of the property

3. Donation
KKiinnddss o off D Doonnaattiioonn
MMoorrttiiss C Caauussaa IInntteerr V Viivvooss
1. Subject to Estate Tax
2. Donor retains ownership
before his death
3. The transfer is revocable by
the donor at will
4. The transfer is void if the
donee dies ahead before
the donor
1. Subject to Estate Tax
2. Donor retains ownership
before his death
3. The transfer is revocable by
the donor at will
4. The transfer is void if the
donee dies ahead before
the donor
1. Subject to Donor’s Tax
2. Takes effect during the
1. Subject to Donor’s Tax
2. Takes effect during the
lifetime of the donor.
lifetime of the donor.

4. Essentials of Donation
1. Capacity of the Donor
o Refers to the condition and legal competence of the
donor to enter into a valid contract
o The donor must be capacitated (not necessary for donee)
1. Donative Intent
o The declaration of the transfer of ownership by the owner
without consideration
a) Oral Donation- any personal property with value less than
5,000, with simultaneous delivery of the thing
b) In Writing- the value of personal property exceeds 5,000
whose donation and acceptance must be in writing,
otherwise it is void.
c) Public Instrument- any donation which involves real
property

5. Essentials of Donation
3. Delivery of the Gift
o The delivery may be Actual or Constructive
o Completion of the gift requires physical delivery or
delivery of the instrument
o Donor’ tax does not apply until there is a completed gift
(no reservation over the gift)
4. Acceptance of the Gift
o Acknowledgement of the thing donated
o It is perfected from the moment the donor has known the
acceptance by the donee and completed by the delivery

6. Gross Gift
▪ The value of the property or right donated subject to
donor’s tax before any deduction
Classifications of Donor
1.Citizen or Resident Alien- taxable for donations
within and outside Philippines
2.Nonresident Alien- taxable only for the donations
within the Philippines

7. Gross Gift
Illustration:
TiaKemi donated all his properties to his relatives in the
Philippines.
Property A in Baguio to Mr. Angkin 1,500,000
Property B in Canada to Mr. Amin 2,500,000
Total 4,000,000
1.If TiaKemi is a resident, how much is the Gross Taxable
Donation?
2.If TiaKemi is a nonresident, how much is the Gross
Taxable Donation?
1.Answer: 4,000,000
2.Answer:1,500,000

8. Gross Gift
Summary Application
GROUP OF DONORS AND TAXABLE DONATIONS
DONOR
Gross Gift’s Location
Within
Philippines
Outside
Philippines
A. Citizen or Resident
• Real Property
• Tangible Personal Property
• Intangible Personal Property
Taxable
Taxable
Taxable
Taxable
Taxable
Taxable
B. Nonresident Alien
• Real property
• Tangible Personal Property
• Intangible Personal Property
Taxable
Taxable
Taxable*
None
None
None

9. Conjugal Donation
oHusband and Wife cannot transfer by virtue of sale
or donation any conjugal or communal property
WITHOUT CONSENT from the other, unless it is a
moderate donations for charity or on occasion of
family rejoicing
oSpouses are considered as SEPARATE DONOR of the
conjugal property
oUnless, the wife expressly joins in making the
donation, it is presumed to have been done by the
husband
oDonations made between husband and wife during
marriage are void, except as cited in item 1.
oDonation Mortis Causa is valid subject to Estate Tax.

10. Conjugal Donation
Illustration:
Mr and Mrs Galante, spouses and citizens of the Philippines,
donated to their legitimate daughter the following properties:
Vacation House (conjugal property- Hong Kong 1,500,000
Car (conjugal property)- Phil 750,000
Jewelry (exclusive property of Mrs.Galante) 475,000
Total 2,725,00
The Gross Gift of the Spouses are computed as:
Mr. Galante Mrs.Galante
Vacation House (1,500,000/2) 750,000 750,000
Car (750,000/2) 375,000 375,000
Jewelry 475,000
Gross Gift per Spouse 1,125,000 1,600,00

11. Valuation of Donation
General Valuation: The Value existing at the TIME THE
GIFT IS MADE.
oCash Gifts- at Face Amount
oPersonal Property- the Fair Market Value
oReal Property- FMV by the City Assessor or by the BIR,
higher
oTransfer for Inadequate Consideration- the excess of
the fair market value (personal property), however if it
is a real property, it is not subject to donor’s tax but
subject to final tax.
oNet Gift- the amount of mortgage assumed is
deducted from the fair market value of the property

12. Deductions from Gross Gifts
Classifications of Donors
Citizen or Resident Nonresident
Deductible Items Alien
1.Dowries Yes No
2.Encumbrances Yes Yes
3.Diminution Yes Yes
4.To Government Yes Yes
5.To NGO Yes Yes

13. Deductions from Gross Gifts
1. Dowries- gift given by natural or adopting parents on
account of marriage
o A deduction of 10,000 is allowed provided that the gift is given
before the wedding or within one year after the celebration.
Illustration:
On January 1, 2014, Mr and Mrs Mayaman donated a house and lot, a
conjugal property, at fair market value of 620,000 to their
legitimate son on account of his marriage on January 15, 2014.
The net gift of each spouse is:
Mr. Mayaman Mrs.Mayaman
Gross Gift (620,000/2) 310,000 310,000
Less: Deductions 10,000 10,000
Net Gift of each Spouse 300,000 300,000

14. Deductions from Gross Gifts
2. Encumbrance Assumed by the Donee- a claim or
liability attached to a property such as mortgage,
security interests, cost of rights and unpaid taxes
– Allowed as a deduction once assumed by the donee.
Illustration:
Miss Tapia donated to Mr Gomez, her boyfriend, a car amounting
to 400,000. The car has an unpaid mortgage of 180,000. Mr
Gomez agreed to assume payment for the mortgage.
The Net Gift of Miss Tapia would be:
Gross Gift-Car 400,000
Less: Deduction (Mortgage assumed) 180,000
Net Gift 220,000

15. Deductions from Gross Gifts
3. Diminution of Gift Provided by the Donor – refers to
the decrease in the value of the property donated as
a result of a condition made by the donor to the donee
Illustration:
Rista donated 300,000 to Huthut on condition that the latter will give
60,000 of the total gift to the charity.
The net gift of Rista would be:
Gross Gift 300,000
Less: Deduction- diminution to charity 60,000
Net Gift 240,000

16. Deductions from Gross Gifts
4. Donations to the National Government- gifts made for the use of
the National Government, or any entity created by any of its
agencies not constructed for profit
– Deductible at 100% of the gift (Donation during Election must be
reported ti Comelec)
Illustration:
Don Pepot donated his 100 hectares land valued at the date of
donation at 1,000,000 as follows:
National Government 500,000
Solano Local Government 300,000
Mar Roxas, friend 200,000
The Net Gift of Don Pepot would be:
Gross Gift 1,000,000
Less: Deductions (500,000+300,000) 800,000
Net Gift 200,000

17. Deductions from Gross Gifts
5. Donation to Non Profit Organizations- donations to educational,
charitable, religious, cultural, social welfare, accredited NGOs
and other related agencies are allowed as exemption as long as
that not more than 30% of the donation shall be used for
administrative purposes.
Illustration:
Mr. Eloh Canoe, a nonresident alien, donated 1,000,000 to an
accredited NGO. Compute for the Net Gift.
a. If not more than 30%
Gross Gift 1,000,000
Less: Deduction 1,000,000
Net Gift -
b. If more than 30%
Gross Gift 1,000,000
Less: Deduction -
Net Gift 1,000,000

18. S E A T W O R K : ( 1 / 2 C W )
6-6
6-9
6-10
6-11
6-15
6-16
6-24
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19. Tax Exempt Donations
1. The first 100,000 of the net gift to relatives every year.
2. Donations given to the following:
a) Ramon Magsaysay Award Foundation
b) Philippine Inventor’s Commission
c) Philippine-American Cultural Foundation
d) International Rice Research Institute
e) Integrated Bar of the Philippines
f) Development Academy of the Philippines
g) National Museum, National Library, and the archives of the National
Historical Institute
h) National Social Action Council
i) Southern Philippines Development Administration
j) Task Force on Human Settlement
k) Intramuros Administration
l) Irrevocable donations of American-owned private lands
m) Aqua-culture Development of the Southeast Asian Fisheries Development
Center of the Philippines
n) Museum of Philippine Costumes
o) Donations of Foreign Origin
p) Gratuitous transfer by a religious corporation

20. Donor’s Tax
▪ Imposed on the transfer of property by way of gift intervivos
▪ The tax shall not apply until there is completed gift
▪ Computation is on a cumulative basis over one calendar year
Formula:
1. On the first donation
Gross gifts xxx
Less: Exemptions (deducitons) if applicable xxx
Net taxable Gifts xxx
Multipy by applicable tax rates xxx
Donor’s Tax Due xxx
2. On Subsequent donations within same calendar year
Gross gifts xxx
Less: Exemptions (deducitons) if applicable xxx
Net taxable Gifts xxx
Add: All previous Net gifts during the year xxx
Aggregate Net Gifts xxx
Donor’s Tax on the Aggregate Net Gift xxx
Less: Donor’s Tax on Previous Net Gifts xxx
Donor’s Tax Due, Current xxx

21. Rates of Donor’s Tax
1. Gifts to Relatives- in general, the donor’s tax for each year shall be
computed on the basis of the total net gifts made during the calendar
year
Net Gift Tax Plus Of the Excess
Over Not Over Shall Be % Over
- 100,000 exempt - -
100,000 200,000 - 2% 100,000
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 & above 1,004,000 15% 10,000,000

22. Rates of Donor’s Tax
2. Gift to Stranger- the tax payable by the donor shall be 30%
of the net gift.
For purposes of Taxation, 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 relationship
▪ For Donor’s tax purposes, the children of the first cousin
of the donor are considered strangers.

23. Rates of Donor’s Tax
Illustration:
May 10 Gross Gift (Antique) 100,000
Mr Santiago Baldado donated the following during 2013:
Jan 5 House and lot to Francis, his legitimate son, 1,000,000
Less: Deduction -
Net Taxable Gift 100,000
Add: All previous net gifts 1,290,000
Aggregate Net Gifts 1,390,000
Donor’s Tax on 1,000,000 44,000
Tax on excess (290,000 x 8%) 31,200
Donor’s Tax on the aggregate net gifts 75,200
less: Donor’s tax , previous 67,200
Donor’s tax, current 8,000
Apr 30 Gross Gift: (Cash) 50,000
less: Net Gift on Deduction- account Diminution of marriage
10,000
40,000
Multiply by Donor’s Tax Rate (Stranger) 30%
Donor’s Tax on the Gift 12,000
Mar 15 Car to Maria, his legitimate daughter on 300,000
Jan 5 Gross Gift (House and Lot) 1,000,000
account of her birthday
Less: Deduction- Dowry 10,000
Net Taxable Gift 990,000
Donor’s Tax on 500,000 14,000
Tax on Excess (490,000x6%) 29,400
Donor’s Tax, Current 43,400
Apr 30 Cash to Susan, his secretary, on account 50,000
Mar 15 Gross Gift (Car) 300,000
of her birthday. On condition that 10,000
shall be given to charity.
Less: Deduction -
Net Taxable Gift 300,000
Add: All previous net gifts 990,000
Aggregate Net Gifts 1,290,000
Donor’s Tax on 1,000,000 44,000
Tax on excess (290,000 x 8%) 23,200
Donor’s Tax on the aggregate net gifts 67,200
less: Donor’s tax , previous 43,400
Donor’s tax, current 23,800
May 10 Antique items to Tokmo, his uncle, on 100,000
account of gratitude
The Donor’s Tax of Mr Baldado would be:

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PROBLEM 6-19
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25. Problem 6–19
1. Letter C
Gross gifts, as of August 15, 200A (P150,000 x 2 lots) P300,000
Less: Deductions 0
Net gifts, August 15, 200A P300,000
Donor’s tax on P200,000 P 2,000
Tax on excess (P300,000 – P200,000) x 4% 4,000
Total donor’s tax P 6,000

26. 2. Letter D
Wedding gifts, as of November 15, 200A 150,000
Less: Deductions - dowry 10,000
Net gifts, November 15, 200A 140,000
Add: Previous, net gifts 300,000
Total net gifts 440,000
Donor’s tax on P200,000 2,000
Tax on excess (P440,000 – P200,000) x 4% 9,600
Total donor’s tax 11,600
Less: Donor’s tax – August 15, 200A 6,000
Donor’s tax payable – November 15, 200A 5,600

27. Tax Credits
1. Only ONE Foreign country is involved
Tax Credit= Net Donations in Foreign Country x Donor’s Tax
World Net Donations
OR
Donor’s Tax = Actual Donor’s tax paid to foreign country
whichever is LOWER
2. TWO or MORE Foreign Countries
Limit A: Per Foreign Country
Net Donations per Foreign Country x Donor’s Tax
Entire Net Donations
OR
Donor’s Tax = Actual Donor’s tax paid to foreign country
whichever is LOWER
Limit B: By Total
Net Donations ALL Foreign Country x Donor’s Tax
Entire Net Donations
OR
The Actual Donor’s Tax paid to Foreign Country, LOWER Value

28. Tax Credits
Illustration:
The following were donations made by Mr Galante, a Filipino, to his relative for
the taxable year 2014:
Donation of Property which are located in:
Foreign Country A 300,000
Foreign Country B 200,000
Philippines 500,000
Total Donations 1,000,000
Foreign Donor’s Tax
Foreign Country A 10,600
Foreign Country B 10,000
How much is the Tax Credit and the Donor’s Tax Due?

29. Tax Credits
Illustration:
Donation of Property which are located in:
Foreign Country A 300,000
Foreign Country B 200,000
Philippines 500,000
Total Donations 1,000,000
Foreign Donor’s Tax
Foreign Country A 10,600
Foreign Country B 10,000
Limit A:
Country A= 300,000 x 44,000 = 13,200
1,000,000 vs = 10,600 10,600
Country B=200,000 x 44,000= 8,800
1,000,000 vs = 10,000 8,800
Total 19,400
Limit B: vs
Total Foreign: 500,000 x 44,000 = 22,000 19,400
1,000,000

30. Tax Credits
Illustration:
Donation of Property which are located in:
Foreign Country A 300,000
Foreign Country B 200,000
Philippines 500,000
Total Donations 1,000,000
Limit A:
Country A= 300,000 x 44,000 = 13,200
1,000,000 vs = 10,600 10,600
Country B=200,000 x 44,000= 8,800
1,000,000 vs = 10,000 8,800
Total 19,400
Limit B: vs
Total Foreign: 500,000 x 44,000 = 22,000 19,400
1,000,000
Tax on 1,000,000 44,000
Less: Tax Credit 19,400
Donor’s Tax Still Due 24,600

31. S E A T W O R K : ( 1 / 2 C W )
PROBLEM 6-29
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32. Problem 6–29
1. Letter C
Philippine donor’s tax P404,000
Actual donor’s tax - foreign P120,000
Tax credit, limit
(P404,000 x 500,000/5,000,000) - lower P40,400 P40,400
2. Letter B
Philippine donor’s tax:
Relative (P500,000) P 14,000
Stranger (P5,000,000 – P500,000) x 30% 1,350,000 1,364,000
Less: Tax credit
Actual donor’s tax – foreign (lower) P120,000 120,000
Tax credit, limit
(P1,364,000 x 500,000/5,000,000) 136,400
Donor’s tax still due and payable P1,244,000

33. Filing of Returns and Payment of Tax
The return shall consist of:
1.Each gift made during the calendar year that is to be included in the
computation of gift tax
2.The deductions claimed and allowable
3.Any previous net gifts made during the same calendar year
4.The name of the donee
5.Other information required by rules and regulations pursuant to the
law
Filing of Return- within 30 days after the gift is made
- pay as you file, unless with extension not more
than six months

34. Attachments to the Donor’s Tax Return
1. Sworn statement of the relationship of the donor to the donee
2. Proof of claimed tax credit, if applicable
3. Certified true copy if the Original/ Transfer/Condominium Certificate Title
of the donated property, if applicable
4. Certified true copy of the latest tax declaration of lot and/or improvement, if
applicable
5. Certificate of No Improvement issued by the Assessor’s Office where the
donated real properties have not declared improvements, if applicable
6. Proof of valuation of shares of stock at the time of donation if applicable
a) For Listed Stocks- newspaper clippings/ certificate issued by SEC as to value of the
shares
b) For Unlisted Stocks- latest audited Financial Statements of the issuing corporation
with computation of the book value per share
7. Proof of valuation of other types of personal properties, if applicable
8. Proof of claimed deductions, if applicable
9. Proof of Tax Debit Memo used as payment , if applicable

35. Penalties
1. 25% Surcharge- shall be imposed on the following violations:
a) Failure to file any return on or before the due date
b) Filing a return with a person or office other than those with whom it is
required to be filed
c) Failure to pay the full or partial amount of tax shown on the return or the
full amount of tax due for which no return is required to be filed on or
before the due date
d) Failure to pay the deficiency tax within the time prescribed for its
payment in the notice of assessment
No Surcharge of 25% shall be imposed if:
a) The donor’s tax return is filed voluntarily
b) Without notice from the BIR Commissioner
c) It is shown that there was a reasonable cause for failure to file the return
d) The failure to file the return was not due to wilful neglect.

36. Penalties
2. 50% Surcharge- shall be imposed on the following
violations:
a) Willful neglect to file thee return within the period
prescribed by the Code or by rules and regulations
b) The return filed is false or fraudulent
2. Interest- at the rate of 20% per annum shall be imposed
on the basic unpaid amount of tax from the date
prescribed for the payment until the amount is fully paid

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