Donors Tax

A. Format of Computation Stranger Total (Gross) gifts Less: Deductions (exemptions) Total Net Gifts Add: Total prior net gifts Total net gifts subject to tax Tax Due Total Tax Due Less; Tax Credits/ payments Payments for prior gifts Foreign Donors Tax Paid Tax payable (overpayment) B. Donors Tax Rate 1. If the net gift is: Over P 100,000 200,000 500,000 1,000,000 3,000,000 5,000,000 10,000,000 But not over P 100,000 200,000 500,000 1,000,000 3,000,000 5,000,000 10,000,000 The tax shall be Exempt P0 2,000 14, 000 44,000 204,000 404,000 1,004,000 2% 4% 6% 8% 10% 12% 15% P 100,000 200,000 500,000 1,000,000 3,000,000 5,000,000 10,000,000 Plus Of excess over ( xxx ) ( xxx ) P xxx P xxx xxx xxx xxx P xxx P xxx P xxx xxx xxx xxx P xxx P xxx P xxx Relative

2. When the done or beneficiary is stranger, the tax payable by the done shall be thirty percent (30%) of the net gifts.

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C. Composition of Gross Gifts Resident or citizen donor Personal Properties Real Properties D. Rule of Reciprocity Properties covered by the rule Basic rules: Intangible personal properties situated in the Philippines given as gifts by bob-resident alien donor. a. When there is reciprocity The intangible personal properties situated in the Philippines given as gifts b a no-resident alien donor are not subject to donors tax. b. When there is no reciprocity The intangible personal properties situated in the Philippines as gifts by a nonresident alien donor are subject to donors tax. E. Transfer for Less Than Adequate and Full Consideration 1. The Rule: Where property, other than real property subject to capital gains tax, is transferred for less than an adequate and full consideration in money or moneys worth, then the amount by which the fair market value of the property exceeded the value of the consideration shall, for the purpose of donors tax, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year. 2. Tabular presentation of the rule on transfer for less than adequate and full consideration Personal properties Ordinary Assets Capital Assets Subject to donors tax Subject to donors tax Real properties Subject to donors tax Not subject to donors tax Wherever situated Wherever situated Non-Resident Alien Donor Situated in the Philippines Situated in the Philippines

F. Valuation of gifts Made in Property

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Property Donated Gifts Made in property Real Property

Valuation Fair Market Value at the of the gift Provisions in estate tax shall apply to the valuation

G. Exemptions of Certain Gifts/Deductions from Gross Gifts 1. Found in Tax Code Resident or Citizen Donor a. Dowries or gifts made on account of marriage b. 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 c. Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic organization or research institution or organization Notes: purposes. 2. A non-stock educational and/or charitable corporation, institution, accredited nongovernment organization, etc. (no. 1 c above) is a school, college or university and/or charitable corporation, accredited non-government organization, etc. (no. 1 c above): a. Incorporated as a non-stock entity, b. Paying no dividends, 3|Donors Tax 1. In case of gifts made to certain institutions (no.1 c above), in order to be exempt, not more than 30% of said gifts shall be used by such done for administration Allowed Allowed Allowed Allowed Allowed Non-Resident Alien Donor Not Allowed

c. Governed by trustees who receive no compensation, and d. Devoting all its income to the accomplishment and promotion of the purpose enumerated in its Articles of Incorporation.

2.

Other Deductions Resident or Citizen Donor a. Encumbrance on the property donated if assumed by the done b. Those specifically provided by the donor as a diminution from the property Allowed Allowed Allowed Allowed Non-Resident Alien Donor

3. Exempt Donations Under Special Laws.- Donation to: a. International Rice Research Institute (IRRI); b. Philippine American Cultural Foundation; c. Ramon Magsaysay Award Foundation; d. Philippine Inventors Commission; e. Integrated Bar of the Philippines (IBP); f. Development Academy of the Philippines (DAP); g. National Social Action Council; h. Agriculture Department of Southeast Asian Fisheries Development Center of the Philippines (SEAFDEC). H. Computation of Taxable Net Gift and the Donors Tax Due 4|Donors Tax

1. Net Gift shall mean the net economic benefit from the transfer that accrues to the done. 2. The computation of the donors tax is on a cumulative basis over a period of one calendar year. 3. Husband and wife are considered as separate and distinct taxpayers for the purpose of donors tax. 4. With the exception of moderate donations for charity on a occasions of family rejoicing, neither spouse may donate any community property or conjugal property without the consent of the other. 5. Every donation between the spouses during the marriage shall be void except for moderate gifts, which the spouse may give each other on the occasion of any family rejoicing, and donation mortis causa. 6. 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 donors 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. 7. The tax payable of the donor if the done is a relative is based on the tabular donors tax rates (2% to 15%). 8. For purposes of donors tax, a stranger is a person who is not a: a. Brother, sister (whether by whole or half blood), spouse, ancestor, and lineal descendants; or b. Relative by consanguinity in the collateral line within the fourth degree of relationship. 9. Any provision of law to contrary notwithstanding, any contribution in cash or in kind to any candidate, political party or subject or coalition of parties for campaign purposes, duly reported to the commission (COMELEC) shall not be subject to the payment of any gift tax (Sec 13 RA No. 7166). 10. The donors tax shall not apply unless there is a completed gift. 11. The law in force at the time of the completion of the donation shall govern the imposition of donors tax.

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I.

Tax Credit for Donors Taxes Paid to a Foreign Country Limit Net gift/total net gift x Philippine donors tax due xxx Actual foreign donors tax xxx Allowed (lower between actual and limit) xxx

1. One foreign country

2. Two or more foreign countries

Limit (a) by country Limit (b) by total Limit [lower between limits (a) an (b)] Actual total foreign donors taxes And actual total foreign donors taxes)

xxx xxx xxx xxx xxx

Allowed tax credit( lower between allowed limit

J. Filing of Return and Payment of Tax 1. Requirement Any individual who makes any transfer by gift (except those which are exempted from donors tax) shall, for the purpose of donors tax, make a return under oath at least in duplicate. 2. Contents of the The return shall set forth: donors return tax a. Each gift made during the calendar year which is to be included in computing net gifts; b. The deductions claimed and allowable; c. Any previous net gifts made during the same calendar year; d. The name of the done; and 6|Donors Tax

e. Such other information as may be required by rules and regulations made pursuant to law. 3. Time for filing of The return shall be filed within thirty (30) days after the date the gift is return 4. Place return of and made. The tax due thereon shall be paid at the time of filing. filing a. In case of resident donors: 1. Authorized agent bank; 2. Avenue District Officer; 3. Revenue Collection Officer; 4. Duly authorized Treasurer of the city or municipality where the donor was domiciled at the time of the transfer. b. In case of non-resident donors: 1. Philippine embassy or Consulate where he is domiciled at the time of the transfer, or 2. Office of the Commissioner. 5. Notice of The donor engaged in business shall give a notice of donation on every donation by a donation worth at least P 50, 000 to the RDO which has jurisdiction over donor engaged his place of business within 30 days after receipt of the qualified done in business institutions duly issued Certificate of Donation, which shall be attached to the said Notice of Donation, stating that not more than 30% of the said donations/gifts for the taxable year shall be used for administration purposes. payment of tax

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