lOMoARcPSD|9083520 DOnor's Tax Accountancy (Polytechnic University of the Philippines) StuDocu is not sponsored or endorsed by any college or university Downloaded by sechees mc (secheesmc@gmail.com) lOMoARcPSD|9083520 o DONORS TAX REVIEWER WHAT IS DONOR’S TAX? - o Donor’s tax is an act of liberality “act’ is used by the law, but it is also considered as a “contract’ Transferring gratuitously in favor of another, who accepts it. Imposed upon any person, resident or non-resident An excise tax, not a property tax It is a direct tax Applies to both natural and juridical person Imposed only upon full transfer of ownership, right or interest. Donor’s has both the capacity to enter a contract and has the capacity to dispose. Determined at the perfection of the donation 2. Intention to donate (DONATIVE INTENT) o Refers to the declaration to transfer of the legal owner, without consideration. o Applicable only to direct gift/ donation o Not necessary to indirect gift. o Parent Company-to-Debtor Shareholder transfer is equivalent to dividend distribution. o Parent-to-Subsidiary is not a donation. 3. Delivery o The imposition of donor’s tax is based on the FMV PERFECTION OR COMPLETION OF DONATION Perfection – the donor’ s has the knowledge of donee’s acceptance. Completion – upon delivery, actual or constructive. PURPOSE OF THE DONOR’S TAX INCOMPLETE GIFT? - 4. Acceptance o Must be made during the lifetime of the donor and the donee o Delivery and acceptance are required to consummate a donation The donor has still a reserved interest over the property ** Incomplete gift can be completed by: 1. Renouncement of power or interest by the donor 2. The right to exercise the power or interest ceases. 6% in excess of 250,000 1. Prevent avoidance of estate tax 2. To prevent or compensate for the loss of progressive rates of income tax due to slit gifts. FORMAL REQUIREMENTS OF DONATION Personal Property (Movable) Amount < or = 5000 Form ELEMENTS OF DONATION (CIDA) Oral or in Writing 1. Capacity of the donor o This refers to condition or legal competence to enter a contract Downloaded by sechees mc (secheesmc@gmail.com) >5000 Writing Real or Registrable (Immovable) Regardless of amount Public instrument lOMoARcPSD|9083520 ** Donation is a FORMAL CONTRACT. Donations that are not in accordance with the formalities required by the law is VOID. CLASSIFICATION OF DONATION Intangible without - 1. Simple 2. Renumeratory 3. Modal - AS TO PERFECTION 1. Donation inter-vivos 2. Donation mortis-causa - - It based on the FMV of the property at the time of perfection Donation of real property is valued at the higher between Cir and Provincial/ City Assessor Stocks or securities traded in stock exchange is valued at its arithmetic mean between highest and lowest quotation If not traded in stock exchange: a. Preferred Shares – Par value b. Common shares – BV on the valuation date Cash price is used at the date of purchased. Installment price is not equivalent to FMV Deductions is used to obtain the Net Gift subject to tax Exclusions is used to obtain Gross Gifts COMPOSITION OF GROSS GIFTS Property Property within (personal or real) Property within (personal or real) Intangible within Applies when the donation of intangible property located within PH is made by NRA There is a reciprocity when: a. The donor (NRA) did not impose transfer tax on intangible property owned by the citizen of PH b. The foreign country where NRA resided allows a similar exemption INTANGIBLE PERSONAL PROPERTY in the PH VALUATION OF GROSS GIFTS - Excluded RECIPROCITY RULE AS TO MOTIVE OR PURPOSE - Included Citizen/ Resident Alien NRA Included Included Included Excluded Included ***Included 1. 2. 3. 4. 5. Franchise – WITHIN PH SOB issued by DC SOB issued by FC, which 85% is located WITHIN SOB issued by FC, business situs is WITHIN Shares or right in partnership WITHIN COMPUTATION OF TAXABLE NET GIFTS GROSS GIFTS a. Direct Gift b. Gift (through creation of trust) c. Transfer for insufficient consideration d. Repudiation of inheritance e. Renunciation in a common property f. Condonation of debt DEDUCTIONS a. Encumbrances b. Diminutions c. Government, charitable, education LESS: EXEMPT GIFTS TAXABLE NET GIFTS Downloaded by sechees mc (secheesmc@gmail.com) Citizen/ Resident NRA Allowed Allowed Allowed Allowed Allowed Allowed XX XX 250K XX lOMoARcPSD|9083520 *** Any contribution for campaign purposes is not subject to donor’s tax CUMULATIVE BASIS OF COMPUTING THE NET TAXABLE GIFTS - The computation is based on the cumulative gifts or donation within the same calendar year, regardless of the relationship between the donee and the donor - *** PAYMENT OF LOAN BY THE GUARANTOR - INCLUDED IN GROSS GIFTS 1. Transfer for insufficient consideration - The transfer for insufficient consideration, other than real property subject to capital gains tax, is subject to donor’s tax - Imposed at the execution of contract to sell or deed of sale - Gift = FMV – SP - When the consideration is fictitious, the entire value of the transferred property is subject to donor’s tax - Real property classified as an ordinary asset not those classified as capital asset. The intention is to SELL. - Bargain transaction is not subject to DT 2. Stocks not traded in stock exchange - Gift = FMV – SP - The excess is subject to DT, unless it is sold at arm’s length, free from donative intent. - This kind of property is also subject to CGT. The insolvency of the debtor is irrelevant in determining the donor’s tax The following cases are not subject to DT a. Condonation is due to the rendition of service b. Made in favor of its shareholder If the obligation is jointly entered by the debtor and guarantor, it is payment made by the guarantor is not subject to DT SPLITTING OF GIFTS - A tax minimization scheme (tax avoidance) made in a numerous calendar year. To avoid higher tax due to a higher tax rate. BAYANIHAN TO HEAL AS ONE ACT (RA 11469) Exemption of Imported Materials Donated Subject to ordinary rules of deductibility: 1. Critical or needed healthcare supplies and equipment 2. Materials needed for manufacturing: Given that the manufacturer is listed in DTI Master list and other related bodies Effectivity date – ONLY during the 3-month effectivity of RA 11469, unless extended or withdrawn. Donation for the sole and exclusive purpose of combating COVID is exempt from donor’s tax: 3. Renunciation of share in common property by the surviving spouse and inheritance - Subject to DT - General renunciation is not subject to DT, UNLESS: a. The renunciation is made specifically or categorically in favor of IDENTIFIED heir(s): AND b. In exclusion or disadvantage of other co-heir(s) 4. Condonation or cancellation of debt a. b. c. d. Cash donations Needed healthcare equipment Relief goods Use of property: real or personal REQUIREMENTS TO BE EXEMPTED: 1. Donated to private hospital and non-stock nonprofit institutions 2. Local private and international institution: provided that Downloaded by sechees mc (secheesmc@gmail.com) lOMoARcPSD|9083520 i. There is an actual, direct, and exclusive distribution of the property ii. Partner as conduit machinery with NGO/NGA not conducted for profit x. xi. xii. xiii. xiv. VOID DONATIONS Donations made to or between: 1. Guilty of adultery or concubinage 2. Guilty of the same criminal offense 3. Public officer, his wife, descendants, and ascendants. EXEMT GIFTS 1. 2. 3. Presented in the gross gift of the donor Partake the nature of deductions: used to arrive at TNG Donations not exceeding 250k Gifts to National Government (not conducted for profit) Gift to educational and charitable institutions Provided that: Notice of Donation – use to claim full deduction: a donor engaged in business • For every donation of at least 50k • Stating that not more than 30% will be used for administration purposes. • Within 30 days after the receipt of Certificate of Donation duly issued by the qualified institution 4. Gift to entities under special laws i. Prizes and rewards given to athlete ii. International Rice Research Institution iii. Ramon Magsaysay Award Foundation iv. Philippine Inventor’s Commission v. Integrated Bar of the Philippines vi. Development Academy of the Philippines vii. PH-American Cultural Foundation viii. PhilHealth ix. Task Force on Human Settlement Intramuros Administration Southern Philippines Development Administration National Social Action Council Museum of the Philippine Costumes Aqua-Culture Department of Southeast Asia Fisheries Development Center of the Philippines 5. Encumbrances o Net gift is measured by deducting from FMV the amount of mortgage assumed 6. Diminutions o This refers to the decrease in value of the property as a condition made by the donor. *** For donor’s tax purposes, husband and wife are treated as separate taxpayers TAX CREDIT FOR FOREIGN DONOR’S TAX - Can only be claimed by citizens or residents of the PH If there is only one FC (Net Gifts, FC/Net Gifts, WORLD) X PH DONOR’S TAX DUE = LIMIT Downloaded by sechees mc (secheesmc@gmail.com) VERSUS Actual Tax Paid, FC Allowed Tax Credit (Lower Amount) lOMoARcPSD|9083520 PLACE OF FILING 1. Authorized agent bank 2. Revenue district officer- Place of domicile 3. Revenue collection officer or Office of the Commissioner: if there is no legal residence In case of Non-Resident 1. PH Embassy or Consulate 2. Office of the Commissioner (RDO 30- South Quezon City) CIVIL PENALTIES AND INTEREST 1. Penalty of 25% - no false or fraudulent intent 2. Penalty of 50% - with false or fraudulent intent’ 3. Interest on unpaid tax Interest Rate: i. Under Train Law – 12% ii. Prior to 2018 – 20% ADMINISTRATIVE PROVISONS FILING AND PAYMENT - Duplicate tax return 1. Gift made during the calendar year 2. Deduction claimed and allowed 3. Previous net gifts during CY 4. Name of the donee Downloaded by sechees mc (secheesmc@gmail.com) lOMoARcPSD|9083520 QUERIES: QUERIES 1. Kapag tinatanong ang net gifts, isasama ba yung mga gift na hindi completed? RESPONSE 2. Ang net gifts ay d pa deducted ang 250k Downloaded by sechees mc (secheesmc@gmail.com) lOMoARcPSD|9083520 Downloaded by sechees mc (secheesmc@gmail.com)
