Donor's Tax

Donor’s Tax A. Format of Computation Stranger Total (Gross) gifts

Relative

P xxx

P xxx

Less: Deductions (exemptions)

xxx

xxx

Total Net Gifts

xxx

xxx

Add: Total prior net gifts

xxx

xxx

Total net gifts subject to tax

P xxx

P xxx

Tax Due

P xxx

P xxx

Total Tax Due

P xxx

Less; Tax Credits/ payments Payments for prior gifts

( xxx )

Foreign Donor’s Tax Paid

( xxx )

Tax payable (overpayment)

P xxx

B. Donor’s Tax Rate 1. If the net gift is: Over

But not over P 100,000

P 100,000 200,000

200,000

The tax shall be

Plus

Of excess over

Exempt P0

2%

P 100,000

500,000

2,000

4%

200,000

500,000

1,000,000

14, 000

6%

500,000

1,000,000

3,000,000

44,000

8%

1,000,000

3,000,000

5,000,000

204,000

10%

3,000,000

10,000,000

404,000

12%

5,000,000

1,004,000

15%

10,000,000

5,000,000 10,000,000

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

Non-Resident Alien Donor

Personal Properties

Wherever situated

Situated in the Philippines

Real Properties

Wherever situated

Situated in the Philippines

D. Rule of Reciprocity Properties covered by the

Intangible personal properties situated in the Philippines given

rule

as gifts by bob-resident alien donor.

Basic rules:

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 donor’s 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 donor’s 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 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 donor’s 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

Real properties

Ordinary Assets

Subject to donor’s tax

Subject to donor’s tax

Capital Assets

Subject to donor’s tax

Not subject to donor’s tax

F. Valuation of gifts Made in Property

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Property Donated

Valuation

Gifts Made in property

Fair Market Value at the of the gift

Real Property

Provisions in estate tax shall apply to the valuation

G. Exemptions of Certain Gifts/Deductions from Gross Gifts 1. Found in Tax Code

a. Dowries or gifts made on account

Resident or Citizen

Non-Resident Alien

Donor

Donor

Allowed

Not Allowed

Allowed

Allowed

Allowed

Allowed

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:

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 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|Donor’s Tax

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

a. Encumbrance on the property

Resident or Citizen

Non-Resident Alien

Donor

Donor

Allowed

Allowed

Allowed

Allowed

donated if assumed by the done b. Those specifically provided by the donor as a diminution from the property

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 Donor’s Tax Due 4|Donor’s Tax

1. Net Gift shall mean the net economic benefit from the transfer that accrues to the done. 2. The computation of the donor’s 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 donor’s 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 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. 7. The tax payable of the donor if the done is a relative is based on the tabular donor’s tax rates (2% to 15%). 8. For purposes of donor’s 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 donor’s 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 donor’s tax.

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I.

Tax Credit for Donor’s Taxes Paid to a Foreign Country

1. One foreign

Limit

country

Net gift/total net gift x Philippine donor’s tax due xxx Actual foreign donor’s tax xxx Allowed (lower between actual and limit) xxx

2. Two or more foreign countries

Limit (a) – by country

xxx

Limit (b) – by total

xxx

Limit [lower between limits (a) an (b)]

xxx

Actual total foreign donor’s taxes

xxx

Allowed tax credit( lower between allowed limit And actual total foreign donor’s taxes)

xxx

J. Filing of Return and Payment of Tax 1. Requirement

Any individual who makes any transfer by gift (except those which are exempted from donor’s tax) shall, for the purpose of donor’s tax, make a return under oath at least in duplicate.

2. Contents of the The return shall set forth: donor’s 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|Donor’s 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

and made. The tax due thereon shall be paid at the time of filing.

payment of tax 4. Place

of

return

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

institution’s 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.

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