TITLE III – ESTATE & DONOR’S TAX, CHAPTER II – Donor’s Tax
SECTION 98. 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.
SEC. 99. Rate of Tax Payable by Donor. –
(A) In General. – The 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. (As amended by RA No. 10963 (December 19, 2017)).
(B) 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. (As amended by RA No. 10963 (December 19, 2017)).
SEC. 100. Transfer for Less Than Adequate and Full Consideration. – Where property, other than real property referred to in Section 24(D), is transferred for less than an 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 an adequate and full consideration in money or money’s worth. (As amended by RA No. 10963 (December 19, 2017)).
SECTION 101. Exemption of Certain Gifts. – The following gifts or donations shall be exempt from the tax provided for in this Chapter:
(A) In the Case of Gifts Made by a Resident. –
(B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. –
(C) Tax Credit for Donor’s Taxes Paid to a Foreign Country. –
SECTION 102. Valuation of Gifts Made in Property. – If the gift is made in property, the fair market value thereof at the time of the gift shall be considered the amount of the gift. In case of real property, the provisions of Section 88(B) shall apply to the valuation thereof.
SECTION 103. Filing of Return and Payment of Tax. –
(A) Requirements. – Any individual who makes any transfer by gift (except those which, under Section 101, are exempt from the tax provided for in this Chapter) shall, for the purpose of the said tax, make a return under oath in duplicate. The return shall set forth:
(B) Time and Place of Filing and Payment. – The return of the donor required in this Section shall be filed within thirty (30) days after the date the gift is made and the tax due thereon shall be paid at the time of filing. Except in cases where 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. In the case of gifts made by a nonresident, the return may be filed with the Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer, or directly with the Office of the Commissioner.
SECTION 104. Definitions. – For purposes of this Title, the terms ‘gross estate‘ and ‘gifts‘ include real and personal property, whether tangible or intangible, or mixed, wherever situated: Provided, however, That where the decedent or donor was a nonresident alien at the time of his death or donation, as the case may be, his real and personal property so transferred but which are situated outside the Philippines shall not be included as part of his ‘gross estate’ or ‘gross gift’: Provided, further, That franchise which must be exercised in the Philippines; shares, obligations or bonds issued by any corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws; shares, obligations or bonds by any foreign corporation eighty-five percent (85%) of the business of which is located in the Philippines, shares, obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines; shares or rights in any partnership, business or industry established in the Philippines, shall be considered as situated in the Philippines: Provided, still further, That no tax shall be collected under this Title in respect of intangible personal property: (a) if the decedent at the time of his death or the donor at the time of the donation was a citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of any character, in respect of intangible personal property of citizens of the Philippines not residing in that foreign country, or (b) if the laws of the foreign country of which the decedent or donor was a citizen and resident at the time of his death or donation allows a similar exemption from transfer or death taxes of every character or description in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country.
The term ‘deficiency‘ means: (a) the amount by which the tax imposed by this Chapter exceeds the amount shown as the tax by the donor upon his return; but the amount so shown on the return shall first be increased by the amount previously assessed (or collected without assessment) as a deficiency, and decreased by the amounts previously abated, refunded or otherwise repaid in respect of such tax, or (b) if no amount is shown as the tax by the donor, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a deficiency, but such amount previously assessed, or collected without assessment, shall first be decreased by the amount previously abated, refunded or otherwise repaid in respect of such tax.
(Manual encoding credits: Jacky Margaret Adriano)
By: Garry S. Pagaspas, CPA
Court of Tax Appeals (CTA) division has denied the application for refund of donor’s tax alleged to have been erroneously paid by spouses on the transfer of a condominium unit to a common child in relation to the court decision declaring their marriage null and void.
In a decision of a Regional Trial Court (RTC) in Makati City sometime November 2015, it declared the marriage of spouses as null and void, and approved the “Agreement on Custody and Support and Liquidation, Dissolution, and Separation of the Property Regime”. In furtherance of the agreement, former spouses executed a Deed of Donation for the transfer of a condominium unit in favor of their common child and paid donor’s tax totaling PhP760,800.00 (each of them paying PhP380,400.00 donor’s tax in respective BIR Form Nos. 1800) for the issuance of the Certificate Authorizing Registration and transfer of the title to the condominium unit to the common child. After such transfer, the spouses filed applications for refund May 27, 2017 and February 8, 2018, respectively, and was not acted by the BIR prompting them to file Petition for Review with the CTA last February 12, 2018 claiming that the donation is without donative intent and as such, not taxable.
The issue in this case is whether or not the Deed of Donation in compliance of the requirements of the dissolution of the property relations between spouses for the delivery of the presumptive legitime to the common child in compliance with Article 102(5) in relation to Article 51, both of the Family Code of the Philippines.
In resolving this issue, the CTA explained is essence as follows:
A. Donor’s tax is an excise tax imposed on the privilege of transferring property by way of gift inter vivos (quoting Lladoc vs. CIR, 14 SCRA 292). Although the Tax Code, as amended, does not define “transfer of property by gift“, the same is understood to include “donation” defined under Article 725 of the Civil Code as “an act of liberality whereby a person disposes of gratuitously of a thing or right in favor of another, who accepts it” (quoting Abello vs. CIR, 452 SCRA 162,168).
B. Donation has the following elements: (a) the reduction of the patrimony of the donor; (b) the increase in the patrimony of the donee, and; (c) the intend to do an act of liberality or animos donandi (quoting Abello vs. CIR, 452 SCRA 162,168, citing Republic vs. Guzman, 326 SCRA 90; Tayoto vs. Heirs of Kusop, 184 SCRA 355). According to the CTA, in this case, there is no doubt that donation was actually made by the parties because the elements of a valid donation are present.
C. “Even granting that the subject donation was made by petitioners for the purpose of complying with the legal requirements of the dissolution of the property relations between them, the same does not negate presence of donative intent in the subject transaction considering that petitioners gave portion of their patrimony to the common child without any material consideration.”
D. “While its is true that Article 51 and 102(5) of the Family Code mandate the delivery of the presumptive legitime of the common children upon dissolution of the absolute community regime and the partition of the properties of the spouses, the same does not ipso jure cause the transfer of title or ownership over the properties comprising the presumptive legitime from either or both of the spouses to their common children.” “At most, these provisions merely prescribe a specific obligation that the spouses have to comply with. and in the present case, petitioners have actually complied with the foregoing provisions through the execution of the Deed of Donation over the subject property in favor of their common child.”
E. “To reiterate, donor’s tax is an excise tax imposed on the privilege of transferring property by way of gift inter vivos, i.e. during the lifetime of the donor. In the present case, what is being subjected to the payment of the donor’s tax in the privilege, duly exercised by the petitioners, of transferring the subject property to their common child. It is beyond doubt that the said transfer of property by way of gift was made during the lifetime of the petitioners.”
F. “The transfer is fully consummated as the title over subject property was already issued under the name of the donee. Consequently, the said transfer falls within the ambit of Section 98, of the 1997 NIRC. On the other hand, the subject donation is not one of those enumerated under Section 101 of the 1997 NIRC as exempt from donor’s tax.
From the above, the CTA denied the Petition for Review seeking refund of paid donor’s tax.
Reference:
CTA Case No. 9765 promulgated November 23, 2018 by CTA Second Division. Please read the full text of the decision at the CTA website for more details.
Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for about fifteen (15) years now helping out taxpayers on securing BIR Rulings, appeal of BIR Ruling denials, company registrations in Philippines, tax compliance, tax savings, tax assessments, tax refunds, and other related professional tax services. He has been helping out some foreign clients determine the most appropriate legal entity to register in the Philippines based on intended operations, the eventual registration of such legal business entity and other related professional services such as securing Ph Visa, payroll, and business consultancy. He was formerly with the academe and is presently a frequent speaker of Tax and Accounting Center, Inc. and other seminar entities.
Disclaimer: This CTA case digest article is for purposes of academic discussions only as personally summarized by the author not of Tax and Accounting Center, Inc. and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may also please send mail at info(@)taxacctgcenter.ph, or you may post a question at Tax and Accounting Center Forum and participate therein.
By: Tax and Accounting Center Philippines
REVENUE REGULATIONS No. 6-2013 dated April 22, 2013 (RR No. 6-2013) entitled “Amending Certain Provision of Revenue Regulations No. 6-2008 (RR 6-2008) entitled “Consolidated Regulations Prescribing the Rules on Taxation of Sale, Barter, Exchange of Other Disposition of Shares of Stock Held as Capital Assets.”
RR 6-2013 amended Section 7 of RR 6-2008 to read as follows:
“SEC. 7. Sale, Barter or Exchange of Shares of Stock Not Traded Through a Local Stock Exchange Pursuant to Secs. 24 (C), 25 (A)(3), 25 (B), 27 (D) (2), 28(A) (7) (C), 28 (B) (5) (C) of The Tax Code, as Amended. — xxx xxx xxx
(c.2) Definition of “fair market value” of the Shares of Stock. — For purposes of this Section, “fair market value” of the shares of stock sold shall be:
(c.2.1) x x x
(c.2.2) In the case of shares of stock not listed and traded in the local stock exchanges, the value of the shares of stock at the time of sale shall be the fair market value. In determining the value of the shares, the Adjusted Net Asset Method shall be used whereby all assets and liabilities are adjusted to fair market values. The net of adjusted asset minus the liability values is the indicated value of the equity. For purposes of this section, the appraised value of real property at the time of sale shall be the higher of –
(1) The fair market value as determined by the Commissioner, or (2) The fair market value as shown in the schedule of valued fixed by the Provincial and City Assessors, or (3) The fair market value as determined by Independent Appraiser.”
Implication of RR 6-2013
In effect, RMC 6-2013 requires that the value of the shares of stock for capital gains tax in the Philippines shall be the fair market value determined using the Adjusted Net Asset Method where all assets and liabilities are adjusted to fair market values.
To determine the fair market value of shares, services of an independent appraiser in the Philippines could be resorted, though RMC 6-2013 is silent as to whether such requirement is mandatory for the transfer of shares. By the use of the fair market value, the seller will become taxable with capital gains tax in the Philippines with respect to the incremental value of assets owned by the company who issued the shares. This scenario is most applicable to issuing companies owning real properties because real properties tend to increase valuation throughout the time.
Summary
The new ruling on RR 6-2013 amending RR 6-2008 is a warning to sellers of shares of stock held as capital asset in the Philippines to be extra careful in dealing with their valuations. Under RR 6-2008, if valuation is less than the fair valuation for tax purposes, then, the seller could be held additionally liable for donor’s tax under Section 100 of the Tax Code, as amended, for transfers for insufficient consideration on top of its capital gains tax liability.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at in**@************er.org, or you may post a question at Tax and Accounting Center Forum and participate therein.
Under Republic Act No. 10165 (RA No. 10165) and otherwise known as Foster Care Act of 2012, it has been a declared policy of the State to provide every child who is neglected, abused, surrendered, dependent, abandoned, under sociocultural difficulties, or with special needs with an alternative family that will provide love and care as well as opportunities for growth and development. Under said RA No. 10165, a child may be placed under foster care for the provision of planned temporary substitute parental care to a child by a foster parent under certain condition and upon approval the Foster Family Care License of the Department of Social Welfare and Development (DSWD).
Apart from the regulations on foster child care in the Philippines, RA No. 10165 or Foster Care Act of 2012 in the Philippines provides for the following tax incentives and as such, the full text of RA No. 10165:
Foster child as additional dependent
Under Rule 23(2) of the Implementing Rules implementing Section 22(b) of RA No. 10165, a foster parent shall be allowed an additional personal exemption of P25,000 for each qualified dependent, to include the foster child if the period of foster care is a continuous period of one (1) taxable year. However, the total number of qualified dependents remains at four or a total of P100,000, including the qualified foster child.
Income tax exemptions of agencies
Agency is a child caring or child-placing institution licensed and accredited by the DSWD to implement foster care program. Under Rule 24.1 of the Implementing Rules, implementing Section 23 of RA No. 10165, agencies shall be exempt from income tax derived by it as such organization pursuant to Section 30 of the National Internal Revenue Code, as amended, and as implemented by Revenue Regulations No. 13-1998.
Qualification as Donee Institution of the Agency
Agencies can also qualify as a done institution for tax incentives on donations to foster care programs. A separate application shall be filed with the prescribed government agencies for the purpose (e.g. BIR).
Donor’s tax exemption on donations to agency
Donations to the agency of concerned taxpayers are exempted from donor’s tax in the Philippines imposed under Section 101 of the National Internal Revenue Code , as amended. To qualify such donor’s tax exemption in the Philippines, not more than 30% of the amount of donations shall be spent for administrative purposes.
Donations as tax deductible expense
Donor’s to agency shall be granted allowable deductions from their gross income to the extent of the amount donated to agencies in accordance to Section 34(H) of the National Internal Revenue Code, as amended.
References:
Donor’s tax is imposed upon any person, natural or juridical, resident or non-resident, who transfers or causes to transfer by gift or donation, whether direct or indirect, in trust or otherwise, real, personal, tangible or intangible property. Hereunder are some features for your better appreciation.
A tax upon one’s gratitude to others
Donor’s tax in the Philippines is imposed upon gratuitous transfers of property from one person to another during their lifetime. Gratuitous means that the property is transferred free of charge or that the donee (the receipient) does not pay for it in receiving the property from the donor (the giver). One cited reason for the imposition of donor’s tax in the Philippines is to mitigate the gap between the rich and the poor so that the amount that the more able one’s will give or donate will be lessened by the donor’s tax imposed.
Imposed also on indirect donations
A donation need not be explicit to be taxable. Section 100 of the Tax Code of the Philippines imposes a tax on transfers for insuficient consideration. This means that if you sell a property for a price much lower than the market value od that property or a similar property, donor’s tax in the Philippines will apply. This may happen to parties making unrealistic sales or transfers of property making it appear to be a sale for an insufficient selling price or consideration to avoid donor’s tax in the Philippines or death taxes – estate tax in the Philippines.
Imposed upon valid donations or transfer
To be taxable, a donation or trsnsfer must be validly made to produce the legal effects of a transfer of title. Validity of donation or transfer would depend on the capacity of the parties to make a valid donation ot transfer, and the formalities of the deed of donation or deed of transfer. Void donations are not subject to donor’s tax because it does not transfer the title of the property, thus, no gratuitous transfer.
Imposed upon the donor of the property
In donor’s tax in the Philippines, it is the donor or giver who is bound to pay the tax and not the donor. The agreement in the deed of donation that the donee or receipient of the property will be the one to pay the donor’s tax is not binding with respect to the tax authority – Bureau of Internal Revenue (BIR). It is but logical to make the donor liable because if it has the means to donate a property free of charge, then, it reasonably follows that it is capable of paying the tax.
Tax rate is either a progressive rate of 2%-15% or 30%
Donor’s tax computation would depend on whether the donor and the donee are relatives or not – strangers as the Tax Code calls them. As defined in the Tax Code, relatives of the donor refers to a brother or sister – by whole or half blood, spouse, ancestor, lineal descendant, or relative by consanguinity in the collateral line within the fourth civil degree of relationship. Donations to relatives are taxed at 2% – 15%, each and every donation aggrgated, and allowed deductions for dowry, diminutions, and encumbrances to a certain extent. Donations of the donor to the relatives of not exceeding P100,000.00 within the calendar year are not taxable.
Strangers are those individuals not enumerated under relatives. For donor’s tax purposes, donations of corporations and other juridical entities are donations to strangers. Donor’s tax in the Philippines for donations to strangers is at 30% of the gross amount of taxable donation and the tax is paid every after donation without need of the aggregation as compared to donations to relatives.
Exemptions from donor’s tax Philippines
Taxation is the rule, exemption is the exception applies to donor’s tax. Certain exemptions are authorized by laws based on the donation itself or based on the status of the donee. Example of tax exempt donations are donations on account of marriage up to P10,000.00, donations to accredited donee institutions under certain conditions, donations to specific entities – Integrated Bar of the Philippines, Ramon Magsaysay Award Foundation, and many more to mention.
Filing of donor’s tax returns
A donor’s tax return in the Philippines or BIR Form No 1800 is required to be filed and paid not later than the 30th day following the date of every donation made. Failure to file and pay donor’s tax is subject to penalties – 25% surcharge (50% if fraudulent), 20% interest, and compromise penalties ranging from P200.00 to P25,000.00.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at in**@************er.org.)
See our quality seminars, workshops, and trainings…
See how we can help you with our professional services…
Read More Articles…
Live Webinar 1 & 2: BIR Tax Compliance for VAT Entity
Live Webinar: Value Added Tax: In and Out
Live Webinar: Returns and Reports Preparation under eBIR Forms and Online Submissions
Onsite Training: PEZA Registered Entities: Taxation and Basic Reports
Live Webinar on Ph Payroll Computations and Taxation
Live Webinar: Withholding Taxes, Subjects & Applications
Onsite Training: Basic Bookkeeping for Non-Accountants
Onsite Seminar: BIR Examination: Their Procedures and Our Defenses
Live Webinar: Winning BIR Tax Assessments Series: Process, Remedies & Writing Effective Protest
Onsite Training: Basic Business Accounting & BIR Compliance VAT Entity
Revenue Memorandum Circular No. 34-2025
Revenue Memorandum Circular No. 32-2025
Republic Act No. 12079
2025 Filing of Annual Financial Statements and General Information Sheet
Revenue Regulations No. 012-2025
Δ
Phone : (02) 5310-2239
Mobile : Smart: 0939-916-2952 Globe: 0967-497-4989
Email : info(@)taxacctgcenter.ph
© Tax and Accounting Center 2025. All Rights Reserved