64:01- 82:00- Taxation 2 January 5, 2018

Let’s talk about Donor’s Tax

The Donor’s Tax before the Train Law graduated range ang Tax Rates the ranges is from 2% to 15% that
is why there is always a common question of whether or not kung may property si Papa ibibigay niya sa
anak ano ba idodonate ba or ibebenta or hihintayin na lang mamatay para estate. This are the options
kasi minsan pag donation you have to determine kung kanino idodonate. Is it to a stranger? Or is it a
relative? Kung stranger 30%, ang laki! Kung to a relative naman you have the range 2-15%. You oppose
that with the tax implication of sale which is pila? Lupa 6%, so 6% against 2-15%, 6% plus docs tax 1.5%
approximately so mga 7.5%. That’s why ang iba ang ginagamble na lang si sale specially if the property is
really high because if the property is high you have the 15% for donation sa relative but for a stranger
30%.

But because of the Train Law it appears na wala ng difference. The donor’s tax rate for each is 6% for the
total gifts in excess of the P200 thousand.

So the question, which is more tax efficient? Idonate or hintayin mo mamatay? The problem with
hintayin mo mamatay what if madungagan pa ang anak so mudaghan pa ang anak so mudaghan pa ang
kashare so you have to consider that and then pag namatay na so gusto ni Papa na ipatransfer, given na
6% na lang si donation is it proper for you to donate, is it more cost efficient for you to have it as a sale.
It depends, kung sale ka kasi tama naman 6% pero the danger is the selling price, syempre wala ka
naman binayad jan anak ka. The selling price that should reflect in your deed of sale should really
approximate with the value of the property. Otherwise you have the donor’s tax. So baka ma double
“quammy” ka. Kung donation ka please take note that the benefit of donation is that you have the
deduction of P250 thousand.

Look at the provision. The donor’s tax is 6% on the basis of the total gifts in excess of P250 thousand, so
meron kang P250 thousand na threshold, so kung meron idodonate na property na P250 thousand or
less, that may be tax exempt. So that’s one of the benefits.

How do you compute the donor’s tax this is the trick of the trade. Look at for the basis of the
computation of the donor’s tax, 6% computed of the total P250 thousand of the exempt gift. What if I
have a property that I’m going to donate worth P500 thousand. So ang gagawin ko idodonate ko siya
into a calendar year. Idodonate ko Dec 30 and January 5 next donation ko because the calendar year is
from Jan 1- December 30. So ihahalf ko siya on P250 thousand. Kasi if idodonate ko siya at one time
P500 thousand. I have to pay the 6% in excess of P250 thousand. But if iproportion ko siya into that mag
0 out for Donor’s Tax.

The valuation of gift in the form of properties shall follow section 6. Therefore it follows the rule that we
have just discussed in the estate tax. So in other words, if meron kang shares of stock na gusto mo
itransfer idonate mo na lang.
Kung ibebenta mo you have to appraise that’s an issue. In fact may mga SEC, may mga BIR opinion
seeking to clarify that sabi ni BIR nakalagay sa regulation di mag apply ang donation or gifts sa estate
kunin. So kung gusto mo lang mgtransfer ng gifts tapos gusto mo lang di malaki ang tax na babayaran
mo idonate mo na lang siya.

So the computation of the donor’s tax is cumulative in 1 calendar year. The husband and wife is
considered as separate tax payer. So who is considered as the tax payer sa donation? The donor, so ang
parents mo may community property. What is the effect? May conjugal/communal property and only
the husband signed the donation, there is only one donor for tax purposes. So anong mangyayari kung
ang property mo conjugal, communal ang parent mo idodonate sayo so magiging dalawa basta pipirma
si both parents, ang mangyayari you have two, P250 thousand. P250 thousand, idivide mo pa ng
calendar year so P500 thousand. So please take note that husband and wife is considered separate for
purposes of the donor’s tax.

Filing of return and payment of donor’s tax

The filing of the donor’s tax shall be made within 30 days after the date the gift is made and the tax due
thereon shall be paid at the time of filing.

So, this is very important in order to be exempt from the donor’s tax and to pay full deduction of the
qualified donee we’ve discussed this in the income tax diba. May mga qualified donee institution mga
NGOs. Kung nagdonate ka sa kanila ng ganitong amount, you can claim with the said deduction. What
are the requirements. You should give a notice of donation that every donation, dpat magbibigay sila ng
certificate of donation as proof to be attached sa notice of donation, stating that more than 30%. So
kung magdodonate ka. Dapat sa mga accredited NGOs. Mga big companies, like Florendo diba meron
silang mga foundations kasi meron silang mga tax shields. So kung magdodonate sila sa mga ganyan
tapos iclaclaim nila as deduction in the entire certificate of donations.

(Kappa chesmes)

SEC. 100. Transfer for Less Than Adequate and Full Consideration. - Where property, other than real
property referred to in Section 24(D), is transferred for less than an adequate and full consideration in
money or money's worth, then the amount by which the fair market value of the property exceeded the
value of the consideration shall, for the purpose of the tax imposed by this Chapter, be deemed a gift,
and shall be included in computing the amount of gifts made during the calendar year:

“Provided, however, that a sale, exchange or other transfer of property made in the ordinary course of
business (a transaction which is a bona fide, at arms length, and free from any donative intent) will be
considered as made for an adequate and full consideration in money or money’s worth.”

This is a welcome revision. Kasi before there is no provision that a transaction is bona fide and free from
any donative intent. So ang mangyayari is ngayun if magbebenta ka ng property lower than the fair
market value there is a presumed deemed gift. So inaaccess nila na donation and before pag stranger
idodonate ko ang donor’s tax is 30% ang laki. On top of your 6% is 30%. But it’s always in argument iba
naman pag donation, the fact na nagbigay ako ng property sayo does that mean na donation nay un?

You know the requisites of donation, there has to be a donative intent, an intent to donate, di pwede na
ibibigay sayo ang property you can conclusively say na donation na. What are the requisites of donation
there has to be an increase and decrease of the patrimony of the donee and donor. There has to be an
intent of the donor to give it, as an act of liberality.

“Provided, however, that a sale, exchange or other transfer of property made in the ordinary course of
business (a transaction which is a bona fide, at arms length, and free from any donative intent) will be
considered as made for an adequate and full consideration in money or money’s worth.”

So diba sabi natin if it’s considered with adequate and full consideration walang donation. What if the
market value is P100 thousand, pero nabenta mo siya ng P80 thousand, dapat di siya consider na right
then and there na gift because of the adequate consideration. You have to look at it in which a
transaction is ordinary course of business, pwede ba? Pwede naman malay mo ang binigyan mo is
customer which is frequent. So binigyan mo siya ng discount, a bona fide sale at arms length, di kayo
related and free from any donative intent.

So for the BIR to say that it is a presumed gift. Sabihin mo na meron na akong provision that it cannot be
a gift when a transaction is bona fide, at arms lenth and free from any donative intent. Please take note
of this. This is a welcome provision.

Exception for certain gifts. Gifts made for Government they are not into profit. They are exempted.

Gifts in favor of education and/or charitable institution in connection of your tax rule.

Please take note in section 12. A donor’s tax is also a property tax. In the case of Plata vs Commisioner.
But the same tax is impose on for the contract of donation. In a donation of a personal property what
are the requisites. It has to be in writing. But in a real property, it has to appear in a public instrument.
After sa time, may deemed acceptance na. It is the time that you have to file the affidavit. Please take
note that in writing pwede ka card lang. Gift more than P5000 so may card. For example iphone, more
than P5,000. Is that considered a gift? I’m sure you have already discussed that in property.

(Cheka na.)