DONOR’S TAX REVIEWER

Elements of Donor’s Tax Purpose of Donor’s Tax

1. Capacity of the donor to make a donation 1. To prevent avoidance of estate tax

 Donor- is the one who needs to have 2. To prevent of compensate for the loss of the
capacity progressive rate of income tax
 Donee- can be incapacitated
3. To recoup future loss of income tax revenue
2. Donative intent

 Required only in direct gifts Formalities

3. Delivery
Personal Property Real
 Time where donation is completed Property

4. Acceptance Amount ≤ 5,000 >5.000 Regardless

of amount
 Perfection of donation Form Oral or in In writing In a public
 Shall be made during the lifetime of the writing instrument
donor and donee
*5. Compliance with required formalities Characteristics of Donor’s tax
1. Excise tax not a property tax
Classification of donation 2. It is contract
As to motive or purpose: 3. Perfection upon donor knowing donee’s
acceptance
1. Simple- pure liberality
3. Direct tax
2. Renumeratory- not subject to donor’s tax
5. Privilege tax
3. Modal- consideration is less than value donated
6. Proportional tax of 6%
As to time of taking effect (perfection)
7. Ad valorem
1. Donation inter-vivos
8. National tax
2. Donation mortis cause
9. Revenue/ fiscal tax
Two types of intervivos donation
1. Direct Donation
Proper valuation
 Made by donor directly to done
 Common definition  Property- FMV at the time of the gift
 All the requirements needed are present  Right of usufruct, use or habitation,
 Donation of rights annuity- take into account the probable life
of the beneficiary according to the latest
2. Indirect Donation Basic Standard Mortality table
 Transfer of property by donor in favor of  Real Property- FMV. Whichever is higher:
done but under supervision of another o Determined by CSR
party o Shown in the schedule of Provincial
 Donation on trust or city assessor
Either be:  Shares of stocks listed in local stocks
a. Revocable- x complete; x taxable exchange- FMV (average of highest or
b. Irrevocable- complete and taxable lowest quotation price at or nearest the date
of donation)
 Shares of stocks not listed- ordinary
Incomplete gift shares uses BV while preference share use
par value
It will be a complete gift when:
1. Donor renounces the power; or
2. Right to exercise power ceases because of
happening of even other than death of donor
Composition of Gross Gifts
General renunciation

Property RC/NRC/RA NRA w/o NRA  GR: Not subject to donor’s tax
RP w/in Yes Yes Yes  XPN: Subject if:
RP w/o Yes No No o Expressly made in favor of an heir,
Tangible Yes Yes Yes and
Perso o To the exclusion or disadvantage of
w/in
another
Tangible Yes No No
Perso w/o  If dalawa lang sila, general na kasi walang
IPP w/in Yes Yes No ibang makikinabang
IPP w/o Yes No No Condonation or cancellation of indebtedness

 GR: Subject to donor’s tax

Intangible Personal Property in the Philippines
 XPN: Condonation due to rendition of
1. Franchise must be exercised within the Ph service
 XPN: Condonation was made by a
2. Shares, obligations or bonds issued by corporation in favor of its shareholder
Domestic Corporation
Payment of Loan by the Guarantor
3. Shares, obligations or bonds issued by Foreign
Corporation  GR: gratuitous. Subject to donor’s
 XPN: if jointly entered by the guarantor and
o 85% is situated in Ph
the borrower with a credit-bank
4. Shares, obligations or bonds issued by Foreign  Note: it is irrelevant whether the donee is
Corporation if such shares, obligation or bonds insolvent or not
acquired a business situs in Ph
Splitting of gifts
5. Shares, obligations or bonds in any partnership
 Tax minimization scheme (tax avoidance)
business or industry established in Ph
Donation made by a Foreign Corporation

Transfer of insufficient consideration  GR: Subject to donor’s if property is

located in Ph
Property other that those subj to CGT:  XPN: Donation of its own stocks unless
85% of the foreign corp is located in Ph or
 Transferred for less than full consideration.
shares are acquired in Ph
Gift=FMV-Consideration
 Note: Donation of own SOS in favor of
 If consideration is fictitious- entire value is
resident employee is not subj to donor;s
subject to donor’s
 Transfer in an ordinary course of Void donations
business not subject to donor’s
1. Between persons who were guilty of adultery or
‘Donor’s tax for sale or exchange not through concubinage
Local Stock Exchange of shares of stock of
2. Between persons guilty of criminal offense, in
domestic corporation
consideration thereof.
 Absence of donative intent does not exempt
3. Made to public officer or his wife, descendants
sale of stocks
and ascendants by reason of his office
 Difference of par/BV and the consideration
is considered gift
 EXEMPTION: done through ordinary course
Other donations:
of business (arm’s length and free of
donative intent) considered as made for an 1. Donations not exceeding 250,000
adequate and full consideration
2. Made for the use of the National Government or
any entity created by any of its agencies which is
not for profit
DEDUCTIONS
3. In favor of non-profit educational and/or
Renunciation of share in common property by
charitable, religious, culture or social welfare
surviving spouse
corporation, institution, accredited nongovernment
 Subject to donor’s tax organization, trust or philanthropic organization or
research institution or organization. Provided, not
more than 30% of said gifts shall be used for admin
purpose
4. Donations exempted under special laws
5. Encumbrances on the property donated if
assumed by done
6. Dimunitions

 Decrease in value of property due to

condition made by a donor to done

Foreign Tax Cedit

LIMIT A
Net Gifts, FC __ X Philippine Donor’s tax due = xxx
Net Gifts, world
VERSUS
Actual tax paid, Foreign country xxx
Allowed Tax Credit (lower between) xxx

LIMIT B

 Step 1- limit 1 per country

 Step 2 compute overall
Net Gifts, all FC X Philippine Donor’s tax due = xxx
Net Gifts, world
VERSUS
Actual tax paid, all Foreign country xxx
Limit 2 (lower between) xxx

 Step 3- lower amount of limit 111 and limit

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