DONORS TAX

Donation is an act of liberality , whereby a person disposes gratuitously of a thing or right in favor of
another who accepts it.
KINDS OF DONATION
1. Inter vivos made between living persons to take effect during the lifetime of the donor.
2. Mortis Causa made in the nature of testamentary disposition that is , it shall take effect upon
the death of the donor .
DONATION NOT SUBJECT TO DONORS TAX
1. Donation mortis causa is subject to estate tax as stated in the tax code because transfer was
made upon the death of the donor .
2. Donation Inter vivos amounting to 50,000 and below are exempt from taxes and not subject to
donors tax according to Tax Code.
MEANING OF GIFT TAX
Gift Tax imposed on gifts or the transfer without consideration of property between 2 or more persons
who are living at the time the transfer is made.
KINDS OF GIFT TAXES
1. Donors tax levied on the act giving ; it supplements the estate tax
2. Donnes tax levied on the act of receiving; it is formerly the counterpart of inheritance tax which
has been integrated into an estate tax.
NATURE OF GIFT AX
1. An excise tax. It is not a tax of property because its imposition does not rest upon general
ownership.
2. Tax imposed without reference to the death of the donor unlike in the case of estate tax.
PURPOSE OF GIFT TAX
1. The Gift Tax was enacted to supplement the inheritance and estate taxes by preventing their
avoidance by those who give away property in anticipation of death through the taxation of gifts
inter vivos without which the property would be subjected to the said taxes.
2. The donors tax is also intended to prevent the avoidance of income tax through the devise of
splitting the income to the donees with donor thereby escaping the effect of the progressive
rates of income taxation.
REQUISITES OF TAXABLE GIFT
1.
2.
3.
4.

Capacity of the donor to make a donation

Donatives intent or intent on the part of the donor to make a gift .
Delivery, whether actual or constructive, of the gift and
Acceptance of the gift.

To qualify taxable gift , the transfer of property genuinely gratuitous . Property received as gift does not
create taxable income to the done but any income derived from property after he becomes the owner is
taxable to him, under the income tax law .
TRANSFERS AND PERSONS SUBJECT TO DONORS TAX
1. The donors tax applies whether the transfers is in trust or otherwise, whether the gift is direct
or indirect, and whether the property is real or personal tangible or intangible.
2. Donors tax is levied and paid upon the transfer by any person , resident or nonresident , of the
property of gift .

DISTINCTIONS BETWEEN DONORS TAX AND ESTATE TAX

1. Donors tax is a tax on the privilege to transmit property during life while estate tax is on the
privilege to transmit property upon ones death.
2. Donors tax rates are lower.
3. In donors tax, exemption is only 100,000 while in estate tax the exemption is 200,000.
4. In doors tax m, a notice of donation is not required while in the estate tax , notice of death is
required.
5. In donors tax, extension of payment is not provided while in estate tax , an extension maybe
granted by the commissioner of internal revenue.
Both taxes are paid at the time the returns are paid.

MEANING OF NET GIFT

Net gift means the total amount of gift less the allowable deduction and specific exemptions .
TAX IMPOSED ON NET GIFTS
The donors tax is computed upon the basis of the total net gifts made during the calendar year. Net
gifts of 100,000 or less are exempted.
RATES AND COMPUTATION OF DONORS TAX
Over
100,000
200,000
500,000
1,000,000
3,000,00
5,000,000
10,000,000

But not over

100,000
200,000
500,000
1,000,000
3,000,000
5,000,000
10,000,000

The formula for computing the tax :

Gross gift
less : allowable deductions
Net gifts
less : 100,000 exemption
= taxable net gifts
multiplied by tax rate
= amount of donors tax due

The shall be
exempt
0
2,000
14,000
44,000
204,000
404,000
1,004.000

Plus

Excess over

2%
4%
6%
8%
10%
12%
15%

100,000
200,000
500,000
1,000,000
3,000,000
5,000,000
10,000,000