Donors Tax
It was thus in contemplation of death. Hence, it is subject to inheritance taxes.
Donors Tax (Sec. 98 of NIRC)
Donation
1) Article 725: Donation is an act of liberality whereby a person disposes
gratuitously of a thing or right in favor of another, who accepts it.
2) Article 734: The donation is perfected from the moment the donor
knows of the acceptance by the donee.
3) Article 749: In order that the 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 document, 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 an authentic form, and this step shall be noted
in both instruments.
What is the Donors Tax?
It is a tax on the privilege of transmitting ones property or property
rights to another or others without adequate and full valuable consideration. It is
an act of liberality. (Tuazon v. CIR July 3, 1969)
What it Should Not Mean
Donations in contemplation of death are not considered a donation
subject top donors tax. Since it is in contemplation of death (takes effect after
death), it is subject to estate tax.
The BIR has to prove that the donation was in contemplation of death.
Dizon v. Posadas
Father donated all his properties to his son who accepted it only a few days
before the formers death. The son argues that he should not be assessed
inheritance taxes since the donation was inter vivos.
We construe the expression in section 1540 "any of those who, after his
death, shall prove to be his heirs", to include those who, by our law, are given the
status and rights of heirs, regardless of the quantity of property they may receive
as such heirs. That the appellant in this case occupies the status of heir to his
deceased father cannot be questioned. Construing the conveyance here in
question, under the facts presented, as an advance made by Felix Dison to his
only child, we hold section 15,10 to be applicable and the tax to have been
properly assessed by the Collector of Internal Revenue.
The donation in this case was considered an advance to the sons legitime.
Vidal de Roces v. Posadas
The gifts referred to in section 1540 of the Revised Administrative Code
are, obviously, those donations inter vivos that take effect immediately or during
the lifetime of the donor, but are made in consideration of his death. Gifts inter
vivos, the transmission of which is not made in consideration of the donor's death,
should not be understood as included within the said legal provision for the reason
that it would be equivalent to levying a direct tax on property and not on the
transmission thereof, which act is not within the scope of the provisions contained
in Article XI of Chapter 40 of the Administrative Code referring expressly to tax on
inheritances, legacies and other acquisitions mortis causa.
Such interpretation of the law is not in conflict with the rule laid down in
the case of Tuason and Tuason vs. Posadas (54 Phil., 289), wherein it was said that
the expression "all gifts" refers to gifts inter vivos, because the law considers them
as advances in anticipation of inheritance in the sense that they are, gifts inter vivos
made in consideration of death. In that case, it was not held that that kind of gifts
consisted in those made completely independent of death or without regard to it.
The truth of the matter is that in this section (1540) the law presumes that
such gifts have been made in anticipation of inheritance, devise, bequest, or gift
mortis causa, when the donee, after the death of the donor proves to be his heir,
devisee or donee mortis causa, for the purpose of evading the tax, and it is to
prevent this that it provides that they shall be added to the resulting amount."
Basically, this case is telling us that if the donation made during the
lifetime of the donor is in contemplation of death, then it should be included in the
gross estate.
Rules
1) Gifts By Employers to Employees
a. As Compensation or Remuneration Not Subject to Donors
Tax
b. Mere Liberality Subject to Donors Tax
c. Fringe Benefits are not subject to Donors Tax
2) Gifts By Corporation to Shareholders
a. Its characterized as dividend distribution
3) Corporate Sponsorship
a. BIR 3-80 (Corporate Sponsorship)
The Corporate Hole Sponsorship Scheme wherein
sponsors buy a specific hole in the golf course so that
said corporation can advertise their products is not a
donation subject to donors tax. The amounts given
are for the right to advertise. There is no liberality
involved.
4) Bonus Plus Additional Compensation
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BIR DA-060-2-5-99
5) Contributions to Political Campaigns
CIR v. Abello
Contributions to political campaigns are considered as gratuitous and
therefore subject to donors tax. The argument that the consideration for the
donation is the chance to control who the political leaders of the future might be
is untenable. From the viewpoint of the donee, he doesnt regard himself as
exchanging services for the money contributed.
Who are Liable for Donors Tax?
1) Citizens and Residents
2) Non-Resident Aliens
Rates Payable
1) Who is subject to the graduated rates plus who is a stranger? (Sec.
99)
a. Subject to the Graduated Rates:
Brothers, sisters (whether full or half blood),
ancestors, lineal descendants or;
Relative by consanguinity in the collateral line
within the fourth degree of relationship
b. Those Considered as Strangers
Thos not included in 1 and 2 above.
2) Treatment of sons-in-law and parents-in-law
a. BIR 158-89
Donations to relatives by affinity which includes
parents-in-law and sons-in-law are considered
donations to strangers and are thus subject to the
30% rate.
3) Donations of Conjugal Property
Tong Ho v. BTA
The transfer of shares to the corporation is considered a donation
because said children had no funds to buy the shares. Under the old Civil Code,
donations made by the husband from the conjugal property are not considered
joint donations by the spouses. They are considered exclusive donations of the
husband and he should be considered the sole donor who should be taxed.
4) Donations Mortis Causa
a. BIR 204-81
Cabacungan made a donation mortis causa of a
parcel of land to the United Methodist Church. This
donation is in contemplation of death so it forms part
of the gross estate and is subject to estate tax.
Donors tax is not applicable.
b.
BIR 81-98
A donation mortis causa takes effect only after the
death of the donor. As such, the provisions on estate
tax apply. The donation is exempt from donors tax.
5) Contributions to Political Campaigns
a. CIR v. Abello: Contributions to political campaigns are
considered donations which are subject to donors tax.
Exemptions
1) Residents
a. 100,000 and below (Sec. 99A)
b. Donations Propter Nuptias
i. By parent to legitimate, recognized natural, adopted
children.
ii. Only up to the first P10,000.
c. Gifts to the National Government
i. BIR 67-98
Wrong Citation
ii. BIR 100-98
The CARL has exempted the transfer of
ownership of lands pursuant to the CARP. This
process includes the giving of land to those
displaced. Such transfers of land to the
displaced families shall also be exempt from
tax because they are still part of the whole
process.
d. Gifts to Educational and/or Charitable Organizations
i. BIR 42-80
Faith Academy made a donation to Christian
Education Assistance Foundation. Such a
donation is exempt from donors tax because
Christian Education Assistance Foundation was
a non-stock, non-profit organization paying no
dividends, governed by trustees and which
devotes all its income to the furtherance of the
purposes in its Articles of Incorporation.
ii. BIR 101-80
Donations to the Cultural Center of the
Philippines (CCP) are exempt from donors tax
because it is made to a cultural organization.
Furthermore, CCP is a governmental agency.
2) Non-Resident Aliens
 a.
b.
Gifts to National Government (See Above)
Gifts to Educational and/or Charitable Organizations (See
Special Topics
Above) 1) Termination of Trust
a. BIR 85-82
Credits for Donors Taxes Paid to Foreign Country The termination of the trust does not give rise
1) General to capital gains tax. The donors tax was already paid
2) Limited because donors tax is imposed on transfers whether or not
in the form of a trust.
Filing of Returns (Sec. 103 of NIRC) 2) Income Tax Exempt Organization
Contents of Return a. BIR 107-82
1) Each gift made during the calendar year A donation to the Fraternal Order of
2) Deductions claimed and allowable Freemasons is partly exempted from donors tax. Although
3) Previous net gifts during the same calendar year such group is a chartable non-stock corporation, it is also
4) Name of donee engaged in fraternal and beneficiary purposes which are not
5) Such other information that may be required within the purview of the tax exemption provisions. As
such, donations to the organization are exempt from donors
Estate Tax Donors Tax tax up to the extent of P1,000.
Contents of the Return Value of the gross estate Each gift made during 3) Dissolution of the Conjugal Partnership
at the time of death the calendar year a. BIR 220-83
Deductions allowed from Deductions claimed and The dissolution of the conjugal partnership
the gross estate allowable whereby one spouse gives to another his share to a parcel of
Other information Previous net gifts during land is not subject to donors tax. Such property is
the same calendar year previously co-owned by them. The transfer is merely part of
Other information the dissolution process or the partition of the property.
There was no donative intent here.
4) Homeowners Association to Members
Estate Tax Donors Tax
a. BIR 440-93
Time of Filing of Within 6 months from Within 30 days from time
Christ the Kings raffle of property to its
Return death of decedent gift was given
members is not subject to donors tax because it is pursuant
Time of Payment Same as Filing Same as Filing
to socialized housing which by law, is exempted from
Where to File Authorized Agent Bank donors tax.
Revenue District Officer 5) Repudiation of Heir
Revenue Collection Officer a. BIR 455-93
Authorized Treasurer of City/Municipality Renunciation by grandmother of her share in
Office of the Commissioner her husbands estate was donated by her to all of her first-
If non-resident, at born grandchildren. The BIR assessed the transaction with
Philippine embassy or estate tax because there was a donation. If all the co-heirs
consulate in the country renounce in favor of all the compulsory heirs, accretion
where he is domiciled or would occur and there would be no donors tax. However, if
with Office of the renunciation is in favor of only some heirs, as in this
Commissioner case, the renunciation would be tantamount to a donation
which is subject to donors tax.
Definition for Estate Plus Donors Tax (Sec. 104 of NIRC) 6) Benefits of a Qualified Donee Institution
Read the Code a. Sec. 34 H(1)
 Donations to accredited domestic
corporations or associations organized and operated
exclusively for religious, charitable, scientific, cultural,
youth, etc. shall be deductible to the net income of the
donor to the extent of 10% if the donor is an individual and
5% if the donor is a corporation.
b. Sec. 34 H(2)
The following donations shall be deductible in full:
1. Donations to the Government
2. Donations to Certain Foreign Institutions or
International Organizations (because of
treaties or other agreements)
3. Donations to Accredited Nongovernment
Organizations (Nonprofit Domestic
Corporation)
c. Sec. 101 A(3)
Gifts in favor of educational and/or charitable,
religious, cultural or social welfare corporation or
accredited nongovernment organization shall be
exempt from donors tax.
7) Termination of Co-Ownership
a. BIR 145-98
Transfer of ownership of property co-owned for the
purpose of terminating co-ownership is not a
transfer subject to capital gains tax nor of donors
tax. The transfer here is without donative intent.
8) Partition of Co-Owned Properties
a. BIR DA-499-11-18-98
b. BIR DA 065-97