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COMPILED NOTES: SABABAN, MAMALATEO & CHAVEZ

MARIVIC B. DE GRACIA
TAXATION 2
MARIVIC DE GRACIA

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DONORS TAX
DONATION- is an act of liberality whereby a person (donor) disposes gratuitously
of a thing or right in favour of another (done) who accepts it. (Art. 725 NCC)
-A person gives to another a thing or right on account of the latters merits or of
the services rendered by him to the donor provided do not constitute a
demandable debt or when the gift imposes upon the done a burden which is less
than the value of the thing given. (Art. 726 NCC)
GR: the person who gratuitously disposes of a thing must not receive any
consideration whether money, service or property on account of such transfer.
EXCEPTION:
1. Extends to sales or exchanges for less than adequate and full consideration in
money or moneys worth. (Sec. 100 NIRC)
-only the difference between the FMV of the property and the value of
the consideration which is deemed as donation.
2. Condonation or remission of the debt, not due to rendition of service.
3. Renunciation of inheritance in favour of identified heir/s to the exclusion of other
co-heirs. (Sec. 11[4] RR-2-03)
KINDS OF DONATION
DONATION MORTIS CAUSA DONATION INTER VIVOS
Estate tax (5%-20%) Donors tax (2%-15%)
Made in consideration of death without the donors
intention to lose the thing conveyed or its free
disposal in case of survival
Is made without such
consideration but out of the
donors generosity
Testamentary in nature, should be embodied in a
last will and testament (Art. 728 NCC)
If not embodied in a valid will, the donation is void
(Puig v. Penaflorida
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)

Transfer conveys no title or ownership to the Its effect is produced while

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In case of doubt, the conveyance should be deemed a donation inter vivos
rather than mortis causa, in order to avoid uncertainty as to the ownership of
the property subject of the deed. (Puig v, Penaflorida)
transferee before the death of the transferor
Transferor retains the ownership, full or naked, of
the property conveyed
Donors death determines the acquisition of the
right to the property
the donor is still alive

The transfer is revocable before the transferors
death, the donor has reserved power to dispose the
property conveyed.
2

The transfer is irrevocable
3


The transfer would be void if the transferor survived
the transferee

Being in a form of will, need not be accepted by the
donees during the lifetime of the donor
Acceptance is a
requirement

CHARACTERISTICS OF DONATION MORTIS CAUSA
1. It conveys no title or ownership to the transferee before the death of the
transferor; or what amounts to the same thing, that the transferor should retain the
ownership (full or naked) and control of the property while alive;
2. That before his death, the transfer should be revocable by the transferor at will
ad nutum; but revocability may be provided in the donor to dispose of the
properties conveyed; and
3. That the transfer should be void if the transferor should survive the transferee.



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Irrevocabilty is a quality absolutely incompatible with the idea of
conveyances mortis causa, where revocability is precisely the essence of the
act. (Austria-Magat v. CA)
3
Donation Mortis Causa is not controlling; if the donation by its terms is inter
vivos, this character is not altered by the fact that the donor styled it mortis
causa. (Del Rosario v. Ferrer GR. 187056, Sept. 20, 2010)



COMPILED NOTES: SABABAN, MAMALATEO & CHAVEZ
MARIVIC B. DE GRACIA
TAXATION 2
MARIVIC DE GRACIA

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DONORS TAX/ GIFT TAX
-not a property tax but an excise tax imposed on the privilege of the owner to
give.
-imposed upon the transfer by any person, resident or non-resident, of any
property by gift. (Sec. 99 NIRC)
-apply whether the transfer is in trust or otherwise, whether the gift is direct or
indirect, and whether the property is real or personal, tangible or intangible. (Sec.
98 NIRC)
FORMULA:
GROSS GIFTS
Less: ALLOWED DEDUCTION/ EXEMPTION
NET GIFTS
Multiply: RATE______________________
TAXABLE NET GIFTS
Less: TAX CREDIT
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__________________
DONORS TAX PAYABLE






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TAX CREDIT- allowed only for residents and citizens of the Philippines for the
donors taxes they paid in foreign country
LIMITATIONS:
a. the amount of the credit shall not exceed the same proportion of the tax
against such credit is taken, which the net gifts situated within such country
taxable under donors tax bears to his entire net gifts;
b. the amount of the tax credit shall not exceed the same proportion of the tax
credit shall not exceed the same proportion of the tax against such credit is
taken, which the donors net gifts situated outside the Philippines taxable under
donors tax bears to his entire net gifts.
FORMULA IN CASE OF SECOND DONATION WITHIN THE SAME CALENDAR
YEAR:
GROSS GIFT
Less: ALLOWED DEDUCTION/ EXEMPTION
NET GIFT
Add: PRIOR NET GIFTS WITHIN THE SAME CALENDAR YEAR
TOTAL TAXABLE NET GIFTS
Multiply: RATE___________________________________
DONORS TAX DUE ON TOTAL NET GIFTS
Less: DONORS TAX DUE ON PRIOR GIFTS W/IN THE SAME CY
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DONORS TAX PAYABLE

PERFECTION OF DONATION
-it is perfected from the moment the donor knows of the acceptance by the done

COMPLETION OF THE DONATION
-completed by the delivery either actually or constructively of the donated property
to the done.

LAW GOVERNING THE IMPOSITION OF DONORS TAX
-law in force at the time of the perfection/completion of the donation shall govern
the imposition of donors tax.

ESSENTIALS OF A TAXABLE DONATION

1. Capacity of the donor
2. Donative intent
-transfer of properties from one corporation to another corporation which is
connected with, subordinate to and a district or local organization or branch of the
transferor corporation is not subject to donors tax because wanting in donative
intent
-required in transfers of property for less than adequate and full consideration
3. Delivery, whether actual or constructive
4. Acceptance of the gift by the donee

GROSS GIFT

FACTORS AFFECTING GROSS GIFT:
1. Citizenship and residence of the donor at the time of donation
2. Location of the property


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Deducted because it has been paid.


COMPILED NOTES: SABABAN, MAMALATEO & CHAVEZ
MARIVIC B. DE GRACIA
TAXATION 2
MARIVIC DE GRACIA

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CLASSIFICATION OF DONOR

IMMOVABLE AND
TANGIBLE PERSONAL
PROPERTY
INTANGIBLE PERSONAL
PROPERTY
WITHIN WITHOUT WITHIN WITHOUT
RCD
RAD
NRCD

NRAD - -
NRAD WITH
RECIPROCITY
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- - -

DONATION OF CONJUGAL PROPERTY
-whether married or single
-properties owned by the spouse whether under conjugal partnership or absolute
community are treated as a separate donation.
-husband and wife are equally regarded as a separate donor.

Renunciation by the 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 IS SUBJECT TO DONORS TAX.
-whereas, GENERAL RENUNCIATION by an heir , including the
surviving spouse, of his/her in the hereditary estate is NOT SUBJECT
TO DONORS TAX.


VALUATION OF DONATION

CASH PERSONAL
PROPERTY
REAL PROPERTY
Value or face amount of
the currency
FMV at the time of
donation
FMV fixed by the
Provincial and City
Assessor or the FMV as
determined by the BIR,
whichever is higher.



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If there is a reciprocity clause such intangible personal property located within
the Philippines is NOT subject to donors tax, therefore not included in the gross
gift.
ALLOWED DEDUCTIONS OR EXEMPTIONS FROM THE GROSS ESTATE
-tax for each calendar year shall be computed on the basis of the total net gifts
made during the year.

1. Donors tax due is computed on a cumulative basis;
2. The donors tax due is based on the net gifts



COMPILED NOTES: SABABAN, MAMALATEO & CHAVEZ
MARIVIC B. DE GRACIA
TAXATION 2
MARIVIC DE GRACIA

4

EXEMPTION OF CERTAIN GIFTS
RCD, RAD,
NRCD
NRAD
DOWRIES

Requisites:
i. made on account of marriage and before its celebration or within 1 year thereafter
ii. by parents to each of their legitimate, recognized natural, or adopted children
iii. to the extent of first P10,000.

-
GIFTS TO NATIONAL GOVERNMENT -not conducted for profit

GIFTS TO POLITICAL SUBDIVISION

GIFTS IN FAVOR OF:
i. educational
ii. charitable
iii. religious
iv. cultural
v. social welfare corporation, institution
vi. accredited nongovernmental organization
vii. trust or philanthropic organization
viii. research institution or organization

Requisites:
i. the entity or institution must either or any of those mentioned
ii. not more than 30% of said gifts shall be used by such done for administration
iii. incorporated as a nonstock entity, paying no dividends, governed by trustees who receive no compensation, and devoting all its
income, whether students fee or gifts, donation, subsidies or other forms of philanthropy, to the accomplishment and promoti on of the
purposes enumerated in its Articles of incorporation.

Note: in case of NRA 3
rd
requisite does not apply


MORTGAGE ASSUMED BY THE DONEE

If a mortgaged property is transferred as gift, BUT imposing upon the done the obligation to pay the mortgage liability,
-then the net gift is measured by deducting from the FMV of the property the amount of mortgage assumed. (Sec. 11, RR 2-03)


DIMINUTIONS

Eg. If A donated P500,000 to B with instruction that B shall give P100,000 to SSC-R, the taxable net gift would only be P400,000.




COMPILED NOTES: SABABAN, MAMALATEO & CHAVEZ
MARIVIC B. DE GRACIA
TAXATION 2
MARIVIC DE GRACIA

5
EXEMPTION UNDER SPACIAL LAWS:
1. donations to Philippine government for scientific, engineering and technological
research, invention and development (RA 1606)
2. Donations to social welfare, cultural, and charitable organizations (PD 507; RA
1916)
3. Donations to the International Rice Research Institute (RA 2707)
4. Donations to Ramon Magsaysay Award Foundation (RA 3076)
5. Donations to Southern Philippines Development Administration (PD 690)
7. Donations to the Intramuros Administration (PD 1616)

PROCEDURE FOR COMPUTING NET GIFTS

NET GIFT- the net economic benefit from the transfer that accrues to the donee.

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 schedule of tax rates
prescribed in the law.

The tax is imposed on the cumulative basis during the calendar year; i.e., the
rates are applied on the aggregate net gifts during the calendar year, but donors
taxes paid during the calendar year are credited against the donors tax due on
the latest donation during the same calendar year.

SCHEDULAR RATES OF DONORS TAX IMPOSABLE ON DONATION MADE
TO A DONEE WHO IS NOT A STRANGER.

BUT NOT
OVER
OVER THE TAX
SHALL BE
PLUS OF THE
EXCESS OVER
- P 100,000 EXEMPT
P100,000 200,000 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








TAX PAYABLE BY THE DONOR IF DONEE IS A STRANGER
-30% of the net gifts

STRANGER:
a. Brother, sister (whether by whole or half-blood), legally adopted child
spouse, ancestor, and lineal descendant; or
b. Relative by consanguinity in the collateral line within the 4
th
degree of
relationship
c. donation made between business organizations and those made
between an individual and a business organization

DONATIONS TO POLITICAL PARTY OR COALITION OF PARTIES FOR
ELECTION CAMPAIGN
-governed by the Election Code
-Political/electoral contributions, duly reported to the COMELEC, are not subject
to the payment of any gift tax.

FILING OF RETURNS AND PAYMENTS OF DONORS TAX (Sec. 103)

Requirements:
-any person making a donation unless donation is specifically exempt is required,
for every donation, to accomplish under oath a donors tax return in duplicate.

TIME AND PLACE OF FILING AND PAYMENT

Donors tax return: filed within 30 days after the date the gift is made or
completed, no extension allowed

Tax due: paid at the same time that the return is filed/ pay as you file

Place of filing:
a. authorized agent bank
b. revenue district officer
c. revenue collection officer
d. duly authorized treasurer of the city or municipality where the donor was
domiciled at the time of the transfer
e. if there be no legal residence in the Philippines: Office of the Commissioner
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f. the case of gifts made by a non-resident, the return may be filed with the
Philippine Embassy or consulate in the country where he is domiciled at the time
of the transfer; or directly with the Office of the Commissioner

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Office of the commissioner shall refer to the revenue District Office having
jurisdiction over the BIR-National Office Building which houses the Office of the
Commissioner or presently, to the revenue District Office (Sec. 13, RR 2-03)


COMPILED NOTES: SABABAN, MAMALATEO & CHAVEZ
MARIVIC B. DE GRACIA
TAXATION 2
MARIVIC DE GRACIA

6

NOTICE OF A DONATION BY A DONOR ENGAGED IN BUSINESS

-In order to be exempt from donors tax and to claim full deduction of the donation
the following must concur:

1. ACCREDITATION- given to qualified done institution duly accredited by the
Philippine Council for NGO certification Inc.

2. NOTICE OF DONATION- the donor engaged in business shall give a notice of
donation on every donation worth at least P50,000 to the revenue district office
which has jurisdiction over his place of the business within 30 days after receipt of
the qualified done institution, which shall be attached to the notice of donation

3. CERTIFICATION OF DONATION- stating that not more than 30% of said
donation for the taxable year shall be used such accredited non stock, non profit
corporation for administration purposes.