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B.

Donors Tax PRINCIPLES


Definition
Not defined under the Tax Reform Act of 1997 . A gift is merely subjected to donors tax.
!"#T or $%NAT"%N& an act of liberality 'hereby a (erson dis(oses gratuitously of a thing or right in fa)or of
another 'ho acce(ts it. *Art 7+,- .i)il .ode/
REQUISITES for a gift to be subject to donors tax0 1A."$2
1. The donor must ha)e .A3A."T4
+. There must be an "NT5NT T% $%NAT5
6. There must be $57"85R4- either actual or constructi)e
9. The donee must A..53T the donation
Kinds of Donations
1. $onations inter )i)os : a donation made bet'een li)ing (ersons- 'hich is (erfected the moment the donor
;no's of the acce(tance of the gift by the donee< subject to donors tax
+. $onations mortis causa : a donation 'hich ta;es effect u(on the death of the donor< subject to estate tax
Q: What are onsidered donations for tax !"r!oses#
1. =ales- exchanges and other transfers of (ro(erty for less than an ade>uate and full consideration in money or
moneys 'orth
+. .ondonation or remission of debt 'here the debtor did not render ser)ice in fa)or of the creditor
Note'orthy- the element of donati)e intent is conclusi)ely (resumed in transfers of (ro(erty for less than an
ade>uate or full consideration in money or moneys 'orth. ?o'e)er- real (ro(erty considered ca(ital assets under
the Tax .ode are exce(ted from this rule. *=ec 1@@ in relation to =ec +9*d// Ander =ection +9*d/- the fair mar;et
)alue itself- if higher than the gross selling (rice- is the base for com(uting the ca(ital gains tax im(osed u(on the
sale of such ca(ital assets. Thus- 'hat the seller a)oids in the (ayment of the donors tax- it (ays for in the ca(ital
gains tax.
A((licable 7a'The la' in force at the time of the (erfectionB com(letion of the donation *=ec 11- RR +&+@@6/
N%T50 Any contribution in cash or in ;ind to any candidate- (olitical (arty or coalition of (arties for cam(aign
(ur(oses shall be go)erned by the 5lection .ode- as amended. *=ec. 99*./- N"R./
.A=5 7AC0 Abello ). ."R *#eb. +6- +@@,/D The contributions of the A..RA (artners to the cam(aign funds of =en.
Angara during the 19E7
"n the case of donations of immo)able (ro(erty- they must be made in a (ublic document s(ecifying therein the
(ro(erty donated. The acce(tance may be made in the same $eed of $onation or in a se(arate (ublic document-
but it shall not ta;e effect unless it is done during the lifetime of the donor. "f the acce(tance is made in a se(arate
instrument- the donor shall be notified thereof in an authentic form- and this ste( shall be noted in both
instruments.
national elections constitutes a donation- thus- subject to gift taxes. ?o'e)er- the =. noted that succeeding cases
shall be go)erned by RA 71FF enacted by .ongress on No). +,- 1991. The RA (ro)ides in =ec 16 that
(oliticalBelectoral contributions- duly re(orted to the .ommission on 5lections- are N%T subject to the (ayment of
any gift tax.
PR$PERTIES INCLUDED C%asses of Donors and their &ross &ift
1. .itiGens or Residents of the 3hili((ines : all (ro(erties located not only 'ithin the 3hili((ines but also in foreign
countries
+. Nonresident Alien : all real and tangible (ro(erties 'ithin the 3hili((ines- and intangible (ersonal (ro(erty-
unless there is reci(rocity- in 'hich case it is not taxable
H0 Chat are the intangible (ro(erties 'hich are considered by la' as situated in the 3hili((inesI
1. #ranchise 'hich must be exercised in the 3hili((ines
+. %bligations or bonds issued by any cor(oration or sociedad anonima organiGed or constituted in the 3hili((ines
6. =hares- obligations or bonds issued by any foreign cor(oration E,J of the business of 'hich is located in the
3hili((ines
9. =hares- obligations or bonds issued by any foreign cor(oration if such shares- obligations or bonds ha)e ac>uired
a business situs in the 3hili((ines
,. =hares or rights in any (artnershi(- business or industry established in the 3hili((ines
Rule on Reci(rocity *=ec 1@9- N"R./There is reci(rocity if the foreign country of 'hich the decedent 'as a citiGen
and resident at the time of his death0
1. did not im(ose a transfer tax of any character- in res(ect of intangible (ersonal (ro(erty of citiGens of the
3hili((ines not residing in that foreign country< or
+. allo'ed a similar exem(tion from transfer tax in res(ect of intangible (ersonal (ro(erty o'ned by citiGens of the
3hili((ines not residing in that country
This rule a((lies to the transmission by gift of intangible (ersonal (ro(erty located or 'ith a situs 'ithin the
3hili((ines of a nonresident alien.
5K5L3T"%N=
$eductible from gross gifts in order to arri)e at the taxable net gifts.
Not to be treated as exclusions from the gross gifts of the donor.
1. $o'ries or donations made on account of marriage before its celebration or 'ithin one year thereafter by
(arents to each of their legitimate- recogniGed natural- or ado(ted children to the extent of the first 31@-@@@.
?o'e)er- this exem(tion may not be a)ailed of by a non&resident not a citiGen of the 3hili((ines.
H0 .an both (arents ma;ing a donation to a child in consideration of marriage a)ail of the 31@-@@@ deductionI
TAXATION LAW 2
4es. "f both s(ouses made the gift- then the gift is taxable one&half to each donor s(ouse. =e(arate donors tax
returns must be filed< husband and 'ife are considered as se(arate and distinct tax(ayers for (ur(oses of donors
tax. *=ection 1+- RR +&+@@6/ ?o'e)er- 'here there is failure to (ro)e that the donation 'as actually made by both
s(ouses- the donation is taxable as an exclusi)e act of the husband *Tang ?o ). MTA- 97 3hil E9@/- 'ithout
(rejudice to the right of the 'ife to >uestion the )alidity of the donation 'ithout her consent (ursuant to the
(ro)isions of the .i)il .ode and the #amily .ode. *=ection 1+- su(ra/
+. !ifts made to or for the use of the National !o)ernment or any entity created by any of its agencies 'hich is not
conducted for (rofit- or to any (olitical subdi)ision of the said !o)ernment
6. !ifts in fa)or of an educational andBor charitable- religious- cultural or social 'elfare cor(oration- institution-
accredited non& go)ernment organiGation- trust or (hilanthro(ic organiGation or research institution or
organiGation- (ro)ided not more than 6@J of said gifts 'ill be used by such donee for administration (ur(oses H0
Chat is a non&(rofit educational andBor charitable cor(oration- etcI"t is a school- college or uni)ersity andBor
charitable cor(oration- accredited N!%- trust or (hilanthro(ic organiGation andBor research institution or
organiGation0
N "ncor(orated as a non&stoc; entity-
N 3aying no di)idends-
!o)erned by trustees 'ho recei)e no com(ensation- and
$e)oting all its income- 'hether students fees or gifts- donations- subsidies or other
forms of (hilanthro(y- to the accom(lishment and (romotion of the (ur(oses enumerated in its Articles of
"ncor(oration
9. 5ncumbrances on the (ro(erty donated if assumed by thedonee in the deed of donation
,. $onations made to entities exem(ted under s(ecial la's- e.g.0
o A>uaculture $e(artment of the =outheast Asian #isheries $e)elo(ment .enter of the 3hili((ines
o $e)elo(ment Academy of the 3hili((ines o "ntegrated Mar of the 3hili((ineso "nternational Rice Research "nstituteo
National Luseum
o National 7ibraryo National =ocial Action .ouncilo Ramon Lagsaysay #oundationo 3hili((ine "n)entors .ommissiono
3hili((ine American .ultural #oundationo Tas; #orce on ?uman =ettlement on the
donation of e>ui(ment- materials and ser)ices
F. $onations to (ersons not strangers 'here the total of such net gifts for the calendar year is not more than
31@@-@@@.@@
Net !iftsNet !ift is the net economic benefit from the transfer that accrues to the donee.Accordingly- if a
mortgaged (ro(erty is transferred as a gift- but im(osing u(on the donee the obligation to (ay the mortgage
liability- then the net gift is measured by deducting from the fair mar;et )alue of the (ro(erty the amount of the
mortgage assumed. *=ection 11- RR +&+@@6/
.%L3ATAT"%N
?o' is donors tax com(utedIThis general formula shall be follo'ed0
"f there 'ere se)eral gifts made during the year- this formula is follo'ed0
R'TES $( T')
The a((licable donors tax rate is de(endent u(on the relationshi( bet'een the donor and the donee.ION LAW 2
!ross gifts made7ess0 $eductions from the gross gifts Net gifts madeLulti(lied by a((licable rate$onors tax on
the net gifts
1.
"f the donee is a stranger to the donor- the tax rate is e>ui)alent to 6@ J of the net gifts.
A stranger for (ur(oses of the donors tax
a. a (erson 'ho is not a brother- sister *'hether by 'hole or half&blood/- s(ouse- ancestor or lineal descendant- or
b. a (erson 'ho is not a relati)e by consanguinity in the collateral line 'ithin the fourth degree of relationshi(.
*=ec. 99*M//Note that donations made bet'een business organiGations and those made bet'een an indi)idual and
a business organiGation shall be considered as donations made to a stranger *RR +& +@@6/
"f the donee is not a stranger to the donor- the tax for each calendar year shall be com(uted on the basis of the
total net gifts made during the calendar year0
!ross gifts made on this date7ess0 $eductions from the gross gifts Net gifts made on this dateAdd0 all (rior net
gifts during the year Aggregate net giftsLulti(lied by a((licable rate$onors tax on the aggregate net gifts 7ess0
donors tax (aid on (rior net gifts $onors tax due on the net gifts to date
TAXATION LAW 2
%)er Mut not %)er Tax "s 3lus %f the 5xcess %)er
@ 1@@-@@@ 5xem(t
1@@-@@@ +@@-@@@ @ +J 1@@-@@@
+@@-@@@ ,@@-@@@ +-@@@ 9J +@@-@@@
,@@-@@@ 1 million 19-@@@ FJ ,@@-@@@
1 million 6 million 99-@@@ EJ 1 million
6 million , million +@9-@@@ 1@J 6 million
, million 1@ L 9@9-@@@ 1+J , million
1@ L 1-@@9-@@@ 1,J 1@ million
.orres(on ding $onors Tax *refer to schedule/
8A7AAT"%N
1+9-@@@ 3 +@9-@@@ 3+,9-@@@
Tax $ue B 3ayable
1+9-@@@

$onors Tax 3 +@9-@@@
7ess0 Tax 3re)iously 3aid 1+9-@@@
Tax $ue 3E@-@@@
$onors Tax 3 +,9-@@@
7ess0 Tax 3re)iously (aid *1+9;OE@;/
+@9-@@@ Tax $ue 3,@-@@@

Note0 A legally ado(ted child is entitled to all the rights and obligations (ro)ided by la' to legitimate children- and
therefore- a donation to him shall not be considered as a donation made to a stranger.
$B*ECT $( T')'TI$N
$onors tax shall be im(osed 'hether the transfer is in trust or other'ise- 'hether the gift is direct or indirect
and 'hether the (ro(erty is real or (ersonal- tangible or intangible.
The com(utation of the donors tax is on a cumulati)e basis o)er a (eriod of one calendar year "llustrations01.
$onation to son by (arents on account of marriage *31@@-@@@/0 ?usband Net Taxable !ift P 3,@-@@@ : 1@-@@@ P
39@-@@@Tax $ue P None- since 39@-@@@ is belo' the 31@@-@@@ threshold
Cife : same as abo)e
+. $onation to son and daughter&in&la' by (arents on account of marriage *31@@-@@@/0
N "f the gift is made in (ro(erty- the fair mar;et )alue at that time 'ill be considered the amount of gift.
Real 3ro(ertytaxable base P #L8 as determined by the .ommissioner of M"R *Qonal 8alue/ or #L8 as sho'n in
the latest schedule of )alues of the (ro)incial and city assessor *Lar;et 8alue (er Tax $eclaration/- 'hiche)er is
higher. "f there is no Gonal )alue- the taxable base is the #L8 that a((ears in the latest tax declaration
"m(ro)ement)alue of im(ro)ement is the construction cost (er building (ermit andBor occu(ancy (ermit (lus
1@J (er year after year of construction- or the #L8 (er latest tax declaration. TAK .R5$"T A situation may arise
'hen the (ro(erty gi)en as a gift is located in a foreign country and the donor may be subject to donors tax t'ice
on the same (ro(erty0 first- by the 3hili((ine go)ernment and second- by the foreign go)ernment 'here the
(ro(erty is situated. The remedy of claiming a tax credit is- therefore- aimed at minimiGing the burdensome effect
of double taxation by allo'ing the tax(ayer to deduct his foreign tax from his 3hili((ine tax- subject to the
limitations (ro)ided by la'. H0 Cho may claim tax creditITax credit for donors tax may be claimed only by a
resident citiGen- non&resident citiGen and resident alien. H0 Chat are the limitations on the tax creditI1. N5T !"#T
*foreign country/ K 3?"7 $%N%R= 5NT"R5 N5T !"#T= TAK +. N5T !"#T*all foreign countries/K 3?"7$%N%R=
5NT"R5 N5T !"#T= TAK N%T50 The com(utation of the donors tax credit is the same as the com(utation for estate
tax credit. .%L37"AN.5 R5HA"R5L5NT= $%N%R= TAK R5TARN ". Cho #iles
?usbando !ift (ertaining to the son
Net Taxable !ift P 3+,-@@@ : 1@-@@@ P 31,-@@@Tax $ue P None- since 31,-@@@ is belo' the 31@@-@@@ threshold
o !ift (ertaining to the daughter&in&la' Net Taxable !ift P 3+,-@@@Tax $ue P 3+,-@@@ x 6@J P 37-,@@Cife : same
as abo)e
6. $onations to donees not considered strangers for tax (ur(oses 'ere made on0
Ranuary 6@- +@@+ : 3 +-@@@-@@@
Larch 6@- +@@+ && August 1,- +@@+ &&
1-@@@-@@@ ,@@-@@@
After the first donation After the second donation After the third donation
Net Taxable !ift

+-@@@-@@@

Ranuary $onation &
3+-@@@-@@@ Larch $onation &
1-@@@-@@@ Total 36-@@@-@@@

Ranuary $onation & 3+-@@@-@@@
Larch $onation & 1-@@@-@@@
August $onation & ,@@-@@@
Total 36-,@@-@@@
5)ery (erson- 'hether natural or juridical- resident or non&resident- 'ho transfers or causes to transfer (ro(erty
by gift- 'hether in trust or other'ise- 'hether the gift is direct or indirect and 'hether the (ro(erty is real or
(ersonal- tangible or intangible.
Contents of the Donors Tax Ret"rn
1. 5ach gift made during the calendar year 'hich is to be included in com(uting net gifts<
+. The deductions claimed and allo'able<
6. Any (re)ious net gifts made during the same calendar year<
9. The name of the donee<
,. Relationshi( of the donor to the donee< and
F. =uch further information as the .ommissioner may re>uire.
Chen #iled#iled 'ithin thirty *6@/ days after the date the gift is made or com(leted and the tax due thereon shall
be (aid at the same time that the return is filed.
Chere #iled and 3aidAnless the .ommissioner other'ise (ermits- it shall be filed and the tax (aid to an authoriGed
agent ban;- the Re)enue $istrict %fficer- Re)enue .ollection %fficer or duly authoriGed Treasurer of the city or
munici(ality 'here the donor 'as domiciled at the time of the transfer- or if there be no legal residence in the
3hili((ines- 'ith the %ffice of the .ommissioner. "n the case of gifts made by a non&resident- the return may be
filed 'ith the 3hili((ine 5mbassy or .onsulate in the country 'here he is domiciled at the time of the transfer- or
directly 'ith the %ffice of the .ommissioner.