MODULE 1: DONOR’S TAXATION

Lesson 2: Taxable Net Gift and Computation of Donor’s Tax Due

Overview:

Donor’s Tax is a tax on a donation or gift and is imposed on the gratuitous transfer of
property between two or more persons who are living at the time of the transfer. It 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.

On this module, it will discuss the donor’s tax rates to be used in the computation of
donor’s tax due under the Old and New Tax code, the computation of donor’s tax due according
to type or class of donors and done, and the donors taxation for married couple.

Module Objectives:
After successful Completion of this module, you should be able to:
1. Understand the provision of the law that governs imposition of Donor’s Tax
2. To learn and apply the amendments in the Old Tax code due to enactment of TRAIN law,
amending the Philippine Tax Code.
3. To compute the taxable net gift and the corresponding donor’s tax due based on the Old
Tax Code and new Tax Code.
4. Understand the Situs of Taxation of Donor’s tax.
5. Learn the filing and computation of donor tax for Married Couple.

Course Materials:
Codal of Donor’s Tax (NIRC, as amended)

SEC. 99. Rates of Tax Payable by Donor. -

Under the NEW Tax Code, (as amended by RA 10963); it simplifies the
donor's tax schedule from an eight-bracket schedule with rates ranging from 2% to 15% to a
single rate of 6% of total net gifts in excess of P250,000. The 6% tax rate likewise applies if the
donee is a stranger.

Under the OLD Tax Code (Before enactment of RA 10963 / also known as the “TRAIN
law”); the tax rates for computation of Donor’s tax are as follows:

(A) In General. - The 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 following schedule:

If the net gift is:

Over But Not Over The Tax Plus Of the
Shall be Excess Over
P 100,000 Exempt
P 100,000 200,000 0 2% P100,000
 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

(B) Tax Payable by Donor if Donee is a Stranger. - When the donee 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.

(C) 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.

Tax Rates / Computation of Donor’s tax Due

The rate applicable shall be based on the law prevailing at the time of donation.

A. Effective January 1, 2018 and onwards (Republic Act (RA) No. 10963/TRAIN):

Rate - 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 (P250,000) exempt gift
made during the calendar year.

Notes:

1. When the gifts are made during the same calendar year but on different dates, the
donor's tax shall be computed based on the total net gifts during the year.

2. The relationship between the donor and the donee(s) shall not be considered. Republic
Act No. 10963 (TRAIN Law) does not distinguish donations made to relatives, or donations made
to strangers.

B. Notes:

1. When the gifts are made during the same calendar year but on different dates, the
donor's tax shall be computed based on the total net gifts during the year.

2. Donation made to a stranger is subject to 30% of the net gift. A stranger is a person
who is not a:
  brother, sister (whether by whole or half-blood), spouse, ancestor and lineal
descendants; or
 relative by consanguinity in the collateral line within the fourth degree of
relationship.

COMPUTATION OF DONOR’S TAX;

Beginning Jan 1, 2018, the tax shall be 6% computed on abasis pf total net gift in excess
of P 250,000 exempt gift made during the calendar year.
The computation of donor’s tax is on a cumulative basis over a period of 1 (one) calendar
year.

Donor’s Tax Return Formula, In General

Gross Gift- to date P xxx
Less: Allowed deductions- to date P (xx)
Taxable Net Gift-To Date P xxx

Donor’s Tax due P xx

Illustration 1:
Gross Gift- to date P 3,860,000
Less: Allowed deductions- to date P 3, 100,000
Taxable Net Gift-To Date P 760,000

Under the OLD Tax Code;

A. Donor’s Tax Due (if relatives) use the P 29,600
graduated tax rate table (shown in previous
page)

B. Donor’s Tax Due (if Strangers) use the 30% P 228,000

tax rate

Under the NEW Tax Code*

A. Donor’s Tax Due (regardless of relationship) P 30,600
use the fixed rate of 6% in excess of P 250,000
(shown in previous page)
* The 6% donor’s tax rate is effective on Jan 1,
2018 and so on.
 SUMMARIZED RULES ON DONOR’S TAXATION:
Donors Taxable Base Taxable Source Tax rates
Resident Taxable Net Gift Net Gift-World Old: Graduated tax rates if
Citizen relative; 30% if stranger
Gross Gift -Allowed (Within and Without the Phil) New: 6% of taxable Net gift in
deduction excess of 250,000
Non- Taxable Net Gift Net Gift-World Old: Graduated tax rates if
Resident relative; 30% if stranger
Citizen Gross Gift -Allowed (Within and Without the Phil) New: 6% of taxable Net gift in
deduction excess of 250,000
Resident Taxable Net Gift Net Gift-World Old: Graduated tax rates if
Alien relative; 30% if stranger
Gross Gift -Allowed (Within and Without the Phil) New: 6% of taxable Net gift in
deduction excess of 250,000
Non resident Taxable Net Gift Net Gift-Phil only Old: Graduated tax rates if
Alien relative; 30% if stranger
Gross Gift -Allowed (Within the Phil only) New: 6% of taxable Net gift in
deduction excess of 250,000

Illustration 2:
Asta, donated the following properties on April 9:
Property Amount Allowed Deduction
Property Gift in Phil 650,000 154,000
Property Gift Abroad 300,000 45,000
On the same calendar year, dated July 25, Asta donated again the following properties:

Property Amount Allowed Deduction

Property Gift Phil 100,000 30,000
Property Gift Abroad 100,000 40,000

Compute the Donor’s tax still due IF:

Case A. Asta, donor, is a non-resident citizen and donees are his relatives. Assuming that
donation was perfected/completed on 2016.
Donor’s tax Due on April 9
Gross gift-World (650,000+300,000) P 950,000
Allowed Deductions- World (154,000+ 45,000) P 199,000
Taxable Net Gift-World on April 9 P 751,000
Donor’s tax Due (based on graduated tax rate table) P 29,060

Donor’s tax Due on July 25

 Gross gift-World ( 100,000+100,000) P 200,000
Allowed Deductions- World ( 40,000+ 30,000) P 70,000
Taxable Net Gift-World on July 25 P 130,000
Plus: Previous Net Gift (April 9) P 751,000
Total net Gift-World : to date / as of July 25 P 881,000
Donor’s Tax Due-World P 36,860
Less: Prior Gift tax paid P 29,060
Donor’s tax Due (based on graduated tax rate table) P 7,800

Case B. Asta, donor, is a non-resident citizen and donees are his relatives. Assuming that
donation was perfected/completed on 2019.
Donor’s tax Due on April 9
Gross gift-World ( 650,000+300,000) P 950,000
Allowed Deductions- World ( 154,000+ 45,000) P 199,000
Taxable Net Gift-World on April 9 P 751,000
Donor’s tax Due (at 6% tax rate in excess of P 250,000) P 30,060

Donor’s tax Due on July 25

Gross gift-World ( 100,000+100,000) P 200,000
Allowed Deductions- World ( 40,000+ 30,000) P 70,000
Taxable Net Gift-World on July 25 P 130,000
Plus: Previous Net Gift (April 9) P 751,000
Total net Gift-World : to date / as of July 25 P 881,000
Donor’s Tax Due-World (at 6% tax rate in excess of 250,000) P 37,860
Less: Prior Gift tax paid P 30,060
Donor’s tax Still Due P 7,800

Case C. Asta, donor, is a non-resident alien and donees are strangers. Assuming that
donation was perfected/completed on 2019.

Donor’s tax Due on April 9

Gross gift-Phil only P 650,000
Allowed Deductions-Phil only P 154,000
Taxable Net Gift-Phil only on April 9 P 496,000
Donor’s tax Due (at 6% tax rate in excess of P 250,000) P 14,760

Donor’s tax Due on July 25

Gross gift-Phil only P 100,000
Allowed Deductions- Phil only P 30,000
 Taxable Net Gift-Phil only on July 25 P 70,000
Plus: Previous Net Gift (April 9) P 496,000
Total net Gift- Phil Only : to date / as of July 25 P 566,000
Donor’s Tax Due-Phil only (at 6% tax rate in excess of 250,000) P 18,960
Less: Prior Gift tax paid P 14,760
Donor’s tax Still Due P 4,200

Case D. Asta, donor, is a non-resident alien and donees are strangers. Assuming that
donation was perfected/completed on 2016.

Donor’s tax Due on April 9

Gross gift-Phil only P 650,000
Allowed Deductions-Phil only P 154,000
Taxable Net Gift-Phil only on April 9 P 496,000
Donor’s tax Due at 30% rate P 148,800

Donor’s tax Due on July 25

Gross gift-Phil only P 100,000
Allowed Deductions- Phil Only P 30,000
Taxable Net Gift-Phil only on July 25 P 70,000
Plus: Previous Net Gift (April 9) P 496,000
Total net Gift- Phil Only : to date / as of July 25 P 566,000
Donor’s Tax Due-Phil only at 305 rate P 169,800
Less: Prior Gift tax paid P 148,800
Donor’s tax Still Due P 21,000

DONOR’S TAXATION ON MARRIED COUPLE

Conjugal Donation of Husband and Wife cannot transfer by virtue of sale or donation of
any conjugal or communal property WITHOUT CONSENT from the other, unless it is a moderate
donation for charity or on occasion of family rejoicing.
Spouses are considered as SEPARATE DONOR of the conjugal property unless, the wife
expressly joins in making the donation, it is presumed to have been done by the husband. The
husband and wife are required to file their separate donor’s tax return and shall pay the
corresponding donor’s tax due.

Gifts made by the spouses shall be classified as either A). Exclusive gift OR B.) Conjugal
gift.
For conjugal gift, distribute the value of gross gift and its related allowed deductions with
heir separate interest or equity in said items of gift. IF not specified or not determinable, assume
heir equities are share and share alike or 50% each.
 Donations made between husband and wife during marriage are void, except moderate
donation for charity or on occasion of family rejoicing.

Donation Mortis Causa is valid subject to Estate Tax.

Illustration 3: Conjugal Donation

Mr and Mrs Galla, spouses and citizens of the Philippines, donated to their legitimate
daughter the following properties in 2019:

 Vacation House (conjugal property- Hong Kong) 1,500,000;

 Car (conjugal property)- Phil 750,000
 Jewelry (exclusive property of Mrs.Galla) 475,000
 Assuming no allowed deductions
The Gross Gift of the Spouses are computed as:
Mr. Galla Mrs.Galla
Vacation House 750,000 750,000
(1,500,000/2)
Car (750,000/2) 375,000 375,000
Jewelry 0 475,000
Total Net Gift per Spouse 1,125,000 1,600,00
Donor’s Tax Due P 52,500 P 81,000