DONOR'S TAX

SEC. 98. Imposition of Tax. (A) There shall be levied, assessed, collected and paid upon the
transfer by any person, resident or nonresident, of the property by
gift, a tax, computed as provided in Section 99.
(B) The tax shall 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.
-

TRANSFER of the property by gift

o If not by gift, it may sale (capital gains tax or income
tax) or inheritance (estate tax)
o Refers to donation inter vivos
If donation mortis causa, estate tax

Kinds of donations
1. Donation inter vivos - A donation made between living
persons. Its perfection is at the moment when the donor knows
the acceptance of the donee. It is subject to donors tax.
2. Donation mortis causa - donation which takes effect upon
the death of the donor. It is subject to estate tax.
SEC. 99. 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

100k or less, EXEMPTED from Donors Tax

Up to 15% (lower than estate tax which is up to 20%)
But if donation if for a stranger, 30% of NET gifts

COMPOSITION OF GROSS GIFT

1. For resident citizen, non-resident citizen, and resident alien
wherever situated;
a. Real property wherever situated within & without the
Philippines;

b. Personal property wherever situated, tangible or intangible.

2. For non-resident alien - only within Phils;
a. Real property situated within the Philippines;
b. Personal property:
i. Tangible property situated within the Philippines
ii. Intangible personal property with situs in the
Philippines unless exempted on the basis of reciprocity
(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.
NET GIFT - is the net economic benefit from the transfer that
accrues to the donee.
- If a mortgaged property is transferred as a gift, but imposing
upon the donee the obligation to pay the mortgage liability,
then the net gift is measured by deducting from the fair
market value of the property the amount of mortgage
assumed.
'STRANGER' - a person who is NOT a:
a. Brother, sister (whether by whole or half-blood)
b. spouse,
c. ancestor and lineal descendant; or
d. 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.
SEC. 100. Transfer for Less Than Adequate and Full
Consideration. - Where property, other than real property
referred to in Section 24(D), is transferred for less than an adequate
and full consideration in money or money's worth, then the amount
by which the fair market value of the property exceeded the value of
the consideration shall xxx be deemed a gift, and shall be included
in computing the amount of gifts made during the calendar year.
-

In case consideration for the transfer is not adequate, the

excess of the FMV of the property over the actual value of
consideration shall be subject to donor's tax
this rule DOES NOT apply when the property is a capital asset.
The transfer for less than adequate and full consideration,
which gives rise to a deemed gift, does not apply to a sale of
property subject to capital gains tax.
This rule only applies to ordinary asset:

1. Stock in trade of the taxpayer or other property of a kind which would

properly be included in the inventory of the taxpayer if on hand at the
close of the taxable year
2. Property held by the taxpayer primarily for sale to customers in the
Ordinary course of trade or business
3. Property Used in the trade or business of a character which is subject to
the allowance for depreciation provided in the NIRC
4. Real property used in trade or business of the taxpayer

SEC. 101. GIFTS EXEMPTED from DONORS TAX

(A) In the Case of Gifts Made by a Resident. (1) Dowries or gifts made on account of marriage and 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;
(2) 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;
and
(3) Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution, accredited
nongovernment organization, trust or philanthropic organization
or research institution or organization: Provided, however, That
not more than 30% of said gifts shall be used xxx for
administration purposes.
(4) (additional) net gifts of the amount of 100K or less
For the purpose of this exemption, a 'non-profit educational
and/or charitable corporation, institution, accredited
nongovernment organization, trust or philanthropic
organization and/or research institution or organization'
is a school, college or university and/or charitable corporation,
accredited nongovernment organization, trust or philanthropic
organization and/or research institution or organization,
incorporated as a non-stock entity, paying no dividends,
governed by trustees who receive no compensation, and
devoting all its income, whether students' fees or gifts, donation,
subsidies or other forms of philanthropy, to the accomplishment
and promotion of the purposes enumerated in its Articles of
Incorporation.
-

Requisites for the exemption of dowries

1. The gift is given on account of marriage;
2. The gift is given before the celebration of marriage or
within 1 year thereafter;
3. Donor is the parent or both parents;
4. Donee is the legitimate, recognized natural or legally

adopted child of the donor; and

5. Maximum amount of the exemption is P10,000 for each
child that may be claimed by each parent.

(B) Exempted Gifts Made by a Nonresident Alien of the

Philippines.
- the same as citizens but not to dowries or gifts by reason of
marriage
(1) 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.
(2) Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution, foundation,
trust or philanthropic organization or research institution or
organization: Provided, however, That not more than thirty
percent (30%) of said gifts shall be used by such donee for
administration purposes.
(C)Tax Credit for Donor's Taxes Paid to a Foreign Country. (1) In General. - The tax imposed by this Title upon a donor
who was a citizen or a resident at the time of donation shall
be credited with the amount of any donor's tax of any character
and description imposed by the authority of a foreign country.
(2) Limitations on Credit. - The amount of the credit taken
under this Section shall be subject to each of the following
limitations:
(a) The amount of the credit in respect to the tax paid to any
country shall not exceed the same proportion of the tax
against which such credit is taken, which the net gifts
situated within such country taxable under this Title bears to
his entire net gifts (per country basis)
(b) The total amount of the credit shall not exceed the same
proportion of the tax against which such credit is taken,
which the donor's net gifts situated outside the Philippines
taxable under this title bears to his entire net gifts (overall
basis)

SEC. 102. Valuation of Gifts Made in Property.

If the gift is (personal) property = the FMV at the time of the
gift
In case of real property, the provisions of Section 88(B) shall
apply to the valuation thereof.

SEC. 88. Determination of the Value of the Estate. (A) Usufruct. - To determine the value of the right of
usufruct, use or habitation, as well as that of annuity, there
shall be taken into account the probable life of the
beneficiary in accordance with the latest Basic Standard
Mortality Table, to be approved by the Secretary of Finance,
upon recommendation of the Insurance Commissioner.
(B) Properties. - The estate shall be appraised at its FMV
as of the time of death.
Or whichever is higher between:
(1) The FMV determined by the Commissioner; or
(2) The FMV shown in the schedule of values fixed by the
Provincial and City Assessors.
If NO zonal value, the FMV that appears in the
latest tax declaration.
If there is an improvement, the value of
the 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.
SEC. 103. Filing of Return and Payment of Tax. (A) Requirements. - any individual who makes any transfer by gift
(except those exempted) xxx make a return under oath in duplicate.
The return shall set forth:
(1) Each gift made during the calendar year which is to be
included in computing net gifts;
(2) The deductions claimed and allowable;
(3) Any previous net gifts made during the same calendar year;
(4) The name of the donee; and
(5) Such further information as may be required by rules and
regulations made pursuant to law.
(B) Time and Place of Filing and Payment - The return of the
donor required in this Section shall be filed
- within thirty (30) days after the date the gift is made and
- the tax due thereon shall be paid at the time of filing.
Except in cases where the Commissioner otherwise permits, the
return shall be filed and the tax paid to an authorized agent bank,
the Revenue District Officer, Revenue Collection Officer or duly
authorized Treasurer of the city or municipality where the donor was
domiciled at the time of the transfer, or if there be no legal
residence in the Philippines, with the Office of the Commissioner.
In the case of gifts made by a nonresident, 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.
SEC. 104. Definitions. - For purposes of this Title, the terms
'gross estate' and 'gifts' include real and personal property,
whether tangible or intangible, or mixed, wherever situated:
Provided, however, That where the decedent or donor was a
nonresident alien at the time of his death or donation, as the case
may be, his real and personal property so transferred but which are
situated outside the Philippines shall not be included as part of his
'gross estate' or 'gross gift': Provided, further, That franchise
which must be exercised in the Philippines; shares, obligations or
bonds issued by any corporation or sociedad anonima organized or
constituted in the Philippines in accordance with its laws; shares,
obligations or bonds by any foreign corporation eighty-five percent
(85%) of the business of which is located in the Philippines; shares,
obligations or bonds issued by any foreign corporation if such
shares, obligations or bonds have acquired a business situs in the
Philippines; shares or rights in any partnership, business or industry
established in the Philippines, shall be considered as situated in the
Philippines: Provided, still further, that no tax shall be collected
under this Title in respect of intangible personal property:
(a) if the decedent at the time of his death or the donor at the
time of the donation was a citizen and resident of a foreign
country which at the time of his death or donation did not
impose a transfer tax of any character, in respect of intangible
personal property of citizens of the Philippines not residing in
that foreign country, or
(b) if the laws of the foreign country of which the decedent or
donor was a citizen and resident at the time of his death or
donation allows a similar exemption from transfer or death taxes
of every character or description in respect of intangible
personal property owned by citizens of the Philippines not
residing in that foreign country.
The term 'deficiency' means:
(a) the amount by which tax imposed by this Chapter exceeds
the amount shown as the tax by the donor upon his return; but
the amount so shown on the return shall first be increased by
the amount previously assessed (or Collected without
assessment) as a deficiency, and decreased by the amounts
previously abated, refunded or otherwise repaid in respect of
such tax, or
(b) if no amount is shown as the tax by the donor, then the
amount by which the tax exceeds the amounts previously
assessed, (or collected without assessment) as a deficiency, but
such amounts previously assessed, or collected without
assessment, shall first be decreased by the amount previously
abated, refunded or otherwise repaid in respect of such tax.

- Rules on donation of INTANGIBLE personal properties

Under Sec. 104, the following intangible properties shall be
considered as situated in the Philippines for estate and donors
tax purposes:
1. Franchise which must be exercised in the Philippines;
2. Shares, obligations or bonds issued by any corporation or
sociedad anonima) organized or constituted in the Philippines in
accordance with its laws; (domestic corporation)
3. Shares, obligations or bonds by any foreign corporation 85%
of its business is located in the Philippines;
4. Shares, obligations or bonds issued by any Foreign corporation
if such shares, obligations or bonds have acquired a business situs
in the Philippines;
5. Shares or rights in any partnership, business or industry
Established in the Philippines (Sec. 104, NIRC)