October 2023
DONOR’S TAX
Atty. C. Llamado
-
Also called Gift Tax
Imposed on the gratuitous transfer of real or personal, tangible or intangible property.
Imposed whether the transfer is in trust or otherwise.
Purpose:
1) To prevent avoidance of the estate tax
2) To compensate for the loss or decrease of income and estate taxes
when large estates are split.
Requisites:
1) Transfer is gratuitous or without consideration. The transfer is made out
of pure generosity of the donor (donative intent).
2) Both the donor and the donee are living at the time of the transfer (inter
vivos).
3) There must be a completed gift, i.e. there must be delivery, actually or
constructively, of the donated property to the donee.
Notes:
a) Renunciation by the surviving spouse of his or her share in the
conjugal or community properties after the dissolution of the
marriage in favour of the heirs of the deceased spouse or any other
person, is subject to donor’s tax.
b) However, a general renunciation by an heir (including a surviving
spouse) of his share in the hereditary estate left by the decedent does
not give rise to a donation. Therefore, it is not subject to donor’s
tax.1
The renunciation by an heir of his share in the estate shall give rise
to a donation subject to a donor’s tax when:
(i) the renunciation is specifically and categorically done in favor
of identified heir or heirs to the exclusion of other co-heirs of
the estate; or
(ii) it is a partial renunciation where the heir waives his share to
only identified properties but not to the entire properties of the
decedent.2
In the 2 cases above, donor’s tax will be imposed on the value
foregone as a result of such waiver/renunciation.
1
Since there is no donation, there is also no Documentary Stamp Tax (“DST”) due (RMC No. 102-2019).
2
RMC No. 94-2021.
1
October 2023
Contract of Donation
When perfected? At the moment the donor knows of the acceptance of the gift by the done.3
Who can be donors? All persons who may contract and dispose of their property may make a
donation.4
Who can be donees? All those who are not specially disqualified by law may accept donations.5
Minors and others who cannot enter into a contract may become donees,
but acceptance shall be done through their parents or legal representatives.6
Donations made to conceived and unborn children may be accepted by those
persons who would legally represent them if they were already born.7
What donations shall be void?
1) Between spouses, whether direct or indirect, during the marriage, except moderate gifts
which the spouses may give each other on the occasion of any family rejoicing;8
Note: Indirect donations to a spouse are void, and include the following donations
of a spouse:9
a) To a stepchild who has no compulsory heirs other than the other spouse at the
time of the donation;
b) To a common child who has no compulsory heirs other than the other spouse at
the time of the donation;
c) To the parents of the other spouse;
d) To the other spouse’s adopted child in cases when, at the time of the donation,
the only surviving relatives of the adopted is the adopter-spouse, the illegitimate
children of the adopted, and the surviving spouse of the adopted;
e) To a common adopted child who has no other surviving heirs.
2) Between persons living together as husband and wife without a valid marriage;10
3) Between persons guilty of concubinage or adultery at the time of donation;11
4) Between persons found guilty of the same criminal offense, in consideration thereof;12
5) Those made to a public officer or his/her spouse, descendants, and ascendants, by reason
of his or her office;13
6) Donations made by persons to those who cannot inherit from them:14
(a) Donations to the priest who heard the confession of the donor during his last illness, or
the minister who extended spiritual aid to him during the same period;
3
Art. 734, Civil Code.
Art. 735, Civil Code.
5
Art. 738, Civil Code.
6
Art. 741, Civil Code.
7
Art. 742, Civil Code.
8
Art. 87, Family Code.
9
Art. 190. Family Code.
10
Art. 87, Family Code.
11
Art. 739, Civil Code.
12
Ibid.
13
Ibid.
14
Arts. 740 and 1027, Civil Code.
4
2
October 2023
(b) Donations to the relatives of such priest or minister in (a) within the 4th degree;
(c) Donations to the church, order, chapter, community, organization, or institution to
which such priest or minister in (a) belongs;
(d) Those made to a guardian with respect to donations made by a ward before the final
accounts of the guardianship have been approved, except when the guardian is the
ward’s ascendant, descendant, brother, or sister;
(e) Any physician, surgeon, nurse, health officer, or druggist who took care of the donor
during his last illness.
Donation of Movables
(1) Donation may be oral or in writing.
(a) If orally made, it requires the simultaneous delivery of the thing or the document
representing the right donated.
(b) If in writing, it does not require simultaneous delivery of the thing donated.
(2) Acceptance may be oral, in writing, or tacit.
If value of the movable does not exceed ₱5,000, the donation may be oral or in writing,
and the acceptance may be oral, in writing, or tacit.
If the value of the movable exceeds ₱5,000, the donation and the acceptance must be in
writing, otherwise the donation is void. Without such writing, the donation would be void,
even if there is simultaneous delivery.15
Donation of Immovables
Donation must be in writing and in a public instrument (notarized).
Acceptance may be made in the same deed of donation or in a separate public instrument.
The acceptance must be done during the lifetime of the donor, and the latter must be
notified of the acceptance.
15
Art. 748, Civil Code.
3
October 2023
OTHER TRANSACTIONS SUBJECT TO DONOR’S TAX
(1) Transfers for Insufficient Consideration16
Requisites:
(a) The property transferred is real or personal property, except real property classified
as a capital asset subject to the 6% CGT upon its sale or transfer;
(b) The transfer is for less than a full price;
(c) The transfer is inter vivos; and
(d) The transaction is not an arm’s length transaction or bona fide transaction. The party
transferring the property for less than a full price has an intention to donate the same.
Purpose: To prevent escape from the income tax by accepting a lower price for the
property.
Tax Consequences:
Gift (subject to the Donor’s Tax)
FMV of the property transferred
Less: Price (consideration) received
Income (subject to Income Tax)
Price (consideration) received
Less: Cost
In Transfers for Insufficient Consideration in the Sale of Domestic Shares of
Stock:
FMV of share of stock sold, bartered or exchanged shall be as follows:
(1) If the shares are listed, but are sold, bartered, or exchanged outside the local
stock exchange, the FMV shall be:
(a) The closing price on the day the shares are sold, bartered, or exchanged; or
(b) The closing price on the day nearest to the date of sale, barter, or exchange
if there is no sales transaction of the shares in the local stock exchange on
the day it was sold, bartered, or exchanged.
(2) If the shares of stock are not listed and traded in the local stock exchange, the
FMV shall be:
(a) For common shares – the book value based on the latest available financial
statements duly certified by an independent public accountant prior to the
date of sale, but not earlier than the immediately preceding taxable year.17
(b) For preferred shares – the liquidation value which is equal to the
redemption price of the preferred shares as of the balance sheet date
nearest to the transaction date, including any premium and cumulative
preferred dividends in arrears.
16
Sec. 100, NIRC, as amended by R.A. No. 10963.
17
In case there are both common and preferred shares, the book value per common share shall be computed
by deducting the liquidation value of the preferred shares from the total equity of the corporation, and
dividing the result by the number of outstanding common shares as of the balance sheet date nearest to the
transaction date.
4
October 2023
EXCEPTION: When the sale/exchange is bona fide, at arm’s length, and free from any
donative intent, the same will be considered as made for an adequate and
full consideration in money or money’s worth.18 In such cases, there is
no insufficient consideration, and therefore no gift.
(2) Condonation or Remission of Debt
- Where the debtor did not render any service in favor of the creditor.
(3) Exercise of granted equity-based compensation by the successor/heir of an
employee-grantee.
NEW
-
18
19
Equity-based compensation granted to an employee may be made transferable to the
employee’s successor/heir. In the event the granted equity-based compensation is
exercised by such successor/heir, the difference between the book value or FMV of the
shares at the time of exercise, whichever is higher, and the price fixed on the grant date,
shall be considered as a donation subject to donor’s tax.19
Sec. 100, NIRC, as amended by R.A. No. 10963.
RMC No. 143-2022.
5
October 2023
GROSS GIFT
-
Depends upon the citizenship and/or residence of the donor:
Donor
Real Property
Within
Without
Tangible Personal
Property
Within
Without
Intangible Personal
Property
Within
Without
Resident Donor:
1) Citizen
2) Resident Alien
Non-resident Donor:
3) Non-resident Alien
(if there is
reciprocity)
Intangible personal property means incorporeal property which do not have any physical form,
but represents rights and privileges. Examples include bank deposits, trademarks, shares of stock,
patents, copyrights, bonds, notes, interest in a partnership, etc.
Intangible Asset
1) Receivable (promissory note)
2) Bank deposit
3) Other intangible properties:
a) Franchises, patents, copyrights, trademarks
b) Investment in partnership
c) Shares of stock, bonds, corporate obligations
(1) Domestic corporation
(2) Foreign corporation
Except:
i) If ≥ 85% of business is in the Philippines
ii) If shares or bonds have acquired a business
situs in the Philippines
Situs
Residence of the debtor
Location of the bank
Where property is used or exercised
Where partnership is established
Within the Philippines
Without the Philippines
Within the Philippines
Within the Philippines
Gross Gift of Husband and Wife
Husband and wife may donate:
(a) The conjugal or community properties. Each spouse shall be considered a separate
donor of his or her interest in the property: ½ of the conjugal property donated being
a gift of the husband, and the other half that of the wife.
(b) Separate or exclusive property owned by only one spouse.
6
October 2023
VALUATION OF GIFTS
- Properties shall be valued at the time the gift is made.
Property
Real Property
Personal Property
Stocks listed in the stock
exchange
Stocks not listed in any
local exchange
Notes; accounts
receivable
Stock options
Units of participation in
any association,
recreation, or amusement
club
Valuation
FMV which is the higher of the zonal value or the assessor’s value
FMV at the time of the gift
Average of the lowest and highest quotes on the valuation date
(date of gift) or day nearest to the valuation date.
For common shares: Book Value20
For preferred shares, par value.
FMV is the discounted amount of the unpaid principal plus interest.
(1) At the time of donation, the FMV of the stock option
(2) Upon exercise of the option, the difference between the higher
of the BV or FMV of the underlying shares at the time of
exercise, and the exercise price.
Bid price nearest the date of the gift published in any newspaper or
publication of general circulation.
20
In determining the book value, appraisal surplus and the value assigned to preferred shares shall not be
considered.
7
October 2023
EXEMPTIONS (EXCLUSIONS) FROM GROSS GIFT
A) Gifts made to the National Government or to any political subdivision of the
National Government or to any entity created by the government which is not
conducted for profit.
B) Gifts made to educational, charitable, religious, cultural, social welfare
institutions, accredited NGOs and trusts, philanthropic organizations, and
research institutions.
Provided:
1) The non-profit institution is a non-stock entity that pays no dividends, is governed
by trustees who do not receive any compensation, and devotes all of its income to
the accomplishment of its purposes; and
2) Not more than 30% of the gifts shall be used for administrative purposes.
3) The non-profit institution must be accredited by the designated accrediting
government agency, and registered with the BIR.
C) Campaign contributions in cash or in kind to any candidate which are duly
reported to the COMELEC21
Notes:
(1) Only those donations or contributions that have been utilized or spent during the
campaign period as set by the COMELEC are exempt from the donor’s tax. Therefore,
any donation utilized before or after the said campaign period shall be subject to the
donor’s tax.22
(2) Section 35(i) of R.A. No. 11232 (the Revised Corporation Code of the Philippines)
provides that no foreign corporation shall give donations in aid of any political party
or candidate or for purposes of partisan political activity. Accordingly, because the
provision only refers to foreign corporations, domestic corporations are now allowed
to give such donations to any political party or candidate, and the same shall be exempt
from the donor’s tax.
(3) However, campaign contributions are not deductible by either individuals or
corporations for purposes of computing the income tax. Political candidates and
parties are not one of those entities defined by the Tax Code to which a contribution
could be deductible.
D) Other donations which are exempted from the donor’s tax under special laws:
(1) Donation made for the operation of the Dual Training System under R.A. No. 7686.
(2) Donations of cooperatives to duly accredited charitable, research, and educational
institutions, and to socio-economic projects within their area of operations;
(3) Donations of lands certified by the LGU to have been donated for socialized housing
purposes;
(4) Donation to the Philippine Red Cross;
(5) Donations to state universities and colleges.
21
22
R.A. No. 7166.
RMC No. 3-2016; RMC No. 38-2018; RMC No. 31-2019.
8
October 2023
(6) Donations of imported healthcare equipment or supplies23 intended to combat the
COVID-19 public health emergency as well as donations of imported materials needed
to make health equipment and supplies deemed as critical to address said public
emergency, 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
National Government, shall be exempt from the donor’s tax.
Moreover, donations of (a) cash, (b) critical or needed healthcare equipment or
supplies, (c) relief goods such as, but not limited to food packs (rice, canned goods,
noodles, etc.) and water, and (d) the use of real or personal property (shuttle services,
use of lots/buildings) shall also be exempt from donor’s tax when given to the following
donees:24
(1) (a) Private hospitals, (b) non-stock, non-profit educational and/or charitable,
religious, cultural or social welfare corporations, institutions, foundations,
NGOs (even if non-accredited), (c) trusts, (d) philanthropic organizations,
and/or (e) research institutions or organizations; and
(2) Local private corporations, civic organizations, and/or international
organizations/institutions. Provided, they shall (a) actually, directly, and
exclusively distribute and/or transfer said donations to, and/or (b) partner, as
conduits or logistical machineries, with accredited NGOs and/or the National
Government or any entity created by any or its agencies which is not conducted
for profit, or any political subdivision of said government.
Note: The exemption of abovementioned donations started on March 16, 2020 upon
the issuance of Presidential Proclamation No. 929, and shall be available until
the end of the three (3) month effectivity of R.A. No. 11469,25 unless extended
or withdrawn by Congress, or ended by Presidential Proclamation.26
NEW
23
(7) Beginning January 1, 2021 and during the period of the state of calamity as declared in
Presidential Proclamation No. 1201 (September 16, 2020), no donor’s tax shall be
imposed on the donation of COVID-19 vaccines to the following: (1) the National
Government, through the DOH and the National Task Force Against COVID-19
(“NTF”), (2) any of the political subdivisions of the state, (3) private entities, and (4)
international humanitarian organizations (such as the Philippine Red Cross). Provided,
the vaccines are not intended for resale or other commercial use, and shall be distributed
without any consideration from persons to be vaccinated.27
This shall include personal protective equipment (gloves, masks, goggles, face shields, surgical
equipment and supplies); laboratory equipment and its reagents; medical equipment and devices; support
and maintenance for laboratory and medical equipment, surgical equipment and supplies; medical
supplies, tools, and consumables (alcohol, sanitizers, tissue, thermometers, hand soap, detergent, sodium
hydrochloride, cleaning materials, povidone iodine, common medicines); testing kits, and such other
supplies or equipment as may be determined by the DOH and other relevant government agencies. (Rev.
Reg. No. 6-2020).
24
Rev. Reg. No. 9-2020.
R.A. No. 11469 became effective March 25, 2020.
26
Rev. Reg. No. 9-2020.
27
Sec. 11, R.A. No. 11525; Rev. Reg. No. 1-2021.
25
9
October 2023
DEDUCTIONS FROM GROSS GIFT
A) Mortgage or encumbrance on the property which obligation is assumed by the
donee28
B) Those specifically provided by the donor as a diminution of the property donated.
C) The first ₱250,000 (per year).
28
Rev. Reg. No. 2-2003.
10
October 2023
COMPUTATION OF DONOR’S TAX
Beginning January 1, 2018, the tax shall be six percent (6%) computed on the basis of the total
gifts in excess of Two Hundred Fifty Thousand Pesos (₱250,000) exempt gift made during the
calendar year.29
The computation of the donor’s tax is on a cumulative basis over a period of one (1) calendar
year.30
The donor’s or gift tax is computed on the net gift of the first donation. In case there are subsequent
donations in the same calendar year, the tax is computed on a cumulative basis, i.e., the prior gross
gifts in the same calendar year are added to the current gross gift to arrive at the total gross gifts.
The total exemptions or deductions shall be subtracted from the total gross gifts. The donor’s tax
shall be based on the total net gifts.
(a) On the first donation during the year:
Gross gift
Less: Exemption or deduction
₱
xxx
(xxx)
Net gift
₱
xxx
Gift tax (6%)
₱
xxx
(b) On subsequent donations within the same calendar year:
29
30
Gross gift
Add: Prior gross gift
Total gross gifts
Less: Exemptions and deductions
₱
Total net gifts
₱
xxx
Gift tax (6%)
Less: Gift tax on prior net gifts in the
same calendar year
₱
xxx
Gift tax on subsequent gift
₱
xxx
xxx
₱ xxx
(xxx)
(xxx)
xxx
Sec. 99(A), NIRC; Rev. Reg. No. 12-2018.
Rev. Reg. No. 12-2018.
11
October 2023
CREDIT FOR FOREIGN DONOR’S TAXES PAID
-
Available only to Resident Donors (citizens or resident alien donors)
Subject to Limits
Limits:
(A) Net Gift (per Foreign Country)
Total Net Gifts
x
(B) Net Gifts (in all Foreign Countries)
Total Net Gifts
Philippine Donor’s Tax
x
Philippine Donor’s Tax
Rules:
1) If there is only one (1) foreign country, only Limit (A) is used.
2) If there are ≥ two (2) foreign countries, use both Limits
Formula:
Donor’s tax paid in Country 1
Limit A (Country 1)
Lower (1)
+
Donor’s tax paid in Country 2
Limit A (Country 2)
Lower (2)
Limit (A)
Lower = Credit
Sum of donor’s taxes paid in
Countries 1 and 2
Lower =
Limit (B)
Limit B
12
October 2023
Donor’s Tax Return
Who files?
Any donor who makes any transfer by gift.
Notes:
(a) No return is required if the transfer is exempt from donor’s tax, like donations to
the National Government or to non-profit institutions.
(b) A separate return shall be filed by each donor for each gift or donation made on
different dates during the year. Any previous gifts made in the same calendar year
shall be reflected in each return.
(c) Only one return shall be filed for several gifts or donations by a donor made on the
same date to different donees.
(d) If the gift or donation involves conjugal/community property, each spouse shall file a
separate return corresponding to his/her respective share in the conjugal/community
property. This rule shall likewise apply in the case of co-ownership over the property
being donated.31
Time of filing?
Within thirty (30) days from the date the gift is made.
Time of payment: At the time of filing the return.
Where filed?
(a) If donor is a resident donor (i.e., citizen or resident alien) – with the Authorized Agent
Bank (AAB), RDO, collection officer or duly authorized treasurer of the city or
municipality where donor is domiciled at the time of transfer, or with the Office of the
Commissioner if donor has no legal residence.
(b) If donor is a non-resident donor (i.e., non-resident alien) – with the Philippine
Embassy or Consulate in the country where he is domiciled at the time of transfer; or
directly with the Office of Commissioner (RDO No. 39).
(c) In cases of “No Payment Return” – The returns shall be filed with the Revenue District
Office having jurisdiction over the place of domicile of the donor at the time of the
donation, or if there is no legal residence in the Philippines, with the Office of the
Commissioner (RDO No. 39 – South Quezon City).32
Contents of the Donor’s Tax Return
The return shall set forth:33
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.
Guidelines and Instructions (BIR Form No. 1800 – Donor’s Tax Return).
RMC No. 54-2019.
33
Sec. 103(A), NIRC.
31
32
13
October 2023
Notice of Donation.34
In order to be exempt from the donor’s tax and to claim full deduction of the donation given
to qualified donee institutions, the donor engaged in business shall give a Notice of
Donation on every donation worth at least Fifty Thousand Pesos (₱50,000) to the RDO
which has jurisdiction over his place of business.
The aforementioned notice shall be given to the RDO within thirty (30) days after receipt
of the donee’s duly issued Certificate of Donation (BIR Form No. 2322). The same
certificate shall be attached to the Notice of Donation, and shall state that not more than
30% of the donations for the taxable year shall be used by such accredited non-stock, nonprofit, NGO-donee institution for administration purposes pursuant to Section 101(A)(3)
and B(2) of the Tax Code.
34
Rev. Reg. Nos. 2-2003, 12-2018.
14