A Requirement on

Management, Tax and Consultancy

Cyrra Q. Balignasay
BSA-5
 DONOR’S TAX

Republic Act No. 10963 (The TRAIN Law) retains the following sections of the
Republic Act No. 8424, (National Internal Revenue Code of 1997):

SEC. 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. 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.

SEC. 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 see forth:

(1) Each gift made during the calendar year which is to be included in computing net
gifts;
(2) The deductions claimed and allowable;
(3) Any previous net gifts made during the same calendar year;
(4) The name of the donee; and
(5) Such further information as may be required by rules and regulations made pursuant
to law.

(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.

SEC. 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 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 amounts previously assessed, or collected without assessment, shall first be
decreased by the amount previously abated, refunded or otherwise repaid in respect of
such tax.
Amendments made by Republic Act No. 10963 (The TRAIN Law) from the
following sections of the Republic Act No. 8424, (National Internal Revenue Code
of 1997):

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

(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:

THE TAX OF THE EXCESS

OVER BUT NOT OVER PLUS
SHALL BE 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.

As Amended By Republic Act No. 10963 (TRAIN LAW)

SEC. 99. Rates 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 (PhP250, 000)
exempt gift made during the calendar year.
(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.

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.

As Amended By Republic Act No. 10963 (TRAIN LAW)

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.

SEC. 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.-

(1) Dowries or gifts made on account of marriage and before its celebration or within
one year thereafter by parents to each of their legitimate, recognized natural, or adopted
children to the extent of the first Ten thousand pesos (P10,000):

(2) Gifts made to or for the use of the National Government or any entity created by any
of its agencies which is not conducted for profit, or to any political subdivision of the said
Government; and
(3) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, accredited nongovernment organization, trust or philanthropic
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.
For the purpose of the exemption, a 'non-profit educational and/or charitable
corporation, institution, accredited nongovernment organization, trust or philanthropic
organization and/or research institution or organization' is a school, college or university
and/or charitable corporation, accredited nongovernment organization, trust or
philanthropic organization and/or research institution or organization, incorporated as a
nonstock entity, paying no dividends, governed by trustees who receive no
compensation, and devoting all its income, whether students' fees or gifts, donation,
subsidies or other forms of philanthropy, to the accomplishment and promotion of the
purposes enumerated in its Articles of Incorporation.

(B) In the Case of Gifts Made by a Nonresident Not a Citizen of the Philippines. –

(1) 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.

(2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, foundation, trust or philanthropic 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.

(C) Tax Credit for Donor's Taxes Paid to a Foreign Country. –

(1) In General. - The tax imposed by this Title upon a donor who was a citizen or a
resident at the time of donation shall be credited with the amount of any donor's tax of
any character and description imposed by the authority of a foreign country.

(2) Limitations on Credit. - The amount of the credit taken under this Section shall be
subject to each of the following limitations:

(a) The amount of the credit in respect to the tax paid to any country shall not exceed
the same proportion of the tax against which such credit is taken, which the net gifts
situated within such country taxable under this Title bears to his entire net gifts; and

(b) The total amount of the credit shall not exceed the same proportion of the tax
against which such credit is taken, which the donor's net gifts situated outside the
Philippines taxable under this title bears to his entire net gifts.
 As Amended By Republic Act No. 10963 (TRAIN LAW)

SEC. 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.-

(1) 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; and
(2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, accredited nongovernment organization, trust or philanthropic
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.
For the purpose of this exemption, a ‘non-profit educational and/or charitable
corporation, institution, accredited nongovernment organization, trust or
philanthropic organization and/or research institution or organization’ is a school,
college or university and/ or charitable corporation, accredited nongovernment
organization, trust or philanthropic organization and/ or research institution or
organization, incorporated as a nonstock entity, paying no dividends, governed by
trustees who receive no compensation, and devoting all its income, whether students’
fees or gifts, donation, subsidies or other forms of philanthropy, to the accomplishment
and promotion of the purposes enumerated in its Articles of Incorporation.

(B) In the Case of Gifts Made by a Nonresident Not a Citizen of the Philippines. –

(1) Gifts made to or for the use of the National Government 148 National Tax Research
Center or any entity created by any of its agencies which is not conducted for profit, or
to any political subdivision of the said Government.

(2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, foundation, trust or philanthropic 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.

(C) Tax Credit for Donor's Taxes Paid to a Foreign Country. –

(1) In General. – The tax imposed by this Title upon a donor who was a citizen or a
resident at the time of donation shall be credited with the amount of any donor’s tax of
any character and description imposed by the authority of a foreign country.

(2) Limitations on Credit. – The amount of the credit taken under this Section shall be
subject to each of the following limitations:

(a) The amount of the credit in respect to the tax paid to any country shall not exceed
the same proportion of the tax against which such credit is taken, which the net gifts
situated within such country taxable under this Title bears to his entire net gifts; and

(b) The total amount of the credit shall not exceed the same proportion of the tax
against which such credit is taken, which the donor’s net gifts situated outside the
Philippines taxable under this Title bears to his entire net gifts.

 KEYPOINTS

NIRC Provision NIRC TRAIN

The donor’s tax for each The donor’s tax is fixed at

calendar year shall be 6% based on annual total
computed on the basis of gifts exceeding ₱250,000
the total net gifts made (exempt gift), regardless of
during the calendar year in whether the donee is a
accordance with the stranger or not.
Section 99 graduated tax table.
Rates of tax
The donor’s tax shall be The donor’s tax is fixed at
30% of the net gifts when 6% based on annual total
the donee or beneficiary is gifts exceeding ₱250,000
a stranger. (exempt gift), regardless of
whether the donee is a
stranger or not.

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

• a bona fide transaction;

• at arm’s length; and
• free from donative intent.

Dowries or gifts made on The exemption of dowries

account of marriage by (gifts made on account of
parents to each of their marriage) is removed.
Section 101
legitimate, recognized,
Exemption of certain
natural, or adopted
gifts
children to the extent of the
first ₱10,000 shall be
exempt from donor’s tax.
 ILLUSTRATION:
 TIMELINE AND OVERVIEW OF IMPLEMENTATION

The Tax Reform for Acceleration and Inclusion (TRAIN) Act, officially cited

as Republic Act No. 10963, is the initial package of the Comprehensive Tax Reform
Program (CTRP) signed into law by President Rodrigo Duterte on December 19,
2017. The TRAIN Act is the first of four packages of tax reforms to the National Internal
Revenue Code of 1997, or the Tax Code, as amended. This package introduced
changes in personal income tax (PIT), estate tax, donor's tax, value added tax (VAT),
documentary stamp tax (DST) and the excise tax of tobacco products, petroleum
products, mineral products, automobiles, sweetened beverages, and cosmetic
procedures.
 These regulations are effective beginning January 1, 2018, the effectivity of the
TRAIN Law.

Donor’s Tax (The TRAIN Law) Practice in 2018 - 2020 in the Philippines
WHAT ARE THE REQUISITES OF VALID DONATIONS?
This shall not take effect if the donation is not completed. The transfer of property is
completed/perfected if the following elements are met:
 Acceptance of the donee or recipient
 There is actual or constructive delivery of properties
If the property donated is immovable, it must be in public document specifying therein
the property given. Deed of Donation or in a separate public record could be enough,
but it shall not take effect after the completion during the lifetime of the donor.
WHAT IS THE DONOR’S TAX RATE?
Under the old regulation of the donor’s tax, the transfer of properties is taxed based on
the donor. Under the TRAIN law, it makes the computation simpler and easier to
understand and to remember. All transfer of properties during the lifetime of the donor
will be subject to six percent (6%) more than two hundred fifty pesos (250,000) during
the calendar year.
The new tax rate is 6% for any donations which is more than 250,000 regardless the
relationship of the giver and the recipient.
However, any contributions/gifts in cash or kind to any political party or coalition of
parties, candidate for campaign purposes shall be governed by the Election Code, as
amended.
WHAT ARE THE EXEMPTED DONATIONS
In general, all donations in the amount of 250, 000 or less within the calendar year will
not subject to donor’s tax.
There are some gifts or transfers of properties that are exempted by nature or by law.
Here are some of those donations:
TRANSFER FOR LESS THAN ADEQUATE CONSIDERATION
Any property transferred other than real estates for a less than an adequate amount and
full consideration in money by which the fair market value of the said property exceeded
the value received; then any excess will be considered as part of the total gifts to be
subjected to donor’s tax.
However, any property transfer made in the ordinary course of business or arm’s length
transaction and there is no donative intent will be considered as sale and be exempted
from transfer tax but rather a business tax.
TRANSFER FOR PUBLIC USE (TPU)
Gifts made to the government for public purposes and to any entity created any of its
agencies which non-profit organization is not subject to tax.
Gifts made to educational, charitable, religious, cultural or social welfare corporation,
trust or philanthropic organization or research institutions be exempted provided that
more than thirty percent (30%) said donations should be for administrative purposes.

DONATIONS MADE TO YOUR SPOUSE

Donations or gifts given between marriage are is not subject to donor’s tax. Therefore,
any transactions between spouses are considered marital properties. So it means that
you can’t transfer properties without ownership.
HOW TO CLAIM EXEMPTIONS?
If the donor is engaged in business donated at least fifty thousand (50,000) and wanted
to be exempted from donor’s tax and to claim a full deduction of the gifts given, a notice
of donation by a donor should be given to the Revenue District Office (RDO) within 30
days after the receipt of the donee’s duly issued Certificate of Donation.
This certificate should be attached to the Notice of Donation and should state that not
more than thirty percent (30%) of the donations will be used for administrative purposes.
WHAT ARE THE VALUATIONS OF DONATIONS?
General rule: Every property of the decedent is appraised according to their fair market
value at the time of his death.
REAL PROPERTY
Any real property is to be valued at the fair market value as determined by the
Commissioner or the fair market value (appraise value) by an assessor whichever is
higher. Learn more about real properties in the Philippines.
SHARES OF STOCKS
The market value of the stocks will depend on whether listed or non-listed in the stock
exchanges. If the shares are listed, the fair market value is equal to the mean between
the highest and lowest cost at the date of death, unless otherwise market value at the
time of his death.
Those stocks that are unlisted are based on their book value while preferred stocks are
valued at par value. In computing the book value of the ordinary shares, the surplus
shall not be included the same as to proffered stocks, if there is.
ANNUITY, HABITATION, OR RIGHT TO USUFRUCT
In determining the values, the probable life of the beneficiary with the latest basic
standard mortality table must be considered.
For computing the NET GIFT, if there is a mortgaged property transferred as a gift and
transfer also the obligation to pay, then the mortgage payable should be deducted to
compute the net gifts.
If the donation is complete because of reserved powers. This transfer can be done if the
donor renounces the power or his right to exercise the reserved power stops because of
the fulfillment of some conditions other than death.
Tax Developments in Response to COVID-19 in the Philippines
Date accurate as of: 13 April 2020
 Revenue Regulations (RR) No. 09-2020 (approved 06 April 2020, effective from 16
March 2020 to 25 June 2020), provides full deductibility against the gross income of
the donor-Corporation/donor-individual for the following donations/gifts, when given
for the sole and exclusive purpose of combatting COVID-19 during the period of the
state of national emergency under RA No. 11469:

 Cash donations
 Donations of all critical or needed healthcare equipment or supplies
 Relief goods such as, but not limited to, food packs (rice, canned goods, noodles,
etc.) and water
 Use of property, whether real or personal (shuttle service, use of lots/buildings)
 To be entitled to full deductibility, the donations shall be made to any of the following
donees:

 National Government or any entity created by any of its agencies (including

public hospitals) which is not conducted for profit, or to any political subdivision
of the said Government, including fully-owned government corporations
 Accredited non-stock, non-profit educational and/or charitable, religious, cultural
or social welfare corporation, institution, foundation, non-government
organization, trust or philanthropic organization and/or research institution or
organization
 The said RR provides for further conditions and requirements for full deductibility of
said donations.

 Revenue Memorandum Circular (RMC) No. 38-2020, 08 April 2020, extends the
deadline of the availment of tax amnesty on delinquencies under RR no. 4-
2019, as amended by RR no. 5-2020 in relation to RMC No. 33-2020 from 23
May 2020 to 08 June 2020. 
 RMC No. 39-2020, 08 April 2020, extends the due dates further for the
submission and/or filing of certain documents and/or returns as well as
payment of certain taxes under RR No. 07-2020. With the extension of ECQ to
30 April 2020, the extended due dates enumerated in Section 2 of RR No. 07-
2020 are further extended for a period of 15 calendar days, except those where
the extended due dates granted are reckoned from the lifting of the state of
emergency (ECQ).
 The filing and submission of BIR Form 2551Q (Quarterly Percentage Tax
Return), which was originally due on 25 April 2020, is extended to 25 May
2020. 

 Exempts the donations of the above imported goods from donor’s tax, if the
donations are 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.

 The Bureau of Customs (BoC), likewise under the direct control and supervision of
the DOF, has issued Customs Administrative Order (CAO) No. 07-2020, which
exempts the importation of critical health equipment and supplies from customs
duties and taxes, for the period from 25 March 2020 to 25 June 2020.