DONOR’S TAX (SEC. 98-108, RA 82424)

Donor’s or Gift Tax- is tax imposed on the privilege of transmitting property by and from a living person to another by way of donation.

Donation- refers to the act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who, accepts it.

PARTIES TO A DONATION

1. DONOR- the person who gratuitously disposes of his property or right
2. DONEE- the person who receives and accepts the property or right being donated.

KINDS OF DONATION
1. DONATION MORTIS CAUSA- one which takes effect upon the death of the donor. This is similar to a transfer in contemplation of death, and in the nature of a testamentary disposition which is subject to estate tax, not to gift tax.
2. DONATION INTER VIVOS- gifts made and intended by the donor to take effect during his lifetime and therefore subject to donor’s tax, not to estate tax.


1. DONATION OF PERSONAL PROPERTY may be made orally or in writing, except when the value of the donated property exceeds P5,000, in which case, the donation and the acceptance must be in writing.
2. DONATION OF REAL PROPERTY must be in a public document to be valid, specifying therein the property donated and the value of the charges which the done must satisfy. The acceptance by the done may be made in the same deed of donation or in a separate instrument, and done during the lifetime of the donor.

REQUISITES

1. Capacity of the Donor-
2. Donative intent or the donor’s intent to make a donation
3. Delivery, actual or constructive, of the subject matter of the donation
4. Acceptance of the gift by the donee.

The donor’s tax applies to both natural and juridical persons. Every donation between husband and wife during the marriage is declared void by law, except donation mortis causa and moderate gifts which the spouses, on the occasion of any family affair, may give to each other. Gifts coming from the conjugal property made by both spouses are taxable, on half to each donor spouse.

Where the property is transferred for less than adequate consideration in money or money’s worth, the amount by which the value of the property exceeds the amount of consideration shall be deemed a gift for purposes of the donor’s tax. The gift tax will apply regardless of whether the transfer is in trust or not, direct or indirect, real or personal property is involved, tangible or intangible.

Composition of Gross Gift

For a resident donor- real properties, tangible and intangible personal properties wherever located.

For a non resident donor- real properties, tangible or intangible properties located in the Philippines.

Under sec.104 of the tax code, gross gifts include the following:
1. Real, intangible and tangible personal properties or mixed, located in the Philippines and outside of the Philippines, depending on the kind of donor.
2. Franchise which must be exercised in the Philippines
3. Shares, obligations or bonds issued by any corporation or partnership, organized in the Philippines in accordance with our laws;
4. Shares, obligations or bonds issued by any foreign corporations, 85% of which is located in the Philippines
5. Shares, obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines
6. Shares or rights in any partnership, business or industry established in the Philippines.

Exemption/Allowable deductions from gross gift under sec. 101
1. Dowries or gifts of parents on account of marriage made before the marriage or within one year thereafter, in favor of the legitimate, recognized natural or legally adopted children to the extent of the first P10,000.
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, accredited NGO’s xxx, provided that not more than 30% of said gifts shall be used for administration purposes by such donee.

Deductions allowable under the BIR regulations

1. Encumbrances on the donated property, if assumed by the donee;
2. Diminution of the donated property as specified by the donor.

Exemptions under special laws

1. Gifts, contributions, donations to social welfare, cultural, or charitable institutions, no part of the net income of which inures to the benefit of any individual, if not more than 30% of said donation shall be used for administrative purposes. (Presidential Decree 507)
2. Gifts, contributions, donations to the government for purposes of scientific, engineering and technological research, invention and development
3. Gifts, contribution, donations to any international civic organization for religious or charitable purposes, provided that said donations shall be for its use, or to be distributed for free and not for sale or barter;
4. GCD to the IRRI
5. GCD to the IBP, Phil-American Cultural Foundation, Phil. Investors Commission,


In the case of non-resident donors the allowable deductions from gross gifts are the same as those for resident donors, except that the must be connected with donated properties situated in the Philippines only; there is no deduction for dowries given by parents to their children on account of marriage.

When the donee or beneficiary is a stranger, the tax payable by the donor shall be 30% of the net gifts.

A stranger is one who is not a brother, sister (whole or half-blood), spouse, ancestor, and lineal descendant, or relative by consanguinity in the collateral line within the fourth degree of relationship.

Political contributions are considered taxable gifts. The donee in this case is deemed to have received a financial advantage gratuitously. In the absence of an express exempting provision of law, such political contributions are subject to donor’s tax.