REVIEWER FOR CTT EXAMINATION (PART A – NOTES) PAGE A - 28

DONOR’S TAXATION g. Trust or philanthropic organization

h. Research institution
Definition–DONATION is an act of liberality Requisites:
whereby a person disposes gratuitously of a 1. Provided, that not more than 30% of
thing or a right in favor of another who said gifts shall be used for
accepts it. administration purposes;

Donor’s tax is a tax on the privilege to 2. The non-profit institutions must be

transmit property between two or more accredited by the Philippine Council for
persons who are living at the time of the NGO Certification (PCNC).
donation; tax shall apply whether the A non-profit institution is one which is:
transfer is in trust or otherwise, whether the a. organized as a non-stock entity;
gift is direct or indirect. b. paying no dividends;
c. governed by trustees who receive no
Formula in computing Donor’s Tax:
compensation; and
First donation during the year: d. devoting all income whether students’
fees or gifts, donation subsidies or
Gross Gift Pxx
other forms of philanthropy, to the
Less: Deduction xx
accomplishment of the purposes
Net gift xx
enumerated in its Articles of
Less: Exemption 250,000
Incorporation.
Taxable xx
x Tax rate 6% 3. P250,000 per year
Donor’s tax due xx
Exempt under special law – Donation to
Succeeding donations during same year: 1. Rural Farm School
2. People’s Television Network, Inc.
Gross Gift Pxx
3. People’s Survival Fund
Less: Deduction xx
4. Aurora Pacific Economic Zone and Freeport
Present net gift xx
Authority
Add: Prior net gifts during the xx
5. Girl Scouts of the Philippines
year
6. Philippine Red Cross
Total net gifts xx
7. Tubbataha Reefs Natural Park
Less: Exemption 250,000
8. National Commission for Culture and the
Taxable amount xx
Arts
x Tax rate 6%
9. Philippine Normal University
Donor’s tax due xx
10. University of the Philippines
Less: Tax/es paid during the xx
11. National Water Quality Management Fund
year
12. Philippine Investors Commission
Donor’s tax payable xx
13. Ramon Magsaysay Award Foundation
Composition of gross gifts (same with 14. Philippine-American Cultural Foundation
estate taxation) 15. International Rice Research Institute
16. Task Force on Human Settlements
Properties classified as intangibles 17. National Social Action Council
within (same with estate taxation) 18. Aquaculture Department of the Southeast
Deductions from gross gifts Asian Fisheries Development Center
19. Development Academy of the Philippines
1. Mortgage on the property donated
20. Integrated Bar of the Philippines
assumed by the donee.
2. Amount specifically provided by the donor
RATE OF TAX: 6% computed on the basis
as diminution on the property donated.
of total gifts in excess of P250,000 exempt
Exemptions from gross gifts gift made during the calendar year.
1. Gifts made to the national government or
Donations made by spouses
any entity created by any of its agencies
In case of donation made by husband and
which is not conducted for profit, or any
wife out of conjugal or community funds:
political subdivision.
1. Each is donor to the extent of 1/2 of the
2. Gifts in favor of the following non-profit
value of the donation.
institutions:
2. If only one spouse signed the deed of
a. Educational
donation, there is only one donor for
b. Charitable
donor’s tax purposes, without prejudice to
c. Religious
the right of the other spouse to question
d. Cultural
the validity of the donation.
e. Social welfare
f. Accredited NGO
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Donation to several donees Tax credit for donor’s tax paid to a

If the donor had made several donations to foreign country.
different persons on the same date, the total
1. Who can claim? Only citizen or resident
net gift shall be computed together and
alien donor.
contained in one donor’s tax return only.
Transfer for less than adequate 2. Limitations on tax credit:
consideration
Where property, other than real property 1st limitation
(capital asset) is transferred for less than
Net gift per foreign country x Phil tax
adequate consideration in money or money’s
Total net gift
worth, the amount by which the fair market
value exceeded the value of consideration 2nd limitation
shall be deemed a gift subject to donor’s tax. Net gift all foreign countries x Phil tax
A sale, exchange, or other transfer of Total net gift
property made in the ordinary course of Filing and payment
business (a transaction which is bona fide, at 1. Filing – within 30 days from date of gift
arm’s length, and free from any donative
intent) will be considered as made for an 2. Payment – at the time the return is filed.
adequate and full consideration in money or 3. Place of filing – Authorized Agent Bank
money’s worth). (AAB), RDO, Collection Agent, or duly
Valuation of property – at fair market authorized Treasurer of the City or
value at the time of gift (see estate tax). Municipality where the donor was
domiciled at the time of gift.
OTHER MATTERS:
1. Renunciation of inheritance - A If there is no legal residence in the
renunciation of inheritance by surviving Philippines, with the Office of the
spouse or an heir in favor of: Commissioner or with the Philippine
a. Co-heir - not a donation Embassy or Consulate in the country
b. Not a co-heir – there is donation where he is domiciled at the time of the
subject to donor’s tax transfer.
c. Renunciation by surviving spouse of Returns filed with the Philippine Embassy
his/her share in the conjugal or consulate shall be paid thereat.
partnership or absolute community
after the dissolution of the marriage in 4. VALIDATION OF TAX RETURN – Where the
favor of the heirs of the deceased return was filed with an AAB, the lower
spouse or any other person/s – subject portion of the return must be duly
to donor’s tax machine validated and stamped received
by the AAB to serve as receipt of
2. Donations between spouses - Every payment.
donation or grant of gratuitous
advantage, direct or indirect, between the The machine validation shall reflect the
spouses during the marriage shall be amount paid, the date of payment and the
void, except moderate gifts which the transaction code and the stamp mark shall
spouses may give each other on the also show the name of the bank, branch
occasion of any family rejoicing. code, teller’s code and teller’s initial.

The prohibition shall also apply to The AAB shall also issue an official receipt
persons living together as husband and or bank debit advice or credit document,
wife without a valid marriage. whichever is applicable, as additional proof
of payment.
3. Other persons who cannot donate Surcharges (ad valorem penalty)
property to each other (Void
donations) 50% False or fraudulent return is willfully
a. Those made between persons who filed.
were guilty of adultery or concubinage Willful neglect to file the return on
at the time of donation. time.
b. Those made between persons found 25% Failure to file any return and pay the
guilty of the same criminal offense in tax due thereon.
consideration thereof; and If the return is not filed with the
c. Those made to a public officer or his proper internal revenue officer.
wife, descendants and ascendants, by Failure to pay on time the deficiency
reason of his office. tax shown in the notice of
assessment.
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Interest for failure to pay tax per return

on time
RATE – 12% per annum, or such higher rate
as may be prescribed by rules and
regulations, computed from the date
prescribed for payment until the amount is
fully paid.
Attachments
1. Proof of claimed tax credit, if applicable
2. Certified true copies of OCT/TCT/CCT
(front and back pages) of the donated
property, if applicable.
3. Certified true copies of the latest tax
declaration of lot and/or improvement, if
applicable.
4. “Certificate of No Improvement” issued by
the Assessor’s Office where the donated
real property/ies have no declared
improvements, if applicable.
5. Proof of valuation of shares of stocks at
the time of donation, if applicable.
6. Proof of valuation of other types of
personal properties, if applicable.
7. Proof of claimed deductions, if applicable.
8. Copy of tax debit memo used as payment,
if applicable.