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right of the wife to question the validity of the

DONOR'S TAX

donation without her consent pursuant to the pertinent provisions of the Civil Code of the Philippines and the Family Code of the

Basic principles

.Philippines KINDS OF DONATIONS NET GIFT 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 : Definition Donor’s Tax: is a tax on the privilege of transmitting one’s property or property rights to another or others without adequate and full valuable consideration :Nature The subject of donor’s tax is the gift or donation. Article 725 of the Civil Code defines a gift or donation as “an act of liberality whereby a person disposes gratuitously of a thing or right in favor of ”. another who accepts it

Donation inter vivos: a donation made between living persons; perfection is at the moment when the donor knows of the acceptance of the donee (exception: donations of immovable1 properties); subject to donor’s tax Donation mortis causa: a donation which takes effect upon the death of the donor; subject to estate tax APPLICABILITY OF LAWS GOVERNING THE IMPOSITION OF DONOR’S TAX The donor’s tax applies to a completed gift. The transfer is perfected from the moment the donors knows of the acceptance by the donee; it is completed by the delivery, either actual or constructively, of the donated property to the donee. The law in force at the time of the perfection/completion of the donation shall govern the imposition of donor’s tax based on the FMV of . the property

Purpose or object The purpose of donor’s tax is to complement estate tax by preventing tax-free depletion of the transferor’s estate during his lifetime It is also to

A gift that is incomplete because of reserved powers, becomes complete when either: The donor renounces the power; or His right to exercise ceased because of the happening of

prevent avoidance of income tax through the device of splitting income among numerous donees, who are usually members of a family or

some event or contingency or the fulfillment of . some condition, other than the death of the donor

into many trusts, with the donor thereby escaping . the effect of the progressive rates of income tax

SPECIAL RULES ON HUSBAND AND WIFE

( Requisites of valid gift or donation (C-I-D-A Capacity of the donor .1 Intent to donate

.2

Delivery of the subject gift, whether actual or constructive Acceptance by the donee

.3 .4

Husband and wife are considered as separate and distinct taxpayer’s for purposes of the donor’s tax. However, if what was donated is a conjugal or community property and only the husband signed the deed of donation, there is only one donor for donor’s tax purposes, without prejudice to the

•

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spouses. But then of course for the spouse take note of the exception. If it is considered as minor gifts so a donation maybe allowed. Note: Donation is perfected from the moment the donor knows of the acceptance by the donee. Important Notes: Requisites for a donation of a movable: Donation may be oral or in writing If oral, the donation must be accompanied with delivery If value is more than Php 5,000, the donation must be in writing and accepted (in writing (Art. 748, NCC

.1 .6 .7

.1 .8

.9

( similar instrument. (Art. 749, NCC ( Extent of donation (coverage It may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct, sufficient means for the

1. Decrease in Patrimony of the donor; 2. Increase in patrimony of the donee (Donee receives an economic benefit gratuitously coming from the donor); 3. Acceptance by the donee (there can only be donation once there is acceptance);

• Note: (TRAIN law) legislators amended Sec 100 of Tax Code especially pertaining to transfers for insufficient consideration including a phrase that it can only be subject to donor’s tax if there is intent to donate by the other party. • Must be present in a direct gift of property in order that the donor’s tax can be assessed and collected. Such intent followed by a donative act is

place by way of sale, exchange or other transfer of property as contemplated in cases of transfers for

: Void donations

to each other on the occasion of any family rejoicing Between persons living together as husband and wife without a valid marriage Between persons guilty of concubinage or adultery at the time of donation

The following are the requisites of a valid donation:

essential to constitute a gift. Donative intent is necessary only in case of a direct gift. If the gift is indirectly taking

support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be ( supported by the donor. (Art. 750, NCC

Between spouses, whether direct or indirect, during the marriage, except moderate gifts which the spouse may give

Note: All must be present in order to say that . donation exists

4. Delivery or donative act; 5. Intent to donate (donative intent)

Requisites for a donation of an immovable: It must be in public document The property donated and the value of the charges which the done must satisfy must be specified The donee must accept through a deed or

REQUISITES OF VALID GIFT OR DONATION

.A

less than adequate and full consideration (see Section 100, Tax Code), donative intent is not always essential to constitute a gift. 6. Capacity of the donor

.B .C

• Note: The donor must not be a minor, the donor must not be insane or the donation must not be between

. inheritance if they are a compulsory heir

Between persons found guilty of the same criminal offense, in consideration thereof Those made to a public officer or his/her spouse, descendants, and ascendants by reason of office F. Donations made by

Specific renunciation means that the denouncing heir specifically names or provides to whom his or her inheritance goes. General renunciation means that the heir simply states that he waives his right to inherit without specifying to whom his share will .go to As a rule if there are more than 2 heirs, and it is a general renunciation it will be exempt from

General Specif c

More than 2 heirs

Exempt

Taxable

Only 2 heirs

Exempt

Taxable

By the surviving spouse of his share in the common properties

Taxable

Taxable

sale, exchange of transfer of property for less than adequate and full consideration; exception. The properties which may be subject of a transfer for less than adequate consideration where the applicable transfer tax shall be donor's tax is any kind of property, real, personal, intangible or tangible provided it is not the one mentioned in . Sec 24 par D1

If general it is exempt

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Except: Transfers of real property considered as .capital assets CONDONATION OF DEBT Condonation or remission of a debt would constitute a donation to the extent of the fair value of the debt condoned or remitted. Therefore, the

CLASSIFICATION OF DONOR Residents or citizens of the Philippines, and .1 Non-resident aliens or not citizen of the .2 Philippines Situs of the donor’s tax, in so far as the : classification above is concerned

property is located whether in the Philippines or outside Philippines Not-resident aliens - taxable only on Philippine donations except intangible personal properties

persons to those who cannot inherit from them

AS DONATIONS

If specific it is subject to donor's tax if more than two heirs, but if there are only 2 heirs (ex. spouse and child), it would still be exempt even . if the child's name was specified

Resident or citizens - as a rule, taxable on their worldwide donation wherein their donated

.E

TRANSFERS WHICH MAY BE CONSIDERED

donor's tax. The same rule applies if there are .only 2 heirs Type of Renunciation

.D

•

creditor would be considered a donor for donor’s tax purposes and would be liable for the tax . thereon Condonation of forgiveness of debt by the creditor borne out of love or liberality, gratuitous in nature is subject to donor's tax. As a general rule there . must be an intent to donate under direct gift RENUNCIATION OF INHERITANCE

•

Legal heirs in estate taxation are to receive an

. subject to reciprocity conditions

a. Cash – cash gifts are valued at face .amount b. Personal properties – the FMV at the time of the gift is considered as the . amount of gift c. Real property – the FMV is whichever between a) the FMV as determined by the Commissioner of Internal Revenue,

: Philippines, gross gifts would consist of ( Real estate (regardless of location .1

usually called the Zonal Value, and b) the FMV as shown in the schedule of valued . fixed by the provincial and city assessors d. Shares of stocks If the share is listed in the stock exchange, the FMV is the price quote on the date of death,

b. Unlisted preferred shares are valued at par value EXEMPTION OF CERTAIN GIFTS A. If made by a resident Dowries of gifts made on account of .1 marriage and before its celebration or within one year thereafter by parents to each of their legitimate, recognized natural or adopted children to the extent Effective removed donation. does not

. of the 1st 10k pesos January 1, 2018, dowry is by TRAIN law as an exempt Nonetheless, if the gift or dowry exceed the exemption limit of

250k, it may still be exempted from . donor’s tax Gifts made to or for the use of the .2 National Government or any entity created by any of its agencies which is not for profit, or to any political subdivision . of the said government Gifts in favor of education, charitable, .3

( Tangible property (regardless of location

.2

Intangible personal property (regardless of (location

.3

If the donor is non-resident alien or not ➢ resident of the Philippines, gross gifts would :consist of Real estate located in the Philippines .1 .I

otherwise the arithmetic mean between the highest and lowest quotation at a date nearest . the date of death : If the share is unlisted a. Unlisted common shares are based on their book value

➢

If the donor is a resident or a citizen of a

Tangible personal property located in the Philippines

.2

Intangible personal property located in the Philippines , subject to the “reciprocity

.3

”clause .II NOTE: Resident or citizen essentially covers resident citizens, non-resident citizens, as well as, resident aliens. Non-resident aliens covers NRA without necessarily distinguishing if its engaged in trade or business or not because we are not . talking here about income taxation

Determination and composition of gross gift Gross gift refers to the value of the property or right donated or transferred by the donor to the done before any deduction. The properties included in the gross gift or those subject to donor’s tax are determined based on the classification of the donor, the location of the . property and whether the reciprocity rule applies VALUATION OF GROSS GIFT The rules applicable in the valuation of gross estate for estate tax purposes also apply to valuation of gross gift for donor’s tax purposes. Thus, the properties comprising the gross gift are valued based on their fair market value at the time . of donation

located in a foreign country, said donation is being

religious,

subject to donor’s tax twice-by the foreign country where such property is located and by the Philippines where the donor is a citizen or resident. To lessen the severe effect of taxing the same donation twice, tax credit is allowed . for donor's tax paid to a foreign country

corporation, institution, accredited nongovernment organization, trust or philanthropic organization, or research institution or organization. Moreover, the done must not use more than 30% of the . gifts for administration purposes

The donor’s tax imposed by the NIRC upon a donor who was a citizen or a resident at the time of donation shall be credited with the amount of

B. If made by a non-resident not a citizen of : the Philippines Gifts made to or for the use of the .1 National Government or any entity created by any of its agencies which is not for profit, or to any political subdivision . of the said government

any donor’s taxes of any character and description imposed by the authority of a foreign .country

cultural

or

social

welfare

Who may avail: Only donors who are citizens or residents at the time of the donation are entitled to . claim tax credit

Gifts in favor of education, charitable, .2 religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization, or research

: Limitations in estate tax credit Per country basis: The amount of the credit in .1 respect to the tax paid to any country shall not

institution or organization. Provided the done must not use more than 30% of the . gifts for administration purposes c. The following entities are exempt from : donor’s tax by virtue of special laws IBP .1

exceed the same proportion of the tax against which such credit is taken, which the decedent’s net estate situated within such country taxable under the NIRC bears to his entire net estate; and Overall basis: The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the decedent’s net estate situated outside the Philippines taxable under the NIRC bears to . his entire net estate Formula in computing the donor’s tax credit: Lower of actual tax paid and the amounts derived : by computing the tax limits as follows Limitation A (per country): Net gifts (foreign country) X Phil. Donor’s tax Net (gifts (world Limitation B (by total): Net gifts (outside Philippines) X Phil. Donor’s tax Net gifts

Int’l Rice Research Institute .2 Philippine Red Cross .3 .2

Ramon Magsaysay Award .4 Foundation UP .5 Philippine Normal University .6 Development Academy of the .7 Philippines Girls Scout of the Philippines .8 Boy Scout of the Philippines .9 National

Commission for .10 . Culture and the Arts

Tax credit for donor’s taxes paid to a foreign country Donation of property located within the Philippines by a Filipino citizen or a resident alien are subject to Philippine donor’s tax. If the property donated is

((world

intangible. Taxpayers who are filing BIR Form no. 1800 are excluded in the mandatory coverage from using the eBlRForms (Section 2 of RR No. 92016). WHEN AND WHERE TO FILE AND PAY? The Donor’s Tax Return (BIR Form No. 1800) shall be filed within thirty (30) days after the date the gift (donation) is made. 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 nonresident 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. 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. If the gift (donation) involves conjugal/community property, each spouse shall file separate return corresponding to his/her respective share in the conjugal/community property donated. This rule shall likewise apply in the case of co-

Section 101 c) Tax Credit for Donor’s Taxes Paid to a ) – Foreign Country In General.- The tax imposed by this (1 ) 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 (2 ) 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

.a

gifts situated within such country taxable under this Title bears to his entire net gifts; and b. 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

FILING OF RETURN AND PAYMENT WHO SHALL FILE? The Donor’s Tax Return (BIR Form No. 1800) shall be filed in triplicate by 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

of donation.

ownership over the property being donated. When the return is filed with an AAB, taxpayer must accomplish and submit BIRprescribed deposit slip, which the bank teller shall machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word “Received” on the return and also machine validate the return as proof of filing the return and payment of the tax by the taxpayer, respectively. The machine validation shall reflect the date of payment, amount paid and transactions code, the name of the bank, branch code, teller’s code and teller’s initial. Bank debit memo number and date should be indicated in the return for taxpayers paying under the bank debit system. Payments may also be made thru the epayment channels of AABs thru either their online facility, credit/debit/prepaid cards, and mobile payments. For transactions covered by one (1) Deed of Sale/Exchange/Donation involving one (1) to three (3) properties, the taxpayer can avail of the fast lane pursuant to Revenue Memorandum Circular (RMC) No. 43-2018, as amended by RMC No. 107-2018. Payments amounting to twenty thousand pesos (P 20,000.00) and below shall be paid in cash while payments above twenty thousand pesos (P 20,000.00) shall be made through Manager’s Check or Cashier’s Check to the Revenue Collection Officer of the RDO concerned. The time of filing and payment vary depending on the law applicable at the time...