Lladoc vs CIR

Whether or not the imposition of gift tax despite the fact the Fr. Lldoc was not the Parish
priest at the time of donation, catholic parish priest of Victorias did not have juridical
personality as the constitutional exemption for religious purpose is valid.

The Law Governing Donor’s Tax

The donor’s tax is not a property tax, but is a tax imposed on the transfer of
property by way of gift inter vivos.

The donor’s tax shall not apply unless and until there is a completed gift. The
transfer of property by gift is perfected from the moment the donor knows of the
acceptance by the donee; it is completed by the delivery, either actually or constructively,
of the donated property to the donee.

Thus, the law in force at the time of perfection/ completion of the donation shall
govern the imposition of the donor’s tax.

In order that the donation of an immovable may be valid, it must be made in a

public document specifying therein the property donated.

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.

Renunciation by the surviving spouse of his/her share in the conjugal partnership or

absolute community after the dissolution of the marriage in favor of the heirs of the
deceased spouse or any other person/s is subject to donor’s tax whereas general
renunciation by an heirs, including the surviving spouse, of his/her share in the hereditary
estate left by the decedent is not subject to donor’s tax , unless specifically and
categorically done in favor of identified heir/s to the exclusion or disadvantage of the other
co-heirs in hereditary estate.

Imposition of Tax
A. There shall be levied, assessed, collected and paid upon the transfer by any
person, resident or nonresident, of the property by gift, a tax computed as
provided in Section 99.

B. The tax shall apply whether the transfer is in trust or otherwise, whether the gift is
direct or indirect, and whether the property is real or personal, tangible or
intangible.

Situs of Taxation
In income tax law, the rule is that:
 Only the resident citizen and domestic corporations are subject to tax on income
from within and without the Philippines
 Others are subject to tax on income only from within the Philippines.

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Donor’s Tax
To compute for donor’s tax due and payable, we follow this FORMULA:

Gross Gift XX
Less: Deductions (XX)
Net Gift XX
Multiply: Rate %
Taxable Net Gift XX
Less: Tax Credit (XX)
DONOR’S TAX PAYABLE XX
======

For purposes of the donor’s tax, “NET GIFT” shall mean the net economic benefit from the
transfer that accrues to the donee.

A gift that is incomplete because of reserved powers, becomes complete when either:
1. The donor renounces the power; or
2. His right to exercise the reserved power ceases because of the happening of
some event or contingency or the fulfillment of some condition, other than
because of the donor’s death

Rates of Tax Payable by Donors

The tax for each calendar year shall be computed on the basis of the total net gift
made during the calendar year in accordance with following schedule: if the net gift
is:
Over But not over The tax shall be plus Of the excess
over
100,000 Exempt
100,000 200,000 0 2% 100,000
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

Methods
Cumulative - donations within the calendar year.
Splitting – donations during different calendar years.

Tax Payable by Donor if Donee is a Stranger

When the done 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.

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Rate of Donor’s Tax
Under the Train Law
The donor’s tax for each calendar year shall be six percent (6%) computed on the basis of
the total gifts in excess of Two hundred fifty thousand pesos (250,000) exempt gift made
during the calendar year.

Contribution for election campaign

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.

Donations (under the Election Code)

 Donations to a candidate, political party or coalition shall be governed by the
Election Code.
 Donation in exempt from donor’s tax if donation is reported to COMELEC.

Transfer for inadequate consideration

 Applies to both estate tax or donor’s tax.
 6% capital gains tax on real property vs. donor’s tax

Where property, other than real property referred to in Section 24(D), is transferred for
less than the adequate and full consideration in money or money’s worth, then the amount
by which the fair market value of the property exceeded the value of the consideration
shall, for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be
included in computing the amount of gifts made during the calendar year: Provided,
however, that a sale, exchange, or other transfer of property made in the ordinary
course of business (a transaction which is a bona fide, at arm’s length, and free
from any donative intent) will be considered as made for adequate and full
consideration in money or money’s worth. (amended by TRAIN LAW).

Exempted Gifts (by Residents)

 Gifts to children on the account of marriage (Dowries)
 Gift to government
 Gifts in favor of accredited organizations like
 Accredited NGOs Charitable
 Cultural
 Educational
 Philantrophic
 Religious
 Research Institutions
 Social Welfare

Exempted Gifts (by NON-Residents)

 Gift to government
 Gifts in favor of accredited organizations like
 Accredited NGOs Charitable
 Cultural
 Educational
 Philantrophic
 Religious
 Research Institutions
 Social Welfare

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Dowries - Removed Under TRAIN LAW
1) Dowries or gifts made on account of 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 of the first ten thousand pesos (10,000):

Gifts to Government
2) 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;

Gross Gift Valuation

Zonal Value xx
Assessed Value xx
Use: whichever is higher xx

Procedure
File 30 days after the date of the gift is made
Payment 30 days after the date of the gift is made
Place of filing and -any authorized Banks
payment -RDO/RCO
-Duly authorized city/municipality treasurer where the donor is
domiciled at the time of the transfer

Requirements – any person making a donation (whether direct or indirect), unless the
donation is specifically exempt under the Code or other special law, is required, for every
donation, to accomplish under oath a donor’s tax return in duplicate. The return shall set
forth:
 Each gift made during the calendar year which is to be included in computing net
gift;
 The deductions claimed and allowable;
 The name of the donee;
 Any previous net gifts made during the same calendar year; Relationship of the
donor to the donee; and
 Such further information as the Commissioner may require.

Time and Place of filing and payment

 The donor’s tax return shall be filed with thirty (30) days after the date the gift is
made or completed and the tax due thereon shall be paid at the same time that
the return is filed.
 Unless the Commissioner otherwise permits, the return shall be filed and the tax
paid to an authorized agent bank, the Revenue District Officer, Revenue
Collection Officer or duly authorized Treasurer of the city or municipality where
the donor was domiciled at the time of the transfer, or if there be no legal
residence in the Philippines, with the Office of the Commissioner.

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Notice of donation by a donor engaged in business
In order to be exempt from donor’s tax and to claim full deduction of the donation given to qualified-
donee institutions duly accredited by the Philippine Council for NGO Certification, Inc. (PCNC), the
donor engaged in business shall give a notice of donation on every donation worth at least fifty
thousand pesos (50,000) to the Revenue District Office (RDO) which has jurisdiction over his place of
business within thirty (30) days after receipt of the qualified donee institution’s duly issued Certificate
of Donation, which shall be attached to the said Notice of Donation, stating that not more than thirty
percent (30%) of the said donation/gifts for the taxable year shall be used by such accredited non-
stock, non-profit corporation/NGO institution (qualified-donee institution) for administration purposes
pursuant to the provisions of Section 101 (A)(3) and (B)(2) of the Code.

NIRC 1997 vs TRAIN LAW

NIRC Provision NIRC TRAIN

Section 99 Rates of Tax
The donor’s 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
graduated tax table.
The donor’s tax for is fixed
at 6% based on annual total
gifts exceeding P250,000
(exempt gift), regardless of
whether the donee is a
stranger or not.

Section 100 Transfer for
less than adequate
consideration
The amount by which the
fair market value of the
property transferred
exceeded the value of the
consideration received for
such transfer, shall for
purpose of donor’s tax, be
deemed a gift and included
in computing the amount of
gifts made during the year.
Additional provision:
Even if the sale, exchange
or other transfer of property
is for an insufficient
consideration, the same will
still be considered made for
adequate and full
consideration provided that
such transfer is made in the
ordinary course of business,
i.e.,:
 A bona fide
transaction;
 At Arm’s length;
and
 Free from donative
intent.

Section 101 Exemption of Dowries or gifts made on The exemption of dowries

certain gifts account of marriage by (gifts made on account of
parents to each of the marriage) is removed
legitimate, recognized,
natural, or adopted children
to the extent of the first
P10,000 shall be exempt
from donor’s tax.