TAX: DONOR’S TAX [ona | Is an act of liberality whereby a person disposes gratuitously of a thing or thing in favor of another, who accepts it. (Art. 725, Civil Code of the Philippines) Cie a. From ‘Simple The cause is pure liberality viewpoint of | Remuneratory _ | Due to past services rendered or future services or changes and burdens purpose or | Onerous Burdens and charges equal tothe value ofthe thing donated cause Modal Consideration is less than the value of the thing donated > Takes effect during the lifetime of the donor, ‘© When the donor intends that the donation shall take effect during the lifetime of the donor, though the property shall not be delivered til after the donor’s death (Art. 739); ‘©. The fixing of an event or the imposition of a suspensive condition, which OOo nee may take place beyond the natural expectation of fe ofthe donor is also b. Time of considered a donation iner vivos, unless a contrary intention appears. taking effect (At. 730); or ‘© When a person donates something, subject to the resolutory condition of the donor's survival. (Art. 731) > tis subject to Donor’s Tax. Donation mortis | > One which takes effect upon the death of the donor and, therefore partakes causa of the nature of a testamentary disposition, > Itis subject to Estate Tax. 4. Direct Donation | > one made by the donor directly to the donee > Involves transfer of property by the donor in favor of the donee but under the supervision of another party. > This is called Donation in Trust, ‘The designation of donation in trust may either be: 2. Indirect Donation > This is not a completed donation a Revocable > Not taxable This is a completed donation eee) > Taxable All persons who may contract and dispose their property may make a donation. (Art. 735, Civil Code) a. All those who are not specifically disqualified by law therefore may accept donations. (Art. 738, Civil Code) . Minors and others who cannot enter into a contract may become donees but acceptance shall be done through their parents or legal representatives (Art. 741, Civil Code). ©. Donations made to conceived and unbom children may be accepted by those persons who would legally represent them if they were already born (Art. 742, Civil Code).> Atax on the privilege of the donor to give; it is not a property tax but is a tax imposed on the transfer of property sis eer tte mee etd Sr ane re te actually or constructively, of the donated property to the donee. (Sec. 11, RR No. 2-03, par. 1) » Itis an Excise Tax imposed upon the right of a person to transfer property gratuitously during his lifetime. May also called a “Gift Tax” » Imposed on the gratuitous transfer of real or personal, tangible or intangible property. > Imposed whether the transfer is in trust or otherwise, > Donor's taxis a direct tax because the tax is imposed on the donor and determined with reference to all the donor's gift. Donor's tax applies to both natural and juridical persons. > Donative intent is required only in a direct gift. Characteristics of Donor’s Tax eed 1. Generic as to purpose The law in force at the time of the 2. Excise as to subject matter perfection/completion of the donation shall govern the 3. Direct Tax as incidence imposition of Donor's Tax. Hence, for donations made on. 4, Ad Valorem as to amount January 1, 2018 onwards, or the effectivity of TRAIN Law, 8. Proportionate as to rate the TRAIN provisions would be applicable. 6. National as to taxing authority For donations completed prior to such date, the Tax Code provisions prior to the amendment shall apply. ieee » To prevent of the Estate Tax > To compensate for loss or decrease of income and estate taxes when large estates are split. Requisites of Donation 1. Transfer is gratuitous or without consideration. The transfer is made out of pure generosity of the donor. (Donative Intent) 2. Both the donor and donee are living at the time of the transfer (Inter vivos) 3. There must be a completed gift... there must be a delivery, actually or constructively, of the donated property to the donee, Renunciation by the Surviving Spouse of his/her share is the conjugal or community properties after the dissolution the marriage in favor of the heirs of the deceased spouse or any other person, subject to Donor's Tax. ‘General renunciation by an heir (including surviving spouse) of his share in the hereditary estate left by the decedent does not give rise to donation. Therefore, itis not subject to Donor’s Tax (and no DST due RMC No, 102-2019). The renunciation by an heir or his share in the estate shall give rise to a donation subject to a Donor’s Tax when: 1, The renunciation is specifically and categorically done in favor of identified heir or heirs to the exclusion of other co-heirs of the estat 2. Itis a partial renunciation where the heir waives his share to only intended properties but not to the entire properties of the decedent. Donor’s Tax will be imposed on the value foregone as a result of such ‘waiverirenunciation. Type of Renunciation General Specific More than 2 heirs Exempt Taxable Only 2 heirs: Exempt Exempt By the surviving spouse of Common Properties share in the Taxable Taxablefone Personal Property Real Property ‘Amount of Denetinal P5,000 Regardless of amount > Must be in Public Instrument, if not — VOID > The acceptance may be made in the same Form of 6 Jog | Must bein writing, tnot | ttament Deed ef Donation or ina Donation al, in writing or implies OID separate public instrument. > Ifthe acceptance is made in a separate instrument, the donor shall be notified in authentic form. ‘Additional i Requirement | Simultancous delivery None None 1. Between spouses, whether direct or indirect, during the marriage, except moderate gifts which the spouses may sive each other on the occasion of any family rejoicing; Void Donation Note: Indirect donations to a spouse are void, and include the ff donations of a spouse: a. To the stepchild who has no compulsory heirs other than the other spouse at the time of the donation; b. To a common child who has no compulsory heirs other than the other spouse at the time of donation; . To the parents of the other spouse; 4d. To the other spouse's adopted child in cases when, at the time of the donation, the only surviving relatives of the adopted is the adopter-spouse, the illegitimate children of the adopted, and the surviving spouse of the adopted; e. Toa common adopted child who has no other surviving heirs, 2. Between persons living together as husband and wife without a valid marriage; 3. Between persons guilty of concubinage or adultery at the time of donation; 4, Between persons found gully of the same criminal offense, in consideration thereof, 5. Those made to public officer or his/her spouse, descendants, and ascendants, by reason or his/her office. 6. Donations made by persons to those ‘who cannot inherit from them: ‘a. Donations to the priest who heard the confession of the donor during his last illness, or the minister who extended spiritual aid to him during the same period; b. Donations to the relatives of such priestiministerin (a) within the 4" degree; ©. Donations to the church, order, chapter, community, organization, or institution to which, such priest or minister in (a) belongs; d. Those made to a guardian with respect to donations made by a ward before the final accounts of the guardianship have been approved, except when the guardian is the ward's ascendant, descendant, brother, or sister; e. Any physician, surgeon, nurse, health officer, or pharmacist who took care of the donor during his last illness. VOID DONATIONS: (OFFICIALS) Public Official Euture property/inheritance Failure to comply with requirements. Incapacitated persons w/o legal representatives Criminal offense Inexistent object Adultery/concubinage Lack of Acceptance Spouses(xpn: moderate gifts/complete separation)Other Transactions subject to Donor's Tax 4. Transfer for Insufficient Consideration: Real or Personal Property The property transferred in real or personal property, except real property classified as a capital asset subject to the 6% CGT upon its sale or transfer; Requisites; |” The transfers for less than a full price: quisites: |, The transfer is inter-vivos; and The transaction is not an arm's length transaction or bona fide transaction. The party transferring the property for less than a full price has an intention to donate the same. Purpose: _| To prevent escape from the income tax by accepting a lower price for the property Where a property, other than a real property subject to capital gains tax, is transferred for less than ae ‘an adequate and full consideration in money's worth, then the amount by which the FMV of the ue: property exceeded the value of the consideration shall, for the purpose of donor's tax, be deemed gift, and shall be included in computing the amount of gifts made during the calendar year. May be allowed ifit is shown that the sale of property was made in the ordinary course of Exception: | business and free from any donative intent, in which case, the sale shall not be subject to donor's tax. Ex. Property Sold a oe Property eee FMV > SP rence = Deemed Gift = Donor's Tax ane meee SP > Cost Cost Xxx Property Sold. Tax Consequence Ovsinary Assets Personal Property Donor’s Tax if Real Property Donor's Tax Personal Property Donor’s Tax ital Assets a Real Property Capital Gains Tax 1. Transfer for Insufficient Consideration: Sale of Domestic Shares of Stock ‘outside the Loc: Shares are listed, but are | > The closing price on the day the shares are sold, bartered, or exchanged; or sold, bartered or exchange | > The closing price on the day nearest to the date of sale, barter, or exchange if Exchange, the FMV shall be: | _ day it was sold, bartered, or exchanged, al Stock there is no sales transaction of the shares in the Local Stock Exchange on the (cs) cerified by an independent public accountant prior to the date of sale, but not earlier than the immediately preceding taxable Shares not listed and traded year" ne in the Local Stock Exchange the FMV shall be: | Preferred The Liquidation Value (LV) which is equal fo the redemption Shares (PS) | price ofthe preferred shares as ofthe BS date nearest tothe ‘Common Shares ] The Book Value (BV) based on the latest available FS duly transaction date, including any premium and cumulative preferred dividends in arrears. transaction date. “in case there are both CS and PS, the BV per CS shail be computed by deducting the LV of the PS from the Total Equity of the Corporation, and diving the result by number of outstanding CS as of the BS date nearest to the insufficient consi Exception: When the sale/exchange is bona fide, at arm’s length, and free from any donative intent, the same will be considered as made for an adequate and full consideration in money or money's worth. In such case, there is no ideration, and therefore NO GIFT.2. Condonation or Remission of Debt ‘Where the debtor did not render any service in favor of the creditor Forgiveness of debt due t: Tax Consequence Debtor performs services for the creditor, who in return oe a eal ‘The debtor is subject to Income Tax Creditor without any consideration received from a debtor eae a cele AS TEL The creditors liable to Donor's Tax Itresults to a payment of dividends subject to Final Corporation forgives the debt of a stockholder Withholding Tax on Passive Income Payment of Loan by the Guarantor (BIR Ruling No. DA 006-2005, January 11, 2005) ‘A“guarantee” as a rule is gratuitous unless stated otherwise. However, if the obligation is “jointly” entered into by the guarantor and the borrower with a creditor-bank, the security given by the guarantor to fulfil the obligation of the borrower is not gratuitous because the guarantor must be indemnified by the principal debtor in case the guarantor pays for the debt. In such case, payment by the guarantor is not subject to Donor’s Tax. Gratuitous Donations to Associations Associations do not qualify as exempt donee institutions under Sec. 101 (A) (3) of the NIRC. Hence, endowments or gifts received by associations are not exempt from Donor’s Tax. All donattions to associations for tax purposes must be covered by a donor's tax return (RMC 53-2013) ‘Onerous Donations to Associations: Donation with an onerous cause are not in the nature of an endowment or donation. They are in the concept of a fee or price in exchange for performance of a service, use of property, or delivery of an object. Quasi-Transfers ‘Quasi-transfers involves delivery of property to another person but will never result in transfer of ownership thereto. These are not subject to Donor’s Tax. Donation made by a Foreign Corporation Donation of a foreign corporation of its own shares of stock In favor of a resident employee is not subject to Donor's Tax (BIR Ruling No. 18-87, Jan. 26, 1987). Because it should be assumed that such were given to resident employee in consideration of his services to the corporation. Likewise, the same shall constitute taxable compensation to the recipient. Diminution of Gift as specified by the Donor ‘The donor may specify that a person of the donation will be given to another person other than the donee. Diminution is not exempt from Donor’s Tax. It is merely a deduction against the original deduction but itis in itself another form of donation from the same donor which may be subject to Donor's Tax. Investee Company not subject to Donor’s Tax on APIC In this case, the BIR attempted to assess donor's tax against the investee company for the capital infusion, in the form of contribution as additional paid in capital (APIC), made by non-resident corporation. The APIC was contributed to sustain the viability of a company's operations. While the CTA did not rule whether or not an APIC is a donation, it held that even assuming that the same is a donation, the investee company is considered the donee. The burden to ay the donor's tax is imposed upon the donor and not upon the donee. Moreover, the liability for the payment of donor's tax is not transferrable. Consequently, the taxpayer is not liable to pay donor's tax. (CTA Case No, 8653 dated Jan. 27, 2016) Gift to Government Exempt from Donor’s Tax The BIR confirmed that the donation to the Office of Civil Defense-National Disaster Risk Reduction and ‘Management Council is not subject to Donor's Tax. The tax code is clear that donations made to or for the use of National Government or any entity created by any agencies, which is not conducted for profit, or to any political subdivision of the Government, by local or foreign donor, are not subject to Donor’s Tax. (BIR Ruling No. 437-2015 dated Dec. 23, 2015)Eimokorca Taxable Donation Donations that do not qualify among those exemption criteria are subject to tax. Gross Gift of Husband and Wife Husband and Wife may donate: a. The conjugal or community properties — each spouse shall be considered as separate donor of his/her interest in the property: % of the conjugal property donated being a gift of the husband, and other half that of the wife. ‘Gift from Common Property — the gift is taxable 7 to each donor spouse. Husband and Wife are considered as separate and distinct taxpayers for purposes of the Donor’s Tax. b._ Separate or exclusive property owned by only one spouse Donation between Husband and Wife General Rule _| Donation between the husband and wife is not taxable as itis declared VOID by law Exception ‘Moderate gifts between the spouse are valid During family rejoicing, such as birthdays, anniversaries, Christmas, and the lke. Donation of _ | > Neither spouse may donate any conjugal or community properly without the consent of the Conjugal or other. Community | > However, either spouse may, without the consent of the other, Property 1. Make moderate donations from the conjugal/community property from charity; 2._On occasion of family rejoicing or distress. Donation of Common Properties > Husband and Wife shall be considered as separate and distinct taxpayers for purposes of Donor's Tax. > Donation of conjugal or community property by the spouses is deemed 7% made by the husband and % made by the wife. The husband and the wife shall file separate donor's tax return for the donation. > However, ifthe donated property is a conjugal or a community property and the husband was the only signatory in the Deed of Donation, There is only one donor for donor's tax purposes, without prejudice to the right of the wife to question the validity of the donation without her consent pursuant to the pertinent provision of the Civil Code of the Philippines and the Family Code of the Philippines. no een ick) Gross Gift xxx—|——+ [Total (Gross) Gifts Less: Deductions 1K > Direct Gifts Total Net Gifts ox > Gifts through creation of trust i ‘i > Transfer for Insufficient ‘Add: Total Prior Net Gifts during the calendar year XxX Consideration Total Net Gifts to date XXX > Repudiation of Inheritance Less: Exempt Gift 250,000 » Renunciation by the surviving spouse of histher share in the ‘common property Computation of Tax Due and Tax Payabl > Condonation of Debt — when the Creditor cancels the debt without Total Net Gifts subject to Tax Xxx any consideration received from the Multiply by: Donor's Tax Rate 6% Debtor. The creditor is liable to Total Donor’s Tax Due XXX DonarsiTex! Less: Tax CreditPayments XXX iDemcaons| Payment for Prior Gifts XXX > Encumbrances assumed by the Foreign Donor's Tax paid XXX donee » Diminutions Tax paid in return prev. filed (in case XXX Xxx of amended return)Donor's Tax Rates > Donor’s tax is fixed at 6% based on annual tolal gifts exceeding P250,000 (exempt gif), regardless of whether the donee is a stranger or not. > However, the donation of real property is now subject to Documentary Stamp Tax of P15 for every P1,000, > Applicable to Donor's Tax: “+ Family + Friends * Stranger + Legally adopted child + Donations made to business organizations Gross Gifts 1. Direct Gift (Donor to Donee) Gift through | The tax shall apply whether the transfer is in trust or otherwise, whether the gift creation of | is direct or indirect, and whether the property is real or personal, tangible or trust intangible. Renunciation by surviving spouse of his/her share is CPG/ACP Included after the dissolution of marriage in favor of the heirs of the deceased spouse or any other persons. Renunciation a ~ by Heir of Renunciation by an heir, including the surviving spouse, of Inheritance his/her share in the hereditary estate left by the decedent, Exception: Specifically and categorically done in favor of 2. Indirect Gifts identified heir. > By an heir of his share in the hereditary estate in favor of all the heirs ~ not subject to donor's tax coor on an tate > By surviving spouse of his/her share is CPG/ACP after the dissolution of marriage in favor of the heirs of the deceased spouse or any other persons ~ subject to donor's tax > Specific renunciation by an heir of his share in the hereditary iz oeeete penuncmon (n estate in favor of one or more of the heirs ~ subject to favor of one or more of the " helrg but not all helrs) donor's tax. sitar *_ Not applicable it 2 siblings/children only Computation of Donor’s Tax in case the heir wavesirenounces his share from Specific Property forming part of the estate of the decedent (RMC 24-2021) > General Renunciation — not subject to Donor's Tax > Partial Renunciation — where the net value of inheritance waived shall be imposed donor's tax. Net Value of Inheritance is the difference between the value of the supposed rightful share of the heir as against the value of property he actually received from estate of the decedent. Value of supposed share XXX Less: Value of property received as a result of the partial renunciation xXx Gross Gift (Inclusion): (SHARED CORE) ‘Spouses renounce share in common property Heir renounce share in inheritance ‘Adequate Consideration (less than) Retention/Reservation of right Reserved-ET Xpn: Waived during lifetime-DT Unreserved(DT) Donations(valid/perfect/absolute) Conditional RevocableCo nae Properties located in the Philippines. Properties located in a Foreign Country of Real pargiele | intangible Personal] Real Tangible | Intangible Bonors | Properties | properties Properties Fl a v v. v. v. v Non-Resident Citizen v v v v v v Resident alien] v y, v zs 7 Non-Resident |W v v x x x x ‘Alien ie a reciprocity | reciorocty, Rules to Observe ‘a. As arule, the value of the propertyiright donated shall be the Fair Market Value existing when the gift was made (as of the time of the donation). b. The time to value is the moment when the donation has been completed (delivered). c. When the donation is subject to a suspensive condition, the value of the gift is to be determined only at the time when the stipulated condition is fulfilled, subject to the time of delivery and acceptance of the gift Rule of Reciprocity Reciprocity Clause — “no tax shall be collected xxx in respect of intangible personal property: a. Ifthe 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. Ifthe 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 of every character or description in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country.” (Sec. 104 of the Tax Code) 1. Properties covered by reciprocity Intangible Personal Property situated in the PH owned by Non-Resident Alien. > When there is reciprocity - The Intangible Personal Property of NRA situated in the PH are not included in the Gross Gift > When there is no reciprocity - The Intangible Personal Property of NRA situated in the PH are included in the Gross Gift ‘What Intangible Properties are considered as situated within the Philippines? > Franchise which must be exercisable in Philippines > Shares, obligations, or bonds, issued by Domestic Corporations > Shares, obligations, or bonds, issued by any Foreign Corporations: 85% of business of which is located in the Philippines; or O If such shares, obligations, or bonds have acquired business (situs) in the Philippines > Share or rights in any partnership, business or industry established in the Philippines 2. Basic Rules Intangible Properties Situs 1. Receivable (Promissory Note) Residence of the Debtor 2, Bank Deposit Location of the Bank 3, Other Tangible Properties a Franchises, Patents, Copyrights, Trademarks Where property is used or exercised b. Investment in Partnership Where Partnership is established ¢. Share of Stock (including Corporate Bonds) i, Domestic Corporation| Within PH ii, Foreign Corporation Without (outside) PH XPN: if > 85% of business is in the PH Within PH if shares have acquired a business situs in the PH Within PHWate) Property Donated Valuation Gift is made in Property Fair Market Value atthe time of the gift Provision in estate tax shall apply to the valuation of said le real property Notes: > Donor’s Tax accrues upon the completion of the donation meaning upon delivery. (At the time the gift is made or ‘completed (Sec. 15 B of RR 12-2018)] > Donation is perfected upon acceptance by the donee. > In conditional donations, the donation is completed and perfected upon satisfaction by the donee of the terms of donation of the terms of donation or upon waiver by the donor of the conditions. Property Valuation Real Property FMV whichever is the higher of zonal value or assessor's valuue Personal Property FMV at the time of the gift “Average of the lowest and highest quotes on the valuation date (date of gift) or day nearest to the valuation date, Book Value on the valuation date (date of gift), or on en the date nearest the valuation date. rere In determining the Book Value of Common Share sted in the Stock Exchange appraisal surplus shall not be considered as well as the value assigned to preferred shares if there are any. Stock listed in the Stock Exchange Preferred Snares Par Value Notes; Accounts Receivable FMV is the discounted amount of the unpaid principal plus interest 4. Atthe time of donation, FMV of stock option 2. Upon exercise of the option, the difference between the higher the BV or FMV of the underlying shares at the time of exercise, and the exercise price. ‘Stock Options Units of participation In any association, or amusement club (also_ | FMV is the bid price on the date of death or nearest the date of death called proprietary shares) (such as__| published in any newspaper or publication of general circulation. golf, polo, or similar clubs) SS eee 1. Gift to the National Government Including their political subdivisions or any entity created by any of its agencies which is not conducted for profit. Exclusion from Gross Gift vs. Transfer for Public Use Gross Gift Transfer for Public Use Gifts made to or for use of: > The amount of all bequests, legacies, devises or > National Government; or transfer to or for the use of the Government of the > Any entity created by any of its agencies which is | Republic of the Philippines, or any political not conducted for profit; or subdivision thereof for exclusively public purpose > Any political subdivisions of the said Government 2. Gifts in favor of educational, charitable, religious, cultural and social welfare institutions, etc. Gifs in favor ofan: » Social Welfare Seah . > Charitable [30% used for > Cultural ‘Administration > Educational > Religious (> 30% used for ‘Administration Purposes > Accredited non-government organization > Research Institution or Organization » Trust of Philanthropic OrganizationThe function of accrediting done-institutions has been transferred from Philippine Council for NGO. Certification, Inc. (PCNC) to the following government agencies effective Nov. 16, 2007 under EO No. 671 dated Oct. 22, 2007: For charitable and/or social welfare organizations, a, Department of Social Welfare and Development ‘foundations and associations including but not limited to (Dswo) those engaged in youth, child, women, family disabled persons, older persons, welfare and development b. Department of Science and Technology For research and other scientific activities ©. Philippine Sports Commission For sports development 4. National Council for Culture and Arts For cultural activities , Commission on Higher Education For educational activities 3. Campaign contributions in cash or in kind to any candidate which are duly reported to the COMELEC ‘Only those donations or contributions that have been utilized or spent during the campaign period as set by the COMELEC are exempt from Donor's Tax. Therefore, any donation utilized before or after the said campaign period shall be subject to Donor's Tax. (BP Big. 881, Sec. 3) > Sec. 35 (i) of RA 11232 (RCC) provides that no Foreign Corp. shall give donations in aid of any political party or candidate or for purposes of partisan political party. Domestic Corp. are allowed to donate to any political party or candidate, and the same shall be exempt from Donor’s Tax. 4, Donation of COVID-19 Vaccine > Beginning January 1, 2021 and during the period of the state of calamity declared in Presidential Proclamation No. 1201 (Sept. 16, 2020), no donor's tax shall be imposed on the donation of COVID-19 vaccine to the ff: 1, National Government, through DOH and NTF against COVID-19 2. Any of the political subdivisions of the state 3. Private entities 4, Intemational humanitarian organizations (such as Philippine Red Cross) The vaccines are not intended for resale or other commercial use, and shall be distributed without any consideration from persons to be vaccinated. '5. Exemptions under Special Laws 1, International Rice Research Institute (IRRI) ‘9. National Museum 2. Philippine American Cultural Foundation 10. National Library 3, Ramon Magsaysay Award Foundation 11. Archives of the National Historical Institute 4, Philippine Investors Commission 12. Museum of Philippine Costumes 5. Integrated Bar of the Philippines (IBP) 13, Intramuros Administration 6. Development Academy of the Philippines (DAP) 14, Gifts and donation to the University of the Philippines 7. National Social Action Council (RA 9500) 8. Department of Southeast Asian Fisheries 15, Contributions to the National Book Trust Fund (RA Development Center of the Philippines 9521) 16. Donation to qualified foster care agencies (RA 10165) 6. Farmers and Fisherfolk Enterprise Development Program RR No. 19-2021 issued on Nov. 9, 2021 implements the tax incentive and exemption provisions of RA No. 11321 (Sagip Saka Act) Gifts and donations of real and personal properties shall be exempt from donor's tax Exclusions in Gross Gift (SOCCER ART) 30% Rule Social Welfare Charitable Cultural ‘Educational Religious ‘Accredited non-government organization Research Institution or Organization Trust of Philanthropic OrganizationTax Credit for Donor’s Tax Paid to a Foreign Country Only Citizen or Resident ee rcateeenee ‘Alien decedent Net Gift Philippine Whichever is LOWER: Ler Foreign Country) XX ~—Donor's > etal Donor's Tax Paid Total Net Git Tax ‘Amount deductible Actual > Limit 1, Only one foreign country is involved (LIM. Aon Limitations on tax creit f wv uiM.A 2. Two or more foreign countries are involved ence Philippine | _teerForeign County) “Donors Notes: Total Net Gift Tax ‘Tax Credit for Foreign Donor’s Tax is allowed to minimize the effect of: uM. B > multiplicity of situs; and moran Phiiopne | | 2 > narect double taxeton cairormroanny x Pelee “| Total Net Gift Tax ar cuanses on DONOR'S TAX -_ a, UNDER RA 10963 ‘OR THE TRAIN LAW : PULLERS RA 10963 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 gifts in excess of P250,000. The 16% tax rate likewise applies if the donee is a stranger. OLD TAX SCHEDULE {a) If donee isa relative ea vow cae —— sage | mon | deena oom | $0000 | 2000 +s%afecess wr 209000 ORS RCICETSANG Sscnp00 | soonn00 | 14000+ %ofexess rr Sonm00 1009000 | 3000000 | 44.000 «8% of exes oer 1.000000 Inexces of 250000 o SS AGW | SEARO SER oR SCN * Unorm taxa fr donations to ‘000000 | soomeco | ao fedaes er stangers 0000000 (b) f dooce ia stranger: 50% ofthe net gts OTHER CHANGES Inserts an additional provision under Section 100 of the NIRC of 1997, as amended, which provides that a bona fide, at arm’s length and donative-intent free sale, exchange or other transfer of property made in the ordinary course of business shall be considered as made for an adequate and full consideration in ‘money or money's worth and is therefore not subject to the donor's tax. *——_ Deletes the provision exempting from the donor's tax dowries or gifts made by parents to each of their legitimate, recognized natural, or adopted children on account of marriage