INTRODUCTION TO

DONOR’S TAX
By Erica Jimenez
DONOR’S TAX • Privilege Tax
• Proportional Tax
is a tax imposed on the gratuitous transfer of property • Annual Tax
between two or more persons who are living at the time • Ad Valorem
of the transfer. It is a tax imposed on the right or • National Tax
privilege of the donor to make a gift. • Fiscal Tax
 ▪ CONTROL TAX EVASION
RATIONALE
OF DONOR’S TAXATION ▪ RECOUPMENT OF FUTURE LOSS
REQUISITES OF A
VALID DONATION FORMALITIES

✓ Donor must have the capacity to donate

REAL PROPERTY: public instrument

✓ Donative Intent TANGIBLE

PERSONAL PROPERTY
✓ Delivery
not exceeding P5,000: oral
✓ Donee must accept or consent to the donation exceeding P5,000: written

✓ Formalities required
INTANGIBLE
PERSONAL PROPERTY: public instrument
VOID
DONATIONS
PROHIBITED UNDER THE CIVIL CODE: WITH DEFECTS AT EXECUTION
▪ between spouses, except minor gifts ▪ donation by a person who has
▪ between persons guilty of concubinage or no legal title to the property
adultery ▪ oral or written donation of real
▪ between persons found guilty of the same property or intangible personal
criminal offenses property
▪ to a public officer or his wife, descendants, ▪ donation refused by donee
or ascendants by reason of his office.
▪ donations to incapacitated persons
▪ donations of future property
VOID
DONATIONS
PROHIBITED UNDER THE CIVIL CODE: WITH DEFECTS AT EXECUTION
▪
▪
between spouses, except minor gifts
between persons guilty of concubinage or
▪
capacity
donation by a person who has
no legal title to the property
adultery ▪ oral or written donation of real
▪ between persons found guilty of the same formality
property or intangible personal
criminal offenses property
▪ to a public officer or his wife, descendants, ▪ donation refused by donee
or ascendants by reason of his office. acceptance
▪ donations to incapacitated persons
▪ donations of future property
 GROSS GIFT
NET GIFT
EXEMPTIONS FROM GROSS GIFT

net economic benefit from

the transfer that accrues to GROSS GIFT
the donee.
LESS: DEDUCTIONS
NET GIFT
LESS: P 250,000 EXEMPT GIFT
TAXABLE NET GIFT
x 6%
DONOR’S TAX DUE
 · Rural Farm School (Sec. 14, R.A. No. 10618)
· People’s Television Network, Incorporated (Sec. 15, R.A. No. 10390)
· People’s Survival Fund (Sec. 13, R.A. No. 10174)
· Aurora Pacific Economic Zone and Freeport Authority (R.A. No. 10083)
· Girl Scouts of the Philippines (Sec. 11, R.A. No. 10073)
· Philippine Red Cross (Sec. 5, R.A. No. 10072)
· Tubbataha Reefs Natural Park (Sec. 17, R.A. No. 10067)
· National Commission for Culture and the Arts (Sec. 35, R.A. No. 10066)
· Philippine Normal University (Sec. 7, R.A. No. 9647)
EXEMPT ·
·
University of the Philippines (Sec. 25, R.A. No. 9500)
National Water Quality Management Fund (Sec. 9, R.A. No. 9275)
DONATIONS · Philippine Investors Commission (Sec. 9, R.A. No. 3850)
· Ramon Magsaysay Award Foundation (Sec. 2, R.A. 3676)
· Philippine-American Cultural Foundation (Sec. 4, P.D. 3062)
SPECIAL LAWS · International Rice Research Institute (Art. 5(2), PD 1620)
· Task Force on Human Settlements (Sec. 3(b)(8), E.O. 419)
· National Social Action Council (Sec. 4, P.D. 294)
· Aquaculture Department of the Southeast Asian Fisheries Development
Center (Sec. 2, P.D. 292)
· Development Academy of the Philippines (Sec. 12, PD 205)
· Integrated Bar of the Philippines (Sec. 3, PD 181)
 DONOR’S TAX
COMPOSITION OF GROSS GIFT

➢ sold at less than full adequate consideration

CAPITAL ASSET ORDINARY ASSET
RESIDENT or CITIZEN taxable in full
GLOBAL DONATIONS deductible in full
1. REAL / IMMOVABLE PROPERTY → 6% CGT
difference of SP-FMV
→ GROSS GIFT
NON-RESIDENT
2. TANGIBLE ALIEN/ MOVABLE PROPERTY
PERSONAL
PHILIPPINE DONATIONS difference of SP-FMV
→ GROSS GIFT DONATIVE INTENT
3. INTANGIBLE PERSONAL / MOVABLE PROPERTY
ILLUSTRATION

A corporation sold the following properties:

Fair Value Selling Price
Vacant and unused lot P 2,000,000 P 1,000,000 CA R 6% CGT
Building 4,000,000 2,500,000 OA P 1,500,000
Investment in shares of stocks 1,000,000 400,000 CA P 600,000
Equipment 400,000 200,000 OA 200,000

NET GIFT P 2,300,000

LESS: EXEMPT GIFT P 250,000

TAXABLE NET GIFT 2,050,000

x 6%

DONOR’S TAX DUE P 123,000

ILLUSTRATION

Mr. Ekkon had a car with a fair value of P4,000,000. His brother Juan is interested to
buy the car but could only offer P2,500,000. Another friend offered P3,800,000 for the
car but Ekkon preferred to sell the car to Juan.
: TAXABLE GIFT

ILLUSTRATION

Liam Mado is having a business liquidity problem. Faced with an imminently maturing
debt which he could not repay, he sold his truck with a second hand value of
P3,000,000 for only P1,000,000.
: NOT TAXABLE GIFT
 GENERAL Renunciation
DONATIONS SPECIFIC Renunciation
FOR ELECTION RENUNCIATION
CAMPAIGN OF
INHERITANCE
ELECTION CODE
 GENERAL Renunciation
SPECIFIC Renunciation
RENUNCIATION
OF ILLUSTRATION: Don Juan died with a net
INHERITANCE distributable estate of P1,200,000
for his children Clara, Bernard,
and Cedie as heirs.

Cedie renounces his P400,000

share in the net estate in favor of
a. GENERAL Renunciation : EXEMPT no particular assignee.
 GENERAL Renunciation
SPECIFIC Renunciation
RENUNCIATION
OF ILLUSTRATION: Don Juan died with a net
INHERITANCE distributable estate of P1,200,000
for his children Clara, Bernard,
and Cedie as heirs.

Cedie renounced his P400,000

share in the net estate in favor of
a. GENERAL Renunciation : EXEMPT Clara to the exclusion of Bernard.
b. SPECIFIC Renunciation : TAXABLE
WITH MORE THAN TWO HEIRS
 GENERAL Renunciation
SPECIFIC Renunciation
RENUNCIATION
OF ILLUSTRATION: Don Juan died with a net
INHERITANCE distributable estate of P800,000
for his two heirs children Clara,
and Cedie.

Cedie renounced his P400,000

share in the net distributable
a. GENERAL Renunciation : EXEMPT estate.
b. SPECIFIC Renunciation : TAXABLE
WITH MORE THAN TWO HEIRS

c. SPECIFIC Renunciation : EXEMPT

WITH ONLY TWO HEIRS
 RENUNCIATION
OF
INHERITANCE

a. GENERAL Renunciation : EXEMPT

b. SPECIFIC Renunciation : TAXABLE
WITH MORE THAN TWO HEIRS

c. SPECIFIC Renunciation : EXEMPT

WITH ONLY TWO HEIRS

d. Renunciation of SURVIVING SPOUSE HEREDITARY ESTATE

SHARE IN COMMON PROPERTIES : TAXABLE
 DONATIONS
FOR ELECTION RENUNCIATION INCOMPLETE QUASI
CAMPAIGN OF TRANSFERS TRANSFERS
INHERITANCE
ELECTION CODE
 RR No. 6-2020 incentives for the manufacture or importation of
critical or needed equipment or supplies, which
include healthcare equipment and supplies:

Donations of these imported articles to or for the use of the National

EXEMPT Government or any entity created by any of its agencies which is not
conducted for profit, or to any political subdivision of the said
DONATIONS government are EXEMPT from Donor's Tax, and subject to the
ordinary rules of deductibility under existing rules and issuances.

RA No. 11494
(Bayanihan to Recover
as One Act)
 RR No. 9-2020 further benefits on donations during the period of
Enhanced Community Quarantine (ECQ)

The following donations/gifts shall be considered fully deductible against

the gross income of the donor-corporation/donor-individual:
a. Cash donations;
b. Donations of all critical or needed healthcare equipment or
EXEMPT supplies;
c. Relief goods such as, but not limited to, food packs (rice, canned
DONATIONS goods, noodles, etc.) and water; and
d. Use of property, whether real or personal (shuttle service, use of
lots/ buildings).
RA No. 11494
(Bayanihan to Recover all donations/gifts, subject to the timely submission of the documentary
as One Act) requirements, shall also be considered as exempt from the Donor’s Tax.
 RR No. 26-2020
Is relative to donations of identified equipment for use in public schools.
It covers all donations of personal computers, laptops, tablets, or similar
equipment (i.e. mobile phone, printer) for use in teaching and learning
in public schools starting from the effectivity of the said Act on
September 15, 2020 up to December 19, 2020.
EXEMPT The amount of donation shall be based on the actual acquisition cost of
DONATIONS personal computers, laptops, tablets, or similar equipment donated. If
the personal computers, laptops, tablets, or similar equipment donated
had already been used, its depreciated value shall be taken into
consideration.
RA No. 11494
(Bayanihan to Recover
as One Act)
 RR No. 9-2020 further benefits on donations during the period of
Enhanced Community Quarantine (ECQ)
all donations/gifts, subject to the timely submission of the documentary
requirements, shall also be considered as exempt from the Donor’s Tax
and shall be deductible in full against the gross income of the donor-
corporation and/or donor-individual when given to the following
donees:
a. Private hospitals and/or non-stock non-profit educational and/or
EXEMPT charitable, religious, cultural or social welfare corporation,
institution, foundation, non-government organization (NGO) (even if
DONATIONS non-accredited), trust or philanthropic organization and/or research
institution or organization; and

a. Local private corporations, civic organizations, and/or international

RA No. 11494
organizations/institutions provided that they shall
(Bayanihan to Recover
i.) actually, directly and exclusively distribute and/or transfer said
as One Act)
donations/gifts to, and/or
ii.) partner as conduit/logistical machinery with the accredited NGOs
and/or 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.
 • Common Exempt Donations under Special Laws

RESIDENT or CITIZEN
• Dowries (OLD) : only claimed by parents, P10,000 each
: husband and wife; separate taxpayers

no limit 1 year

EXEMPT • Encumbrances assumed by the Donee

DONATIONS • Diminution specifically provided by Donor
• To National Government : not proprietary in nature
• To Accredited Non-Profit Organizations
: not more than 30% for administrative purposes
: no compensation of BOT
: all assets towards achievement of purposes in AOI

NON-RESIDENT ALIEN
• All except dowries (OLD)