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FREQUENTLY ASKED QUESTIONS: DONORS TAX


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.

B. In the Case of Gifts Made by a


Nonresident not a Citizen of the
Philippines (Sec. 101 (B), NIRC as
amended)

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
nongovernment
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

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
nongovernment
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

FREQUENTLY ASKED QUESTIONS: DONORS TAX


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)

FREQUENTLY ASKED QUESTIONS: DONORS TAX


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. 532013)
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?

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:

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

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)

FREQUENTLY ASKED QUESTIONS: DONORS TAX

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)