MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

DONOR’S TAX

1. Donation Definition

 Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in

favor of another, who accepts it.

Requisites of taxable gift:

A. Capacity of the donor to make the donation

B. Donative intent on the part of the donor to make a gift

C. Delivery, whether actual or constructive, of the gift

D. Acceptance of the gift by the donee.

2. Donor’s taxpayer

 Donor’s tax is imposed upon the transfer of the property by gift by any person, resident or
nonresident.

Donor’s tax is imposed whether the transfer is in trust or otherwise, whether the gift is direct or
indirect, and whether the property is real or personal, tangible or intangible.

3. Properties which form part of gross gift

 The term gross gift includes real and personal property, whether tangible or intangible, or
mixed, wherever situated. (Resident or Citizen)

However, where the donor was a nonresident alien at the time of donation, only the property
located in the Philippines shall form part of his gross gift. (Non-resident alien)

4. Situs of intangible personal property

Philippine situs of the following intangible personal property

A. Franchise - the franchise which must be exercised in the Philippines.

B. Shares, obligations or bonds issued by any corporation or sociedad anonima

organized or constituted in the Philippines

C. Share, obligations or bonds by any foreign corporation 85% of the business

which is located in the Philippines

D. Shares, obligations or bonds issued by any foreign corporation if such shares,

obligations or bonds have acquired a business situs in the Philippines

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

E. Shares or rights in any partnership, business or industry established in the

Philippines, shall be considered as situated in the Philippines

5. Reciprocity Clause

 Receprocity clause (for nonresident alien and intangible personal property). No transfer
tax is imposed in respect of intangible personal property.

A. The foreign country has no donor’s tax law.

B. The foreign country has a donor’s tax law but provides exemption to NRA.

6. Rate of tax payable donor

 The tax for each calendar year shall be six percent (6%) computed on the basis of total
gifts in excess of P250,000 exempt gift during the calendar year.

Any contribution in cash or in kind to any candidate, political party or coalition of parties for
campaign purposes shall be governed by the Election Code. Therefore.exempt.

7. Valuation of Gifts Made in Property

 If the gift is made in property, the fair market value thereof at the time of the gift shall be
considered the amount of the gift. In case of real property, the provisions of Section 88 (B)
shall apply to the valuation thereof.

8. Transfer for less than adequate and full consideration

 Where property, other than real property referred to in Sec. 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
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 will be considered as made for an adequate and
full consideration in money or money’s worth.

9. Exemption of certain gifts:

A. 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;

B. Gifts in favor of an education and/or charitable, religious, cultural or social welfare

corporation, institution, accredited non-government organization, trust or philanthropic
organization or research institution or organization: Provided however, that more than 30% of
said gifts shall be sued by such donee for administration purposes. For the purpose of this
exemption, a non-profit education and/or charitable corporation, institution, accredited

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

non-government organization, trust or philanthropic organizations or research institution or

organization is a:

I. School, college or university and/or charitable corporation, accredited non-government

organization, trust or philanthropic organization or research institution or organization,

II. Incorporated as a non-stock entity

III. Paying no dividends

IV. Governed by trustees who receive no compensation

V. Devoting all its income, whether students’ fees or gifts, donation, subsidies or other
forms of philanthropy, to the accomplishments and promotion of the purposes enumerated in
its Articles of Incorporation.

Exempt Donations under Special Laws:

A. Ramon Magsaysay Foundation

B. International Rice Research Institute

C. Philippine Inventors’ Commission

D. Integrated Bar of the Philippines

E. National Museum

F. National Library

G. Intramuros Administration

H. Development Academy of the Philippines

I. Museum of Philippine Costumes

J. Philippine-American Cultural Foundation

10. Allowable Deductions

A. Mortgage or encumbrance on the property which obligation is assumed by the donee.

B. Those specifically provided by the donor as a diminution of the property donated.

11. Time and Place of Filing and Payment

 The donor’s tax return shall be filed within 30 days from the date of donation and the tax
due thereon shall be paid at the time of filing.

Except in cases where Commissioner otherwise permits, the return shall be filed and the tax
paid to an authorized agent bank, the Revenue District Officer, Revenue Collection Officer or
duly authorized Treasurer if the city or municipality where the donor was domiciled at the time
of the transfer, or if there be no legal residence in the Philippines, with the Office of the
Commissioner.

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

In the case of gifts made by a nonresident, the return may be filed with the Philippine Embassy
or Consulate in the country where he is domiciled at the time of the transfer, or directly with the
Office of the Commissioner.

EXERCISE 1: Determine the amount to be included as part of GROSS GIFT and

ALLOWABLE DEDUCTION in each independent cases below:

1. Real property donated valued at P1,500,000 with unpaid mortgage of P300,000, assumed
by the donee.

2. Real property donated valued at P1,200,000 with unpaid real estate tax of P150,000, not
assumed by the donee.

3. Real property donated valued at P1,500,000 and the donee agreed to assume applicable
donor’s tax of P450,000

4. Personal property donated valued at P100,000, the donor provided that P10,000 of the
property donated transferred by the donee to a social welfare organization.

5. Personal property donated valued at P120,000, the donor did not provide diminution on the
property donated.

EXERCISE 2: Determine the tax due of the Donors.

Mr and Mrs. X, made the following donation.

February 15 - Car worth P400,000 to their legitimate son, A, on account of marriage dated
February 10, 2018. The car was mortgaged for P200,000, only 50% of the mortgage was
assumed by the donee.

March 30 - To Mr. X’ brother, his capital property worth P200,000 on account of marriage 3
months ago. They agreed that the donee shall pay the donor’s tax thereon.

June 1 - To Charmaine (daughter of Mrs. X by former marriage), Mrs. X paraphernal property

worth P100,000 on account of marriage celebrated one year ago.

October 12 - To Charmaine on account of the same marriage, conjugal car worth P400,000
with P200,000 unpaid mortgage. Charmaine assumed 50% of the unpaid mortgage.

December 15 - Parcel of land valued at P500,000 to their two sons on account of their
graduation. The land was co-owned by the couple and a friend, Cliff who agreed to donate the
same. The share of Cliff in the property is valued at P100,000.

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MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

DEPARTMENT OF ACCOUNTANCY

ACCTG163: REVIEW IN TAXATION

END