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ARTICLE 725—749 OF THE CIVIL CODE

Title III. - DONATION
CHAPTER 1
NATURE OF DONATIONS

Art. 725. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts
it. (618a)

Art. 726. When a person gives to another a thing or right on account of the latter's merits or of the services rendered by him to the
donor, provided they do not constitute a demandable debt, or when the gift imposes upon the donee a burden which is less than
the value of the thing given, there is also a donation. (619)

Art. 727. Illegal or impossible conditions in simple and remuneratory donations shall be considered as not imposed. (n)

Art. 728. Donations which are to take effect upon the death of the donor partake of the nature of testamentary provisions, and
shall be governed by the rules established in the Title on Succession. (620)

Art. 729. When the donor intends that the donation shall take effect during the lifetime of the donor, though the property shall not
be delivered till after the donor's death, this shall be a donation inter vivos. The fruits of the property from the time of the
acceptance of the donation, shall pertain to the donee, unless the donor provides otherwise. (n)

Art. 730. The fixing of an event or the imposition of a suspensive condition, which may take place beyond the natural expectation
of life of the donor, does not destroy the nature of the act as a donation inter vivos, unless a contrary intention appears. (n)

Art. 731. When a person donates something, subject to the resolutory condition of the donor's survival, there is a donation inter
vivos. (n)

Art. 732. Donations which are to take effect inter vivos shall be governed by the general provisions on contracts and obligations in
all that is not determined in this Title. (621)

Art. 733. Donations with an onerous cause shall be governed by the rules on contracts and remuneratory donations by the
provisions of the present Title as regards that portion which exceeds the value of the burden imposed. (622)

Art. 734. The donation is perfected from the moment the donor knows of the acceptance by the donee. (623)

CHAPTER 2
PERSONS WHO MAY GIVE OR RECEIVE A DONATION

Art. 735. All persons who may contract and dispose of their property may make a donation. (624)

Art. 736. Guardians and trustees cannot donate the property entrusted to them. (n)

Art. 737. The donor's capacity shall be determined as of the time of the making of the donation. (n)

Art. 738. Al those who are not specially disqualified by law therefor may accept donations. (625)

Art. 739. The following donations shall be void:

(1) Those made between persons who were guilty of adultery or concubinage at the time of the donation;

(2) Those made between persons found guilty of the same criminal offense, in consideration thereof;

(3) Those made to a public officer or his wife, descedants and ascendants, by reason of his office.

In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the
guilt of the donor and donee may be proved by preponderance of evidence in the same action. (n)

Art. 740. Incapacity to succeed by will shall be applicable to donations inter vivos. (n)

Art. 741. Minors and others who cannot enter into a contract may become donees but acceptance shall be done through their
parents or legal representatives. (626a)

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Art. 742. Donations made to conceived and unborn children may be accepted by those persons who would legally represent them
if they were already born. (627)

Art. 743. Donations made to incapacitated persons shall be void, though simulated under the guise of another contract or through
a person who is interposed. (628)

Art. 744. Donations of the same thing to two or more different donees shall be governed by the provisions concerning the sale of
the same thing to two or more different persons. (n)

Art. 745. The donee must accept the donation personally, or through an authorized person with a special power for the purpose, or
with a general and sufficient power; otherwise, the donation shall be void. (630)

Art. 746. Acceptance must be made during the lifetime of the donor and of the donee. (n)

Art. 747. Persons who accept donations in representation of others who may not do so by themselves, shall be obliged to make the
notification and notation of which Article 749 speaks. (631)

Art. 748. The donation of a movable may be made orally or in writing.

An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated.

If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in
writing, otherwise, the donation shall be void. (632a)

Art. 749. In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the
property donated and the value of the charges which the donee must satisfy.

The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it
is done during the lifetime of the donor.

If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be
noted in both instruments. (633)

SUBSECTION 1. - Relationship

Art. 963. Proximity of relationship is determined by the number of generations. Each generation forms a degree. (915)

Art. 964. A series of degrees forms a line, which may be either direct or collateral.

A direct line is that constituted by the series of degrees among ascendants and descendants.

A collateral line is that constituted by the series of degrees among persons who are not ascendants and descendants, but who
come from a common ancestor. (916a)

Art. 965. The direct line is either descending or ascending.

The former unites the head of the family with those who descend from him.

The latter binds a person with those from whom he descends. (917)

Art. 966. In the line, as many degrees are counted as there are generations or persons, excluding the progenitor.

In the direct line, ascent is made to the common ancestor. Thus, the child is one degree removed from the parent, two from the
grandfather, and three from the great-grandparent.

In the collateral line, ascent is made to the common ancestor and then descent is made to the person with whom the computation
is to be made. Thus, a person is two degrees removed from his brother, three from his uncle, who is the brother of his father, four
from his first cousin, and so forth. (918a)

Art. 967. Full blood relationship is that existing between persons who have the same father and the same mother.

Half blood relationship is that existing between persons who have the same father, but not the same mother, or the same mother,
but not the same father. (920a)
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Art. 968. If there are several relatives of the same degree, and one or some of them are unwilling or incapacitated to succeed, his
portion shall accrue to the others of the same degree, save the right of representation when it should take place. (922)

Art. 969. If the inheritance should be repudiated by the nearest relative, should there be one only, or by all the nearest relatives
called by law to succeed, should there be several, those of the following degree shall inherit in their own right and cannot
represent the person or persons repudiating the inheritance. (923)

SEC. 11—17 OF RR NO. 12-2-18 DATED 25 JAN. 2018

SEC. 11. RATE OF DONOR’S TAX

1.1 Rate. – The donor’s tax or each calendar year shall be six percent (6%) computed on the basis of the total gifts in excess of Two
Hundred Fifty Thousand Pesos (P250,000) exempt gift made during the calendar year.

1.2 The application of the rates as provided above is imposed on donations made on or after the effectivity date of the TRAIN Law.

1.3.Contribution for election campaign. – 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. 12. THE LAW THAT GOVERNS THE IMPOSITION OF DONOR’S TAX.

The donor’s tax is not a property tax, but is a tax imposed on the transfer of property by way of gift inter vivos. (Lladoc
vs. Commisioner of Internal Revenue, L-19201, June 16, 1965; 14 SCRA, 292). The donor’s tax shall not apply unless and
until there is a completed gift. The transfer of property by gift is perfected from the moment the donor knows of the
acceptance by the done; it is completed by the delivery, either actually or constructively, of the donated property to
the done. Thus, the law in force at the time of the perfection/completion of the donations hall govern the imposition
of the donor’s tax.

In order that the donation of an immovable may be valid, it must be made in a public document specifying therein the
property donated. The acceptance may be made in the same Deed of Donation or in a separate public document,
but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in a separate
instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.

A gift that is incomplete because of reserved powers, becomes complete when either: (1) the donor renounces
the power; or (2) his right to exercise the reserved power ceases because of the happening of some event or contingency
or the fulfilment of some condition, other than because of the donor’s death.

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/s is subject to donor’s
tax whereas general renunciation by an heir, including the surviving spouse, of his/her share in the hereditary estate left
by the decedent is not subject to donor’s tax, unless specifically and categorically done in favor of identified heir/s to the
exclusion or disadvantage of the other co-heirs in the hereditary estate.

Where property, other than a real property that has been subjected to the final capital gains tax, is transferred
for less than an adequate and full consideration in money or money’s worth, then the maount by which the fair market
value of the property at the time of the execution of the Contract to Sell exceeded the value of the agreed or actual
consideration or selling price shall be deemed a gift, and shall be included in computing the amount of gifts made during
the calendar year.

The law in force at the time of the completion of the donation shall govern the imposition of donor’s tax.

For purposes of the donor’s tax, “NET GIFT” shall mean the net economic benefit from the transfer that accrues
to the donee. Accordingly, if a mortgaged property is transferred as a gift, but imposing upon the done 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.

SEC. 13. VALUATION OF GIFTS MADE IN PROPERTY. – The valuation of gifts in the form of property shall follow the rules
set forth in Section 6 of this regulations: Provided, that the reckoning point for valuation shall be the date when the donation is
made.

SEC. 14. COMPUTATION OF THE DONOR’S TAX. – Donations shall be subject to donor’s tax applicable when the donations
are made. Hence, for donor’s tax purposes, donations made before January 1, 1998 shall be subject to the donor’s tax computed

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on the basis of the old rates imposed under Section 92 of the National Internal Revenue Code of 1977 (R.A. No. 7499), while
donations made on or after January 1, 1998 until Dec. 31, 2017 shall be subject to the donor’s tax computed in accordance with the
amended schedule of rates prescribed under Sec. 99 of the NIRC of 1994 (R.A. No. 8424), implemented by RR No. 2-2003, as
amended. Only donations made on or after January 1, 2018 shall be subject to the donor’s tax rate provided under the TRAIN Law
as implemented by these Regulations.

The computation of the donor’s tax is on a cumulative basis over a period of one calendar year. Husband and wife are considered
as separate and distinct taxpayer’s for purposes of the donor’s tax. However, if what was donated is a conjugal or community
property and only the husband signed the deed of donation, there is only one donor for donor’s tax purposes, without prejudice to
the right of the wife to question the validity of the donation without her consent pursuant to the pertinent provisions of the Civil
Code of the Philippines and the Family Code of the Philippines.

Illustration:

Donations were made on January 30, 2018 at P2,000,000; on March 30, 2018 at P1,000,000; and August 15, 2018 at
P500,000.

Date of donation Amount Donor’s Tax

1. January 30, 2018 P2,000,000
January 30, 2018 donation 2,000,000
Less: Exempt Gift (250,000)
1,750,000 P105,000
2. March 30, 2018 1,000,000
March 30, 2018 donation 1,000,000
Add: January 30, 2018 donation 2,000,000
Less: Exempt Gift (250,000)
Total 2,750,000

Tax Due Thereon 165,000

Less: Tax due/paid on January donation 105,000
Tax due/payable on the March donation 60,000

3. August 15, 2018 500,000

August 15, 2018 donation 500,000
Add: January 2018 donation 2,000,000
March 2018 donation 1,000,000
Less: Exempt Gift (250,000)
Total 3,250,000

Tax Due Thereon 195,000

Less: Tax due/paid on Jan./March donation 165,000
Tax due/payable on the August donation 30,000

Solution/computation:

SEC. 15. FILING OF RETURNS AND PAYMENT OF DONOR’S TAX. -

(A) Requirements. – Any person making a donation (whether direct or indirect), unless the donation is specifically
exempt under the NIRC or other special laws, is required, for every donation, to accomplish under oath a donor’s tax return in
duplicate. The return shall set forth:

1. Each gift made during the calendar year which is to be included in 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 the Commissioner may require.

(B) Time and place of filing and payment. – The donor’s tax return shall be filed within thirty (30) days after the date the
gift is made or completed and the tax due thereon shall be paid at the same time that the return is filed. Unless the Commissioner
otherwise permits, the return shall be filed and the tax paid to an AAB, the Revenue District Officer and Revenue Collection Officer

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having jurisdiction over the place where the donor is 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 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. For this purpose, the term “OFFICE OF THE COMMISSIONER” shall refer to the Revenue District Office (RDO) having
jurisdiction over the BIR-National Office Building which houses the Office of the Commissioner, or presently, to the Revenue
District Office No. 39-South Quezon City.

(C) Notice of donation by a donor engaged in business. – In order to be exempt from donor’s tax and to claim full
deduction of the donation given to qualified-donee institutions duly accredited, the donor engaged in business shall give a notice
of donation on every donation worth at least Fifty Thousand Pesos (P50,000) to the Revenue District Office (RDO) which has
jurisdiction over his place of business within thirty (30) days after receipt of the qualified donee institution’s duly issued Certificate
of Donation, which shall be attached to the said Notice of
Donation, stating that not more than thirty percent (30%) of the said donation/gifts for the taxable year shall be used by such
accredited non-stock, non-profit corporation/NGO institution (qualified-donee institution) for administration purposes pursuant to
the provisions of Section 101(A)(3) and (B)(2) of the NIRC.

SEC. 16. 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, for the purpose of the tax
imposed by this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar
year: Provided, however, that a sale, exchange, or other transfer of property made in the ordinary course of business (a
transaction which is a bona fide, at arm’s length, and free from any donative intent) will be considered as made for an adequate
and full consideration in money or money’s worth.

SEC. 17. EXEMPTION OF CERTAIN GIFTS. - The following are exempt from the donor’s tax:

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; and

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 thirty percent (30%) of said gifts shall be used by such donee for administration purposes.
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.

SEC. 98—104 OF NIRC as amended by Sec. 28 to 30 of R.A. No. 10963

CHAPTER II
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.

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:

Over But Not Over The Tax Shall be Plus Of the Excess Over
P 100,000 Exempt
P 100,000 200,000 0 2% P100,000
200,000 500,000 2,000 4% 200,000
500,000 1,000,000 14,000 6% 500,000

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If the net gift is: 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

(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. For the purpose of this tax, 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 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, for the purpose of the tax imposed by
this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year.

SEC. 101. Exemption of Certain Gifts. - The following gifts or donations shall be exempt from the tax provided for in this Chapter:

(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 Ten thousand pesos (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 thirty percent (30%) of said gifts shall be used by such donee for administration purposes. 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.

(B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. -

(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:

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(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; and

(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.

SEC. 102. Valuation of Gifts Made in Property. - If the gift is made in property, the fair market value thereof at the time of the gift
shall be considered the amount of the gift. In case of real property, the provisions of Section 88(B) shall apply to the valuation
thereof.

SEC. 103. Filing of Return and Payment of Tax. -

(A) Requirements. - any individual who makes any transfer by gift (except those which, under Section 101, are exempt from the tax
provided for in this Chapter) shall, for the purpose of the said tax, 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.

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