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Donors Tax

Donation gratuitous transfer of property from one person to another. (inter-vivos)


Note that the motive of the donation is the controlling rule. If donation is inspired by the thought of death, it is subject to
estate tax.
Essential requisites of Donation
1. Capacity of the donor : legally competent
2. Intention to donate : intentional or voluntary
3. Donative act or delivery
4. Acceptance by the done
The contract of donation is perfect when the donor knows the acceptance of the donee.
Formal Requisites of Donation (Law)
1. Real properties must be in public instrument
2. Personal property
a. Intangible public instrument
b. Tangible
i. If the value is P5000 and below may be made orally
ii. If the value exceeds P 5000 must be in writing
Type of donors
A. Resident or citizen taxable on world donation
1. Resident citizen
2. Non-resident citizen
3. Resident alien
B. Non-resident alien taxable only on Philippine donations, except intangible personal property subject to
reciprocity conditions.
Types of Donees
A. Relatives (including the spouse) Subject to progressive
1. Brother, sister (whether by whole or half-blood), spouse ancestor and lineal descendants
2. Relatives by consanguinity in the collateral line within the fourth degree of consanguinity
B. Strangers- Subject to 30% proportional tax
Nature of Donors Tax
1. Privilege tax
2. Progressive tax
3. Annual tax
4. Ad valorem
5. National tax
6. Revenue or fiscal tax
Exclusions in Gross Gift/ Exempt Donations
1. Donations to exempt donees under the NIRC and special laws
2. Donation for election campaign
3. Transfer for insufficient consideration involving real property classified as capital assets
4. General renunciation of inheritance
5. Donation with reserved powers (Conditional donation and Revocable transfers)
6. Quasi-transfers
7. Void donations
8. Foreign donation of non-resident alien donors
9. Donation of property exempt under reciprocity

Additional Information:
The rule of transfer for insufficient consideration does not apply to SALE of real property classified as capital asset.
The exemption does not extend to: sale of real properties classified as ordinary asset and sale of personal or
movable property.
Renunciation by the surviving spouse of his share in the net conjugal or communal properties is taxable regardless
whether it is specific or general.
Rules on renunciation:
Type of renunciation General Specific
Renunciation with more than 2 Exempt Taxable
heirs
Renunciation with only 2 heirs Exempt Exempt
Renunciation by the surviving Taxable Taxable
spouse of his share in the
common properties 1

A gift that is incomplete because of reserved powers becomes complete when either:
a. The donor renounces the power; or
b. His right to exercise the reserved power ceases because of the happening of some event or contingency or
the fulfillment of some condition, other than because of the donors death.
Void Donations (Prohibited under the Civil Code)

Banzon, Jolina B.
1. Donation between spouses, except minor gifts
2. Donation between persons who were guilty of adultery or concubinage at the time of donation;
3. Donations between persons found guilty of the same criminal offense in consideration thereof;
4. Donations to a public officer or his wife, descendants or ascendants by reason of his office
5. Donations to incapacitated persons
6. Donation of future property
Donation in trust is taxable if it is irrevocable.

Donors Tax Model


Gross Gift P XXX
Less: Deductions from Gross Gift XXX
Net Gift P XXX
Valuation of Gross Gift
A. Real Property higher of zonal or assessed value
B. Personal Property- fair Value
1. Shares of stock
a. Listed closing price at the date of donation
b. Not listed
i. Preferred stocks par value
ii. Common stocks book value (Adjusted Net Asset Value Method)
2. Other properties
a. Newly purchased purchase price
b. Old items second hand value
c. Monetary claims amount fixed in the contract

Note that in adjusted net asset value method: Only for the purpose of FV determination, real properties
shall be assessed at the highest of tax declaration fair value, zonal value and independent appraisal
value.

Timing of Valuation of Gross Gift


- Point of completion or perfection of the donation

Donation of Common Properties


- Donation of conjugal or community property by the spouses is deemed made by the husband and made by
the wife.
- Husband and wife shall file separate donors tax returns.
Donation to Joint or Several Donees
- Split according to the number of donees
Encumbrances on the Property
Dowry Exemption
- Gifts made on account of marriage
- To the extent of the first P 10,000
- Timing: before its celebration or within one year thereafter
- Qualified recipient: The dnee must be a legitimate, a recognized natural or an adopted child

Banzon, Jolina B.