DONOR’S TAX

Section 11. RATE OF DONOR’S TAX

KEYWORDS NOTES
Rate 6% computed on the basis of the total gifts in excess of Two Hundred
Fifty Thousand (P 250,000) exempt gift made during the calendar year.

Application of rate is imposed on donations made on or after January 1,

2018
Contribution for Any contribution in cash or in kind to any candidate, political party
election campaign coalition of parties for campaign purposes, shall be governed by the
Election Code, as amended.

Section 12. THE LAW THAT GOVERNS THE IMPOSITION OF DONOR’S TAX

KEYWORDS NOTES
Definition Donor’s tax is not a property tax, but is a tax imposed on the transfer of
property by way of gift inter vivos.
Donor’s tax shall not apply unless and until there is a completed gift.
Essential Elements  Capacity of the donor- refers to the condition and legal competence
of the done to enter a valid contract since donation is a contract.
 Donative Intent- willful intent of the donor to legally transfer such
rights or properties without any consideration.
 Delivery of the gift- donating party needs to deliver the gift either
actually or constructively.
 Acceptance of the Donee- gift must be accepted by the donee in
order to have a donation.
Donation of In order to be valid, it must be made in a public document specifying
immovable therein the property donated.
property 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 acceptance is in separate instrument, donor shall be notified thereof in
an authentic form and this step shall be noted in both instruments.
Subject to Donor’s Renunciation by the surviving spouse of his/her share in the conjugal
tax partnership or absolute community after dissolution of marriage in favor
of the heirs of the deceased spouse or any other person/s
Not Subject to General renunciation by an heir, including the surviving spouse, of
Donor’s tax his/her share in the hereditary estate left by the decedent
Transferred When property is transferred for less than its FMV at the time of the
property deemed a execution of the Deed of Sale, the difference between the FMV and the
gift selling price for the property shall be deemed a gift and shall be
included in computing the amount of gifts received by the donee for the
calendar year.
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Section 13. VALUATION OF GIFTS MADE IN PROPERTY

KEYWORDS NOTES
Day of Reckoning The reckoning point for valuation shall be the date when the donation is
made.
Basis of Valuation The properties comprising the gross estate shall be valued according to their
fair market value as of the time of decedent's death.
Properties > If real property, the appraised value thereof as of the time of death shall
be, whichever is higher:
(1) The fair market value as determined by the Commissioner, or
(2) The fair market value as shown in the schedule of values fixed by
the provincial and city assessors, whichever is higher.

> In case of shares of stocks, the fair market value shall depend on whether
the shares are listed or unlisted in the stock exchanges.
 Unlisted common shares - are valued based on their book value
 Unlisted preferred shares - are valued at par value
 Listed shares - the fair market value shall be the arithmetic mean
between the highest and lowest quotation at a date nearest the date
of death, if none is available on the date of death itself

> The fair market value of units of participation in any association,

recreation or amusement club (such as golf, polo, or similar clubs), shall be
the bid price nearest the date of death published in any newspaper or
publication of general circulation.

Section 14. COMPUTATION OF THE DONOR’S TAX

Rate 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 :
single tax rate of 6% of net donations is imposed for gifts above
P250,000 yearly regardless of relationship to the donor.

Section 15. FILING OF RETURNS AND PAYMENT OF DONOR’S TAX

KEYWORDS NOTES
Requirements A return is required in all cases of transfer by gifts except those
which are exempt under the NIRC.
Return Shall set forth:
1. Each gift made during the calendar year which is to be
included in
gifts;
2. The deduction claimed and allowable;
3. Any previous net gifts made during the same calendar year;
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4. The name of the donee; and
5. Such further information as the Commissioner may require.

Time & Place of The return shall be filed within 30 days after the date of the gift was
filing the payment made and the tax due thereon shall be paid at the time of filing with an
authorized agent bank, 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 is no legal residence in the Philippines, with the Office of the
Commissioner.
Gifts made by a non- The return may be filed with the Philippine embassy or consulate
resident in the country where the donor is domiciled at the time of the transfer
or directly with the Office of the Commissioner.

Notice of Donation A donation may be exempt from donor’s tax for the donor engaged in
by a donor engaged business shall give on every donation worth at least Fifty Thousand
in business Pesos (P50,000) to the RDO which has jurisdiction over his place of
business within thirty (30) days after receipt of qualified donee
institution duly issued Certificate of Donation, shall be attached to the
notice of donation.
Rules also requires that not more than 30 percent of the gifts shall
be used by the donee institution for administration purposes. (I.e.,
salaries, rent)

Section 16. TRANSFER FOR LESS THAN ADEQUATE AND FULL CONSIDERATION

When property (other Property transferred for less than adequate and full consideration in
than real property) is money/money’s worth:
deemed a gift Fair market value of property > value of consideration

Included in computation of gifts made during the calendar year.

Sale, Exchange, other Considered made for an adequate and full consideration in money/money’s
than transfer of worth.
property made in
ordinary course of
business (free from
any donative intent)

Section 17. EXEMPTION OF CERTAIN GIFTS

Exemption from 1. Gifts made to or for the use of National Government or any
Donor’s tax entity created by any of its agencies which is not conducted for
profit, or to any political subdivision of said government.
2. Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution, accredited non-
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government 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
donee for administration purposes.

Section 18. REPEALING CLAUSE. – All existing rules and regulations or parts thereof, which
are inconsistent with the provisions of these regulations, are hereby repealed, amended or
modified accordingly.

Section 19. SEPARABILITY CLAUSE. – If any clause, sentence, provision or section of these
Rules shall be held invalid or unconstitutional, the remaining parts thereof shall not be affected
thereby.

Section 20. EFFECTIVITY. – These regulations are effective beginning January 1, 2018, the
effectivity of the TRAIN Law.

EXAMPLE PROBLEMS:

1. How much is the donor’s tax due on these donations?

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)

Tax Due / Payable on the January Donation = 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

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Tax Due / Payable on the March Donation 60,000

3. August 15, 2018 500,000

August 15, 2018 500,000

Add: January 2018 donation 2,000,000

Add: 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