Frequently Asked Questions

1. Who are required to file the Donors Tax Return?

Every person, whether 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.

2. What donations are tax exempt?

A. In the Case of Gifts made by a Resident (Sec. 101 (A), NIRC as amended)

Dowries or donations made on account of marriage before its celebration or
within one year thereafter, by parents to each of their legitimate, recognized
natural, or adopted children to the extent of the first P10,000
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
Gifts in favor of an educational and/or charitable, religious, cultural or
social welfare corporation, institution, accredited non-government
organization, trust or philantrophic organization or research institution or
organization, provided not more than 30% of said gifts will be used by such
donee for administration purposes

B. In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines (Sec.
101 (B), NIRC as amended)

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
Gifts in favor of an educational and/or charitable, religious, cultural or
social welfare corporation, institution, accredited non-government
organization, trust or philantrophic organization or research institution or
organization, provided not more than 30% of said gifts will be used by such
donee for administration purposes

C. Tax Credit for Donor's Taxes Paid to a Foreign Country (Sec. 101 (C), NIRC as
amended)

In General. - The tax imposed by this Title upon a donor who was a citizen
or a resident at the time of donation shall be credited with the amount of any
donor's tax of any character and description imposed by the authority of a
foreign country.
Limitations on Credit. - The amount of the credit taken under this Section
shall be subject to each of the following limitations:

- The amount of the credit in respect to the tax paid to any country shall not exceed
the same proportion of the tax against which such credit is taken, which the net
gifts situated within such country taxable under this Title bears to his entire net
gifts; and
- The total amount of the credit shall not exceed the same proportion of the tax
against which such credit is taken, which the donor's net gifts situated outside the
Philippines taxable under this title bears to his entire net gifts.

3. What are the bases in the valuation of property?

If the gift is made in property, the fair market value at that time will be considered
the amount of gift.

In case of real property, the taxable base is the fair market value as determined by
the Commissioner of Internal Revenue (Zonal Value) or fair market value as shown
in the latest schedule of values fixed by the provincial and city assessor (MV per
Tax Declaration), whichever is higher. (Sec. 88 and 102, NIRC as amended)

If there is no zonal value, the taxable base is the fair market value that appears in
the tax declaration at the time of the gift

4. For purposes of Donors Tax, what does the term Net Gift mean?

For purposes of the donors tax, NET GIFT shall mean the net economic benefit
from the transfer that accrues to the donee. Accordingly, if a mortgaged property
is transferred as a gift, but imposing upon the donee the obligation to pay the
mortgage liability, then the net gift is measured by deducting from the fair market
value of the property the amount of mortgage assumed. (sec. 11, RR No. 2-2003)

5. Under R.A. No. 7166, any contribution in cash or in kind to any candidate or
political party or coalition of parties for campaign purposes shall not be subject to
the payment of any gift tax. What instance will it be subject to Donors Tax?

Those contributions in cash or in kind NOT duly reported to the Commission on

Elections (COMELEC) shall not be subject to donors tax.

Section 99 (C) of the Tax Code, as amended, provides that any contribution in
cash or in kind for campaign purposes shall be governed by R.A. No. 7166 or the
Election Code.

Section 13 of the R.A. No. 7166 specifically states that any provision of law to the
contrary notwithstanding any contribution in cash or kind to any candidate or
political party or coalition of parties for campaign purposes, duly reported to the
Commission shall not be subject to the payment of any gift tax (donors tax).
Accordingly, the BIR can impose donors tax on contributions of this nature. (Q-14,
RMC No. 63-2009)

6. For purposes of Donors Tax, is a legally adopted child considered stranger?

A legally adopted child is entitled to all the rights and obligations provided by law
to legitimate children, and therefore, donation to him shall not be considered as
donation made to stranger. (sec. 10, RR No. 2-2003)

7. For purposes of Donors Tax, are donations between businesses considered

donations made between strangers?

Donation made between business organizations and those made between an

individual and a business organization shall be considered as donation made to a
stranger. (sec. 10, RR No. 2-2003)

8. Are gratuitous donations to Homeowners Associations subject to Donors Tax?

Gifts, donations, and other contributions received by the Homeowners
Associations (Associations) are subject to the payment of donors tax pursuant to
Section 98 and 99 of the Tax Code, as amended. Endowment or gifts received by
such associations are not exempt from donors tax considering that gifts to
Associations are not qualified for exemption under Section 101(A)(3) of the Tax
Code. (II, RMC No. 53-2013)

9. Is an onerous donation or donation in exchange for goods, services or use or

lease of properties to Homeowners Association subject to Donors Tax?

Pursuant to RMC No. 9-2013, Associations are subject to the corresponding

internal revenue taxes imposed under the Tax Code of 1997 on their income of
whatever kind and character. In this regard, contributions to associations in
exchange for goods, services and use of properties constitute as other
assessments/charges from activity in exchange for the performance of a service,
use of properties or delivery of an object. As such, these fees are income on the
part of the associations that are subject to income tax under Section 27 of the Tax
Code, as amended. (III, RMC No. 53-2013)

10. What is the proper treatment for transactions involving transfer of property
other than real property referred to in Section 24 (D) for less than adequate and
full consideration?

Where property, other than real property referred to in Section 24 (D) of the NIRC,
as amended, is transferred for less than adequate and full consideration in money
or moneys worth, then the amount by which the fair market value of the property
exceeded the value of the consideration shall, for the purpose of Donors Tax, be
deemed a gift, and shall be included in computing the amount of gifts made during
the calendar year. (Sec. 100, NIRC, as amended)

11. What entities are considered exempted from Donors Tax under special laws?

The list below consists of entities considered Donors Tax exempt under special
laws including, but not limited to the following:

Rural Farm School (Sec. 14, R.A. No. 10618)
Peoples Television Network, Incorporated (Sec. 15, R.A. No. 10390)
Peoples Survival Fund (Sec. 13, R.A. No. 10174)
Aurora Pacific Economic Zone and Freeport Authority (Sec. 7, R.A. No.
10083)
Girl Scouts of the Philippines (Sec. 11, R.A. No. 10073)
Philippine Red Cross (Sec. 5, R.A. No. 10072)
Tubbataha Reefs Natural Park (Sec. 17, R.A. No. 10067)
National Commission for Culture and the Arts (Sec. 35, R.A. No. 10066)
Philippine Normal University (Sec. 7, R.A. No. 9647)
University of the Philippines (Sec. 25, R.A. No. 9500)
National Water Quality Management Fund (Sec. 9, R.A. No. 9275)
Philippine Investors Commission (Sec. 9, R.A. No. 3850)
Ramon Magsaysay Award Foundation (Sec. 2, R.A. 3676)
Philippine-American Cultural Foundation (Sec. 4, P.D. 3062)
International Rice Research Institute (Art. 5(2), PD 1620)
Task Force on Human Settlements (Sec. 3(b)(8), E.O. 419)
National Social Action Council (Sec. 4, P.D. 294)
Aquaculture Department of the Southeast Asian Fisheries Development
Center (Sec. 2, P.D. 292)
 Development Academy of the Philippines (Sec. 12, PD 205)
Integrated Bar of the Philippines (Sec. 3, PD 181)

12. How do we determine the fair market value of the unlisted stocks?

In determining the value of the shares, the Adjusted Net Asset Method
shall be used whereby all assets and liabilities are adjusted to fair
market values. The net of adjusted asset minus the adjusted liability
value is the indicated value of the equity.

For purposes of this item, the appraised value of real property at the
time of sale shall be the highest among the following:

(a) The fair market value as determined by the Commissioner, or

(b) The fair market value as shown in the schedule of values fixed by
the Provincial and City Assessors, or

(c) The fair market value as determined by Independent Appraiser.

(RR NO. 6-2013) (Annex U)