GUIDELINES ON ESTATE AND DONOR'S TAX

(page 4)

Atty. Edwin R. Abella

DONOR'S TAX
A. Definition and Concepts:
Gift tax is an excise on the transfer by a living person to another of
money or other property without consideration.
Donation is an act of liberality whereby a person disposes gratuitously
of a thing or right in favor of another, who accepts it.
What Constitutes A "Gift" For Gift Tax Purposes?
1. Transfer of property without consideration.
2. It also includes sales, exchanges and other dispositions of property
for a consideration to the extent that the value of the property
transferred exceeds the value in money or money's worth of the
consideration received therefor.
Concept of Consideration:
1. Consideration must be measurable in money or money's worth.
Mere legal consideration is not sufficient.
2. The consideration must flow to the donor, mere detriment to the
donee does not satisfy the purpose of the statute.
Commissioner V. Wemyss (324 U.S. 303, 1945)
Marriage is not a consideration reducible to money value. If a person
transfers a property to a trust in consideration of marriage, a gift is
made because no money consideration flows to the transferor/donor.
Donative intent on the part of the tranferor is not an essential element
for the imposition of the gift tax to the transfer.
When Does The "Gift" Occur?
A gift occurs when the donor surrenders CONTROL over the property.
If the donor retains an unlimited power to revoke the gift, it is clear
that no gift has occurred.
ty referred to in Section 24(D) and Section 27(D)(5) of the NIRC).

B. Requisites of A Taxable Gift:

1.
2.
3.
4.

Capacity of the donor

Donative intent (Except gift under Section 93 NIRC)
Acceptance by the donee, and
Delivery of the gift to the donee, actually or constructively.

C. Kinds of Donation:
1. Inter-vivos
2. Mortis causa
3. Indirect donation (Except real property referred to in Section 24(D)
and Section 27(D)(5) of the NIRC).

D. Persons Subject to Donor's Tax:

(Same as in estate tax)
1. Before September 1, 1969 - Only donation made by individual is
subject to donor's tax.
2. On or after September 1, 1969 (RA 6110) Donation made by all
person, whether natural or juridical, is subject to donor's tax.
E. Gross Gifts:
1. Composition -(Same as in estate tax)
2. Valuation - At the time the gift was made (Same as in estate tax)
F. Deductions from the Gross Gift:
1. Dowries or gifts by parents to children on account of marriage,
before
its celebration or within one (1) year thereafter to the extent
ofP10,000.
2. Gifts to the National Government or any of its agencies.
3. Gifts made in favor of an educational, and/or charitable, religious,
cultural or social welfare corporation, foundation, trust or
philanthropic organization or research institution or organization.
4. Encumbrance on the property donated if assumed by the donee in
the deed of donation.
5. Those specifically provided by the donor as a condition of the
donation which will diminish the value of the property received by the
donee.
6. Exempt donation under special laws.

G. Tax Payable by the Donor:

1. On or before December 31, 1972:
a) Donor's and donee's gift taxes were imposed based on graduated rates.
b) Gifts made during previous year or years are collated to the
present gift and the gift tax computed on the total gift.

2. January 1, 1973 to January 15, 1981 (PD 69)

a) Donor's tax was imposed on graduated rates.
b) Gifts made during the previous year or years are computed separately.
c) Donor's tax computed on the total gifts made during each calendar year.
d) Collation of gifts are made only on gifts made during the same calendar
year.
3. January 16, 1981 to July 27, 1992 (PD 1773)
a) Tax payable by the donor in favor of relatives are computed based on the
graduated rates.
b) Tax payable by the donor in favor of stranger is computed at 20% or based
on
graduated rates, whichever is higher.
c) Gifts made during the same calendar year are collated and the donor's tax
computed on the total gifts during the calendar year.
4. July 28, 1992 to December 31, 1997 (RA 7499)
a) Tax payable by the donor on gifts made in favor of relatives is computed
based
on graduated rates.
b) Tax payable by the donor on gifts made in favor of strangers is
computed at 10% of the net gifts.
5. January 1, 1998 to present (RA 8424)
a) Tax payable by the donor on gifts made in favor of relatives is computed
based
on graduated rates.
b) Tax payable by the donor on gifts made in favor of strangers is computed
at
30% of the net gifts.
6. Relatives for donor's tax purposes:
a) Spouse, ancestor and lineal decedent
b) Brother, sister (whether by whole or half blood)
c) Relatives by consanguinity in the collateral lines within the fourth degree of
relationship.

H. Rates of Donor's Tax (RA 8424)

a) Donations to Relatives (Graduated Table)

THE DONORS TAX

SHALL BE

Exempt

OF EXCESS

PLUS

OVER

2%

P100,000

2,000

4%

200,000

14,000

6%

500,000

44,000

8%

1,000,000

204,000

10%

3,000,000

404,000

12%

5,000,000

1,004,000

15%

10,000,000

b) Donations to Stranger - 30%

Sample Problem of Donor's Tax
Mr. Joseph Ramos, single made the following donation's
a) January 15, 1999 - to his brother, Jun, P100,000
b) March 10, 1999 - to Clara, his sister, P250,000
c) Sept 8, 1999 - to his girlfriend, Loi, a brand new car worth P
600,000
d) Oct 25, 1999 - to his father, Carlos, a vacant lot worth P1,000,000
w/ FMV of P800,000 and zonal value of P1,500,000
e) Nov 12, 1999 - to Luis, his brother in law, P 200,000
f) Feb 14, 2000 - to his mother, Maria, P 300,000
Answer:
Date

Donation

a) 1/15/99 Cash
b) 1/15/99 Cash
3/10/99 Cash

Amount Tax Due

100,000

100,000
250,000

Exempt

350,000
Tax on :200,000 2,000
150,000 x 4% 6,000
8,000
Less:Tax on previous
donation -c) 9/8/99 Cash

8,000

600,000-Stranger

Tax Due: 600,000

X 30%
180,000
d) 10/25/99 lot (ZV)1,500,000
3/10/99 Cash
250,000
1/15/99 Cash
100,000
Total donation 1,850,000
Tax on:1,000,000
44,000
850,000 x 8% 68,000
Total Tax Due
112,000
Less:Tax on previous
donation 8,000

104,000

e) 11/12/99 Cash 200,000 - Stranger

Tax Due

200,000
x 30%
60,000

f) 2/14/2000 Cash 300,000

Tax On: 200,000
100,000 x 4%

2000
4000

6,000

Note: Letter (f) was donated in year 2000 therefore; this is not
included in the cumulative total for 1999's donations.

ADMINISTRATIVE REQUIREMENTS ON DONOR'S TAX

A. Donor's Tax Return:
1. Requirements (State the following information/data):
a) Each gift made during the calendar year
b) Deductions claimed and allowable

c) Previous net gifts during the same calendar year

d) Name of donee and address
e) Other pertinent information
2. Time of filing:
a) Before December 31, 1972:
1) On or before March 1 following the close of the calendar year.
b) January 1, 1973 to December 31, 1997
1) Within thirty (30) days after each donation.
2) Extension not exceeding thirty (30) days maybe granted.
c) January 1, 1998 to present
1) Within thirty (30) days after each donation- No Extension
3. Place of filing of donor's tax return
a) Commissioner of Internal Revenue
b) Revenue District Officer, Collection Officer or duly authorized
Treasurer of the municipality where the donor was domiciled
at the time of donation.
B. Payment of Donor's Tax:
1. Donor's tax should be paid at the time the return is filed or
within
thirty (30) days after the date of gift.
2. Extension to pay tax may be granted not exceeding six (6)
months.
Effective January 1, 1998 (RA 8424), no extension for the
payment of the donor's tax shall be granted.
C. Surcharges:
(Same as estate tax)
D. Interest:
(Same as estate tax)