DONOR’S TAX UNDER NIRC:
Donation- is an act of liberality whereby a
person (donor) disposes gratuitously of a thing
or right in favor of another (donee) who accepts
it (Art. 725, Civil Code).
Donor’s tax is an excise tax imposed on the
privilege of transferring property by way of a
gift inter vivos based on pure act of liberality
without any or less than adequate
consideration and without any legal compulsion
to give.
Subject of donor’s tax:
The subject of donor’s tax is the gift or
donation. Article 725 of the Civil Code defines a
gift or donation as “an act of liberality whereby
a person disposes gratuitously of a thing or right
in favor of another who accepts it.”
The law in force at the time of the
perfection/completion of the donation governs
the imposition of donor’s tax (Sec. 11, R.R. 2-
2003).
Kinds of donations:
1. Donation inter vivos - a donation made
between living persons. Its perfection is at the
moment when the donor knows the acceptance
of the donee. It is subject to donor’s tax.
2. Donation mortis causa - a donation which
takes effect upon the death of the donor. It is
subject to estate tax.
Distinctions between Donation inter vivos and
Donation mortis causa (Mamalateo, 2014)
NATURE, PURPOSE AND OBJECT
It is an excise tax on the privilege of the donor
to give or on the transfer of property by way of
gift inter vivos. It is not a property tax.
Two-Fold Purpose of Donor’s tax:
1. To supplement estate tax
2. To prevent avoidance of income tax through
the device of splitting income among numerous
donees who are usually members of a family or
into many trusts, with the donor thereby
escaping the effect of the progressive rates of
income taxation
REQUISITES OF VALID DONATION
Requisites for a gift to be taxable :
1. Capacity of donor to donate
The donor’s capacity shall be determined as of
the time of the making of the donation (Art.
737, NCC).
2. Donative Intent
 beneficial interests in the property transferred
and has no power to recover any such interest
NOTE: Donative intent is necessary only in cases
in himself or his estate.
of direct gift. If the gift is indirectly taking place
by way of sale, exchange or other transfer of
property as contemplated in cases of transfers
for less than adequate and full consideration
(Sec. 100, NIRC), not always essential to Elements of remunerative donation:
constitute a gift.

A person gives to another a thing or right;

3. Acceptance by the donee 4. Actual or
constructive Delivery of gift
Tax treatment in case of donations made by
spouses
Husband and wife are considered as separate
and distinct taxpayers for purposes of the
donor’s tax. However, 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 donor’s 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
and the Family Code of the Philippines (Par. 1.,
Sec. 12, R.R. 2-2003).
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 (Sec. 11, R.R. 2-2003).
1. On account of the latter’s merit or services
rendered by him to the donor; and
2. The giving does not constitute a demandable
debt or when the gift imposes upon the donee a
burden which is less than the value of the thing
given.
NOTE: Donations made by a corporation to its
deceased officer out of gratitude for past
services are subject to donor’s tax. Past services
rendered without relying on a promise, express
or implied, that such services would be paid for
in the future do not constitute a demandable
debt. Thus, the amount given by the
corporation to the heirs of the deceased officer
of the corporation as gratitude for past services
rendered by the officer is subject to donor’s tax.
TRANSFERS WHICH MAY BE CONSTITUTED AS
DONATION
Sale/exchange/transfer of property for
insufficient consideration

A transfer becomes complete and taxable only

when, the donor has divested himself of all
Rule regarding transfer for less than adequate CLASSIFICATION OF DONOR
and full consideration:

Liable to pay donor’s tax:

GR: Where a property is transferred for less
than adequate and full consideration in money
or money’s worth, the amount by which the 1. Resident a. Resident citizen b. Non-resident
FMV exceeds the consideration shall be deemed citizen c. Resident alien
a gift and be included in computing the amount
of gifts made during the calendar year. It is as if 2. Non-resident a. Non-resident aliens b.
the property was donated but in order to avoid Foreign corporation
paying donor’s tax, the donor opted to transfer
the property for inadequate consideration.
NOTE: A corporation, domestic or foreign,
cannot be made liable to pay estate tax, but
XPN: Where property transferred is real may be liable to pay donor’s tax.
property located in the Philippines considered
as capital asset, the transfer is not subject to
donor’s tax but to a capital gains tax, which is a DETERMINATION OF GROSS GIFT
final income tax of 6% of the fair market value
or gross selling price, whichever is higher, and
therefore, there can be no instance where the Gross gifts – All property, real or personal,
seller can avoid any tax by selling his capital tangible or intangible, that was given by the
assets below its FMV. donor to the donee by way of gift, without the
benefit of any deduction (Sec. 104, NIRC).

Condonation/remission of debt
Rule regarding forgiveness/condonation of
indebtedness:
If the creditor condones the indebtedness of
the debtor the following rules apply:
1. On account of debtor’s services to the
creditor the same is in taxable income to the
debtor.
Net gift is the net economic benefit from the
transfer that accrues to the donee.
NOTE: 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.

2. If no services were rendered but the creditor COMPOSITION OF GROSS GIFT

simply condones the debt, it is taxable gift and
not a taxable income.
Included in the gross gifts:

1. For resident (RC, NRC, RA)
a. Real property wherever situated
(within & without the Philippines);
b. Personal property wherever
situated, tangible or intangible.
2. For non-resident (NRA);
a. Real property situated within the
Philippines;
b. Personal property:
i. Tangible property situated
within the Philippines
ii. Intangible personal property
with situs in the Philippines unless
exempted on the basis of reciprocity
VALUATION OF GIFTS MADE IN PROPERTY
1. Personal property - the fair market value of
the property given at the time of the gift shall
be the value of the gross gift. 2. Real property -
the fair market value as determined by the CIR
(zonal value) at the time of donation or the
value fixed by the assessor (assessed value),
whichever is higher (Sec. 102).
If there is no zonal value, the taxable base is the
fair market value that appears in the latest tax
declaration. If there is an improvement, the
value of the improvement is the construction
cost per building permit and or occupancy
permit plus 10% per year after year of
construction, or the market value per latest tax
declaration.
TAX CREDIT FOR DONOR’S TAXES PAID IN A
FOREIGN COUNTRY
The donor’s tax imposed by the NIRC 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 taxes of any character
and description imposed by the authority of a
foreign country.
Only donors who are citizens or residents at the
time of the donation are entitled to claim tax
credit.
Limitations on tax credit:
The following are the limitations to the tax
credit:
1. The amount of credit shall not exceed the
same proportion of the tax against such credit is
taken, which the net gifts situated within such
country taxable under Philippine laws bears to
the entire net gifts (Per country basis)
2. The amount of the tax 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
Philippine laws bears to his entire net gifts
(Overall basis)
Formula in computing the donor’s tax credit:
Lower of actual tax paid and the amounts
derived by computing the tax limits as follows:
Limitation A (per country):
Net gifts (foreign country) X Phil. Donor’s tax
Net gifts (world) Limitation B (by total):
Net gifts (outside Philippines) X Phil. Donor’s tax
Net gifts (world)
NOTE: If there’s only one foreign country, the
tax credit shall be the lower between actual tax
paid and Limitation A. If there are donations in
more than one country, the tax credit shall be
the lower between (a) actual tax paid and (b)
lower between Limitation A and Limitation B.
EXEMPTIONS OF GIFTS FROM DONOR’S TAX
Transactions exempt from donor’s tax:
1. Donation for political campaign purposes
(Sec. 99[C], NIRC 2. Certain gifts made by
residents (Sec. 101[A], NIRC) 3. Certain gifts
made by non-resident aliens Sec. 101[B], NIRC)
4. Donation of intangibles subject to reciprocity
(Sec. 104, NIRC) 5. Donation for athlete’s prizes
and awards (R.A. 7549) 6. Donation under the
“Adopt-a-School Program” (R.A. 8525) 7.
Exemption under other special laws.
Gifts made by a resident (RC, NRC, RA) that are
considered exempt from donor’s tax:
1. Specific exemption - net gifts of the amount
of P100,000 or less are exempt 2. Dowries or
gifts made on account of marriage and before
its celebration or made within one year
thereafter by parents to each of their
legitimate, recognized natural, or adopted
children to the extent of the first Ten thousand
pesos (P10,000) each parent 3. 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 4. Gifts in
favor of: [CARTER-CuPS]
a. Charitable b. Accredited NGOs c. Religious d.
Trust foundations e. Educational institutions f.
Research institutions g. Cultural foundations h.
Philanthropic organizations i. Social welfare
corporations
NOTE: In order to be exempt from donor’s tax
and to claim full deduction of the donation
given to qualified donee institution duly
accredited by the Philippline Council for NGO
certification, Inc. (PCNC), the donor engaged in
business shall give a notice of donation on every
donation worth at least 50,000 to the RDO
which has jurisdiction over his place of business
within 30 days after the 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
30% of said donations/gifts for the taxable year
shall be used by such accredited non-stock,
non-profit corporation/NGO institution for
administration purposes (Domondon, 2008.).
Requisites for exemption of dowries
1. The gift is given on account of marriage;
2. The gift is given before the celebration of
marriage or within 1 year thereafter;
3. Donor is the parent or both parents;
4. Donee is the legitimate, recognized natural or
legally adopted child of the donor; and
5. Maximum amount of the exemption is
P10,000 for each child that may be claimed by
each parent.
NOTE: Both parents may give dowries and gifts
on account of marriage. Each parent is entitled
to the exemption. This has the effect of splitting
the value of the gift into half for both spouses
so each spouse can claim the exemption. Both
spouses must file separate returns because the
husband and the wife are considered as distinct
entities for purposes of donor’s tax (Sec. 12,
R.R. 2003). However where there is failure to
prove that the donation was actually made by
both spouses, the donation is taxable as the
exclusive act of the husband, without prejudice
to the right of the wife to question the validity
of the donation without her consent pursuant
to the provisions of the Civil Code.
Requisites for the exemption of gifts made to
the CARTER-CuPS (Sec. 101, NIRC)
1. Donee is incorporated as a non-stock, non-
profit entity, paying no dividends;
2. Governed by trustees;
3. Trustees receive no compensation;
4. Donee devotes 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; and
5. Not more than 30% of the donation is used
for administrative purposes.
Gifts made by a non-resident (NRA) which are
exempt from donor’s tax
1. Specific exemption - net gifts of the amount
of P100,000 or less are exempt
2. 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.
3. 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 (Sec. 101[B], NIRC).
Rule on donation of intangible personal
properties
Under Sec. 104, the following intangible
properties shall be considered as situated in the
Philippines for estate and donor’s tax purposes:
1. Franchise which must be exercised in the
Philippines;
2. Shares, obligations or bonds issued by any
corporation or sociedad anonima Organized or
constituted in the Philippines in accordance
with its laws; (domestic corporation)
3. Shares, obligations or bonds by any foreign --- Q: Levox Corporation wanted to donate P5
corporation 85% of its business is located in the million as prize money for the world
Philippines; professional billiard championship to be held in
the Philippines. Since the Billiard Sports
4. Shares, obligations or bonds issued by any
Confederation of the Philippines does not
Foreign corporation if such shares, obligations
recognize the event, it was held under the
or bonds have acquired a business situs in the
auspices of the International Professional
Philippines;
Billiards Association, Inc. Is Levox subject to the
5. Shares or rights in any partnership, business donor's tax on its donation? (2011 Bar)
or industry Established in the Philippines (Sec.
104, NIRC).
A: Yes, since the national sports association for
However, no tax shall be collected with respect
billiards does not sanction the event. ---
to donation of intangible personal property
(Reciprocity Rule):

Exemption provided under adopt-a-school

program:
a. If the donor at the time of the donation was a
citizen and resident of a foreign country which
at the time of the donation did not impose a
Under R.A. 8525, any aid, help, contribution or
transfer tax of any character, in respect of
donation provided by an adopting private entity
intangible personal property of citizens of the
to a government school, whether elementary,
Philippines not residing in that foreign country,
secondary or tertiary are exempt from donor’s
or b. If the laws of the foreign country of which
taxes. The assistance may be in the form of, but
the donor was a citizen and resident at the time
not limited to infrastructure, teaching, and skills
of the donation allows a similar exemption from
development, learning, support, computer and
transfer of every character or description in
science laboratories and food and nutrition.
respect of intangible personal property owned
by citizens of the Philippines not residing in that
foreign country.
Exempted from donor’s tax under other special
laws:
Requirements for exemption from donor’s tax
of athlete’s prizes and awards:
1. RA 2707 - Donation to International Rice
Research Institute (IRRI)
1. The donation must be prizes and awards 2. RA 3676 - Donation to Ramon Magsaysay
given to athletes in local and international Award Foundation (RMAF)
tournaments and competitions; 2. Held in the
Philippines or abroad; and 3. Sanctioned by 3. RA 3850 - Donation to Philippines Inventors
their respective sports association (Sec. 1, R.A. Convention (PIC)
7549). 4. PD 181 - Donation to Integrated Bar of the
Philippines (IBP)
5. PD 205 - Donation to the Development calendar year in accordance with the table
Academy of the Philippines under NIRC.

6. Donation to social welfare, cultural or

charitable institution, no part of the net income
2. When the donee or beneficiary is stranger -
of which inures to the benefit of any individual,
the tax payable by the donor shall be thirty
if not more than 30% of the donation shall be
percent (30%) of the net gifts.
used by the donee for administration purposes

7. PD 292 - Donation to Aquaculture

Department of the Southeast Asian Fisheries
Development Center of the Philippines

8. RA 8492 - Donation to the National Museum

9. RA 1006 - Donation to the National Library

10. PD 294 - Donation to the National Social

Action Council (NSAC)

PERSON LIABLE

Any person making a donation is required to file

donor’s tax return unless the donation is
specifically exempted under NIRC or other
special laws. He is required for every donation
to accomplish under oath a donor’s tax return
in duplicate (Sec. 98, NIRC).

Donor’s tax return is filed within thirty (30) days

after the date the donation or gift is made.

TAX BASIS

1. Where the donee is a relative – The donor is

taxed according to graduated tax rates in
Section 99 (A), NIRC. Under said section, the tax
for each calendar year shall be computed on the
basis of the total net gifts made during the