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A. Definition and Concepts:

Gift tax is an excise on the transfer by a living person to another of money or other property without consideration.

Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.

1. Transfer of property without consideration.
2. It also includes sales, exchanges and other dispositions of property for a consideration to the extent that the value of the property transferred exceeds the value in money or money's worth of the consideration received therefor.

Concept of Consideration:

1. Consideration must be measurable in money or money's worth. Mere legal consideration is not sufficient.
2. The consideration must flow to the donor, mere detriment to the donee does not satisfy the purpose of the statute.

Commissioner V. Wemyss (324 U.S. 303, 1945)

Marriage is not a consideration reducible to money value. If a person transfers a property to a trust in consideration of marriage, a gift is made because no money consideration flows to the transferor/donor. Donative intent on the part of the tranferor is not an essential element for the imposition of the gift tax to the transfer.

When Does The "Gift" Occur?

A gift occurs when the donor surrenders CONTROL over the property. If the donor retains an unlimited power to revoke the gift, it is clear that no gift has occurred.

ty referred to in Section 24(D) and Section 27(D)(5) of the NIRC).
 

1. Capacity of the donor
2. Donative intent (Except gift under Section 93 NIRC)
3. Acceptance by the donee, and
4. Delivery of the gift to the donee, actually or constructively.

C. Kinds of Donation:

1. Inter-vivos
2. Mortis causa
3. Indirect donation (Except real property referred to in Section 24(D) and Section 27(D)(5) of the NIRC).
 

(Same as in estate tax)
1. Before September 1, 1969 - Only donation made by individual is
    subject to donor's tax.
2. On or after September 1, 1969 (RA 6110) Donation made by all person, whether natural or juridical, is subject to donor's tax.

E. Gross Gifts:

1. Composition -(Same as in estate tax)
2. Valuation - At the time the gift was made (Same as in estate tax)

F. Deductions from the Gross Gift:

1. Dowries or gifts by parents to children on account of marriage, before
its celebration or within one (1) year thereafter to the extent ofP10,000.
2. Gifts to the National Government or any of its agencies.
3. Gifts made in favor of an educational, and/or charitable, religious,
cultural or social welfare corporation, foundation, trust or
philanthropic organization or research institution or organization.
4. Encumbrance on the property donated if assumed by the donee in the deed of donation.
5. Those specifically provided by the donor as a condition of the donation which will diminish the value of the property received by the donee.
6. Exempt donation under special laws.

1. On or before December 31, 1972:
    a) Donor's and donee's gift taxes were imposed based on graduated rates.
    b) Gifts made during previous year or years are collated to the
        present gift and the gift tax computed on the total gift.
2. January 1, 1973 to January 15, 1981 (PD 69)
    a) Donor's tax was imposed on graduated rates.
    b) Gifts made during the previous year or years are computed separately.
    c) Donor's tax computed on the total gifts made during each calendar year.
    d) Collation of gifts are made only on gifts made during the same calendar year.
3. January 16, 1981 to July 27, 1992 (PD 1773)
    a) Tax payable by the donor in favor of relatives are computed based on the
        graduated rates.
    b) Tax payable by the donor in favor of stranger is computed at 20% or based on
        graduated rates, whichever is higher.
    c) Gifts made during the same calendar year are collated and the donor's tax
        computed on the total gifts during the calendar year.
4. July 28, 1992 to December 31, 1997 (RA 7499)
    a) Tax payable by the donor on gifts made in favor of relatives is computed based
        on graduated rates.
    b) Tax payable by the donor on gifts made in favor of strangers is
        computed at 10% of the net gifts.
5. January 1, 1998 to present (RA 8424)
    a) Tax payable by the donor on gifts made in favor of relatives is computed based
        on graduated rates.
    b) Tax payable by the donor on gifts made in favor of strangers is computed at
        30% of the net gifts.
6. Relatives for donor's tax purposes:
    a) Spouse, ancestor and lineal decedent
    b) Brother, sister (whether by whole or half blood)
    c) Relatives by consanguinity in the collateral lines within the fourth degree of
        relationship.

a) Donations to Relatives (Graduated Table)

Sample Problem of Donor's Tax

Mr. Joseph Ramos, single made the following donation's
a) January 15, 1999 - to his brother, Jun, P100,000
b) March 10, 1999 - to Clara, his sister, P250,000
c) Sept 8, 1999 - to his girlfriend, Loi, a brand new car worth P 600,000
d) Oct 25, 1999 - to his father, Carlos, a vacant lot worth P1,000,000
    w/ FMV of P800,000 and zonal value of P1,500,000
e) Nov 12, 1999 - to Luis, his brother in law, P 200,000
f) Feb 14, 2000 - to his mother, Maria, P 300,000

Answer:

     Date     Donation   Amount  Tax Due

a) 1/15/99 Cash      100,000   Exempt

b) 1/15/99 Cash     100,000
    3/10/99 Cash     250,000
                           350,000

Tax on :200,000 -       2,000
           150,000 x 4%  6,000
                               8,000

Less:Tax on previous
               donation   --          8,000

c) 9/8/99  Cash     600,000-Stranger

   Tax Due: 600,000
                 X 30%
                 180,000

d) 10/25/99 lot (ZV)1,500,000
     3/10/99  Cash     250,000
     1/15/99 Cash      100,000
     Total donation  1,850,000

Tax on:1,000,000        44,000
           850,000 x 8%  68,000
Total Tax Due           112,000

Less:Tax on previous
                donation   8,000    104,000

e) 11/12/99 Cash 200,000 - Stranger

Tax Due   200,000
                 x 30%
                60,000

f) 2/14/2000 Cash 300,000

   Tax On: 200,000     2000
        100,000 x 4%    4000      6,000

Note: Letter (f) was donated in year 2000 therefore; this is not included in the cumulative total for 1999's donations.
 

ADMINISTRATIVE REQUIREMENTS ON DONOR'S TAX

A. Donor's Tax Return:

1. Requirements (State the following information/data):
    a) Each gift made during the calendar year
    b) Deductions claimed and allowable
    c) Previous net gifts during the same calendar year
    d) Name of donee and address
    e) Other pertinent information
2. Time of filing:
    a) Before December 31, 1972:
        1) On or before March 1 following the close of the calendar year.
    b) January 1, 1973 to December 31, 1997
        1) Within thirty (30) days after each donation.
        2) Extension not exceeding thirty (30) days maybe granted.
    c) January 1, 1998 to present
        1) Within thirty (30) days after each donation- No Extension
3. Place of filing of donor's tax return
    a) Commissioner of Internal Revenue
    b) Revenue District Officer, Collection Officer or duly authorized
        Treasurer of the municipality where the donor was domiciled
        at the time of donation.

B. Payment of Donor's Tax:

1. Donor's tax should be paid at the time the return is filed or within    
    thirty (30) days after the date of gift.
2. Extension to pay tax may be granted not exceeding six (6) months.
    Effective January 1, 1998 (RA 8424), no extension for the
    payment of the donor's tax shall be granted.

C. Surcharges:

(Same as estate tax)

D. Interest:

(Same as estate tax)

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