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Definition of Donation or Gift

It is an act of liberality, whereby a

person disposes gratuitously of a


thing or right in favor of another
who accepts it.
For donor's tax purposes, a donation
must be a transfer of property.
Donor disposes the thing or right
Donee accepts the donation

Kinds of donations
inter vivos it is made between living persons

to take effect during the lifetime of the donation


- this donation is subject to
donor's tax
mortis causa it is made in the nature of a
testamentary disposition , that is, it shall take
effect upon the death of the donor
- this donation shall be subject to
estate tax

Elements of Donation
Consent donation is perfected only from the

donor knows of the acceptance by the donee


and must be made during the lifetime of the
parties.
Object all present property of the donor or
part thereof, provided he reserves, in full
ownership or in usufruct, sufficient means for
the support of himself or relatives supported
by the donor.
- donations can't comprehend future
property

Elements of Donation
Cause donative intent is not at all essential
Formalities donation of a movable may be

made orally or in writing


- if the value of personal property
donated exceeds 5,000 pesos, donation and
acceptance shall be made in writing. Otherwise
the donation shall be void
- immovable donation must be made
in public document to be valid

Requisites of taxable gifts


Capacity of the donor
Donative intent
Delivery of the subject matter of the gift.
Acceptance of the gift by the donee

Persons who may give or


receive a donation
All persons who may contract and dispose of

their property may make a donation


Except for the following:
Guardians and trustees cannot donate the
property entrusted to them
Donations to minors and incapacitated persons
Husband and wife cannot donate any conjugal
or community property without the consent of
the other

Void Donations
Those made between persons who were guilty of

adultery or concubinage at the time of donation


Those made between persons found guilty of the
same criminal offense, in consideration thereof
Those made between the spouses during the
marriage, except moderate gifts
Those made between persons living together as
husband and wife without a valid marriage
Those made to a public officer or his wife,
descendants and ascendants, by reason of his
office

Donor's or gift tax


Gift tax is tax imposed on gift or the transfer

without consideration of property between two or


more persons who are living at the time the
transfer is made.
Donor's tax is an excise (privilege) tax
It shall apply whether the transfer is in trust or
otherwise, whether the gift is direct or indirect,
whether the property is real or personal,tangible
or intangible

Kinds of gift taxes


Donors Tax or tax levied on the act of giving,

it supplements the estate tax, it supplements


the estate tax; and
Donees Tax or tax levied on the act of
receiving; It was formerly the counterpart of
the inheritance tax which Is now called estate
tax.

Purposes of Gift Tax


To prevent their avoidance by those who give

away property and money in anticipation of


death through taxation of gifts inter vivos.
To prevent the avoidance of income tax
through the device of splitting income among
numerous donees with the donor.

DISTINCTIONS BETWEEN
DONORS & ESTATE TAX
DONORS TAX

ESTATE TAX

TRANSMIT PROPERTYDURING
LIFE

TRANSMIT PROPERTY UPON


DEATH

LOWER TAX RATES

HIGHER TAX RATES

100,000 EXEMPTION

200,000 EXEMPTION

NOTICE OF DONATION NOT


REQUIRED

NOTICE OF DEATH REQUIRED

NO EXTENSTION OF PAYMENT

EXTENSION MAY BE GRANTED

Quiz
1-2. What are the 2 types of donation?
3-4. Give 2 differences of the donors tax from

the estate tax


5-6. Give the 2 kinds of gift tax
7-10.What are the elements of donation?
11. Who are subject to gift tax?
12. Give 1 void donation.

Gross Gift

Resident Citizen, Non-Resident Citizen and


Resident Alien Donors
Gross gift shall include all of his property wherever
situated

1. Real/immovable property (anything attached to the soil


with permanence)
2. Tangible personal property (can be seen and touched)
3. Intangible personal property (franchise, shares,
obligations, bonds or partnership established in the Philippines,
shares obligations or bonds issued by foreign corporation 85%
of business of which is located in the Philippines
4. Personal property classified as capital asset is transferred
for less than adequate and full consideration in money or
money's worth. The amount By which the FMV of the property
exceeded the value of the consideration shall be deemed a gift

Illustration
Jenny is planning to buy a new diamond ring, sold her old
gold ring to her friend Anson, for P50,000. Her old ring was
acquired in 2007 for P35,000. It's FMV at the time of sale is
P100,000.
Gift
Gain
FMV
Price

P100,000

Selling

P50,000

Less: Consideration
35,000
Deemed Gift
P15,000

50,000
P 50,000

Less: Cost
Gain

Gross Gift
Non-Resident Alien Donor/Non-Resident
Foreign Corporation Donor
Gross gift shall include only his/its property
located in the Philippines
Inclusion of intangible personal property is
subject to reciprocity rule and shall not be
included in the following cases:

1. If the donor at the time of his donation was a resident of


a foreign country which at the time of donation did not
impose a transfer tax of any character in respect of
intangible property of Philippine citizens not residing in that
foreign country; or
2. If the laws of the foreign country of which the donor was
a resident at the time of donation allow a similar exemptions
for Philippine citizens not residing in that foreign country.

VALUATION OF PROPERTY
If the gift is made in property, the fair market

value thereof at the time of the gift shall be


considered the amount of the gift.
In case of real property, the taxable base is the fair
market value as determined by the Commissioner
of Internal Revenue (Zonal Value) or fair market
value as shown in the latest schedule of values of
the provincial and city assessor (MV per Tax
Declaration), whichever is higher

Deductions from Gross Gift


Gifts made by Resident/Citizen Donor

1. Dowries or gifts made on account of marriage and

before its celebration or within one year thereafter by


parents to each of their legitimate, recognized
naturalized or adopted children to the extent of the
first P10,000.

Deductions from Gross Gift


Gifts made by Resident/Citizen Donor
2. Gifts made to or for the use of the National
3.

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
Gifts in favor of an educational and/or charitable,
religious, cultural or social welfare corporation,
institution, accredited non-government organization,
trust or research institution or organization, provided
not more than 30% of said gifts will be used by such
donee for administration purpose

Deductions from Gross Gift


Gifts made by Resident/Citizen Donor

4. Encumbrances on the property donated if assumed by


the donee in the deed of donation

5. Those specifically provided by the donor as diminution


of the property donated.

Deductions from Gross Gift


Gifts made by Non-Resident Alien Donor
All those enumerated for the resident/citizen donor
exemptions except for the gifts made on account of
marriage of children.

Net Gift
Donor's tax is computed based on the net gift
Net gift is arrived at by subtracting from the

gross gift exemptions or deductions allowed


The computation of donor's tax is on a
cumulative basis over a period of one calendar
year

First donation for


a calendar year

Cumulative Basis

Gross Gift
xxx

Gross Gift, This Date


xxx

Les: Exemption
xxx

Les: Exemption
xxx

Net Gift
Xxx

Net Gift, This Date


xxx

Donor's Tax
Xxx

Add: All Prior Net Gift


xxx
Aggregate Net Gift.

Donor's Tax on Aggregate Net Gift


xxx
xxx
Les: Donor's Tax on All Prior Net Gifts
Donor's Tax on the Net Gift, this Date
xxx

xxx

TAX RATES
Net Gift
Over

But not
Over

The Tax
Shall be

Plus

Of the Excess
Over

100,000.00

exempt

100,000.00

200,000.00

2%

100,000.00

200,000.00

500,000.00

P 2,000.00

4%

200,000.00

6%

500,000.00

8%

1,000,000.00

10%

3,000,000.00

12%

5,000,000.00

15%

10,000,000.00

1,000,000.0
14,000.00
0
3,000,000.0
1,000,000.00
44,000.00
0
5,000,000.0
3,000,000.00
204,000.00
0
10,000,000.
5,000,000.00
404,000.00
00
1,004,000.0
10,000,000.00 and over
0
500,000.00

Notes
Rate applicable shall be based on the law prevailing at the
time of donation.

Notes

When the gifts are made during the same calendar year
but on different dates, the donor's tax shall be computed
based on the total net gifts during the year.
Donation made to a stranger is subject to 30% of the net
gift. A stranger is a person who is not a:
-brother, sister (whether by whole or half blood),
spouse, ancestor and lineal descendants; or
-relative by consanguinity in the collateral line within
the fourth degree of relationship.
Any contribution in cash or kind to any candidate, political
party or coalition of parties for campaign purposes, shall
be governed by the election code, as amended.

Mr. Polo

Tax Credit for Donor's Taxes


Paid to a Foreign Country
In General, the tax imposed upon a donor

who was a citizen or a resident at the time


of donation shall be credited with the
amount of any donor's tax of any character
and description imposed by the authority of
a foreign country.

Limitations on Tax Credit


The amount of the credit in respect to the tax

paid to any country shall not exceed the same


proportion of the tax against which such credit
is taken, which the net gifts situated within
such country taxable under this Title bears to
his entire net gifts; and
Net Gift (each foreign country)
Tax Credit Limit
Entire Net Gift

X Phil. Donor's Tax =

Limitations on Tax Credit


The total amount of the credit shall not exceed

the same proportion of the tax against which


such credit is taken, which the donor's net gifts
situated outside the Philippines taxable under
this title bears to his entire net gifts.
Net Gift (all foreign country)
Credit Limit
Entire Net Gift

X Phil. Donor's Tax = Tax

Limitations on Tax Credit


Under limitation
a) The allowable tax credit is the lower amount

between the tax credit limit and the donor's tax


paid to the foreign country
b)Limitation is in addition to limitation (a)
c) Where donor's taxes have been paid to more than
one country, the allowable tax credit is the lower
amount between the tax credit limit computed
under (a) and that computed under (b)

Filing and Payment of


Donor's Tax

Donor's tax return shall be filed within thirty (30)


days after the date the gift is made or completed
Tax due shall be paid at the same time the return
is filed
It shall be filed and paid to an authorized agent
bank, the RDO,RCO or duly authorized treasurer of
the city or municipality where the donor was
domiciled or if there be no legal residence in the
Philippines, with the Office of the Commissioner
For non-residents, the return may be filed with the
Phil. Embassy or Consulate where he is domiciled
or directly with the Office of the Commissioner
Use an eBIR Form 1800 version July 1999