DONATION AND

DONOR’S TAX
DONATION
 Donation is an act of liberality whereby a person disposes gratuitously
of a thing or right in favor of another, who accepts it ( Art. 725 Civil
Code of the Philippines).
 Legally recognized act of voluntarily transferring ownership over a
property by the owner (donor) to his intended recipient (donee) who in
turn accepts the donated property.
 For immovable property, it must be made in a public document (Deed
of Donation), specifying therein the property donated and the value of
the charges which the donee must satisfy.
 The acceptance may be made in the same deed of donation or in a separate
public document, but it shall not take effect unless it is done during the
lifetime of the donor.
ESSENTIAL REQUISITES OF
DONATIONS
 Capacity of the donor – a donor must be legally competent.
 Intention to donate – it must be voluntary.
 Donative act or delivery – donor must deliver the gift.
 Acceptance by donee- the donation is perfected upon acceptance.
FORMAL REQUISITES OF
DONATIONS
PROPERTY REQUIRED FORMALITY
Real Property Public Instrument
Tangible Personal Property:
- Not exceeding P 5,000.00 Oral
- Exceeding P 5,000.00 Written
Intangible Personal Property Public Instrument
TYPES OF INTER-VIVOS
DONATION
Direct donation to the
donee.

Not yet subject to

Direct donor’s tax until
completed.

Inter-Vivos
Revocable
Donation
Indirect
(Donation in Trust)

Donation under the

supervision of another
Irrevocable
party.
A completed
donation, subject
to donor’s tax.
TYPES OF DONOR
Resident Citizen

Taxable on
global
Resident/Citizen Non-Resident Citizen
donations.

Donors Resident Alien

Taxable only on Philippine

donations except
Non-resident alien intangible properties
under reciprocity
conditions.
DONOR’S TAX
The donor’s tax is imposed on the transfer by any
person, resident or nonresident, of property by gift.
Shall not apply unless and until there is a completed
gift.
NATURE OF DONOR’S TAX
Privilege Tax A tax on the “right” to transfer properties by donation.

Proportional Tax Based on a fixed percentage of net gift.

Annual Tax Imposed on yearly net gifts in excess of P 250,000.

DONOR’S TAX

Ad Valorem Tax Depends on the value of the donated property.

National Tax Imposed by National Government.

Revenue/Fiscal Tax Provide government income.

RATIONALE OF DONOR’S TAX
 To control estate tax evasion.
 Imagine if there’s no donor’s tax, the donor may transfer his properties during his lifetime to his
successor to avoid estate tax.
 To control income tax evasion.
 Imagine if there’s no donor’s tax, the taxpayer may sell his properties below market rates to avoid
higher income tax payments.
 To recoup future loss of income tax revenue.
 This future loss of income tax revenue is due to the spread or division of the donated income-
generating properties to multiple individual taxpayers.
COMPLETED/PERFECTED
GIFTS
1. The moment the donor knows the acceptance by
the donee.
2. It is completed by the delivery, either actually or
constructively, of the donated property to the
donee.
GIFTS
 Include real and personal property, whether tangible or
intangible, or mixed wherever situated.
 Transfer of assets for less than an adequate and full
consideration in money or money’s worth.
DONATION FOR ELECTION
CAMPAIGN
 Any contribution in cash or on kind to any candidate, political party or coalition of parties for
campaign purposes, shall be governed by the Election Code.
 There is no automatic exemptions.
 Donations shall be reported to Commission on Elections.
TRANSFER OF INSUFFICIENT CONSIDERATION
INVOLVING REAL PROPERTIES CLASSIFIED AS
CAPITAL ASSETS.

 Subject to 6% Capital Gains Tax.

 The tax base is the fair value or gross selling price whichever is higher.
INSUFFICIENT
CONSIDERATION ON
TRANSFER OF OTHER
PROPERTIES
 Considered a gift to the extent of the difference between the fair value and the selling price of
the property disposed.
RENUNCIATION OF
INHERITANCE
General Specific

Renunciation with more than 2 heirs Exempt Taxable

Renunciation with only 2 heirs Exempt Exempt

Renunciation by the surviving spouse of his share in Taxable Taxable

common properties
DONATION WITH RESERVE
POWERS (INCOMPLETE
TRANSFER)
 Transfer of property wherein ownership will transfer upon the fulfillment of certain conditions
specified by the donor.
 Conditional donation
 Revocable transfer

 Donor’s tax shall not apply unless and until there is a completed gift.
 Not taxable upon delivery of the property but upon perfection or completion of the donation.

 This type of transfer will be completed when:

 The donor renounces the power, or
 Fulfillment of the condition other than the donor’s death.
DONATION TO GOVERNMENT
FOR PUBLIC USE
 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 are exempt from donor’s tax. (BIR RR
No. 12-2018)
DONATION TO ACCREDITED
NON-PROFIT ORGANIZATION
 Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, accredited non-government organization, trust or philanthropic
organization or research institution or organization are exempt from donor’s tax. Provided that,
no more than 30% of said gifts shall be used by such administration purposes. (BIR RR No.
12-2018)
 Requisites for exemptions:
a) Not more than 30% shall be used by such donee for administrative purposes.
b) The donee entity must be organized as non-stock entity.
c) The donee entity does not pay dividend.
d) The donee entity’s board of trustees earns no compensation.
e) The donee must devote all its income, donations, subsidies, or other forms of philantrophy to
accomplishment and promotion of its purposes enumerated in its Articles of Incorporation.
f) Donee entities must be accredited by the applicable government agency.
GRATUITOUS DONATIONS TO
ASSOCIATIONS
 Subject to donor’s tax.
QUASI-TRANSFER
 Involves delivery of property to another person but will never result to transfer of ownership.
 Not subject to donor’s tax.
 VOID DONATIONS
Prohibited donation under Civil Code Defective donation as to execution
Donation between spouses, except minor gifts. Donation by a person who has no legal title to the
property.
Donations between persons convicted of adultery or Oral or written donation of real property or intangible
concubinage at the time of donation. personal property.
Donation between persons found guilty of the same Donation refused by the donee.
criminal offense, in consideration thereof
Donations to public officer or his wife, descendants or
ascendants by reason of his office.
Donations to incapacitated person.
Donation of future property.
FOREIGN DONATIONS OF NON-
RESIDENT ALIEN
 Donations of property situated in foreign country by non-resident alien are not subject to
donor’s tax.
 Donations of intangible property in the Philippines by a non-resident alien are exempt if the
reciprocity exemptions applies.
 The donor is a citizen and resident of a foreign country which at his death or donation did not impose
a transfer tax of any character in respect of intangible personal property of citizens of the Philippines
not residing therein.
 The laws of foreign country of which the donor was a citizen and resident at the time of donation
allows a similar exemption from transfer tax of every character in respect to intangible personal
property of citizens of the Philippines not residing therein.
DIMINUTION OF GIFT AS
SPECIFIED BY THE DONOR
 Still subject to donor’s tax.
NET GIFT
Net economic benefit from the transfer that
accrues to the donee.
DONOR’S TAX RATE
Tax rate is 6% computed on the basis of the total
gifts in excess of P 250,000 exempt gift made
during the calendar year whether the donee is a
relative or stranger.
Payable within 30 days after every donation.
VALUATION OF GIFTS MADE IN PROPERTY
Higher of zonal or fair value per
Real
assessor’s office.

The average high and low price at

Shares of Stock Listed
the date of the donation.

Valuation of Net Gift

Preferred Stocks Par Value

Shares of Stock Not Listed

Book Value appearing in the

Personal Common Stocks financial statements published
nearest to the date of donation.

Newly Purchased Purchase Price

Other Properties Old Items Second Hand Value

Monetary Claims Amount fixed in the contract.

TIME OF VALUATION
 Donation is valued at the point of completion or perfection of the donation.
 Perfection is upon the acceptance by the done or satisfaction of the comditions.
DONATION OF COMMON
PROPERTIES
 Husband and wife shall file separate donor’s tax return due to 50-50 ownership. They are
considered separate and distinct taxpayers for the purposes of donor’s tax.
 If only the husband signed the Deed of the Donation, there’s only one donor for tax purposes,
without prejudice to the right of the wife to question the validity of the donation without her
consent pursuant to such rights in accordance with provisions of the Civil Code and the
Family Code.
ENCUMBRANCES ON THE
PROPERTY DONATED
ASSUMED BY THE DONEE
 Obligations attached to the donated property assumed by the donee are deductible from the
value of the donation.
 DONOR’S TAX RETURN AND
FILING
BIR Form Donor’s Tax Return (BIR Form No. 1800)
Number of Copies 3 copies (triplicate)
Who shall file? Any person, natural or juridical, resident or non-resident, who transfers or causes to
transfer property by gift, whether in trust or otherwise, whether the gift is direct or indirect
and whether the property is real or personal, tangible or intangible.
When to file? Shall be filed within thirty (30) days after the date the gift (donation) is made.
Where to file? The return shall be filed with any Authorized Agent Bank (AAB) of the Revenue District
Office having jurisdiction over the place of domicile of the donor at the time of the
donation, or if there is no legal residence in the Philippines, with the Office of the
Commissioner of Internal Revenue, (Revenue District Office No. 39, South Quezon City).
In case of gifts made by a non-resident alien, the return may be filed with RDO No. 39, or
with the Philippine Embassy or Consulate in the country where he is domiciled at the time
of donation.
 REMINDERS ON FILING:
 A separate return shall be filed by each donor for each gift (donation) made on different dates during
the year reflecting therein any previous net gifts made in the same calendar year.
 Only one return shall be filed for several gifts (donations) by a donor to the different donees on the
same date.
ILLUSTRATIONS AND
COMPUTATIONS
ILLUSTRATION NO. 1

In 2019, Mr. Delgado donated a Computation:

property worth P 3,000,000 to
her sister. Net Gift P 3,000,000
Less: Exemption 250,000
Net Gift Subject to Tax 2,750,000
Tax Rate x 6%
Donor’s Tax P 165,000
ILLUSTRATION NO. 2
A donor made the following donations in 2019:  Computation for the 2019 donor’s tax.
Date Net Gift Exempt Taxable Donor’s Tax Due
(Accum) Donation Tax
Date Donee Net Gift
Jan. 4, 2019 Friend 100,000 Jan. 4, 2019 100,000 250,000 (150,000) 0 0
Mar. 7, 2019 400,000 250,000 150,000 9,000 9,000
Mar. 7, 2019 Brother, Wedding gift 300,000
Nov. 10, 2019 900,000 250,000 650,000 39,000 30,000
Nov. 10, 2019 Sister, Birthday gift 500,000
Dec. 25, 2019 1,300,000 250,000 1,050,000 63,000 24,000

Dec. 25, 2019 Mother, Christmas gift 400,000 Jan. 20, 2020 700,000 - - -

Jan. 20, 2020 Girl Friend 700,000

Total Net Gift for the year P 1,300,000
Less: Exemptions 250,000
Net Gift Subject to Tax 1,050,000
Tax Rate x 6%
Donor’s Tax to date 63,000
Less: Tax Due in prior donation 39,000
Donor’s Tax still due P 24,000
 ILLUSTRATION NO.3
Mr. X donated a parcel of land in favor of his son. The land has a zonal
value of P 6,000,000 and assessed value of P 4,000,000. An
independent appraiser valued the land of P 8,000,000. How much is the
value of the donation?

Answer: P 6,000,000
Note:
NIRC prohibits the use of independent appraisal value in terms of
gifts/donations of real properties.
 ILLUSTRATION NO. 4
Clint donated a car to his sister acquired four years ago for P 2,000,000. The car
was saleable for P 1,200,000 and was subject to a mortgage of P 400,000 which will
be paid by the donor before transfer. How much is the value of the net gift?

Answer: P 1,200,000
Note:
The donor assumed the mortgage.
 ILLUSTRATION NO. 5
Mr. Dionisio donated 1,000 shares of stocks of a
certain listed company. During the time of the
donation, the following trading prices are: Answer: P 830, 000 [(870+790)/2 x 1,000)

Opening price P 800.00

Highest intra-day trading price P 870.00 Note:

Lowest intra-day trading price P 790.00 Regulation requires the simple average of the
high and low prices.
Weighted average traded price P 820.00
Last trading price P 850.00

How much is the value of the net gift?

ILLUSTRATION NO. 6
Mr. Caticlan, a resident citizen, made the following donations during the year:
Date Donee Value
Feb. 2 Brother, Wedding gift P 300,000
Mar. 18 Public School P 200,000
Apr. 5 Daughter, Marriage P 400,000
Aug. 5 Accredited Non-Profit Institution P 400,000
Oct. 30 Father, Land (with condition to pay Real Property Tax, P 150,000) P 500,000

Donor’s Tax Computation:

Date Net Gift (Accum) Exempt Taxable Donation Donor’s Tax Tax Due Remarks

Feb. 2 300,000 250,000 50,000 3,000 3,000

Mar. 18 Exempt - - - - Donation to government.

Apr. 5 700,000 250,000 450,000 27,000 24,000

Aug. 5 Exempt - - - - Donation to accredited NPO

Oct. 30 1,050,000 250,000 800,000 48,000 21,000

ILLUSTRATION NO. 7
Mr. Mamoud made the following donations in 2020:
Date Property Value
Feb. 24 Car in Argentina To donee in Philippines 200,000
May 2 Land in the Philippines to donee abroad 600,000
Oct. 10 Shares of stocks in the Philippines donee abroad 200,000
Nov. 11 Laptop in Germany to a done in Germany 250,000

Net gift analysis: Resident/Citizen versus Non-Resident Alien

Date Resident/Citizen Non-Resident Alien

Feb. 24 200,000 0
May 2 600,000 600,000

Oct. 10 200,000 200,000

Nov. 11 250,000 0

Total Net Gift 1,250,000 800,000

Taxable 1,000,000 550,000

Donor’s Tax 60,000 33,000

 ILLUSTRATION NO. 8
A Filipino citizen made the following donations Tax Credit:
during the year: Donor’s Tax Paid –Foreign P 14,000
Philippines P 600,000
Limit: (300K/900K) x 39,000 P 13,000
Abroad P 300,000
Total P 900,000
Tax Credit allowed (lower amount) P 13,000
Foreign donor’s tax paid: Note:

Philippines P 21,000 If multiple foreign countries, computation and comparison

will be done for each country.
Abroad P 14,000
Tax credit is limited only to resident or citizens.

Computation: Donor’s Tax Payable:

Tax Due:
Tax Due P 39,000
Total Global Net Gifts P 900,000
Less: Tax Credit-Foreign P 13,000
Less: Exempt 250,000
Donor’s Tax Paid –Local 21,000 34,000
Total Net Gifts Subject to Tax P 650,000
Donor’s Tax still due P 5,000
Tax Rate x 6%
Total Donor’s Tax Due P 39,000
 NEXT TOPIC: ESTATE
TAXATION
REMINDER: PREPARE FOR A QUIZ NEXT
MEETING
DONOR’S TAX RETURN (BIR FORM NO. 1800)

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