TAX103 TAX 203 Donor's Tax

BS accountancy

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 Accountancy Review Center (ARC)
of the Philippines Inc.
One Dream, One Team

REVIEWEE HANDOUTS
TAXATION TABAG / SIA
TAX.203—DONOR’s TAX OCT 2021 CPALE REVIEW

LEARNING OBJECTIVES

1. Define donor’s tax 6. Determine allowable deductions from the gross gifts
2. Compare donor’s tax from estate tax 7. Compute the donor’s tax due
3. Describe the nature and characteristics donor’s tax 8. Discuss the filing and payment of donor’s tax due.
4. Identify the elements of donation
5. Determine the composition of the gross gifts

REVIEW NOTES

A. DONATION – is act of liberality whereby a person E. FORMAL REQUISITES

disposes gratuitously of a thing or right in favor of
another, who accepts it (Art. 725, New Civil Code). FORMAL REQUISITES
PERSONAL PROPERTY REAL
B. NATURE OF DONOR’S TAX – it is a tax on the privilege PROPERTY
of the donor to give; it is not a property tax, but is a tax Amount of P5,000 or less More than Regardless
imposed on the transfer of property by way of gift inter- donation P5,000 of amount
vivos. Form of Oral or in In writing, In public
Donation writing otherwise instrument,
The donor’s tax shall not apply unless and until there is a VOID otherwise
completed gift. VOID
Additional Oral donation None None
C. PURPOSES OF DONOR’S TAX Requirement requires
1) To supplement the estate tax simultaneous
delivery
2) To prevent the avoidance of income taxes. Without
donor’s tax, the donor may escape the progressive F. CLASSIFICATION OF DONORS
rates of income taxation through the simple 1) Citizen or Resident (RC/NRC/RA)
expedient way of splitting his income among 2) Non-resident Alien (NRA)
numerous donees. i. With reciprocity
ii. Without reciprocity
D. ELEMENTS OF A TAXABLE DONATION (CIDA)
1) Capacity of the donor to transfer property G. FORMAT OF COMPUTATION
2) Donative intent
FIRST DONATION OF THE YEAR
3) Delivery, whether actual or constructive, of the Gross Gift Pxxx
subject matter Less: Exclusions/Deductions (xxx)
Net gift Pxxx
NOTE: Less: Tax exempt gift (TRAIN Law) (250,000)
The transfer of the property is completed by the Net Taxable Gift Pxxx
delivery, either actually or constructively, of the Multiply: Rate 6%
donated property to the done. Donor’s Tax Due Pxxx
Less: Tax Credit (xxx)
4) Acceptance of the gift by the donee Donor’s Tax Payable Pxxx

NOTE:
The transfer of property by gift is perfected from the
moment the donor knows of the acceptance by the
donee.
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SECOND AND SUBSEQUENT DONATION EXCEPTION: Real property in the Philippines

WITHIN THE YEAR classified as capital asset.
Gross Gift, Current Pxxx
Less: Exclusions/Deductions, (xxx) FMV at the time of sale Pxxx
Current Less: Selling Price (xxx)
Net Gift, Current Pxx Taxable Gift Pxxx
Add: Prior Net Gift xxx
Aggregate Net Gift Pxxx
Less: Tax exempt gift (TRAIN Law) (250,000) COMPONENTS OF GROSS GIFT
Net Taxable Gift Pxxx RP TPP IPP
Multiply: Rate 6% Donor w/i w/o w/in w/o w/in w/o
Donor’s Tax Pxxx n
Tax Paid – Prior Gift(s) (xxx) RC/NRC/R √ √ √ √ √ √
Tax Credit (xxx) A
Donor’s Tax Payable Pxxx NRA w/o √ X √ X √ X
Reciprocity
Note: The computation of the donor’s tax is on a NRA w/ √ X √ X X X
cumulative basis over a period of one calendar year. Reciprocity

NOTE: v Gift from Common Property – the taxable gift is

For purposes of the donor’s tax, “NET GIFT” shall mean one-half to each donor spouse.
the net economic benefit from the transfer that accrues
to the donee. (RR No. 2-2003) v Donation between husband and wife during the
marriage
H. DONOR’S TAX RATE
GENERAL RULE: The gift is not taxable, as it is
The donor’s tax rate payable by a donor for each declared void by law.
calendar year shall be 6% (beginning January 1, 2018)
computed on the basis of the total net gifts in excess of EXCEPTION: Moderate gifts between the spouses
P250,000 exempt gift made during the calendar year. are valid.

The computation of donor’s tax shall be on a cumulative Husband and wife are considered as separate and
basis (on gifts made within the same calendar year), distinct taxpayer’s for purposes of the donor’s tax.
regardless of the relationship of the donor and the donee However, if what was donated is a conjugal or
(relative or stranger, natural or juridical person). community property and only the husband signed the
deed of donation, there is only one donor for donor’s
The tax shall apply whether the transfer is in trust or tax purposes, without prejudice to the right of the
otherwise, whether the gift is direct or indirect, and wife to question the validity of the donation without
whether the property is real or personal, tangible or her consent pursuant to the pertinent provisions of
intangible [Sec. 98(B) of NIRC]. the Civil Code of the Philippines and the Family Code
of the Philippines.
Any contribution in cash or in kind to any candidate,
political party or coalition of parties for campaign J. EXEMPTIONS OR DEDUCTIONS FROM GROSS
purposes, shall be governed by the Election Code, GIFT
hence, not subject to donor’s tax [Sec. 99(B) of NIRC; RR
12-2018)]. 1) Gifts to the Government - gifts made to or for
the use of the National Government or any entity
I. GROSS GIFT created by any of its agencies which is not
conducted for profit, or to any of its political
v Transfers subject to donor’s tax: subdivision of the said government.
1) Direct gift;
2) Gift through creation of a trust; 2) Gifts in favor of an educational and/or
3) Condonation of debt; charitable, religious, cultural or social
4) Repudiation of inheritance if: welfare, institution, accredited non-
1. Specifically and categorically done in favor of government organization, trust or
identified heirs; and philanthropic organization or research
2. To the exclusion or disadvantage of other co- institution or organization
heirs. Requisites:
5) Renunciation by the surviving spouse of his/her 1) Gifts in favor of the following entities:
share in the conjugal partnership or absolute i. Educational
community after the dissolution of the marriage in ii. Charitable
favor of the heirs of the deceased spouse or any iii. Religious
other person/s; iv. Cultural
6) Transfer for insufficient consideration 0 0 v. Social welfare
vi. Accredited non-government
organization;
vii. Trust or Philanthropic organization;
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viii. Research institution or organization; the current public health emergency; provided
that the importing manufacturer is included in the
2) Not more than 30% of the said gift shall be Master list of the DTI and other incentive granting
used for administration purposes. bodies.

3) For the purpose of this exemption, a non- RR 9-2020

profit educational and/or charitable The exemption from donor’s tax of donations
corporation, accredited nongovernment intended to combat the COVID 19 pandemic were
organization, trust or philantrophic further extended under RR 9-2020 issued on April 6,
organization and/or research institution or 2020. Section 4 of RR 9-2020 provides that,
organization: donation of the following items, when made during
§ incorporated as non-stock entity; the period of state of national emergency, for the sole
§ paying no dividends; and exclusive purpose of combating COVID-19, shall
§ governed by trustees who receive no be exempt from donor’s tax:
compensation; and
§ devoting all its income, whether student 1) Cash donations;
fees or gifts, donation, subsidies or 2) Donations of all critical or needed healthcare
other forms of philanthropy, to the equipment or supplies as enumerated under
accomplishment and promotion of the Section 1 of RR 9-2019;
purposes enumerated in its Articles of 3) Relief goods, such as but not limited to, food
Incorporation. packs (rice, canned goods, noodles, etc.) and
water; and
3) Encumbrances on the property donated 4) Use of property, whether real or personal (shuttle
assumed by the donee service, use of lots/buildings)

4) Diminution of gift provided by the donor To be exempt from donor’s tax, the foregoing donations
shall be given to the following donees:
5) Exemption under Special Laws
a. Private hospitals and/or non-stock non-profit
1. International Rice Research Institute educational and/or charitable, religious, cultural
2. Ramon Magsaysay Foundation or social welfare corporation, institution,
3. Integrated Bar of the Philippines foundation, non-government organization (even
4. Development Academy of the Philippines if non-accredited), trust or philanthropic
5. National Museum organization and/or research institution or
6. National Library organization; and
7. Archives of the National Historical Institute
8. Museum of Philippine Costumes b. Local private corporations, civic organizations,
9. Intramuros Administration and/or international organizations/institutions
10. Political contributions provided that they shall (1)actually, directly and
exclusively distribute and/or transfer said
K. TAX EXEMPT DONATIONS UNDER BAYANIHAN donations/gifts to and/or (2) partner as
ACT 1 and 2 conduit/logistical machinery with, the accredited
NGOs and/or national government or any entity
§ Bayanihan 1 – RA 11469 Bayanihan to Heal as One created by any of its agencies which is not
Act conducted for profit, or to any political
subdivision of the said government.
RR 6-2020
Donation of the following imported articles shall be Effectivity / Duration
exempt from donor’s tax and subject to the ordinary This regulation shall be in full force only during
rules of deductibility under existing rules and the 3-month effectivity of RA 11469 ( from March
issuances: 16, 2020), unless extended or withdrawn by
Congress or ended by Presidential Proclamation.
1) Critical or needed healthcare equipment or
supplies intended to combat the COVID-19 § Bayanihan 2 – RA 11494 Bayanihan to Recover as
public health emergency including personal One Act
protective equipment; laboratory equipment and
its reagents, medical equipment and devices; RR 26-2020 – Donation of Identified Equipment for
support and maintenance for laboratory and Use in Public Schools
medical equipment, surgical equipment and
supplies; medical supplies, tools and All donations of personal computers, laptops.,
consumables; testing kits and such other tablets or similar equipment for use in teaching or
supplies and equipment as may be determined learning in public schools shall be exempt from
by the DOH and other relevant government payment of donor’s tax from the effectivity of RA
agencies. 0 0 11494 on September 15 to Dec. 19, 2020.

2) Materials needed to make health equipment and

supplies deemed as critical or needed to address
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In case of local donations where the personal L. TAX CREDIT FOR DONOR’S TAX PAID TO A
computers, laptops, tablets or similar equipment are FOREIGN COUNTRY
originally intended for sale in the course of business
by the donor, the same shall not be treated as v Only resident or citizen can claim tax credit
transaction deemed sale subject to vat under Sec.
106(B)(1) of the Tax Code, as amended. v Amount Deductible:
a. Actual donor’s tax paid abroad
whichever is
The amount of the donation shall be based on the b. Limit lower
actual acquisition cost of personal computers,
laptops, tablets or similar equipment donated. If the
personal computers, laptops, tablets or similar v Limit:
equipment donated had already been in use, its a. Only one foreign country is involved
depreciated value shall be taken into consideration.
Net Gift, foreign
X Philippine Donor’s
RR 28-2020 World Net Gift Tax
Donations 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 b. Two or more foreign countries are involved
political subdivision of the Government of the (whichever is lower of the following):
imported articles identified under this regulation, are
exempt from donor’s tax and subject to the ordinary Limit A – Per Foreign Country
rules of deductibility under existing rules and
issuances, from June 25 to Dec. 19, 2020. For this Net Gift, per foreign country
X Philippine
purpose, critical products, equipment or supplies or World Net Gift Donor’s
essential goods shall include the following: Tax
• Goods which may include personal Limit B – By Total
protective equipment (PPE) such as gloves,
gowns, masks, goggles, and face shields; Net Gift all foreign countries Philippine
surgical equipment and supplies; laboratory X
World Net Gift Donor’s
equipment and its reagents; medical Tax
equipment and devices; support and
maintenance for laboratory and medical M. DEADLINE FOR FILING OF RETURN – within 30
equipment, surgical equipment and days from date of donation.
supplies; medical supplies, tools, and
consumables such as alcohol, sanitizers, NOTE: No allowed extension.
tissue, thermometers, hand soap, detergent,
sodium hypochlorite, cleaning materials, N. DEADLINE FOR PAYMENT – pay as you file.
povidone iodine, common medicines (e.g.,
paracetamol tablet and suspension,
mefenamic acid, vitamins tablet and O. PLACE OF FILING AND PAYMENT
suspension, hyoscine tablet and suspension,
oral rehydration solution, and cetirizine tablet a. Except in cases where the Commissioner
and suspension); testing kits, and such other otherwise permits, the return shall be filed and
supplies or equipment as determined by the the tax paid to the following where the donor was
Department of Health (DOH) and Department domiciled at the time of the transfer, or if there
of Trade and Industry (DTI). be no legal residence on the Philippines, with the
Office of the Commissioner:
• Equipment for waste management, 1) An authorized agent bank
including, but not limited to, waste 2) Revenue District Officer
segregation, storage, collection, sorting, 3) Revenue Collection Officer or
treatment and disposal services as approved
by the Department of Environment and b. In the case of gifts made by a nonresident, the
Natural Resources (DENR), DOH or other return may be filed with:
concerned regulatory agencies. 1) Philippine Embassy or Consulate in the
country where he is domiciled at the time of
• Inputs, raw materials and equipment the transfer, or
necessary for the manufacture or production 2) Directly with the officer of the Commissioner
of essential goods related to the containment
or mitigation of COVID-19 enumerated in
Section 2 (A)(l) of these Regulations.

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P. NOTICE OF DONATION by a donor engaged in stating that not more than 30% of the said
business donations/gifts for the taxable year shall be used by
such accredited non-stock, non-profit corporation/NGO
In order to be exempt from donor’s tax, and to claim full institution (qualified-donee institution) for administration
deduction of the donation given to qualified-donee purpose
institutions duly accredited, the donor engaged in
business shall give a notice of donation on every
donation worth at least P50,000 to the Revenue District
Office (RDO) which has jurisdiction over his place of
business within 30 days after receipt of the qualified
donee institution’s duly issued Certificate of Donation,
which shall be attached to the said Notice of Donation,

DISCUSSION QUESTIONS

Choose the letter of the correct answer. b. Donation inter vivos is subject to donor's tax
1. A tax imposed on the gratuitous transfer of property while donation mortis causa is subject to estate
between two or more persons who are living at the tax.
time the transfer is made c. Donation inter vivos requires a public document
a. estate tax c. income Tax while donation mortis causa may not require a
b. donor’s tax d. transfer tax public document.
d. Donation inter vivos is valued at fair market value
2. Donor’s tax is: at the time the property is given while donation
a. A property tax c. A business tax mortis causa is valued at the fair market value at
b. A personal tax d. An excise tax the time of the death of the grantor.

3. Which of the following is not subject to donor’s tax? 8. Which of the following donations inter vivos may not
a. Donation mortis causa. require that it be in writing?
b. Donation which will take effect upon birth of the a. Donation of personal (movable) property, the
donee. value of which exceeds P5,000.
c. A creditor who, out of his affection, cancelled the b. Donation of personal (movable) property, the
debt of the debtor. value of which is P5,000.
d. A parcel of land in U.S.A. donated by a c. Donation of real (immovable) property, the value
nonresident Filipino to a foreigner. of which is less than P5,000.
d. Donation of real (immovable) property, the value
4. Which of the following is subject to donor’s tax? of which exceeds P5,000.
a. Those made between persons who were guilty of
adultery or concubinage at the time of the 9. The donation of an immovable property shall be
donation. made
b. Those made to conceived but yet to be born a. In writing c. Either A or B
children. b. In public instrument d. Orally
c. Those made to a public officer by reason of his
office. 10. Using the preceding number, acceptance by the
d. Those made between husband and wife during donee may be made:
their marriage. a. In same deed of donation
b. In a separate document
5. The following are the requisites of a donation for c. E i t h e r A o r B
purposes of the donor’s tax, except one. d. N e i t h e r A o r B
a. Capacity of the donor
b. Capacity of the donee 11. A non-resident citizen donor is taxed on his donation
c. Delivery of the subject matter or gift of properties:
d. Donative intent a. Situated in the Philippines only.
b. Wherever situated.
6. When is the donation perfected? c. Situated outside the Philippines only.
a. The moment the donor knows of the acceptance d. Situated in the Philippines only subject to the rule
by the donee of reciprocity.
b. The moment the thing donated is delivered,
either actually or constructively, to the donee 12. Which of the following is taxable only with respect to
c. Upon payment of the donor’s tax properties donated within the Philippines?
d. Upon execution of the deed of donation a. Resident citizen
b. Non-resident citizen
7. One of the following is not a distinction between c. Resident alien
donation inter vivos and donation mortis causa.0 0 d. Non-resident alien
a. Donation inter vivos takes effect during the
lifetime of the grantor while donation mortis
causa takes effect after the death of the grantor.