Chapter 17 Donor's Tax
Chapter 17 Donor's Tax
➢ The donor’s tax is imposed on annual net gifts reckoned over a calendar year basis. For every taxable
donation, the donor shall determine and report his/her net gift. The tax is paid within 30 days after every
donation.
➢ Net gift refers to the net economic benefits from the transfer that accrues to the donee.
Illustration 1
In 2019, Mr. Reyes donated a condominium unit with a value of P4M to his first cousin, Mr. Alfonso.
Amount
Net gift 4,000,000
Less: Exempt donation 250,000
Net gift subject to tax 3,750,000
Multiply by: Tax rate 6%
Donor's tax 225,000
Illustration 2
A donor made the following donations in 2019:
Date Donee Net gift
Jan. 4, 2019 Bestfriend 100,000
Mar. 7, 2019 Brother, as wedding gift 300,000
Nov. 10, 2019 Sister, as birthday gift 500,000
Dec. 25, 2019 Mother as Christmas gift 400,000
Feb. 14, 2020 Girlfriend 700,000
Note: Note that the gifts made in 2019 shall not be included since the donor’s tax is a tax on annual donation. The
accumulation of donation stops at the end of every calendar year.
2. Other properties-
a. Newly purchased- purchase price
b. Old items- second hand value
c. Monetary claims- the amount fixed in the contract
The donation shall be included in net gift at P830,000, computed as ((P870 + P790)/2 x 1,000). The regulation
requires the use of simple average of the high and low not the weighted average price.
Argon issued 40,000 preference shares at par value of P100 per share and 1,000,000 ordinary shares.
The donation of Ms. Pagco shall be reported in net gift at P220,000, computed as P11.00 x 20,000 shares.
Illustration:
Mr. and Mrs. Villarama donated a brand new car worth P2M to their son on his graduation. Mr. and Mrs. Villarama
shall report half of the donation in their respective donor’s tax return as follows:
Illustration:
Don Quito donated an agricultural land to his son, Kervin. The land which was encumbered by an P8M mortgage
had value of P20M. The land also had P500K unpaid real property tax. Kervin assumed the mortgage while Don
Quito assumed the real property tax.
Note: An obligation assumed by the donor is not deductible as it will not reduce the economic benefits accruing to
the donee.
➢ Only one return is required for donations made on at a single day even if made to several donees.
➢ Foreign tax credit is computed depending on whether a single foreign country or multiple foreign
countries are involved.
Korea:
Actual amount paid 5,000
Country limit: (200K/ 1M x 45K) 9,000
Lower amount 5,000
Total of tax credit allowable per country 18,500
Date Net gifts Net gift subject to tax Location of property Donor's tax paid
Mar. 5 400,000 150,000 Philippines 9,000
Apr. 3 200,000 350,000 Philippines 12,000
May. 7 150,000 500,000 Abroad ?
Aug. 4 250,000 750,000 Philippines ?
Year 2020 concluded with P1M total gifts and a P750K net gift subject to tax.
The donor’s tax for the 2020 donation is P45,000 since there is no more succeeding donation from thereafter: