Donor’s Tax  Transfer for Insufficient Consideration (Section 100)

o The property was transferred under the guise of a sale

 What is the subject of donor’s tax? (Section 98) for purposes of avoiding donor’s tax. In that instance,
o There shall be levied, assessed, collected and paid it shall be included in the gross gift tax provided the
upon the transfer by any person, resident or following requisites are considered;
nonresident, of the property by gift, a tax  The transfer is less than adequate and full
o Note that the donation contemplated under this consideration
section is a complete donation: There exists an  Transfer is made inter vivos, otherwise it is
acceptance of the donation by the donee and subject to estate tax
knowledge of such acceptance by the donor.  It shall not fall under the following categories;
o Furthermore, donor must donate the property
 It is not considered as capital asset,
absolutely or without condition or with condition
whereby the property sold is subject
however, donor already relinquished or failed to
to final tax of 6% as provided under
exercise such power. It cannot be included in the gift
Sec. 24(d)
tax if it is conditional.
 It was indeed made in adequate
 What is the current donor’s tax rate? (Section 99)
consideration
o The tax for each calendar year shall be six percent
o There exist a presumption that transfers of property
(6%) computed on the basis of the total gifts in excess
made in the ordinary course of business are made in
of Two hundred fifty thousand pesos (₱250,000)
good faith and free of any donative intent, unless
exempt gift made during the calendar year.
proven otherwise.
 Who are subject to donor’s tax
 Exemption from Donor’s tax (Section 101)
o See those group of people who are subject to estate
The following are considered exemption from donor’s tax for
tax
the first group of people liable;
o Any contribution in cash or in kind to any candidate,
o Gifts made to or for the use of the National
political party or coalition of parties for campaign purposes shall
Government or any entity created by any of its
be governed by the Election Code, as amended.
agencies which is not conducted for profit, or to any
 Pursuant to Election code, they are exempt
political subdivision of the said Government
from donor’s tax Provided that they declare or
o Gifts in favor of an educational and/or charitable,
report it to COMELEC, otherwise subject to
religious, cultural or social welfare corporation,
donor’s tax
institution, accredited nongovernment organization,
 What are the properties to be considered? trust or philanthrophic organization or research
o Same with those included in the gross estate institution or organization
  To be exempt under this category the
following must be met;
 Not more than 30% of the donation
is used for administrative purposes
 Donee must be non-stock, non-profit
organization
 The institution must be governed by
board of trustees who do not receive
and compensation
 Does not issue any dividends
 Devotes all of its income in the
accomplishment of the purpose
enumerated in its AOI
o And those donations made which are considered
exempt by law
The following are considered exempted donation made by the
second group of individuals liable for donor’s tax
Value Added Tax
o 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.
o Gifts in favor of an educational and/or charitable,
religious, cultural or social welfare corporation,
institution, foundation, trust or philanthrophic
organization or research institution or organization:
Provided, however, That not more than thirty percent
30% of said gifts shall be used by such donee for
administration purposes.
 The difference between this category to those
of the first group is that, the only requirement
to be exempt is that not more than 30% of
the donation is used for administrative
purposes
o And those donations made which are considered
exempt by law
 Valuation of gifts made (Section 102)
o Real Properties- The estate shall be appraised at its fair
market value as of the time of death. However, the
appraised value of real property as of the time of death
shall be, whichever is higher of -
 (1) The fair market value as determined by the
Commissioner, or
 (2) The fair market value as shown in the
schedule of values fixed by the Provincial and
City Assessors.
o Personal Properties –The estate shall be appraised at
its FMV as of the time of death.
 Definitions to remember
o VAT - is an indirect tax and the amount of tax may
be shifted or passed on to the buyer, transferee or
lessee of the goods, properties or services.
o In the ordinary course of business - means the regular
conduct or pursuit of a commercial or an economic
activity, including transactions incidental thereto, by
any person regardless of whether or not the person
engaged therein is a nonstock, nonprofit private
organization (irrespective of the disposition of its net
income and whether or not it sells exclusively to
members or their guests), or government entity.
  What is regular - It is not merely an isolated
transaction, it requires habituality
 Exception for Habituality: non-resident
foreign shall be considered as being
course of trade or business.
o Goods or Properties - shall mean all tangible and
intangible objects which are capable of pecuniary
estimation and shall include:
 (a) Real properties held primarily for sale to
customers or held for lease in the ordinary
course of trade or business;
 (b) The right or the privilege to use patent,
copyright, design or model, plan, secret
formula or process, goodwill, trademark, trade
brand or other like property or right;
 (c) The right or the privilege to use in the
Philippines of any industrial, commercial or
scientific equipment;
 (d) The right or the privilege to use motion
picture films, tapes and discs; and
 (e) Radio, television, satellite transmission and
cable television time.
o Gross selling price - the total amount of money or its
equivalent which the purchaser pays or is obligated to
pay to the seller in consideration of the sale, barter or
exchange of the goods or properties, excluding the
value-added tax. The excise tax, if any, on such goods
or properties shall form part of the gross selling price.
o Sale or exchange of services - means the performance of all
kinds of services in the Philippines for others for a fee,
remuneration or consideration (See section Sec.
108(A)) and includes the following
 (1) The lease or the use of or the right or
privilege to use any copyright, patent, design
or model, plan, secret formula or process,
goodwill, trademark, trade brand or other like
property or right;
 “(2) The lease or the use of, or the right to use
of any industrial, commercial or scientific
equipment;
 “(3) The supply of scientific, technical
industrial or commercial knowledge or
information;
 “(4) The supply of any assistance that is
ancillary and subsidiary to and is furnished as
a means of enabling the application or
enjoyment of any such property, or right as is
mentioned in subparagraph (2) or any such
knowledge or information as is mentioned in
subparagraph (3);
 “(5) The supply of services by a nonresident
person or his employee in connection with
the use of property or rights belonging to, or
the installation or operation of any brand,
machinery or other apparatus purchased from
such nonresident person;
 “(6) The supply of technical advice, assistance
or services rendered in connection with
technical management or administration of
any scientific industrial or commercial
undertaking, venture, projector scheme;
 “(7) The lease of motion picture films, -films,
tapes and discs; and
  “(8) The lease or the use of or the right to use
radio, television, satellite transmission and
cable television time.
o Gross Receipts - means the total amount of money or its
equivalent representing the contract price,
compensation, service fee, rental or royalty, including
the amount charged for materials supplied with the
services and deposits and advanced payments actually
or constructively received during the taxable quarter
for the services performed or to be performed for
another person, excluding value-added tax.
 Provided that the persons involved herein is
between payor and payee directly. It cannot
involve an uninterested third person where he
is the ultimate recipient of the consideration
instead of the service provider
o Input tax - means the value-added tax due from or paid
by a VAT-registered person in the course of his trade
or business on importation of goods or local purchase
of goods or services, including lease or use of
property, from a VAT-registered person. It shall also
include the transitional input tax determined in
accordance with Section 111 of this Code.
 Simply put, the VAT paid by seller
o Output tax - means the value-added tax due on the sale
or lease of taxable goods or properties or services by
any person registered or required to register under
Section 236 of this Code.
 Simply put, the VAT passed by the seller
 Who are liable for VAT? (Section 105)
o The persons liable for VAT are;
 Who sells barters, exchanges, leases goods or
properties in the course of trade or business
in PH
 Any person who renders service in the course
of trade or business in PH
 Any person who imports goods
 This transaction is the only
circumstance that does not require to
be in the course of trade or business
o The seller is the one who is statutorily liable for the
payment of the tax, but the burden of the amount of
VAT is shifted or passed on to the buyer, transferee,
lessee or recipient of the goods or services
o Provided that the transaction is not considered as zero
rated or effectively zero rated nor vat exempt.
 VAT status of a transaction
A person can either be subject to the following VAT statuses;
o VATable transaction – transactions that are required by
law to impose vat
o Zero rated VAT – refers to the export sale of goods
and supply of services. The seller charges no output
tax, but can offset the input tax paid with the end goal
of claiming a refund or tax credit
 Technically, it cannot be said that there is no
VAT imposed in this transaction because an
amount is required by law, though it is JUST
0%
o Effiectively zero rated VAT – refers to the sale of goods
or supply of services to persons or entities who are
exempt under special laws or international agreements
 Illustrative situation of zero rated and effectively zero
rated;
  For zero rated sales: ABC a PH individuals,
corporation sold to XYZ a foreign included
corporation, after payment, 2 tons of therein is the
exemption of
wood (Section 106(2)(a)(1).
paying VAT
 For effectively zero rated sales: ABC
corp sold 2 tons of wood to LMN
corporation who under RA 123abc is VAT Transactions (those subject to 12%)
exempt from taxes imposed under  VAT on sale of goods or properties (Section 106(A)(1))
NIRC. ABC should have imposed an o We have to consider whether the transaction is a
output vat but due to the law normal sale or deemed sale transaction
exempting LMN it becomes zero  Normal sale – is the ordinary sale transaction
rated  Deemed sale – technically there is no sale made
o VAT-exempt – refers to transactions that cannot because the essential requisites of sale is
impose output vat and cannot offset input vat lacking, however by virtue of law, it is deemed
o Difference between the four transactions considered sale hence VATable.
o Normal sales
Transactions Zero-rated Effectively VAT exempt  There shall be levied, assessed and collected
with 12% VAT transaction zero rated transactions
transaction on every sale, barter or exchange of goods or
Conditional Total Credit or Total Credit or Partial Credit or properties, value-added tax equivalent to
Credit or Refund- It will Refund- Much refund- any twelve percent (12%) of the gross selling price
Refund. Only always have a like zero rated transactions or gross value in money of the goods or
the excess can tax credit or transaction, it that are properties sold, bartered or exchanged, such
be used as refund because will always considered tax to be paid by the seller or transferor.
refund or credit its output vat is have a tax exempt cannot o Deemed sales
upon offsetting always zero credit or offset the input
the input from percent as refund. tax because no  (1) Transfer, use or consumption not in the
the output tax provided under However this is output tax can course of business of goods or properties
NIRC as not by virtue of be shifted. They originally intended for sale or for use in the
amended having a 0% can only be course of business;
VAT but due granted partial  (2) Distribution or transfer to:
to the authority credit or refund
 (a) Shareholders or investors as share
of law granting via considering
exemption on it as cost of in the profits of the VAT-registered
taxes to certain business persons (property dividends); or
  (b) Creditors in payment of debt
(dacion en pago);
 (3) Consignment of goods if actual sale is not
made within sixty (60) days following the date
such goods were consigned; and
 (4) Retirement from or cessation of business,
with respect to inventories of taxable goods
existing as of such retirement or cessation.
 VAT on Importation of Goods (Section 107A)
o There shall be levied, assessed and collected on every
importation of goods a value-added tax equivalent to
twelve percent (12%) based on;
 Total value basis - the total value used by the
Bureau of Customs in determining tariff and
customs duties plus customs duties, excise
taxes, if any, and other charges, such tax to be
paid by the importer prior to the release of
such goods from customs custody:
 Landed cost basis - That where the customs
duties are determined on the basis of the
quantity or volume of the goods, the value-
added tax shall be based on the landed cost
plus excise taxes, If any.
o Who is liable for VAT under this section? (Section
107b)
 Importer is exempt from VAT however,
when the goods are subsequently sold,
transferred, or exchange in PH to a non-
exempt person or entity. That entity shall have
the burden of paying the tax prior to the
release from customs custody
 VAT on sale of services and use or lease of properties
(Section 108(A))
o There shall be levied, assessed and collected, a value-
added tax equivalent to twelve percent (12%) of gross
receipts derived from the sale or exchange of services,
including the use or lease of properties.
o In order to be considered as a VATable service the
following should be considered;
 Service should be rendered in PH
 Can be any and all kinds of services rendered
to others provided there is no ee-er
relationship
 There is a fee, remuneration or consideration
o The material factor to be considered – provided that
the lease contract or services is rendered or performed
in PH it is VATable, regardless of the execution of the
agreement
VAT Transactions (Zero rated and Effectively Zero
Rated)
 On sale of goods or properties (Sec. 106(2)(a) and (2)(b)]
o A. Export Sales – By virtue of cross border doctrine,
though certain areas stated below are within the
territorial limits of PH, it is deemed a separate customs
territory by law hence regarded as foreign soil.
Provided that the goods remain in the ecozone
(brought and consumed therein) it is within the zero
rated transaction. If it was introduced back in PH, it is
no longer considered zero rated transaction
Any erroneous imposition of output VAT is
recoverable against the supplier, initiated by purchaser
 “(1) The sale and actual shipment of goods
from the Philippines to a foreign country,
irrespective of any shipping arrangement that
may be agreed upon which may influence or
determine the transfer of ownership of the
goods so exported and paid for in acceptable
foreign currency or its equivalent in goods or
services, and accounted for in accordance
with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);
 “(2) Sale and delivery of goods to:
 “(i) Registered enterprises within a
separate customs territory as
provided under special laws; and
 “(ii) Registered enterprises within
tourism enterprise zones as declared
by the Tourism Infrastructure and
Enterprise Zone Authority (TIEZA)
subject to the provisions under
Republic Act No. 9593 or The
Tourism Act of 2009.
 “(3) Sale of raw materials or packaging
materials to a non-resident buyer for delivery
to a resident local export-oriented enterprise
to be used in manufacturing, processing,
packing or repacking in the Philippines of the
said buyer’s goods and paid for in acceptable
foreign currency and accounted for in
accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP);
 Purchased by a non-resident buyer
but delivered to a resident local
export oriented enterprise whereby
they will transform the goods bought.
 The difference with no. 1 of this list
is that the former, there exist
shipment while the latter there exist
no shipment
 “(4) Sale of raw materials or packaging
materials to export-oriented enterprise whose
export sales exceed seventy percent (70%) of
total annual production;
 “(5) Those considered export sales under
Executive Order No. 226, otherwise known
as the Omnibus Investment Code of 1987,
and other special laws; and
 “(6) The sale of goods, supplies, equipment
and fuel to persons engaged in international
shipping or international air transport
operations:
 Provided, That the goods, supplies,
equipment and fuel shall be used for
international shipping or air transport
operations.
o B. Sales to persons or entities whose exemption under
special laws or international agreements to which the
Philippines is a signatory effectively subjects such sales
to zero rate.
 On Service and use or lease of properties (Sec. 108B)
o “(1) Processing, manufacturing or repacking goods for
other persons doing business outside the Philippines
which goods are subsequently exported, where the
services are paid for in acceptable foreign currency and
 accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);
 Elements are as follows;
 For other persons doing business
outside PH
 Goods are subsequently exported
 The services are paid in accordance
with the rules and regulation of the
BSP
o “(2) Services other than those mentioned in the
preceding paragraph, rendered to a person engaged in
business conducted outside the Philippines or to a
nonresident person not engaged in business who is
outside the Philippines when the services are
performed, the consideration for which is paid for in
acceptable foreign currency and accounted for in
accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP);
 Elements are as follows;
 Person engaged in business
conducted outside PH OR Non-
resident person not engaged in
business who is outside PH when the
services are performed
 Consideration is paid in accordance
with the rules and regulation of BSP
 The difference with no. 1 of this list;
 No. 1 involves specific acts and one
specific person
 No. 2 has wide scope of acts and two
specific persons
o “(3) Services rendered to persons or entities whose
exemption under special laws or international
agreements to which the Philippines is a signatory
effectively subjects the supply of such services to zero
percent (0%) rate;
o “(4) Services rendered to persons engaged in
international shipping or international air transport
operations, including leases of property for use
thereof:
 Provided, That these services shall be
exclusive for international shipping or air
transport operations;
o “(5) Services performed by subcontractors and/or
contractors in processing, converting, or
manufacturing goods for an enterprise whose export
sales exceed seventy percent (70%) of total annual
production;
o “(6) Transport of passengers and cargo by domestic air
or sea vessels from the Philippines to a foreign
country; and
 The difference between this and the
transaction under the 12% rule – Under this
proviso, the transportation originated from
PH to a foreign country whereas under the
12% rule, is only limited to domestic
transactions
o “(7) Sale of power or fuel generated through
renewable sources of energy such as, but not limited
to, biomass, solar, wind, hydropower, geothermal,
ocean energy, and other emerging energy sources
using technologies such as fuel cells and hydrogen
fuels.
 o “(8) Services rendered to:
 “(i) Registered enterprises within a separate
customs territory as provided under special
law; and
 “(ii) Registered enterprises within tourism
enterprise zones as declared by the TIEZA
subject to the provisions under Republic Act
No. 9593 or The Tourism Act of 2009.
VAT Exempt Transactions (Section. 109)
 Sec. 109. Exempt Transactions.— (1) Subject to the
provisions of Subsection (2) hereof, the following transactions
shall be exempt from the value-added tax:
 “(A) Sale or importation of agricultural and marine food
products in their original state, livestock and poultry of or king
generally used as, or yielding or producing foods for human
consumption; and breeding stock and genetic materials
therefor.
Products classified under this paragraph shall be considered in
their original state even if they have undergone the simple
processes of preparation or preservation for the market, such
as freezing, drying, salting, broiling, roasting, smoking or
stripping. Polished and/or husked rice, corn grits, raw cane
sugar and molasses, ordinary salt and copra shall be considered
in their original state
o If the products referred herein are no longer
considered original state, it can still be a VAT-exempt
transaction under L of this list, provided that the
cooperatives are duly accredited by the CDA
 “(B) Sale or importation of fertilizers; seeds, seedlings and
fingerlings; fish, prawn, livestock and poultry feeds, including
ingredients, whether locally produced or imported, used in the
manufacture of finished feeds
o except specialty feeds for race horses, fighting cocks,
aquarium fish, zoo animals and other animals generally
considered as pets, they are subject to VAT;
 “(C) Importation of personal and household effects belonging
to the residents of the Philippines returning from abroad and
nonresident citizens coming to resettle in the Philippines:
o Provided, That such goods are exempt from customs
duties under the Tariff and Customs Code of the
Philippines;
 “(D) Importation of professional instruments and implements,
tools of trade, occupation or employment, wearing apparel,
domestic animals, and personal and household effects
belonging to;
o persons coming to settle in the Philippines or Filipinos
or their families and descendants who are now
residents or citizens of other countries, such parties
hereinafter referred to as overseas Filipinos, in
quantities and of the class suitable to the profession,
rank or position of the persons importing said items,
for their own use;
o not for barter or sale, accompanying such persons, or
arriving within a reasonable time:
o Provided, That the Bureau of Customs may, upon the
production of satisfactory evidence that such persons
are actually coming to settle in the Philippines and that
the goods are brought from their former place of
abode, exempt such goods from payment of duties
and taxes:
o Provided, further, That vehicles, vessels, aircrafts,
machineries and other similar goods for use in
 manufacture, shall not fall within this classification and
shall therefore be subject to duties, taxes and other
charges;
 “(E) Services subject to percentage tax under Title V;
 “(F) Services by agricultural contract growers and milling for
others of palay into rice, corn into grits and sugar cane into raw
sugar;
 “(G) Medical, dental, hospital and veterinary services except
those rendered by professionals;
o Exclusive only to Medical, Dental, Hospital, and
Veterinary servies.
o Health care company providers are not considered in
this transaction because they merely provide.
 “(H) Educational services rendered by private educational
institutions, duly accredited by the Department of Education
(DepEd), the Commission on Higher Education (CHED), the
Technical Education and Skills Development Authority
(TESDA) and those rendered by government educational
institutions;
o Two entities found herein;
 Private educational institution- provided that
they are accredited by the proper government
agencies
 Government educational institution with no
qualification to be exempt
 “(I) Services rendered by individuals pursuant to an employer-
employee relationship;
 “(J) Services rendered by regional or area headquarters
established in the Philippines by multinational corporations
which act as supervisory, communications and coordinating
centers for their affiliates, subsidiaries or branches in the Asia-
Pacific Region and do not earn or derive income from the
Philippines;
 “(K) Transactions which are exempt under international
agreements to which the Philippines is a signatory or under
special laws, except those under Presidential Decree No. 529;
 “(L) Sales by agricultural cooperatives duly registered with the
Cooperative Development Authority to their members as well
as sale of their produce, whether in its original state or
processed form, to non-members; their importation of direct
farm inputs, machineries and equipment, including spare parts
thereof, to be used directly and exclusively in the production
and/or processing of their produce;
o The elements are as follows;
 Must be registered with CDA
 Sells exclusively to its members of products in
original state
 If it sells to non-members, it can sell products
of either original or altered state
 “(M) Gross receipts from lending activities by credit or multi-
purpose cooperatives duly registered with the Cooperative
Development Authority;
 “(N) Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with the Cooperative
Development Authority: Provided, That the share capital
contribution of each member does not exceed Fifteen
thousand pesos (₱15,000) and regardless of the aggregate
capital and net surplus ratably distributed among the members;
 “(O) Export sales by persons who are not VAT-registered;
 “(P) Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of trade or
business or real property utilized for low-cost and socialized
housing as defined by Republic Act No. 7279, otherwise
 known as the Urban Development and Housing Act of 1992,
and other related laws, residential lot valued at One million five
hundred thousand pesos (₱1,500,000) and below, house and
lot, and other residential dwellings valued at Two million five
hundred thousand pesos (₱2,500,000) and below:
o The following are exempt under this paragraph
 Real properties not primarily held for sale to
customers or in the ordinary course of trade
or business
 Low-cost housing
 Socialized housing
 House and lot and other residential dwellings
 “(Q) Lease of a residential unit with a monthly rental not
exceeding Fifteen thousand pesos (₱15,000) [and the annual
rental must not exceed 1.5M];
 “(R) Sale, importation, printing or publication of books and
any newspaper, magazine, review or bulletin;
o which appears at regular intervals
o with fixed prices or subscription and sale
o and which is not devoted principally to the publication
of paid advertisements;
 “(S) Transport of passengers by international carriers;
o `Difference between those found in Sec. 108 – this is
the transport by an international carrier whereas those
found under sec. 108 are domestic carriers
 “(T) Sale, importation or lease of passenger or cargo vessels
and aircraft, including engine, equipment and spare parts
thereof for domestic or international transport operations;
 “(U) Importation of fuel, goods and supplies by persons
engaged in international shipping or air transport operations:
o Provided, That the fuel, goods, and supplies shall be
used for international shipping or air transport
operations;
 “(V) Services of bank, non-bank financial intermediaries
performing quasi-banking functions, and other non-bank
financial intermediaries;
 “(W) Sale or lease of goods and services to senior citizens and
persons with disability, as provided under Republic Act Nos.
9994 (Expanded Senior Citizens Act of 2010) and 10754 (An
Act Expanding the Benefits and Privileges of Persons With
Disability), respectively;
 “(X) Transfer of property pursuant to Section 40(C)(2) of the
NIRC, as amended;
 “(Y) Association dues, membership fees, and other
assessments and charges collected by homeowners associations
and condominium corporations;
 “(Z) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);
 “(AA) Sale of drugs and medicines prescribed for diabetes,
high cholesterol, and hypertension beginning January 1, 2019;
and
 “(BB) Sale or lease of goods or properties or the performance
of services other than the transactions mentioned in the
preceding paragraphs, the gross annual sales and/or receipts
do not exceed the amount of Three million pesos (₱3,000,000).
o Elements are as follows;
 The transaction is VATable
 It is not one of those mentioned in sec. 109
 The gross receipts and or annual sales does
not exceed 3Mphp