Tax 2 - Business & Transfer Tax NOTES for the next twelve (12) months, other than those

elve (12) months, other than those that are exempt under
Section 109 (A) to (U), will exceed Three Million Pesos (P3,000,000.00).
Value-Added Tax (VAT) is a form of sales tax. It is a tax on
consumption levied on the sale, barter, exchange or lease of goods or Who may opt to register as VAT and what will be his liability?
properties and services in the Philippines and on importation of goods into  Any person who is VAT-exempt under Sec. 109 of the Tax Code, as
the Philippines. It is an indirect tax, which may be shifted or passed on to the amended, may, in relation to Sec. 109 (2) of the same Code, elect to be VAT-
buyer, transferee or lessee of goods, properties or services. registered by registering with the RDO that has jurisdiction over the head
office of that person, and pay the annual registration fee of P500.00 for
Who are Required to File VAT Returns? every separate and distinct establishment.
 Any person or entity who, in the course of his trade or business, sells,  Any person who is VAT-registered but enters into transactions which
barters, exchanges, leases goods or properties and renders services subject are exempt from VAT (mixed transactions) may opt that the VAT apply to his
to VAT, if the aggregate amount of actual gross sales or receipts exceed transactions which would have been exempt under Section 109 of the Tax
Three Million Pesos (Php3,000,000.00) Code, as amended.
 A person required to register as VAT taxpayer but failed to register  Franchise grantees of radio and/or television broadcasting whose
 Any person, whether or not made in the course of his trade or annual gross receipts of the preceding year do not exceed ten million pesos
business, (P10,000,000.00) derived from the business covered by the law granting the
who imports goods franchise may opt for VAT registration. This option, once exercised, shall be
irrevocable. (Sec. 119, Tax Code).
Value-Added Tax Rates  Any person who elects to register under optional registration shall not
 On sale of goods and properties - twelve percent (12%) of the gross be allowed to cancel his registration for the next three (3) years.
selling price or gross value in money of the goods or properties sold,
bartered or exchanged The above-stated taxpayers may apply for VAT registration not later
 On sale of services and use or lease of properties - twelve percent than ten (10) days before the beginning of the calendar quarter and shall pay
(12%) of gross receipts derived from the sale or exchange of services, the registration fee unless they have already paid at the beginning of the year.
including the use or lease of properties In any case, the Commissioner of Internal Revenue may, for administrative
reason deny any application for registration. Once registered as a VAT
 On importation of goods - twelve percent (12%) based on the total
person, the taxpayer shall be liable to output tax and be entitled to input tax
value used by the Bureau of Customs in determining tariff and customs
credit beginning on the first day of the month following registration.
duties, plus customs duties, excise taxes, if any, and other charges, such as
tax to be paid by the importer prior to the release of such goods from
What are the instances when a VAT-registered person may cancel his
customs custody; provided, that where the customs duties are determined on
VAT registration?
the basis of quantity or volume of the goods, the VAT shall be based on the
 If he makes a written application and can demonstrate to the
landed cost plus excise taxes, if any.
commissioner's satisfaction that his gross sales or receipts for the following
 On export sales and other zero-rated sales - 0%
twelve (12) months, other than those that are exempt under Section 109 (A)
to (U), will not exceed Three Million Pesos (P3,000,000.00); or
Who are liable to register as VAT taxpayers?
 If he has ceased to carry on his trade or business and does not
Any person who, in the course of trade or business, sells, barters or
expect
exchanges goods or properties or engages in the sale or exchange of services
to recommence any trade or business within the next twelve (12) months.
shall be liable to register if:
 His gross sales or receipts for the past twelve (12) months, other than
When will the cancellation for registration be effective?
those that are exempt under Section 109 (A) to (U), have exceeded Three
The cancellation for registration will be effective from the first day
Million Pesos (P3,000,000.00): or
of the following month the cancellation was approved.
 There are reasonable grounds to believe that his gross sales or receipts
 goods for others;
What is "output tax"?  Proprietors, operators or keepers of hotels, motels, rest houses,
Output tax means the VAT due on the sale, lease or exchange of pension houses, inns, resorts, theatres, and movie houses;
taxable goods or properties or services by any person registered or required  Proprietors or operators of restaurants, refreshment parlors, cafes,
to register under Section 236 of the Tax Code. and other eating places, including clubs and caterers;
 Dealers in securities;
What is "input tax"?  Lending investors;
Input tax means the VAT due on or paid by a VAT-registered on  Transportation contractors on their transport of goods or cargoes,
importation of goods or local purchase of goods, properties or services, including persons who transport goods or cargoes for hire and other
including lease or use of property in the course of his trade or business. It domestic common carriers by land relative to their transport of goods or
shall also include the transitional input tax determined in accordance with cargoes;
Section 111 of the Tax Code, presumptive input tax and deferred input tax  Common carriers by air and sea relative to their transport of
from previous period. passengers, goods or cargoes from one place in the Philippines to another
place in the Philippines;
What comprises "goods or properties"?  Sale of electricity by generating, transmission by any entity including
The term "goods or properties" shall mean all tangible and intangible the National Grid Corporation of the Philippines (NGCP), and distribution
objects, which are capable of pecuniary estimation and shall include, among companies including electric cooperatives shall be subject to twelve percent
others: (12%) VAT on their gross receipts.;
 Real properties held primarily for sale to customers or held for lease  Franchise grantees of electric utilities, telephone and telegraph,
in the ordinary course of trade or business; radio
 The right or the privilege to use patent, copyright, design or model, and/or television broadcasting and all other franchise grantees, except
plan, secret formula or process, goodwill, trademark, trade brand or franchise grantees of radio and/or television broadcasting whose annual
other like property or right; gross receipts of the preceding year do not exceed Ten Million Pesos
 The right or privilege to use in the Philippines of any industrial, (P10,000,000.00), and franchise grantees of gas and water utilities;
commercial or scientific equipment;  Non-life insurance companies (except their crop insurances),
 The right or the privilege to use motion picture films, films, tapes and including surety, fidelity, indemnity and bonding companies; and
discs; and  Similar services regardless of whether or not the performance
 Radio, television, satellite transmission and cable television time. thereof calls for the exercise of use of the physical or mental faculties.

What comprises "sale or exchange of services"? The phrase "sale or exchange of services" shall likewise include:
The term "sale or exchange of services" means the performance of all
kinds of services in the Philippines for others for a fee, remuneration or  The lease of use of or the right or privilege to use any copyright,
consideration, whether in kind or in cash, including those performed or patent, design or model, plan, secret formula or process, goodwill,
rendered by the following: trademark, trade brand or other like property or right;
 The lease or the use of, or the right to use of any industrial,
commercial
 Construction and service contractors; or scientific equipment;
 Stock, real estate, commercial, customs and immigration brokers;  The supply of scientific, technical, industrial or commercial knowledge
 Lessors of property, whether personal or real; or information;
 Persons engaged in warehousing services;  The supply of any assistance that is ancillary and subsidiary to and is
 Lessors or distributors of cinematographic films; furnished as a means of enabling the application or enjoyment of any such
 Persons engaged in milling, processing, manufacturing or repacking property, or right or any such knowledge or information;
  The supply of services by a nonresident person or his employee in transport operations, including leases of property for use thereof; Provided,
connection with the use of property or rights belonging to, or the installation that these services shall be exclusively for international shipping or air
or operation of any brand, machinery or other apparatus purchased from transport operations. (Thus, the services referred to herein shall not pertain
such non-resident person; to those made to common carriers by air and sea relative to their transport
 The supply of technical advice, assistance or services rendered in of passengers, goods or cargoes from one place in the Philippines to another
connection with technical management or administration of any scientific, place in the Philippines, the same being subject to twelve percent (12%) VAT
industrial or commercial undertaking, venture, project or scheme; under Sec. 108 of the Tax Code, as amended);

What is a zero-rated sale? v. Services performed by subcontractors and/or contractors in

It is a sale, barter or exchange of goods, properties and/or services processing, converting, or manufacturing goods for an enterprise whose
subject to 0% VAT pursuant to Sections 106 (A) (2) and 108 (B) of the Tax export sales exceeds seventy percent (70%) of total annual production;
Code. It is a taxable transaction for VAT purposes but shall not result in any
output tax. However, the input tax on purchases of goods, properties or vi. Transport of passengers and cargo by domestic air or sea carriers
services, related to such zero-rated sales, shall be available as tax credit or from the Philippines to a foreign country. (Gross receipts of international air
refund in accordance with existing regulations. carriers and international sea carriers doing business in the Philippines
derived from transport of passengers and cargo from the Philippines to
What transactions are considered as zero-rated sales? another country shall be exempt from VAT; however they are still liable to a
The following services performed in the Philippines by VAT-registered percentage tax of three percent (3%) based on their gross receipts derived
person shall be subject to zero percent (0%) rate: from transport of cargo from the Philippines to another country as provided
for in Sec. 118 of the Tax Code, as amended); and
i. Processing, manufacturing or repacking goods for other persons
doing vii. Sale of power or fuel generated through renewable sources of energy
business outside the Philippines which goods are subsequently exported such as, but not limited to, biomass, solar, wind, hydropower, geothermal
where the services are paid for in acceptable foreign currency and and steam, ocean energy, and other shipping sources using technologies
accounted for in accordance with the rules and regulations of the Bangko such as fuel cells and hydrogen fuels; Provided, however that zero-rating
Sentral ng Pilipinas (BSP); shall apply strictly to the sale of power or fuel generated through renewable
sources of energy, and shall not extend to the sale of services related to the
ii. Services other than processing, manufacturing or repacking rendered maintenance or operation of plants generating said power.
to a person engaged in business conducted outside the Philippines or to a
non-resident person 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);

The following sales by VAT-registered persons shall be subject to zero

percent (0%) rate:
iii. Services rendered to persons or entities whose exemption under
special laws or international agreements to which the Philippines is a Export sales
signatory effectively subjects the supply of such services to zero percent a. The sale and actual shipment of goods from the Philippines to a
(0%) rate; foreign
country, irrespective of any shipping arrangement that may be agreed upon
iv. Services rendered to persons engaged in international shipping or air which may influence or determine the transfer of ownership of the goods so
exported, paid in acceptable foreign currency or its equivalent in goods or What are the transactions which are no longer subject to zero-percent
services, and accounted for in accordance with the rules and regulations of (0%)?
the Bangko Sentral ng Pilipinas (BSP);
 Sale of gold to BSP
b. The sale of raw materials or packaging materials to a non-resident
buyer for delivery to as a resident local export-oriented enterprise to be used  Foreign-currency denominated sales
in manufacturing, processing, packing or repacking in the Philippines of the
said buyer's goods, paid for in acceptable foreign currency, and accounted Upon the successful establishment and implementation of an enhanced
for in accordance with the rules and regulations of the BSP; VAT refund system by the Department of Finance (DOF), what are the
transactions that will now be subject to twelve percent (12%) and no longer
c. The sale of raw materials or packaging materials to an export- be subject to zero percent (0%)?
oriented
enterprise whose export sales exceed seventy percent (70%) of total annual i. The sale of raw materials or packaging materials to a non-resident
production; buyer for delivery to a resident local export-oriented enterprise to be used in
manufacturing, processing, packing or repacking in the Philippines of the
d. Transactions considered export sales under Executive Order No. 226, said buyer's goods, paid for in acceptable foreign currency, and accounted
otherwise known as the Omnibus Investments Code of 1987, and other for in accordance with the rules and regulations of the BSP;
special laws; and ii. The sale of raw materials or packaging materials to an export-
oriented
e. The sale of goods, supplies, equipment and fuel to persons engaged in enterprise whose export sales exceed seventy percent (70%) of total
international shipping or international air transport operations; Provided, annual production;
That the goods, supplies, equipment, and fuel shall be used exclusively for iii. Transactions considered export sales under Executive Order No. 226,
international shipping or air transport operations; Provided, that the same is otherwise known as the Omnibus Investments Code of 1987, and other
limited to goods, supplies, equipment and fuel that shall be used in the special laws.
transport of goods and passengers from a port in the Philippines directly to iv. Processing, manufacturing or repacking goods for other persons
a foreign port, or vice-versa without docking or stopping at any other port in doing
the Philippines unless the docking or stopping at any other Philippine port is business outside the Philippines which goods are subsequently exported
for the purpose of unloading passengers and/or cargoes that originated from where the services are paid for in acceptable foreign currency and
abroad, or to load passengers and/or cargoes bound for abroad;Provided, accounted for in accordance with the rules and regulations of the Bangko
further, that if any portion of such fuel, goods or supplies is used for Sentral ng Pilipinas (BSP); and
purposes other than the mentioned in this paragraph, such portion of fuel, v. Services performed by subcontractors and/or contractors in
goods and supplies shall be subject to twelve percent (12%) output VAT. processing,
converting, or manufacturing goods for an enterprise whose export sales
exceeds seventy percent (70%) of total annual production.
f. Sales to Persons or Entities Deemed Tax-exempt under Special Law
or International Agreement
What transactions are considered deemed sales?
g. Sale of goods or property to persons or entities who are tax-exempt The following transactions are considered as deemed sales:
under special laws or international agreements to which the Philippines is a
signatory, such as, Asian Development Bank (ADB), International Rice Transfer, use or consumption, not in the course of business, of goods
Research Institute (IRRI), subject such sales to zero rate. or properties originally intended for sale or for use in the course of business.
Transfer of goods or properties not in the course of business can take place
when VAT-registered person withdraws goods from his business for his
personal use;  Importation of personal and household effects belonging to residents
of
 Distribution or transfer to: the Philippines returning from abroad and non-resident citizens coming to
- Shareholders or investors as share in the profits of the VAT- resettle in the Philippines; Provided, that such goods are exempt from
registered custom duties under the Tariff and Customs Code of the Philippines;
person; or
- Creditors in payment of debt or obligation  Importation of professional instruments and implements, tools of
 Consignment of goods if actual sale is not made within sixty (60) days trade,
following the date such goods were consigned. Consigned goods returned by occupation or employment, wearing apparel, domestic animals, and
the consignee within the 60-day period are not deemed sold; personal and household effects ( except vehicles, vessels, aircrafts
 Retirement from or cessation of business, with respect to all goods on machineries and other similar goods for use in manufacture which are
hand, whether capital goods, stock-in-trade, supplies or materials as of the subject to duties, taxes and other charges) belonging to persons coming to
date of such retirement or cessation, whether or not the business is continued settle in the Philippines or Filipinos or their families and descendants who
by the new owner or successor. The following circumstances shall, among are now residents or citizens of other countries, such parties hereinafter
others, give rise to transactions "deemed sale"; referred to as overseas Filipinos, in quantities and of the class suitable to the
- Change of ownership of the business. There is a change in the profession, rank or position of the persons importing said items, for their
ownership of the business when a single proprietorship incorporated; or the own use and not barter or sale, accompanying such persons, or arriving
proprietor of a single proprietorship sells his entire business within a reasonable time; Provided, That the Bureau of Customs may, upon
- Dissolution of a partnership and creation of a new partnership the production of satisfactorily evidence that such persons are actually
which coming to settle in the Philippines and that the goods are brought from their
takes over the business. place of residence, exempt such goods from payment of duties and taxes.

What is VAT-exempt sale?  Services subject to percentage tax under Title V of the Tax Code, as
It is a sale of goods, properties or service and the use or lease of amended;
properties which is not subject to output tax and whereby the buyer is not
allowed any tax credit or input tax related to such exempt sale.  Services by agricultural contract growers and milling for others of
palay
What are the VAT-exempt transactions? into rice, corn into grits, and sugar cane into raw sugar;

 Sale or importation of agricultural and marine food products in their  Medical, dental, hospital and veterinary services except those
original state, livestock and poultry of a kind generally used as, or yielding rendered
or producing foods for human consumption; and breeding stock and genetic by professionals;
materials therefore;
 Educational services rendered by private educational institutions duly
accredited by the Department of Education (DepED), the Commission on
 Sale or importation of fertilizers; seeds, seedlings and fingerlings; Higher Education (CHED) and the Technical Education and Skills
fish, Development Authority (TESDA) and those rendered by the government
prawn, livestock and poultry feeds, including ingredients, whether locally educational institutions;
produced or imported, used in the manufacture of finished feeds (except  Services rendered by individuals pursuant to an employer-employee
specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals relationship;
and other animals considered as pets);
  Services rendered by regional or area headquarters established in the Php 450,000.00 or as may from time to time be determined by
Philippines by multinational corporations which act as supervisory, the HUDCC and the NEDA and other related laws;
communications and coordinating centers for their affiliates, subsidiaries or o Sale of residential lot valued at One Million Five Hundred
branches in the Asia-Pacific Region and do not earn or derive income from Thousand Pesos (P1,500,000.00) and below, or house and lot
the Philippines; and other residential dwellings valued at Two Million Five
Hundred Thousand Pesos (P2,500,000.00) and below, as
 Transactions which are exempt under international agreements to adjusted using latest Consumer Price Index values. (If two or
which the Philippines is a signatory or under special laws except those more adjacent lots are sold or disposed in favor of one buyer,
granted under P.D. No. 529 - Petroleum Exploration Concessionaires under for the purpose of utilizing the lots as one residential lot, the
the Petroleum Act of 1949; sale shall be exempt from VAT only if the aggregate value of the
lots do not exceed One Million Five Hundred Thousand Pesos
 Sales by agricultural cooperatives duly registered and in good (P1,500,000.00). Adjacent residential lots, although covered by
standing separate titles and/or separate tax declarations, when sold or
with the Cooperative Development Authority (CDA) to their members, as disposed to one and the same buyer, whether covered by one or
well as of their produce, whether in its original state or processed form, to separate Deed of Conveyance, shall be presumed as a sale of
non-members, their importation of direct farm inputs, machineries and one residential lot.)
equipment, including spare parts thereof, to be used directly and exclusively
in the production and/or processing of their produce;  Lease of residential units with a monthly rental per unit not exceeding
Fifteen Thousand Pesos (P15,000.00), regardless of the amount of aggregate
 Gross receipts from lending activities by credit or multi-purpose rentals received by the lessor during the year; Provided, that not later than
cooperatives duly registered and in good standing with the Cooperative January 31, 2009 and every three (3) years thereafter, the amount of
Development Authority; P10,000.00 shall be adjusted to its present value using the Consumer Price
Index, as published by the Philippine Statistics Authority (Formerly known
 Sales by non-agricultural, non-electric and non-credit cooperatives as NSO);
duly
registered with and in good standing with CDA; Provided, that the share  Sale, importation, printing or publication of books and any
capital contribution of each member does not exceed Fifteen Thousand newspaper,
Pesos (P15,000.00) and regardless of the aggregate capital and net surplus magazine, review or bulletin which appears at regular intervals with fixed
ratably distributed among the members; prices for subscription and sale and which is not devoted principally to the
publication of paid advertisements;
 Export sales by persons who are not VAT-registered;
 Transport of passengers by international carriers;
 The following sales of real properties:
o Sale of real properties not primarily held for sale to customers or  Sale, importation or lease of passenger or cargo vessels and aircraft,
held for lease in the ordinary course of trade or business. including engine equipment and spare parts thereof for domestic or
o Sale of real properties utilized for low-cost housing as defined by international transport operations; Provided, that the exemption from VAT
RA No. 7279, otherwise known as the "Urban Development and on the importation and local purchase of passenger and/or cargo vessels
Housing Act of 1992" and other related laws, such as RA No. shall be subject to the requirements on restriction on vessel importation and
7835 and RA No. 8763; mandatory vessel retirement program of Maritime Industry Authority
o Sale of real properties utilized for specialized housing as (MARINA);
defined under RA No. 7279, and other related laws, such as RA
No. 7835 and RA No. 8763, wherein price ceiling per unit is  Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations; Provided, that the said than the transactions mentioned in the preceding paragraphs, the gross
fuel, goods and supplies shall be used exclusively or shall pertain to the annual sales and/or receipts do not exceed the amount of Three Million
transport of goods and/or passenger from a port in the Philippines directly Pesos (Php 3,000,000.00). Note: Self-employed individuals and
to a foreign port, or vice-versa, without docking or stopping at any other professionals availing of the 8% on gross sales and/or receipts and other
port in the Philippines unless the docking or stopping at any other Philippine non-operating income, under Sections 24 (A)(2)(b) and 24 (A)(2)(c)(2) of the
port is for the purpose of unloading passengers and/or cargoes that NIRC shall also be exempt from the payment of twelve (12%) VAT.
originated form abroad, or to load passengers and/or cargoes bound for
abroad; Provided, further, that if any portion of such fuel, goods or supplies
is used for purposes other that the mentioned in the paragraph, such portion Percentage Tax
of fuel, goods and supplies shall be subject to 12% VAT; Percentage tax is a business tax imposed on persons, entities, or
transactions specified under Sections 116 to 127 of the National Internal
 Services of banks, non-bank financial intermediaries performing Revenue Code of 1997 (also known as Tax Code).
quasi-
banking functions, and other non-bank financial intermediaries, such as Quarterly Percentage Tax under Sections 116 to 126 of the Tax
money changers and pawnshops, subject to percentage tax under Sections Code, as amended
121 and 122, respectively of the Tax Code; and
BIR Form 2551Q - Quarterly Percentage Tax Return
 Sale or lease of goods and services to senior citizens and persons with
disabilities, as provided under Republic Act Nos. 9994 (Expanded Senior Who are required to file?
Citizens Act of 2010) and 10754 (An Act Expanding the Benefits and
Privileges of Persons with Disability), respectively; Persons refer to individuals and non-individuals, which include, but are
not limited to, estates, trusts, partnerships, and corporations.
 Transfer of property in merger or consolidation (pursuant to Section
40(C)(2) of the Tax Code, as amended); 1. Persons, who are not VAT-registered, who sell goods, properties or
services, whose annual gross sales and/or receipts do not exceed
 Association dues, membership fees, and other assessments and three million pesos (Php3,000,000.00) and are exempt from value-
charges added tax (VAT) under Section 109 (BB) of the National Internal
collected on a purely reimbursement basis by homeowners’ associations and Revenue Code, as amended by Republic Act (RA) No. 10963.
condominium established under Republic Act No. 9904 (Magna Carta for 2. Persons who lease residential units where the monthly rental per unit
Homeowners and Homeowner’s Association) and Republic Act No. 4726 exceeds fifteen thousand pesos (Php15,000.00) but the aggregate of
(The Condominium Act), respectively; such rentals of the lessor during the year does not exceed three
million pesos (Php3,000,000.00)
 Sale of gold to the Banko Sentral ng Pilipinasn (BSP) (previously
zero-
rated transaction);

 Sale of drugs and medicines prescribed for diabetes, high cholesterol,

and hypertension (beginning on January 1, 2019 as determined by the
Department of Health); and
 Sale or lease of goods or properties or the performance of services
other
3. Persons engaged in the following industries/transactions:
a. Cars for rent or hire driven by the lessee, transportation iv. News services for messages which deal exclusively
contractors, including persons who transport passengers for with the collection of news items for, or the
hire, and other domestic carriers by land for the transport of dissemination of news item through, public press,
passengers (except owners of bancas and owners of animal- radio or television broadcasting or a newsticker
drawn two-wheeled vehicle) and keepers of garages service furnishing a general news service similar to
that of the public press.

b. International air/shipping carriers doing business in the

Philippines on their gross receipts derived from transport of
cargo from the Philippines to another country
e. Banks, non-bank financial intermediaries performing quasi-
banking functions

c. Franchise grantees of –
i. radio and/or television broadcasting companies
whose annual gross receipts for the preceding year
do not exceed Php 10,000,000.00 and did not opt to
register as VAT taxpayers, and
ii. gas and water utilities.

d. Overseas dispatch, message or conversation transmitted

from the Philippines by telephone, telegraph, tele-writer f. Other non-bank financial intermediaries (including
exchange, wireless and other communication equipment pawnshops as clarified under Revenue Regulations [RR] No.
services, except those transmitted by: 10 – 2004)

i. The Philippine Government or any of its political

subdivisions or instrumentalities;
ii. Diplomatic services;
iii. Public international organizations or any of their
agencies based in the Philippines enjoying
privileges, exemptions and immunities which the
Philippine Government is committed to recognize
pursuant to international agreement; and
g. Person, company or corporation (except purely cooperative
companies or associations) doing life insurance business in
the Philippines
h. Fire, marine or miscellaneous agents of foreign insurance
companies
i. Proprietor, lessee or operator of cockpits, cabarets, night or
day clubs, boxing exhibitions, professional basketball games,
Jai-Alai and racetracks, including videoke bars, karaoke
bars, karaoke televisions, karaoke boxes and music lounges
as clarified under Revenue Memorandum Circular (RMC)
No. 18 – 2010
j. Winnings or 'dividends' in horse races DONOR’s TAX
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.

Tax Form

BIR Form 1800 – Donor’s Tax Return

Tax Rates

(The rate applicable shall be based on the law prevailing at the

time of donation)

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.