DONOR’S TAX Definition and Concepts:
Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. For tax purposes, this extends to sales, exchanges or other transfers for less than an adequate and full considerations in money or money’s worth. Kinds of Donations 1. Donation inter vivos – one made between living persons, and which is perfected from the moment the donor knows of the acceptance of the donee. It is subject to donor’s tax. 2. Donation mortis causa – one which is to take effect upon the death of the donor and therefore, partakes of the nature of testamentary disposition. It is subject to estate tax. Formal requisites of donation 1. Movable – the donation of a movable may be made orally or in writing. An oral donation requires the simultaneous delivery of the thing of the document representing the right donated. If the value of the personal property donated exceeds P5,000, the donation and the acceptance shall be made in writing. Otherwise, the donation shall be void and, therefore, not taxable. 2. Immovable – In order that a donation of an immovable may be valid, it must be made in a public document 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 instrument but it shall not take effect unless it is done during the lifetime of the donor. If the acceptance is made in a separate instrument, the donor shall be notified thereof in authentic form, and this step shall be noted in both instruments.
Nature of gift tax Gift tax is an excise on the transfer by a living person to another of money or other property without consideration. It is not a property tax but an excise tax imposed on the privilege of the donor to give or on the privilege of the donee to receive. Kinds of gift tax 1. Donor’s gift tax – tax levied on the act of giving; it supplements the estate tax. 2. Donee’s gift tax – tax levied on the act of receiving; it was the counterpart of the inheritance tax which has been incorporated into the estate tax. 3. Rates of Tax Payable by Donor.
(A) In General . - The tax for each calendar year shall be computed on the basis of the total net gifts made during the calendar year in accordance with the following schedule: If the net gift is: Over
Butt Not Bu Not Over Over
The The Tax Tax Shal Shalll be
Plus
Of the Excess Over
P 100,000
Exempt
P 100,000
200,000
0
2%
P100,000
200,000
500,000
2,000
4%
200,000
500,000
1,000,000
14,000
6%
500,000
1,000,000
3,000,000
44,000
8%
1,000,000
3,000,000
5,000,000
204,000
10%
3,000,000
5,000,000
10,000,000
404,000
12%
5,000,000
10,000,000
1,004,000
15%
10,000,000
(B) Tax Payable by Donor if Donee is a Stranger . - When the donee or beneficiary is stranger, the tax payable by the donor shall be thirty percent (30%) of the net gifts. For the purpose of this tax, a 'stranger,' is a person who is not a: (1) Brother, sister (whether by whole or half-blood), spouse, ancestor and lineal descendant; or (2) Relative by consanguinity in the collateral line within the fourth degree of relationship.
(C) 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, as amended.
Who are required to file the Donor’s 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. What are the procedures in filing the Donor’s Tax return? File the return in triplicate (two copies for the BIR and one copy for the taxpayer) with any Authorized Agent Bank (AAB) of the RDO having jurisdiction over the place of the domicile of the donor at the time of the transfer. In places where there are no AAB, the return will be filed directly with the Revenue Collection Officer or duly Authorized City or Municipal Treasurer where the donor was domiciled at the time of the transfer, or if there is no legal residence in the Philippines, with Revenue District No. 39 South Quezon City. In the case of gifts made by a non-resident alien, the return may be filed with Revenue District No. 39 - South Quezon City, or with the Philippine Embassy or Consulate in the country where donor is domiciled at the time of the transfer. Submit all documentary requirements and proof of payment to the Revenue District Office having jurisdiction over the place of residence of the donor.
What donations are tax exempt? • Dowries or donations made on account of marriage 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 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 • Encumbrances on the property donated donated if assumed by the donee in the deed of donation • Donations made to the following following entities as exempted under special laws: - Aquaculture Department Department of the Southeast Asian Asian Fisheries Development Center of the Philippines - Development Academy of the the Philippines - Integrated Bar of the Philippines - International Rice Research Institute - National Social Action Council - Ramon Magsaysay Foundation - Philippine Inventor’s Commission - Philippine American Cultural Foundation - Task Force on Human Settlement on the donation of equipment, materials and services 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 of the provincial and city assessor (MV per Tax Declaration), whichever is higher If there is no zonal value, the taxable base is the fair market value that appears in the latest tax declaration If there is an improvement, the value of improvement is the construction cost per building permit and or occupancy permit plus 10% per year after year of construction, or the market value per latest tax declaration.