Donor's Tax

• Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.
• A donor's tax is a tax levied, assessed, collected and paid upon the transfer by any person, resident, or nonresident, of the property by gift.
• Donor's tax is a tax imposed on the exercise of the donor's right during lifetime to transfer property to others in the form of gift. Hence, it is not a property tax.
• Purposes of Donor's tax:

  1. To supplement the estate tax
  2. To prevent the avoidance of income taxes.
• Elements of Taxable Donation

  1. Capacity of the donor to transfer property
  2. Donative intent (req. only in direct gift)
  3. Delivery
  4. Acceptance of the gift by the donee (donation is perfected upon this moment)
• For the donation of personal property worth 5000 pesos or less, they can be made orally or in writing. If it exceeds 5000, then it must be in writing.
• Donation of a real property, regardless of amount, shall be in a public document.
• In public document means the donation should be made in writing through a duly executed notarized deed of donation signed by the donor, the done/s, and witnesses.
• First donation of the year:

  Gross Gift xx

  Less: Exemptions/Deductions (xx)

  xx

  Less: Tax Exempt Gift (Train Law) (250,000)

  Net Taxable Gift xx

  x Donor's Tax Rate 6%

  Donor's Tax xx

  Less: Tax Credit (if applicable) (xx)

  Donor's Tax Payable xx
• Subsequent Donation(s) Within the Year

  Gross Gift, Current xx

  Less: Exemptions/Deductions, Current xx

  xx

  Add: Prior Gifts (within the year) xx

  Total xx

  Less: Tax Exempt Gift xx

  Net Taxable Gifts (cumulative) xx

  x Donor's Tax Rate 6%

  Donor's Tax Due (cumulative) xx

  Tax Paid - Prior Gifts (w/in the year) xx

  Tax Credit (If applicable) xx

  Donor's Tax Payable xx
• The computation of the donor's tax is on a cumulative basis over a period of one calendar year (regardless of the relationship of the donor and donee).
• Any contribution in cash or in kind to any candidate, political party of coalition of parties for campaign purposes shall be governed by the Election Code, as amended.
• Transfers subject to donor's tax:

  1. Direct gift
  2. Gift through creation of a trust
  3. Condonation of debt
  4. Repudiation of inheritance if:
  5. specifically and categorically done in favor of identified heirs; and
  6. to the exclusion or disadvantage of other co-heirs
  7. 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
  8. Transfer for insufficient consideration (xpn. RP classified as Capital asset located in the PH)
• Gift from common property - the gift is taxable one-half to each donor spouse
• Donation b/w husband and wife during the marriage

  G.R. Not taxable, as it is declared void by law

  XPN. Moderate gifts b/w the spouses are valid
• Net gift shall mean the net economic benefit from the transfer that accrues to the donee.
• Deductions:

  1. Encumbrances on the property donated assumed by the donee
  2. Diminution of gift provided by the donor
  3. Gifts to the government - gifts for the use of National Government or any agencies which is not conducted for profit
  4. Gifts to educational, charitable, religious corporation etc. (<30% for admin purp)
• Exemption under Special/Other laws

  1. IRRI
  2. Ramon Magsaysay Foundation
  3. Integ Bar of the PH
  4. Development Academy of the Philippines
  5. National Museum
  6. National Library
  7. Archives of National Historical Insti
  8. Museum of PH Costumes
  9. Intramuros Admin
• Donor's tax credit pertains to donor's tax paid abroad which is allowed as deduction from the donor's tax due computed under the Tax Code
• Amount deductible

  1. Actual donor's tax paid abroad
  2. Limit

  Whichever is lower
• Only one FC is involved:

  (Net Gift, foreign/World net gift) x PH Donor's Tax
• 2 or more countries:

  (Net gift all fc/World net gift) x PH Donor's Tax
• The donor's tax shall be filed within 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. Extension period is not applicable.