Donor’s Tax

The Donor’s Tax before the Train Law graduated rates ang Tax Rates. The rates are from 2% to 15% that is why there is always a common
question of whether or not kung may property si Papa ibibigay niya sa anak ano ba idodonate ba or ibebenta or hihintayin na lang mamatay
para estate. This are the options kasi minsan pag donation you have to determine kung kanino idodonate. Is it to a stranger? Or is it a
relative? Kung stranger 30%, ang laki! Kung to a relative naman you have the rates 2-15%. You oppose that with the tax implication of
sale which is pila? Lupa 6%, so 6% against 2-15%, 6% plus docs tax 1.5% approximately so mga 7.5%. That’s why ang iba ang ginagamble
na lang si sale specially if the property is really high because if the property is high you have the 15% for donation sa relative but for a
stranger 30%. But because of the Train Law it appears na wala ng difference. The donor’s tax rate for each is 6% for the total gifts in
excess of the P200 thousand.

So the question, which is more tax efficient? Idonate or hintayin mo mamatay? The problem with hintayin mo mamatay (kelan mamatay?)
what if madungagan pa ang anak so mudaghan pa ang anak so mudaghan pa ang kashare so you have to consider that and then pag
namatay na so gusto ninyo paspas na ipatransfer, given na 6% na lang si donation is it proper for you to donate, is it more cost efficient
for you to have it as a sale. It depends, kung sale ka kasi tama naman 6% pero the danger is the selling price, syempre wala ka naman
binayad jan anak ka. The selling price that should reflect in your deed of sale should really approximate with the value of the property.
Otherwise you have the donor’s tax. So baka ma double “quammy” ka. Kung donation ka please take note that the benefit of donation is
that you have the deduction of P250 thousand.

1. Section 98 to 104 as amended by TRAIN Law

SEC. 98. Imposition of Tax. -

(A) There shall be levied, assessed, collected and paid upon the transfer by any person, resident or nonresident, of the property
by gift, a tax, computed as provided in Section 99.

(B) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property
is real or personal, tangible or intangible.

Sec. 99. Rate of Tax Payable by Donor.—

(A) In General.— The tax for each calendar year 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.

Look at the provision. The donor’s tax is 6% on the basis of the total gifts in excess of P250 thousand, so meron kang P250
thousand na threshold, so kung meron idodonate na property na P250 thousand or less, that may be tax exempt. So that’s one
of the benefits.

How do you compute the donor’s tax? This is the trick of the trade. Look at for the basis of the computation of the donor’s tax,
6% computed of the total P250 thousand of the exempt gift. What if I have a property that I’m going to donate worth P500
thousand. So ang gagawin ko idodonate ko siya into a calendar year. Idodonate ko Dec 30 and January 5 next donation ko
because the calendar year is from Jan 1- December 30. So ihahalf ko siya on P250 thousand. Kasi if idodonate ko siya at one
time P500 thousand. I have to pay the 6% in excess of P250 thousand. But if iproportion ko siya into that mag 0 out for Donor’s
Tax.

(B) Any contribution in cash or in kind to any candidate, political party or coalition of parties for campaign purposes shall be
governed by the Election Code, as amended.”

Sec. 100. Transfer for Less Than Adequate and Full Consideration.— Where property, other than real property referred to in
Section 24(D), is transferred for less than an adequate and full consideration in money or money’s worth, then the amount by which
the fair market value of the property exceeded the value of the consideration shall, for the purpose of the tax imposed by this
Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year: Provided, however,
That a sale, exchange, or other transfer of property made in the ordinary course of business (a transaction which is a bona fide, at
arm’s length, and free from any donative intent), will be considered as made for an adequate and full consideration in money or
money’s worth.

This is a welcome revision. Kasi before there is no provision that a transaction is bona fide and free from any donative intent. So ang
mangyayari is ngayun if magbebenta ka ng property lower than the fair market value there is a presumed deemed gift. So inaaccess
nila na donation and before pag stranger idodonate ko ang donor’s tax is 30% ang laki. On top of your 6% is 30%. But it’s always
in argument iba naman pag donation, the fact na nagbigay ako ng property sayo does that mean na donation na yun?

You know the requisites of donation, there has to be a donative intent, an intent to donate, di pwede na ibibigay sayo ang property
you can conclusively say na donation na. What are the requisites of donation there has to be an increase and decrease of the
patrimony of the donee and donor. There has to be an intent of the donor to give it, as an act of liberality.

So diba sabi natin if it’s considered with adequate and full consideration walang donation. What if the market value is P100 thousand,
pero nabenta mo siya ng P80 thousand, dapat di siya consider na right then and there na gift because of the adequate consideration.
You have to look at it in which a transaction is ordinary course of business, pwede ba? Pwede naman malay mo ang binigyan mo is
customer which is frequent. So binigyan mo siya ng discount, a bona fide sale at arms length, di kayo related and free from any

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donative intent. So for the BIR to say that it is a presumed gift. Sabihin mo na meron na akong provision that it cannot be a gift
when a transaction is bona fide, at arms lenth and free from any donative intent. Please take note of this.

Sec. 101. Exemption of Certain Gifts.— The following gifts or donations shall be exempt from the tax provided for in this Chapter:

So, this is very important in order to be exempt from the donor’s tax and to pay full deduction of the qualified donee we’ve discussed
this in the income tax diba. May mga qualified donee institution mga NGOs. Kung nagdonate ka sa kanila ng ganitong amount, you
can claim with the said deduction. What are the requirements. You should give a notice of donation that every donation, dpat
magbibigay sila ng certificate of donation as proof to be attached sa notice of donation, stating that more than 30%. So kung
magdodonate ka. Dapat sa mga accredited NGOs. Mga big companies, like Florendo diba meron silang mga foundations kasi meron
silang mga tax shields. So kung magdodonate sila sa mga ganyan tapos iclaclaim nila as deduction in the entire certificate of
donations.

(A) In the Case of Gifts Made by a Resident.—

(1) 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;

(2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited
nongovernment organization, trust or philanthropic organization or research institution or organization: Provided, however,
That not more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes. For the
purpose of this exemption, a ‘non-profit educational and/or charitable corporation, institution, accredited nongovernment
organization, trust or philanthropic organization and/or research institution or organization’ is a school, college or university
and/or charitable corporation, accredited nongovernment organization, trust or philanthropic organization and/ or research
institution or organization, incorporated as a nonstock entity, paying no dividends, governed by trustees who receive no
compensation, and devoting all its income, whether students’ fees or gifts, donation, subsidies or other forms of philanthropy,
to the accomplishment and promotion of the purposes enumerated in its Articles of Incorporation.

(B) In the Case of Gifts Made by a Nonresident Not a Citizen of the Philippines. -

(1) 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.

(2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation,
trust or philanthropic organization or research institution or organization: Provided, however, That not more than thirty
percent (30%) of said gifts shall be used by such donee for administration purposes.

(C) Tax Credit for Donor's Taxes Paid to a Foreign Country. -

(1) In General. - The tax imposed by this Title 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.

(2) Limitations on Credit. - The amount of the credit taken under this Section shall be subject to each of the following
limitations:

(a) 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

(b) 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.

SEC. 102. Valuation of Gifts Made in 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 provisions of Section 88(B) shall apply to the valuation thereof.

SEC. 103. Filing of Return and Payment of Tax. -

(A) Requirements.- any individual who makes any transfer by gift (except those which, under Section 101, are exempt from the
tax provided for in this Chapter) shall, for the purpose of the said tax, make a return under oath in duplicate.

The return shall se forth:

(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 by rules and regulations made pursuant to law.

(B) Time and Place of Filing and Payment. - The return of the donor required in this Section shall be filed within thirty (30) days
after the date the gift is made and the tax due thereon shall be paid at the time of filing.

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 Except in cases where the Commissioner otherwise permits, the return shall be filed and the tax paid to an authorized agent
bank, the Revenue District Officer, Revenue Collection Officer or duly authorized Treasurer of the city or municipality where the
donor was domiciled at the time of the transfer, or if there be no legal residence in the Philippines, with the Office of the
Commissioner.

In the case of gifts made by a nonresident, the return may be filed with the Philippine Embassy or Consulate in the country
where he is domiciled at the time of the transfer, or directly with the Office of the Commissioner.

SEC. 104. Definitions. - For purposes of this Title, the terms "gross estate" and "gifts" include real and personal property, whether
tangible or intangible, or mixed, wherever situated: Provided, however, That where the decedent or donor was a nonresident alien
at the time of his death or donation, as the case may be, his real and personal property so transferred but which are situated outside
the Philippines shall not be included as part of his "gross estate" or "gross gift": Provided, further, That franchise which must be
exercised in the Philippines; shares, obligations or bonds issued by any corporation or sociedad anonima organized or constituted in
the Philippines in accordance with its laws; shares, obligations or bonds by any foreign corporation eighty-five percent (85%) of the
business of which is located in the Philippines; shares, obligations or bonds issued by any foreign corporation if such shares,
obligations or bonds have acquired a business situs in the Philippines; shares or rights in any partnership, business or industry
established in the Philippines, shall be considered as situated in the Philippines: Provided, still further, that no tax shall be collected
under this Title in respect of intangible personal property: (a) if the decedent at the time of his death or the donor at the time of the
donation was a citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of
any character, in respect of intangible personal property of citizens of the Philippines not residing in that foreign country, or (b) if the
laws of the foreign country of which the decedent or donor was a citizen and resident at the time of his death or donation allows a
similar exemption from transfer or death taxes of every character or description in respect of intangible personal property owned by
citizens of the Philippines not residing in that foreign country.

The term "deficiency" means: (a) the amount by which tax imposed by this Chapter exceeds the amount shown as the tax by the
donor upon his return; but the amount so shown on the return shall first be increased by the amount previously assessed (or collected
without assessment) as a deficiency, and decreased by the amounts previously abated, refunded or otherwise repaid in respect of
such tax, or (b) if no amount is shown as the tax by the donor, then the amount by which the tax exceeds the amounts previously
assessed, (or collected without assessment) as a deficiency, but such amounts previously assessed, or collected without assessment,
shall first be decreased by the amount previously abated, refunded or otherwise repaid in respect of such tax.

2. Revenue Regulations 12- 2018

SEC. 11. RATE OF DONOR’S TAX. –

1.1. Rate. – The donor’s tax for each calendar year shall be six percent (6%) computed on the basis of the total gifts in excess
of Two Hundred Fifty Thousand Pesos (P250,000) exempt gift made during the calendar year.

1.2. The application of the rates as provided above is imposed on donations made on or after the effectivity date of the TRAIN
Law.

1.3. Contribution for election campaign. – Any contribution in cash or in kind to any candidate, political party or coalition of
parties for campaign purposes, shall be governed by the Election Code, as amended.

SEC. 12. THE LAW THAT GOVERNS THE IMPOSITION OF DONOR’S TAX. – The donor’s tax is not a property tax, but is a tax
imposed on the transfer of property by way of gift inter vivos. (Lladoc vs. Commissioner of Internal Revenue, L-19201, June 16,
1965; 14 SCRA, 292). The donor’s tax shall not apply unless and until there is a completed gift. The transfer of property by gift is
perfected from the moment the donor knows of the acceptance by the donee; it is completed by the delivery, either actually or
constructively, of the donated property to the donee. Thus, the law in force at the time of the perfection/completion of the donation
shall govern the imposition of the donor’s tax.

In order that the donation of an immovable may be valid, it must be made in a public document specifying therein the property
donated. The acceptance may be made in the same Deed of Donation or in a separate public document, but it shall not take effect
unless it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified
thereof in an authentic form, and this step shall be noted in both instruments.

Please take note in section 12. A donor’s tax is also a property tax. In the case of Plata vs Commisioner. But the same tax is impose
on for the contract of donation. In a donation of a personal property what are the requisites. It has to be in writing. But in a real
property, it has to appear in a public instrument. After sa time, may deemed acceptance na. It is the time that you have to file the
affidavit. Please take note that in writing pwede ka card lang. Gift more than P5000 so may card. For example iphone, more than
P5,000. Is that considered a gift? I’m sure you have already discussed that in property.

A gift that is incomplete because of reserved powers, becomes complete when either:
(1) the donor renounces the power; or
(2) his right to exercise the reserved power ceases because of the happening of some event or contingency or the fulfilment of some
condition, other than because of the donor’s death.

Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute community after the dissolution of the
marriage in favor of the heirs of the deceased spouse or any other person/s is subject to donor’s tax whereas general renunciation
by an heir, including the surviving spouse, of his/her share in the hereditary estate left by the decedent is not subject to donor’s tax,
unless specifically and categorically done in favor of identified heir/s to the exclusion or disadvantage of the other co-heirs in the
hereditary estate.
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 Where property, other than a real property that has been subjected to the final capital gains tax, is transferred for less than an
adequate and full consideration in money or money’s worth, then the amount by which the fair market value of the property at the
time of the execution of the Contract to Sell or execution of the Deed of Sale which is not preceded by a Contract to Sell exceeded
the value of the agreed or actual consideration or selling price shall be deemed a gift, and shall be included in computing the amount
of gifts made during the calendar year.

The law in force at the time of the completion of the donation shall govern the imposition of donor’s tax.

For purposes of the donor’s tax, “NET GIFT” shall mean the net economic benefit from the transfer that accrues to the donee.
Accordingly, if a mortgaged property is transferred as a gift, but imposing upon the donee the obligation to pay the mortgage liability,
then the net gift is measured by deducting from the fair market value of the property the amount of mortgage assumed.

SEC. 13. VALUATION OF GIFTS MADE IN PROPERTY. – The valuation of gifts in the form of property shall follow the rules set
forth in Section 6 of this regulations: Provided, That the reckoning point for valuation shall be the date when the donation is made.

The valuation of gift in the form of properties shall follow section 6. Therefore it follows the rule that we have just discussed in the
estate tax. So in other words, if meron kang shares of stock na gusto mo itransfer idonate mo na lang.

Kung ibebenta mo you have to appraise that’s an issue. In fact may mga SEC, may mga BIR opinion seeking to clarify that sabi ni
BIR nakalagay sa regulation di mag apply ang donation or gifts sa estate kunin. So kung gusto mo lang mgtransfer ng gifts tapos
gusto mo lang di malaki ang tax na babayaran mo idonate mo na lang siya.

So the computation of the donor’s tax is cumulative in 1 calendar year. The husband and wife is considered as separate tax payer.
So who is considered as the tax payer sa donation? The donor, so ang parents mo may community property. What is the effect? May
conjugal/communal property and only the husband signed the donation, there is only one donor for tax purposes. So anong
mangyayari kung ang property mo conjugal, communal ang parent mo idodonate sayo so magiging dalawa basta pipirma si both
parents, ang mangyayari you have two, P250 thousand. P250 thousand, idivide mo pa ng calendar year so P500 thousand. So please
take note that husband and wife is considered separate for purposes of the donor’s tax.

3. Filing of Returns and Payment of Donor’s Tax

SEC. 15. FILING OF RETURNS AND PAYMENT OF DONOR’S TAX. –

(A) Requirements. – Any person making a donation (whether direct or indirect), unless the donation is specifically exempt
under the NIRC or other special laws, is required, for every donation, to accomplish under oath a donor’s tax return in duplicate.
The return shall set forth:

1. Each gift made during the calendar year which is to be included in 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 the Commissioner may require.

(B) Time and place of filing and payment. – The donor’s tax return shall be filed within thirty (30) days after the date the
gift is made or completed and the tax due thereon shall be paid at the same time that the return is filed. Unless the Commissioner
otherwise permits, the return shall be filed and the tax paid to an AAB, the Revenue District Officer and Revenue Collection
Officer having jurisdiction over the place where the donor is domiciled at the time of the transfer, or if there be no legal residence
in the Philippines, with the Office of the Commissioner. In the case of gifts made by a non-resident, the return may be filed with
the Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer, or directly with the Office
of the Commissioner. For this purpose, the term “OFFICE OF THE COMMISSIONER” shall refer to the Revenue District Office
(RDO) having jurisdiction over the BIR-National Office Building which houses the Office of the Commissioner, or presently, to the
Revenue District Office No. 39-South Quezon City.

(C) Notice of donation by a donor engaged in business. – In order to be exempt from donor’s tax and to claim full
deduction of the donation given to qualified-donee institutions duly accredited, the donor engaged in business shall give a notice
of donation on every donation worth at least Fifty Thousand Pesos (P50,000) to the Revenue District Office (RDO) which has
jurisdiction over his place of business within thirty (30) days after receipt of the qualified donee institution’s duly issued Certificate
of Donation, which shall be attached to the said Notice of Donation, stating that not more than thirty percent (30%) of the said
donation/gifts for the taxable year shall be used by such accredited non-stock, non-profit corporation/NGO institution (qualified-
donee institution) for administration purposes pursuant to the provisions of Section 101(A)(3) and (B)(2) of the NIRC.

4. Transfer for Less Than Adequate and Full Consideration

SEC. 16. TRANSFER FOR LESS THAN ADEQUATE AND FULL CONSIDERATION. – Where property, other than real property
referred to in Section 24(D), is transferred for less than an adequate and full consideration in money or money’s worth, then the
amount by which the fair market value of the property exceeded the value of the consideration shall, for the purpose of the tax
imposed by this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year:
Provided, however, that a sale, exchange, or other transfer of property made in the ordinary course of business (a transaction which
is a bona fide, at arm’s length, and free from any donative intent) will be considered as made for an adequate and full consideration
in money or money’s worth.

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5. Exemption of Certain Gifts (Cases and Rulings)

i. Lladoc VS CIR, GR No. L- 19201, 16 June 1965

Facts:
In 1957 MB Estate donated cash of 10,000 pesos to Fr. Crispin Ruiz, the parish priest of Catholic Parish of Victorias, Negros Occidental
for the construction of the said church. In 1960 the Commissioner of Internal Revenue issued an assessment for donee’s gift tax
against the Catholic Parish of Victoria in which the parish priest at the time of assessment was herein Fr. Lladoc. The Internal Revenue
found as per assessment that Fr. Lladoc is liable for 1,370 pesos including surcharge and interest. Fr. Lladoc filed a protest to the
assessment contending that: (1) assessment of gift tax is a clear violation of the provision of Constitution; (2) the donation was
received by Fr. Crispin Ruiz. With these grounds he could not be held liable.

Issue:
WON gift tax is exempted under the Constitution?

Ruling:
The Supreme Court held that the exemptions provided in the Constitution particularly Article VI, Section 22, referring to the property
tax imposed upon the land and building exclusively used for religious and charitable purposes. Gift tax is not mentioned in the said
exemption which in the present case, the internal revenue made an assessment. A gift tax is not a property tax but an excise
tax imposed on the transfer of property by way of gift inter vivos. The Supreme Court further held that to claim tax
exemption, there must be clear, positive or express grant of such privilege by law. As to the second issue Fr. Lladoc is not personally
liable for the tax assessment it must be the Head of the Diocese.

Notes:
Fr. Lladoc is not personally liable for the tax assessment because at the time donation was made Lladoc was not yet the parish priest
of Victoria Paris. The real party in interest must be the Head of the Diocese and hence should be held liable.

ii. The Philippine American Life VS Secretary of Finance, GR No. 210987, 24 November 2014

Facts:
In 2009, Philippine American Life and General Insurance Company (Philamlife) sold its 498,590 Class A shares in Philam Care Health
Systems, Inc. (PhilamCare) to STI Investments, Inc. through competitive bidding for USD2,190,000 or PhP104,259,330 based on the
prevailing exchange rate at the time of the sale.
After the sale was completed and the necessary documentary stamp and capital gains taxes were paid, Philamlife filed an application
for a certificate authorizing registration/tax clearance with the Bureau of Internal Revenue (BIR) Large Taxpayers Service Division to
facilitate the transfer of the shares. Months later, Philamlife was informed that it needed to secure a BIR ruling in connection with its
application due to potential donor’s tax liability. In compliance, Philamlife requested a ruling to confirm that the sale was not subject
to donor’s tax. It pointed out the following: (1) the transaction cannot attract donor’s tax liability since there was no donative intent
citing BIR Ruling [DA-(DT-065) 715-09]; (2) the shares were sold at their actual fair market value and at arm’s length and as long
as the transaction conducted is at arm’s length, a sale for less than an adequate consideration is not subject to donor’s tax; and (3)
the donor’s tax does not apply to sale of shares sold in an open bidding process. However, Commissioner on Internal Revenue (CIR)
denied Philamlife’s request. As determined by the CIR, the selling price of the shares sold was lower than their book value based on
the financial statements of PhilamCare as of 2008. As such, CIR ruled that the difference between the book value and the selling
price in the sales transaction is taxable donation subject to a 30% donor’s tax under Section 99(B) of the NIRC. CIR likewise held
that BIR Ruling [DA-(DT-065) 715-09], on which Philamlife anchored its claim, has already been revoked by Revenue Memorandum
Circular (RMC) No. 25-2011.

Issue:
WON the price difference is subject to donor's tax.

Held:
Yes. The Court held that the price difference is subject to donor's tax. Petitioner's substantive arguments are unavailing. The absence
of donative intent, if that be the case, does not exempt the sales of stock transaction from donor's tax since Sec. 100 of the NIRC
categorically states that the amount by which the fair market value of the property exceeded the value of the consideration shall be
deemed a gift. Thus, even if there is no actual donation, the difference in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for determining the "fair
market value" of a sale of stocks. Such issuance was made pursuant to the Commissioner's power to interpret tax laws and to
promulgate rules and regulations for their implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied retroactively in
contravention to Sec. 246 of the NIRC. Instead, it merely called for the strict application of Sec. 100, which was already in force the
moment the NIRC was enacted.

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