Donation of Movable Property (Personal)

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DONOR’S TAX - Law in force of time shall govern the

imposition based on FMV of the property


- Act of liberty
- Contract ; requires acceptance
- A person disposes gratuitously a thing or
4. Acceptance
right in favor of another
- Must be made during the lifetime
- tax levied, assessed, collected and paid
- Time of knowledge of the donor that the
upon the transfer by any person of the
done has accepted the donation
property by gift.
- Delivery and acceptance is required to
- Imposed on the exercise of donor’s right
consummate donation.
DURING LIFETIME
- Excise tax in the form of donation inter-vivos
- Direct tax
- Transfer tax 5. Donation is in prescribed forms
- Applies to both natural and juridical persons COMPLETION OF INCOMPLETE GIFTS
- Ownership and right of interest in property
- RA 8424 - Donor renounces power
- Donor’s right to exercise power ceases
PERFECTION
PURPOSE OF DONOR’S TAX
- Donor knows of the acceptance by the done
1. To prevent avoidance of estate tax by
COMPLETED preventing the tax free depletion of donor’s
- Delivery of the donated property estate during his lifetime
2. To compensate for the loss of progressive
LAW THAT GOVERNS IMPOSITION OF rates of income tax
DONOR’S TAX 3. Raise revenue to support government
- Law in force at the time of
perfection/completion FORMALITIES
RA 10963 – 6% in excess of 250,000 Donation of Movable Property (Personal)
ELEMENTS OF DONATION  Orally or in writing
1. Capacity of the donor to make donation  Oral – simultaneous delivery of thing or
- condition and legal competence of the document
donor to enter a contract  > 5,000 = must be in writing
- capacity to dispose Donation of Immovable Property (Real)
- determined at the perfection of the
donation  Made in a public document
 Acceptance in a separate public document,
but it shall not take effect unless it is done
2. Donative intent or intent to make a gift during the lifetime of the donor.
- Proper declaration to transfer ownership
TABLE 6.1. SUMMARY OF FORMAL REQS
without consideration.
PERSONAL REAL
- Direct gifts only
(MOVABLE) (IMMOVABLE)
- NOTE: parent-subsidiary relationship and AMOUNT ≤5,000 >5,000 regardless
declaration of dividend NOT subject to
donor’s tax FORM OF Oral or In In public
DONATION in writing instrument
writing

3. Delivery
- Completed gift CHARACTERISTICS OF DONOR’S TAX
1. Excise tax. Gift inter-vivos
2. Contract. There must be a completed gift Requisite 1. Death of 1. Donative
3. Perfected from the moment the donor s or decedent intent of
knows of the acceptance of the done Elements 2. Heir is donor
4. Direct tax. Tax is imposed on the donor alive at 2. Capacity
5. Renunciation by surviving spouse after the the time or
dissolution of marriage – subject to donor’s of dece- authority
dent’s of donor
tax
death. 3. Delivery
6. General renunciation by an heir, is not
Not of
subject to ta, unless in favor of identified disqualifie donated
heirs to the exclusion/disadvantage of other d. property
co-heirs 3. Estate/ 4. Acceptan
Inheritanc ce
CLASSIFICATION OF DONATION
e 5. Proper
1. Excise tax form
2. Ad valorem tax Accrual Upon death of At the time the
3. Direct tax Period decedent donation is
4. National tax perfected
5. Transfer tax Governin Statute in force at Statute in force
g Law the time of death at the time of
6. Personal tax
of decedent perfection of
As to motive or purpose: donation
Tax Rate 6% net estate ≥ 250,000 = 6%
1. Simple – Pure liberty Filling & 1. Withing 1 1. Within 30
2. Renumeratory – Not subject to donor’s tax, Payment yr from days from
not gratuitous death donation
3. Modal – Consideration > value of thing 2. ≤ 30 days 2. No
donated =extensio extension
n
As to time of effect (Perfection): 3. Pay as 3. Pay as
you file you file
1. Inter-vivos – Lifetime 4. Extension 4. No
2. Mortis-causa – after death to pay extension
VALUATION OF GROSS GIFTS Extrajudicial for
= 2yrs payment
- Based on the FMV of the property donated Judicial =
at the time the donation is perfected 5yrs
NOTE: REAL PROPERTY Scope RC, NRC, RA – RC, NRC, RA –
FMV by CIR estate within and gifts within and
FMV by Provincial and City Assessors without without
RA – estate RA – gifts within
= HIGHER
within
Stocks, bonds and other securities:

 Traded. Mean of highest quoted SP and GROSS GIFTS


lowest quoted SP
- Depend on the citizenship or residence of
 Not traded. the DONOR
Ordinary stocks – book value or security on RESIDENT or CITIZEN – within or without
valuation date. NONRESIDENT ALIEN – within only
Preferred stocks – par value of the security.
TABLE 6.3. COMPOSITION OF GROSS GIFTS
TABLE 6.2. ESTATE TAX VS. DONOR’S TAX Property Citizen/Resident Nonresident
ESTATE TAX DONOR’S TAX alien alien
Concept Succession Gift or donation Property Included Included
involved Donation Mortis Donation Inter- within
causa vivos Property included Excluded
without Donor’s Tax Payable xx
Intangible included Included***
property (subject to
within reciprocity) TRANSFER FOR INSUFFICIENT
Intangible Included Excluded CONSIDERATION
without

INTAGIBLE PERSONAL PROPERTY in the DONOR’S TAX FOR SALE NOT THRU THE
Philipinnes LOCAL STOCK EXCHANFGE
1. Franchise exercised within the Philippines Fair value – Selling Price = goft subject to donor’s
2. SOB by any corp constituted in the Phil tax
3. SOB by any foreign corp, 85% is located in
the Philippines - Parties must present proof of business
4. SOB by a foreign corp if SOB have acquired purpose.
a business situs in the Philippines Hereditary estate subject to donor’s tax when
5. Shares or right established in the renounced provided:
Philippines
1. It was expressly made in favor of the heir
COMPUTATION OF TAXABLE NET GIFT 2. To the exclusion or disadvantage of another
Gross Gifts heir

1. Direct Gifts RENUNCIATION OF SHARE


2. Gifts thru creation of trust Subject to donor’s tax – renunciation by surviving
3. Transfer for insufficient consi spouse of his share in the conjugal partnership
4. Repudiation of inheritance after the dissolution of the marriage in favor of the
5. Renunciationby surviving spouse heirs of the deceased spouse.
6. Condonation of debt
CONDONATION OF INDEBTNESS
Deductions
- Act of liberty without receiving any
1. Encumbrances consideration
2. Diminution
3. Government, charitable/ educational No condonation:

Less: Exempt Gift (250,000)  Condonation is due to the rendition of


services. Subject to income tax
CUMULATIVE BASIS OF COMPUTING THE NET  Condonation was made by a corporation in
TAXABLE GIFTS favor of its shareholders.
- As to gifts made within the same calendar PAYMENT OF LOAN BY THE GUARANTOR
year
- Gratuitous unless stated otherwise
Net Gift xx
SPLITTING OF GIFT
Add: Prior net gift xx
- Tax minimization scheme
Less: exmpt gift (250,000) - Avoid a higher tax due to higher tax base
Net taxable gift xx - Result to a lower tax due

Multiply by 6% DONATIONS MADE BY A FOREIGN


CORPORATION
Donor’s Tax Due xx
- Only if the property donated is located in the
Less: Prior tax paid (xx) Philippines
- 85% of the business is located in the TAX CREDIT
Philippines subject to reciprocity
- To minimize the harsh effect of taxing the
- Donation of its own share in favor of a
same gift twice
resident employee – NOT SUBJECT
- Foreign donor’s tax credit can be only
VOID DONATIONS claimed by citizens or residents of
Philippines
1. Between persons who were guilty of
adultery or concubinage
2. Between persons found guilty of the same
LIMIT A
criminal offense
3. Made to public officer or his wife by reason Net gifts , foreign countries
of his office x Philippine dono r ' s tax due
Net gifts , worl d
EXEMPT GIFTS = LIMIT A
- Not treated as exclusions for donor VERSUS
- Deductible from the gross gifts in order to
arrive at taxable net gifts LOWER BETWEEN LIMIT B

DEDUCTIONS FROM GROSS GIFTS ACTUAL PAID

1. gifts made for the use of national


government which is not conducted for profit
ADMINISTRATIVE PROVISIONS
2. gifts in favor of nonprofit
educational/charitable etc. Not ≤ 30% of the Filing and Payment
said gift shall be used by done for
administration purposes - Make a return
1. Each gift made during the calendar year
NOTE: if conducted for profit, donation is subject to 2. Deductions claimed
donor’s tax. It is included in the gross gift but not 3. Any previous net gifts
allowed as part of deductions. 4. Name of done
5. Further information
Notice of Donation by a donor engaged in business
- Return is filed and paid within 30days after
- give notice of donation on every donation the date of completion
worth at least 50,000 to the RDO which has
Place of filing
jurisdiction of business within 30days after
receipt of qualified done. 1. Authorized agent bank
- 2. RDO
3. Encumbrances 3. Revenue Collection Officer having
- Net economic benefit that accrues to the jurisdiction where the donor is domiciled at
done. FMV – mortgage = NET the time of transfer
4. Donations < 250,000 in one year
5. Donations made to entities as exempted Non-resident alien place of filing
under special laws 1. Philippine Embassy or Consulate in the
PHILIPPINE RED CROSS country where he is domiciled
2. Office of Commissioner – RDO
- Exempt from the payment of all direct or
indirect taxes Civil of penalties and interest
- Exempt from direct and indirect taxes, vat, 1. 25% - no false or fraudulent intent
duties fees and other charges 2. 50% - false, malicious or fraudulent intent
- All donations and gifts shall be exempt from 3. Interest on unpaid amount of tax – 12%
donor’s tax and shall be deductible from
gross income Deeds of sale
≤ 20,000 – paid in cash 11. Proof of valuation of other types of personal
properties, if applicable;
≥ 20,000 – made thru manager’s check or cashier’s
12. Proof of claimed deductions, if applicable;
check
13. Certificate of
Documentary Requirements deposit/investment/indebtedness/stocks for
donated cash or securities
Mandatory Requirements [additional two (2) 14. Certificate of registration of motor vehicle, if
photocopies of each document]: any;
1. Duly Notarized Original Deed of Donation; Other Additional Requirements, if applicable
2. Taxpayer Identification Number (TIN) of [additional two (2) photocopies of each
Donor and Donee/s; document]:
3. Proof of claimed tax credit, if applicable;
4. Validated return and Original Official 15. Duly Notarized Original Special Power of
Receipt/Deposit Slip as proof of payment; Attorney (SPA), if the person
for no payment return, copy of transacting/processing the transfer is not a
Acknowledgment Receipt of return filed thru party to the transaction
eBlRForms; 16. Certification from the Philippine Consulate if
5. Duly Notarized Original Special Power of document is executed abroad
Attorney (SPA) for the transacting party if 17. Location Plan/Vicinity map issued by the
the person signing is not one of the parties Local Assessor’s Office if zonal value
to the Deed of Donation; cannot be readily determined from the
documents submitted
For Real Properties [additional two (2) photocopies 18. Certificate of Exemption/BIR Ruling issued
of each document]: by the Commissioner of Internal Revenue or
6. Certified True Copy/ies of the his authorized representative, if tax exempt
Original/Transfer/Condominium Certificate/s 19. Such other documents as may be required
of Title (front and back pages) of the by law/rulings/regulations/etc.
donated property, if applicable;
7. Certified True Copy/ies of the Tax
Declaration at the time or nearest to the
date of the transaction issued by the Local
Assessor’s Office for land and improvement,
if applicable;
8. Certification of No Improvement issued by
the Assessor’s Office, if applicable;
For Personal Properties [additional two (2)
photocopies of each document]:
Proof of valuation of shares of stock at the time of
donation, if applicable;
9. a. For shares of stocks not listed/not traded
- Latest Audited Financial Statement of the
issuing corporation with computation of the
book value per share b. For shares of
stocks listed/traded - Price index from the
Philippine Stock Exchange (PSE)/latest Fair
Market Value (FMV) published in the
newspaper at the time of transaction c. For
club shares - Price published in newspapers
on the transaction date or nearest to the
transaction date
10. Stock certificate;

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