Principles and Administration of Taxation

What is Taxation?
• State Power: The government's inherent right to collect contributions (taxes)
from its people.
• Process: The way the government levies and enforces tax collection.
• Cost Distribution: How the government allocates its expenses by
requiring contributions from those who benefit from its services.
Why Taxation?
• Government Funding: Governments need money to provide
essential services (defense, education, etc.). This need is the basis of
taxation.
• Basis of Taxation: There's a mutual support system where citizens
receive benefits (services) and provide funds (taxes).
• Benefit Presumed: Everyone benefits from government services, directly
or indirectly, so taxes are required, even if you don't use every service
directly.
Theories of Cost Allocation
• Benefit Received Theory: Pay more taxes if you benefit more from
government services.
• Ability to Pay Theory: Consider a taxpayer's financial capacity.
o Vertical Equity: Those with higher incomes pay a larger percentage
(or amount) of taxes.
o Horizontal Equity: People with similar financial situations should
pay similar taxes.
The Lifeblood Doctrine
• Taxes are Essential: Taxes are vital for the government to function.
• Implications:
o Taxes exist even without specific constitutional grants.
o Tax exemptions are interpreted narrowly (against the taxpayer).
o The government chooses what to tax.
o Courts generally don't interfere with tax collection.
o Income received in advance is taxable.
o Deductions may be limited.
Inherent Powers of the State
 • Taxation: Power to collect contributions.
• Police Power: Power to enact laws for people’s well-being.
• Eminent Domain: Power to take private property for public use (with
compensation).
• Similarities: All are necessary for a government to function, inherent,
legislative, and impact private rights.
Scope of Taxation
• Comprehensive: Taxation is broad, plenary (complete), unlimited, and
supreme.
• Limitations: There are limits, both inherent and constitutionalLimitations of
Taxation
• Inherent Limitations:
o Territoriality: Taxes generally apply within the state's borders.
o International Comity: Respect for other nations (e.g., not taxing
foreign embassies).
o Public Purpose: Taxes must be used for the common good, not private
gain.
o Government Exemption: The government generally doesn't tax
itself.
o Non-Delegation: Taxing power is primarily held by the legislature
(Congress), with some exceptions (e.g., local governments).
• Constitutional Limitations: Many, including:
o Due process and equal protection.
o Uniformity and progressivity.
o Restrictions on imprisonment for debt, freedom of religion, and
non-impairment of contracts.
o Specific rules about tax exemptions.
Stages of Taxation
1. Levy or Imposition: Congress passes tax laws.
Congress (PH)
1. Senate – 24 members (nationwide vote)
2. House of Representatives – ~316 members (district + party-list)
Law-making process = 3 Readings (in both houses):
ART Bills =
• Appropriation
• Revenue
• Tariff
Start ONLY in the House of Representatives (Lower House)
 Senate can amend, but cannot originate ART bills

2. Assessment and Collection: The government assesses and collects taxes.

Situs of Taxation (Where to Tax)
• Determines which jurisdiction can tax something. Examples:
o Business: Where the business is conducted.
o Services: Where the service is rendered.
o Goods: Generally, where the sale happens.
o Property: Where the property is located.
o Personal: Place of residence.
Other Important Doctrines
• Marshall Doctrine: "Power to tax involves the power to destroy." (Can be
used to discourage bad activities).
• Holme's Doctrine: "Taxation power is not the power to destroy while
the court sits." (Can encourage beneficial activities through incentives).
• Tax Laws are Generally Prospective: They apply to the future, not the
past.
• Non-Compensation: Taxes can't be automatically offset by claims against
the government.
• Non-Assignment: Tax obligations can't be transferred to another entity.
• Imprescriptibility: The government's right to collect taxes generally doesn't
expire.
• Estoppel: The government is generally not bound by errors of its employees.
• Judicial Non-Interference: Courts usually don't stop tax collection.
• Strict Construction of Tax Laws:
o Taxation is the rule; exemptions are the exception.
o Ambiguous tax laws favor the taxpayer.
o Ambiguous exemption laws favor the government.
Double Taxation
• Definition: Taxing the same thing twice by the same tax jurisdiction.
• Elements: Same object, type of tax, purpose, jurisdiction, and tax period.
• Types: Direct (all elements present) and Indirect (at least one element is
different).
• Minimization: Tax exemptions, foreign tax credits, treaties.
Escapes from Taxation
 • Tax Evasion: Illegal methods to avoid taxes (underreporting income, etc.).
• Tax Avoidance: Legal ways to reduce taxes (tax planning).
• Tax Exemption: Being excused from paying a tax.
• Shifting: Transferring the tax burden to someone else (e.g., businesses
raising prices).
• Capitalization: The value of an asset changes based on tax rates.
• Transformation: Businesses reduce costs to offset taxes.
• Tax Amnesty: A general pardon for past tax violations.
• Tax Condonation: Forgiveness of a tax liability.
Key differences between Tax Amnesty and Tax Condonation:
• Amnesty: Covers both civil and criminal liabilities, retrospective, and
may require payment of a portion of the tax.
• Condonation: Covers only civil liabilities, prospective, and applies to unpaid
balances only.

Types of Taxation Laws

1. Tax laws: provide for the assessment and collection of taxes (e.g.,
National Internal Revenue Code, Tariff and Customs Code)
2. Tax exemption laws: grant immunity from taxation (e.g., Minimum
Wage Law, Omnibus Investment Code of 1987)
Sources of Taxation Laws
1. Constitution
2. Statutes and Presidential Decrees
3. Judicial Decisions or Case Laws
4. Executive Orders and Batas Pambansa
5. Administrative Issuances (e.g., Revenue Regulations, Revenue Memorandum
Orders)
6. Local Ordinances
7. Tax Treaties and conventions with foreign countries
Revenue Regulations
1. Define rules and regulations for the effective enforcement of tax laws
2. Clarify or explain tax laws
3. Carry into effect general provisions of tax laws
Tax
 1. An enforced proportional contribution levied by the lawmaking body of the
State to raise revenue for public purposes
2. Elements of a valid tax:
o Must be levied by the taxing power having jurisdiction over the object
of taxation
o Must not violate constitutional and inherent limitations
o Must be uniform and equitable
o Must be for public purpose
o Must be proportional in character
o Must be generally payable in money
Classification of Taxes
1. As to purpose:
o Fiscal or revenue tax: tax imposed for general purpose
o Regulatory tax: tax imposed to regulate business, conduct, acts or
transactions
o Sumptuary tax: tax levied to achieve some social or economic objectives
2. As to subject matter:
o Personal, poll or capitation tax: tax on persons who are residents of a
particular territory
o Property tax: tax on properties, real or personal
o Excise or privilege tax: tax imposed upon the performance of an
act, enjoyment of a privilege or engagement in an occupation
3. As to incidence:
o Direct tax: tax imposed on individuals or businesses, which is
collected from the person who intends to pay the same
o Indirect tax: tax imposed on individuals or businesses, which is
collected from another person (e.g., businesses paying tax on
behalf of consumers)
4. As to amount:
o Specific tax: tax of a fixed amount imposed on a per unit basis
(e.g., per kilo, liter or meter)
o Ad valorem tax: tax of a fixed proportion imposed upon the value of the
tax object
5. As to rate:
o Proportional tax: tax with a flat rate
o Progressive tax: tax with increasing rates as the tax base increases
 o Regressive tax: tax with decreasing rates as the tax base increases
o Mixed tax: tax with a combination of different rates
Distinction of Taxes with Similar Items
1. Tax vs. Revenue: tax is a compulsory contribution to the government,
while revenue is all income collections of the government
2. Tax vs. License fee: tax is imposed on persons, properties, or
privileges, while license fee is imposed on the exercise of a privilege
3. Tax vs. Toll: tax is a demand of sovereignty, while toll is a charge for the use
of property
4. Tax vs. Debt: tax arises from the law, while debt arises from private contracts
5. Tax vs. Special Assessment: tax is a compulsory contribution, while
special assessment is a levy on lands adjacent to a public improvement
6. Tax vs. Tariff: tax is broader than tariff, which is the amount imposed
on imported or exported commodities
7. Tax vs. Penalty: tax is an amount imposed for public purpose, while
penalty is an amount imposed to discourage an act
Tax System
1. The tax system refers to the methods or schemes of imposing, assessing, and
collecting taxes
2. The Philippine tax system is divided into two: the national tax system and the
local tax system

Types of Tax Systems

• According to Imposition:
o Progressive: Rates increase as the tax base (income, etc.)
increases (used for individual income tax).
o Proportional: A fixed rate for all (used for corporate income and some
business taxes).
o Regressive: (Not used in the Philippines): Rates decrease as the tax
base increases.
• According to Impact:
o Progressive System: Emphasizes direct taxes (borne by the
taxpayer; encourages efficiency). This impacts the rich more.
o Regressive System: Emphasizes indirect taxes (shifted to
consumers). This impacts the poor more (considered "anti-poor" in
the Philippines).
Tax Collection Systems
 1. Withholding System: Tax is deducted from income before it's paid to the
recipient (e.g., income tax withheld from employees, expanded
withholding tax).
2. Voluntary Compliance System: Taxpayers figure out their tax
liability, report it, and pay it themselves (the "self-assessment
method"). Taxes already withheld are credited against what's owed.
3. Assessment or Enforcement System: The government identifies
non-compliant taxpayers, assesses what they owe (including
penalties), and uses legal methods to collect.
Principles of a Sound Tax System
1. Fiscal Adequacy: Enough tax revenue to cover government spending
(avoid deficits). Taxes should increase with government spending.
2. Theoretical Justice (Equity): Taxes should be fair, consider the
ability to pay, and not be oppressive.
3. Administrative Feasibility: Tax laws should be easy to understand
and follow, reducing costs for both the taxpayer and the government.
Tax Administration
• The management of the tax system (primarily by the Bureau of
Internal Revenue - BIR). The Department of Finance (DOF)
supervises.
Key BIR Officials:
• Commissioner
• 4 Deputy Commissioners (Operations, Legal, Information Systems, Resource
Management)
Powers of the Bureau of Internal Revenue (BIR) ‘MAKER’
1. Assess and collect taxes.
2. Enforce forfeitures, penalties, fines, and court judgments.
3. Implement its powers under the Tax Code and other laws.
4. Assign personnel.
5. Provide and distribute forms, receipts, etc.
6. Issue receipts and clearances.
7. Submit reports.
Powers of the Commissioner of Internal Revenue (CIR) ‘REVIEWER’
1. Interpret the tax code (subject to review by the Secretary of Finance).
2. Decide tax cases (subject to the Court of Tax Appeals).
3. Get information (summon, examine, and take testimony) to determine:
 o Correctness of tax returns.
o Tax liability.
o Tax compliance.
o Can examine records, get information, and summon people.
4. Make assessments.
5. Examine tax returns and determine tax due.
6. Conduct inventory and surveillance.
7. Prescribe estimated gross sales/receipts if a taxpayer:
o Doesn't issue receipts.
o Records are inaccurate.
8. Terminate the tax period if the taxpayer:
o Retires from business.
o Leaves the Philippines.
o Hides assets.
o Obstructs tax collection.
9. Prescribe real property values (zonal values).
10. Compromise tax liabilities.
11. Inquire into bank deposits (under specific circumstances: death, financial
incapacity, and taxpayer waivers).
12. Accredit and register tax agents (denials are appealable).
13. Refund or credit internal revenue taxes.
14. Abate or cancel tax liabilities (in some cases).
15. Prescribe procedures and documentation.
16. Delegate some powers to subordinates.
Non-Delegated Powers of the CIR (Cannot be Delegated):
1. Recommend rules and regulations to the Secretary of Finance.
2. Issue rulings of first impression or reverse/modify existing rulings.
3. Compromise or abate tax liabilities (except for Regional Evaluation Boards in
limited cases).
4. Assign revenue officers to monitor excise tax-producing establishments.
Agents for Tax Collection
1. Commissioner of Customs (for import taxes).
2. Heads of government offices (for energy tax).
3. Accredited banks (for tax payments).
Other Agencies
• Bureau of Customs (also collects VAT on imports).
• Board of Investments (BOI - promotes investment, oversees tax incentives).
• Philippine Economic Zone Authority (PEZA - oversees ecozones, provides
incentives).
• Local Government Tax Units (provinces, cities, etc. - collect local taxes).
Taxpayer Classification (for Administration)
• Large Taxpayers: Supervised by the Large Taxpayer Service (LTS) of the
BIR.
• Non-Large Taxpayers: Supervised by Revenue District Offices (RDOs).
Criteria for Large Taxpayer Classification:
A. Based on Payments
1. VAT: P200,000+ per quarter.
2. Excise Tax: P1,000,000+ paid annually.
3. Income Tax: P1,000,000+ paid annually.
4. Withholding Tax: P1,000,000+ paid/remitted annually.
5. Percentage Tax: P200,000+ per quarter.
6. Documentary Stamp Tax: P1,000,000+ annually.
B. Based on Financial Condition and Operations
1. Gross Receipts/Sales: P1,000,000,000+ annually.
2. Net Worth: P300,000,000+ at year-end.
3. Gross Purchases: P800,000,000+ annually.
Automatic Large Taxpayer Classification:
1. Branches of large taxpayers.
2. Subsidiaries/affiliates of large taxpayers.
3. Companies from mergers/consolidations of large taxpayers.
4. Corporations that absorb operations of a large taxpayer after spin-off.
5. Corporations with P300,000,000+ authorized capital.
6. Multinationals with P300,000,000+ capital.
7. Publicly listed corporations.
8. Banks (universal, commercial, foreign).
9. Corporations (at least P100,000,000 authorized capital) in certain
industries (banking, insurance, utilities, etc.).
10. Corporations in metallic mineral production.
 Estate Tax Reviewer
1. Overview of Estate Tax
• Rate of Estate Tax:
• A tax of six percent (6%) is charged on the transfer of the net
estate (the total value of a deceased person's assets after debts and
expenses) as determined by Sections 85 and 86 for every person who
has died, whether they lived in the Philippines or not.

2. Gross Estate
• Definition: The gross estate includes the value of all property owned by the
deceased at the time of their death, whether it is real property (like land
and buildings) or personal property (like money and personal belongings),
and whether it is tangible (physical items) or intangible (like stocks or
bonds).
• Nonresident Decedents: If the deceased was not a citizen of the
Philippines, only the part of their gross estate located in the Philippines is
taxable.
A. Components of Gross Estate
• Decedent's Interest:
• This refers to the interest (ownership rights) the deceased had in their
property at the time of death.
• Transfer in Contemplation of Death:
• This includes any property the deceased transferred (gave away) while
expecting to die soon, or that they intended to take effect after their
death. This also includes transfers where the deceased kept some
rights, such as:
1. The right to use or earn income from the property.
2. The right to decide who will receive the property or its
income, unless it was a bona fide sale (a genuine sale) for a
fair price.
• Revocable Transfer:
1. This refers to transfers made by the deceased that could be
changed or canceled by them before their death. This includes
situations where the deceased had the power to change the
terms of the transfer.
2. For this rule, the power to change or cancel a transfer is
considered to exist at the time of death, even if the change was
supposed to happen later. If the deceased had not given notice or
 made the change before their death, it is treated as if they had
done so on the date of death.
• Property Passing Under General Power of Appointment:
• This includes property that the deceased could control through
a general power of appointment (the authority to decide who will
receive the property) exercised by them:
1. By a will (a legal document stating how to distribute property
after death), or
2. By a deed (a legal document for transferring property) made
with the intention of taking effect after death.
• Proceeds of Life Insurance:
• This refers to the money that the estate (the total assets of the
deceased) or designated beneficiaries receive from life insurance
policies taken out by the deceased, regardless of whether the
deceased could change the policy.
• Prior Interests:
• This applies to various transfers and interests, regardless of when they
were created, and includes the rules mentioned in the previous
sections.
• Transfers for Insufficient Consideration:
• If any transfer or trust is made for less than its fair value, only the
difference between the fair market value (the price it would sell for)
and what was received will be included in the gross estate.
• Capital of the Surviving Spouse:
• The assets of the surviving spouse (the husband or wife left behind) are
NOT included in the gross estate of the deceased.

3. Computation of Net Estate

• Deductions for Citizens or Residents:
• For citizens or residents of the Philippines, the value of the net
estate is calculated by subtracting certain amounts from the gross
estate:
• Standard Deduction: An amount of Five million pesos (₱5,000,000.00) is
automatically deducted.
• Claims Against the Estate: If there are debts, they must be properly
documented (notarized) and if the loan was taken out within three (3)
years before the death, a statement showing how the loan was used must be
submitted.
 • Claims of the Deceased Against Insolvent Persons: This refers to debts
owed to the deceased that are included in the gross estate.
• Unpaid Mortgages: Deductions for any unpaid loans on property included
in the gross estate, but not for income taxes on income received after death or
property taxes not due before death. Losses from disasters or theft that are not
covered by insurance can also be deducted if they occurred before the estate
tax payment deadline.
• Property Previously Taxed: If the deceased received property from
someone who died within five (5) years before their own death, deductions
are allowed based on the timing of the prior decedent's death:

Time Before Death Percentage

Within 1 year 100%
More than 1 year, up to 2 80%
More than 2 years, up to 3 60%
More than 3 years, up to 4 40%
More than 4 years, up to 5 20%

These deductions are allowed only if the donor's tax (tax on gifts) or estate
tax was paid for the property received, and only if the value of the property is
included in the decedent's gross estate.
• Transfers for Public Use: This includes any bequests (gifts made in a will),
legacies, or transfers to the Government of the Republic of the
Philippines for public purposes.
• The Family Home: The current fair market value of the family home is
deducted, but if it exceeds Ten million pesos (₱10,000,000), the excess
amount is subject to estate tax.
• Amount Received by Heirs Under Republic Act No. 4917: Any amount
received by the heirs from the deceased’s employee due to the employee's
death under Republic Act No. 4917 is included in the gross estate.

B. Deductions for Nonresident Estates

• For a nonresident who is not a citizen of the Philippines, deductions from
the value of the part of their gross estate located in the Philippines include:
1. Standard Deduction: An amount of Five hundred thousand
pesos (₱500,000.00).
2. Proportional Deductions: A portion of the deductions specified in
paragraphs (2), (3), (4) of Subsection (A) based on the value of the
estate in the Philippines compared to the total value of the estate.
 3. Property Previously Taxed: Similar deductions as for residents,
with specific conditions based on the timing of the prior decedent's
death.
4. Transfers for Public Use: The amount of all bequests, legacies, or
transfers to or for the use of the Government of the Republic of the
Philippines for public purposes.
5. Share in the Conjugal Property: The net share of the surviving
spouse in the conjugal partnership property (shared property
between spouses) is deducted from the net estate of the deceased.
6. Tax Credit for Estate Taxes Paid to a Foreign Country:
• In General: The tax imposed by this Title can be reduced by
any estate tax paid to a foreign country.
• Limitations on Credit: The amount of the credit is limited to
the proportion of the tax paid to the total estate value in that
country compared to the total estate value worldwide.

4. Exemptions from Taxation

• Certain Acquisitions and Transmissions: The following are not taxed:
• (A) The merger of usufruct (the right to use and enjoy the benefits of
someone else's property) in the owner of the naked title (the basic
ownership of the property).
• (B) The transfer of inheritance or legacy by the fiduciary heir (the
person responsible for managing the estate) to
the fideicommissary (a person designated to receive property).
• (C) The transfer from the first heir, legatee, or donee to another
beneficiary, as per the wishes of the deceased.
• (D) All bequests, legacies, or transfers to social welfare, cultural,
and charitable institutions that do not benefit any individual:
However, no more than thirty percent (30%) of these funds can be
used for administrative costs.

5. Determination of Estate Value

• Usufruct: To determine the value of the right of usufruct, use, or habitation,
as well as that of annuity (a fixed sum paid regularly), the probable life of the
beneficiary (the person receiving the benefit) is considered based on the
latest Basic Standard Mortality Table (a statistical table showing the
probability of death at each age), approved by the Secretary of Finance, upon
recommendation of the Insurance Commissioner.
 • Properties: The estate is appraised at its fair market value at the time of
death. The value of real property is determined by the higher of:
1. The fair market value set by the Commissioner; or
2. The fair market value listed by the Provincial and City
Assessors (local government officials who assess property values).

6. Estate Tax Returns

A. Requirements
• For all transfers subject to the estate tax, or regardless of the estate's gross
value, if the estate includes registered property such as real estate (land
and buildings), vehicles, or stocks, a return must be filed under oath in
duplicate. This return must include:
1. Value of the Gross Estate: The total value of the gross estate at the
time of death, or for nonresidents, the portion of the gross estate
located in the Philippines.
2. Deductions Allowed: A detailed list of deductions permitted from the
gross estate as defined in Section 86 of the tax code.
3. Additional Information: Any other relevant information necessary
to establish the correct amount of taxes owed.
• If the estate tax return indicates a gross value exceeding Five million pesos
(₱5,000,000), it must be certified by a Certified Public Accountant
(CPA) and include:
• (a) A comprehensive list of the decedent's assets along with their
respective values at the time of death.
• (b) A detailed list of deductions from the gross estate that are allowed
in Section 86.
• (c) The total amount of tax due, indicating whether it has been paid or
is still outstanding.
B. Time for Filing
• The estate tax return must be filed within one (1) year from the date of the
decedent's death. Additionally, a certified copy of the partition schedule (a
legal document outlining how the estate will be divided) and the court's
approval must be submitted to the Commissioner within thirty (30)
days after the court's order.
C. Extension of Time
• The Commissioner has the authority to grant an extension of up to thirty
(30) days for filing the return in special circumstances, which must be
justified.
D. Place of Filing
• The estate tax return should be filed with:
• An authorized agent bank,
• A Revenue District Officer,
• A Collection Officer, or
• An authorized Treasurer of the city or municipality where the
decedent resided at the time of death.
• If the decedent had no legal residence in the Philippines, the return should be
filed with the Office of the Commissioner.

7. Payment of Tax
A. Time of Payment
• The estate tax must be paid at the time the return is filed by
the executor (the person responsible for managing the
estate), administrator, or heirs.
B. Extension of Time
• If paying the estate tax on time would cause undue hardship (significant
difficulty), the Commissioner may allow an extension of:
• Up to five (5) years for estates settled through the courts.
• Up to two (2) years for estates settled outside of court
(extrajudicially).
• The amount due must be paid by the end of the extension period. During this
time, the Statute of Limitations (the legal time limit for tax assessments)
is paused. Extensions are not granted for cases involving negligence (failure
to take proper care) or fraud (deception). If an extension is granted, the
Commissioner may require the executor or administrator to provide
a bond (a financial guarantee) to ensure payment.
C. Payment by Installment
• If the estate does not have sufficient cash to pay the total estate tax, payments
can be made in installments over a period of two (2) years from the due
date without incurring penalties or interest.
D. Liability for Payment
• The estate tax must be paid by the executor or administrator before any
distribution of assets to beneficiaries (those who inherit from the estate).
Beneficiaries are also responsible for paying their share of the estate tax
based on their portion of the estate.
8. Discharge from Personal Liability
• If the executor or administrator requests a determination of the estate tax
amount and seeks a discharge (release) from personal liability,
the Commissioner must respond within one (1) year. Once the executor
pays the determined amount, they are released from personal liability for
any future tax deficiencies (shortfalls).
9. Definition of Deficiency
• Deficiency refers to the amount by which the tax owed exceeds what was
reported on the estate tax return. If no amount is reported, it refers to the
amount exceeding previously assessed taxes.
10. Payment Before Delivery
• Executors cannot distribute shares of the estate to beneficiaries until they
provide proof that the estate tax has been paid in full.
11. Duties of Certain Officers and Debtors
• Registers of Deeds (officials responsible for recording property
transactions) cannot register any property transfer or mortgage without proof
of tax payment. They must notify the Commissioner and other relevant
officials if they discover any unpaid taxes.
• Debtors (those who owe money) of the deceased cannot pay their debts to the
heirs or executor without proof of tax payment. However, they can pay the
executor if the debt is included in the estate inventory (the list of assets and
liabilities of the estate).
12. Restitution of Tax
• If new debts arise after the estate tax has been paid, and these debts are
settled by court order, the parties involved can request a refund of a portion
of the tax paid.
13. Payment of Tax Antecedent to the Transfer
• No shares, bonds, or rights can be transferred to new owners without proof of
tax payment. Banks may allow withdrawals from accounts of deceased
individuals, but these withdrawals are subject to a 6% withholding tax (a tax
deducted at the source before the money is paid out).
 Donor Taxation Overview
1. General Overview of Donor’s Tax
o Imposition of Tax (Section 98)
• Donor’s Tax is a tax levied on the transfer of property by way of gift,
regardless of whether the donor is a resident or non-resident.
• Key Elements:
• The tax applies to any transfer of property by gift.
• The transfer can be direct or indirect (e.g., by trust or other arrangements).
• Property subject to the tax includes both real and personal property, whether
tangible or intangible.

1.2 What Constitutes a Gift?

• A gift refers to the voluntary transfer of property for no or
inadequate consideration.
• It applies even if the donor does not physically transfer the property
but intends to give up ownership.

2. Tax Rates and Computation

• 2.1 Rates of Donor's Tax (Section 99)
• General Rate: 6% of the total taxable gifts made within the
calendar year exceeding PHP 250,000 (the exempt threshold).
• Example: If a donor gives gifts worth PHP 500,000 in a year, the taxable
portion is PHP 250,000 (PHP 500,000 – PHP 250,000), and the tax would be
6% of PHP 250,000, which is PHP 15,000

3. Contributions for Campaign Purposes

• Governing Law: Any money or items given to candidates, political parties,
or groups for election campaigns are controlled by the Election Code (the
set of laws that govern elections). This is not part of DONORS TAX. This
means that there are specific rules about how much can be given and how it
should be reported.

4. Transfer for Less Than Adequate Consideration

• Definition: If property (like land, a car, or other valuable items) is given for
less than its fair market value (the price it would sell for in a normal sale),
the difference in value is treated as a gift for tax purposes.
 • Conditions:
• The transfer must be for less than what the property is worth.
• If the transfer is a genuine business deal (meaning both parties are
acting fairly and without the intent to give a gift), it is not considered a
gift. This is important to prevent people from avoiding taxes by selling
property for less than its value.

5. Exemptions from Donor Tax

A. Gifts by Residents
1. To the National Government: Gifts made to the National Government or
its non-profit (not making a profit) organizations are exempt (not subject to
tax). This includes donations to government projects or public services.
2. To Non-Profit Organizations: Gifts to schools, charities, religious groups,
cultural organizations, or social welfare groups are exempt, provided:
• No more than 30% of the gift is used for administrative (management)
costs. This means that the organization must use most of the money
for its intended purpose, not just for paying salaries or office expenses.
• The organization must be non-profit and run by trustees (people who
manage the organization) who do not get paid. This ensures that the
organization is focused on helping others rather than making money.
B. Gifts by Nonresidents
1. To the National Government: The same exemptions apply as for residents.
Nonresidents can also donate to the government without being taxed.
2. To Non-Profit Organizations: The same rules as for residents apply,
allowing nonresidents to donate to non-profit organizations without tax.

C. Tax Credit for Foreign Donor's Taxes

1. General Rule: Donors who are citizens or residents can reduce their
Philippine tax by the amount of foreign donor taxes they have paid. This
means if you paid taxes on a gift in another country, you can lower your
Philippine tax bill by that amount.
2. Limitations:
• The credit (the amount you can subtract from your tax) cannot be more
than the part of the tax that relates to gifts taxable in the foreign
country. This ensures that you are not getting a larger tax break than
what you actually paid.
• The total credit is limited to the part of the gifts outside the
Philippines. This means you can only claim credit for taxes paid on
 gifts that are not in the Philippines.

Example to Make It Clearer

You donated a total of ₱10 million worth of gifts worldwide.

Out of that, ₱4 million was donated in the U.S.
The U.S. government charged you ₱200,000 in donor's tax for that gift.
In the Philippines, you owe ₱1 million in donor’s tax for all your donations worldwide.

Now, how much can you deduct from your Philippine tax?

(4M / 10M) * 1M = 400,000

You can only deduct a portion based on the ratio of foreign gifts to total gifts:

This means that the maximum tax credit allowed is ₱400,000.

But since you only paid ₱200,000 in the U.S., you can only deduct ₱200,000 (you can't deduct
more than what you actually paid).

6. Valuation of Gifts
• Property Gifts: The fair market value (the price it would sell for) at the time
of the gift is used to calculate the tax. This means that if you give a car worth
$10,000, that amount is used to determine how much tax you owe.
• Real Property: The FMV of real property is determined using the provisions
of Section 88(B) (related to estate tax valuation).
• The FMV may be based on either the zonal value (as determined by the
Bureau of Internal Revenue) or the assessed value (as listed in the
property tax declarations).

7. Filing of Return and Payment of Tax

A. Requirements
• Individuals making taxable gifts must file a return (a form reporting the gift)
under oath (a formal promise), including:
1. A list of gifts made during the year. This includes all gifts that exceed
the tax-exempt amount.
2. Deductions (amounts you can subtract) claimed. This could include any
allowable expenses related to the gift.
3. Any previous net gifts made that year. This helps keep track of total
gifts for tax purposes.
4. The name of the person receiving the gift (the donee). This is important
 for record-keeping.
5. Any other information required by law. This could include details about
the property or the relationship between the donor and donee.

B. Filing and Payment Timeline

• Deadline: The return must be filed within 30 days of the gift date, and the
tax must be paid at that time. This means you need to act quickly after
making a gift.
• Where to File:
• To an authorized bank, Revenue District Officer, or Treasurer in the
donor's city or town. This is where you submit your tax forms and
payments.
• Nonresidents can file with the Philippine Embassy (the official office
representing the Philippines in another country) or directly with the
Commissioner (the head of the tax authority).
8. Definitions
• Gross Estate and Gifts: Includes all real and personal property (things you
own), whether it is physical (like a car) or not (like stocks). This means
everything you own is considered when calculating taxes.
• Nonresident Alien Exemption: Property outside the Philippines is not
included in the gross estate for nonresident aliens (foreigners who are not
citizens). This means that if you are not a citizen and you own property
outside the Philippines, it won’t count against your estate for tax purposes.
• Deficiency: The amount by which the tax owed is more than what was
reported on the return. If you owe more tax than you declared, that extra
amount is called a deficiency.
9. Important Notes
• Intangible Property: No tax is collected on intangible personal property
(things that cannot be touched, like stocks or bonds) if:
• The donor was a citizen and resident of a foreign country that does not
have a transfer tax (a tax on gifts) at the time of the donation. This
means if you live in a country that doesn’t tax gifts, you won’t be taxed
in the Philippines either.
• The foreign country allows similar exemptions for Philippine citizens.
This means if the country you live in has rules that protect you from
being taxed on gifts, you won’t be taxed in the Philippines.
Multiple-Choice Questions (70)- Estate Tax 5. Which of the following is NOT a
1. What is the rate of estate tax charged on component of the gross estate?
the transfer of the net estate in the A) Proceeds of life insurance
Philippines? B) Capital of the surviving spouse
A) 5% C) Transfer in contemplation of death
B) 6% D) Revocable transfers
C) 10% E) Prior interests
D) 15% Answer: B) Capital of the surviving spouse
E) 20% 6. What is the standard deduction for citizens
Answer: B) 6% or residents of the Philippines when
2. Which of the following is included in the computing net estate?
gross estate? A) ₱1,000,000
A) Only real property B) ₱2,000,000
B) Only personal property C) ₱5,000,000
C) Both real and personal property D) ₱10,000,000
D) Only intangible property E) ₱20,000,000
E) Only tangible property Answer: D) ₱10,000,000
Answer: C) Both real and personal 7. Which of the following deductions is NOT
property allowed for nonresident estates?
3. For nonresident decedents, which part of A) Standard deduction
their gross estate is taxable in the B) Proportional deductions
Philippines? C) Property previously taxed
A) All property owned worldwide D) Claims against the estate
B) Only property located in the Philippines E) Share in the conjugal property
C) Only personal property Answer: A) Standard deduction
D) Only real property 8. What is the maximum percentage of
E) None of the above property previously taxed that can be
Answer: B) Only property located in the deducted if the prior decedent died more
Philippines than four years before the current
4. What does "transfer in contemplation of decedent?
death" refer to? A) 20%
A) Transfers made during the decedent's B) 40%
lifetime C) 60%
B) Transfers made with the expectation of D) 80%
death E) 100%
C) Transfers made after death Answer: A) 20%
D) Transfers made for fair market value 9. Which of the following is exempt from
E) None of the above estate taxation?
Answer: B) Transfers made with the A) Transfers for public use
expectation of death B) Transfers to individual beneficiaries
 C) Transfers for administrative costs 14. What is the maximum extension period for
D) All of the above filing the estate tax return in special
E) None of the above circumstances?
Answer: A) Transfers for public use A) 15 days
10. How is the value of usufruct determined B) 30 days
for estate tax purposes? C) 60 days
A) Based on the market value of the D) 90 days
property E) 1 year
B) Based on the age of the beneficiary Answer: B) 30 days
C) Based on the fair market value at the 15. Who is responsible for paying the estate
time of death tax?
D) Based on the original purchase price A) The beneficiaries
E) Based on the assessed value by local B) The executor or administrator
authorities C) The decedent's creditors
Answer: B) Based on the age of the D) The government
beneficiary E) The heirs only
11. When must the estate tax return be filed Answer: B) The executor or administrator
after the decedent's death? 16. What happens if the estate tax is not paid
A) Within 30 days before distributing assets to beneficiaries?
B) Within 90 days A) Distribution can proceed without issue
C) Within 1 year B) Beneficiaries must pay the tax
D) Within 2 years C) Executors cannot distribute shares
E) Within 5 years D) The estate is exempt from tax
Answer: C) Within 1 year E) None of the above
12. What is required if the gross value of the Answer: C) Executors cannot distribute
estate exceeds ₱5,000,000? shares
A) A simple return 17. What is the definition of "deficiency" in the
B) A certified return by a CPA context of estate tax?
C) No special requirements A) The total tax owed
D) A court order B) The amount reported on the return
E) A notarized statement C) The amount exceeding reported taxes
Answer: B) A certified return by a CPA D) The amount of deductions
13. Which of the following can extend the time E) The total value of the estate
for filing the estate tax return? Answer: C) The amount exceeding
A) The executor reported taxes
B) The heirs 18. Which of the following is NOT a duty of
C) The Commissioner Registers of Deeds regarding estate tax?
D) The court A) Register property transfers
E) None of the above B) Notify the Commissioner of unpaid
Answer: C) The Commissioner taxes
 C) Collect estate taxes E) None of the above
D) Refuse to register without proof of tax Answer: A) Value of the gross estate
payment 23. What is the purpose of the estate tax
E) All of the above return?
Answer: C) Collect estate taxes A) To distribute assets
19. What is the time limit for the B) To report the gross estate and
Commissioner to respond to an executor's deductions
request for a determination of estate tax? C) To determine beneficiaries
A) 30 days D) To assess property value
B) 60 days E) None of the above
C) 90 days Answer: B) To report the gross estate and
D) 1 year deductions
E) 2 years 24. Which of the following is NOT included in
Answer: C) 90 days the gross estate?
20. Which of the following is true regarding A) Life insurance proceeds
payments made by installment for estate B) Property owned by the surviving spouse
tax? C) Real estate
A) Payments can be made over 1 year D) Personal belongings
B) Payments can be made over 2 years E) Stocks and bonds
without penalties Answer: B) Property owned by the
C) Payments must be made in full surviving spouse
D) Installment payments incur interest 25. What is the tax credit for estate taxes paid
E) None of the above to a foreign country limited by?
Answer: D) Installment payments incur A) The total estate value in that country
interest B) The total estate value worldwide
21. What is the consequence of failing to pay C) The amount of deductions claimed
estate tax on time? D) The gross estate value
A) Immediate penalties E) None of the above
B) No consequences Answer: B) The total estate value
C) The estate is exempt from tax worldwide
D) The executor is released from liability 26. Which of the following deductions applies
E) The estate can be settled without tax to both citizens and nonresidents?
payment A) Standard deduction
Answer: A) Immediate penalties B) Claims against the estate
22. Which of the following is a requirement for C) Property previously taxed
filing an estate tax return? D) Transfers for public use
A) Value of the gross estate E) Share in the conjugal property
B) List of beneficiaries Answer: B) Claims against the estate
C) Executor's personal information 27. What is the fair market value of the family
D) A will home deducted from the gross estate?
 A) Up to ₱5,000,000 C) To provide guidance on tax deductions
B) Up to ₱10,000,000 D) To determine the estate tax amount
C) Up to ₱15,000,000 E) All of the above
D) No limit Answer: E) All of the above
E) Only the amount paid for the home 32. Which of the following is NOT a
Answer: B) Up to ₱10,000,000 requirement for the estate tax return?
28. Which of the following is a condition for A) Value of the gross estate
deducting unpaid mortgages from the B) List of all debts
gross estate? C) List of beneficiaries
A) The mortgage must be paid in full D) Deductions allowed
B) The mortgage must be documented E) Additional relevant information
C) The mortgage must be for property Answer: B) List of all debts
included in the estate 33. What happens if the estate tax return is
D) Both B and C filed late?
E) None of the above A) No penalties apply
Answer: D) Both B and C B) The estate is exempt from tax
29. What is the maximum percentage of C) The executor may face penalties
deductions allowed for property previously D) The return is automatically accepted
taxed if the prior decedent died within 1 E) None of the above
year? Answer: C) The executor may face
A) 20% penalties
B) 40% 34. Which of the following is a valid reason for
C) 60% extending the time to file the estate tax
D) 80% return?
E) 100% A) Executor's illness
Answer: E) 100% B) Lack of documentation
30. Which of the following is true regarding C) Disagreement among heirs
the transfer of inheritance by a fiduciary D) All of the above
heir? E) None of the above
A) It is always taxable Answer: D) All of the above
B) It is exempt from taxation 35. What is the consequence of not paying the
C) It requires court approval estate tax before distributing assets?
D) It can be transferred without A) Beneficiaries can receive their shares
restrictions B) Executors can distribute shares without
E) None of the above proof of payment
Answer: A) It is always taxable C) Executors are liable for unpaid taxes
31. What is the role of the Commissioner in D) The estate is exempt from tax
the estate tax process? E) None of the above
A) To collect taxes Answer: C) Executors are liable for unpaid
B) To approve estate tax returns taxes
36. Which of the following is true regarding 40. Which of the following is a requirement for
the payment of estate tax? the estate tax return?
A) It can be paid after asset distribution A) Value of the gross estate
B) It must be paid at the time of filing the B) List of beneficiaries
return C) Executor's personal information
C) It can be ignored if the estate is small D) A will
D) It is optional for the executor E) None of the above
E) None of the above Answer: A) Value of the gross estate
Answer: B) It must be paid at the time of 41. What is the consequence of failing to pay
filing the return estate tax on time?
37. What is the purpose of the estate tax A) Immediate penalties
deductions? B) No consequences
A) To reduce the taxable estate value C) The estate is exempt from tax
B) To increase the estate value D) The executor is released from liability
C) To exempt certain properties E) The estate can be settled without tax
D) To simplify the tax return process payment
E) None of the above Answer: A) Immediate penalties
Answer: A) To reduce the taxable estate 42. Which of the following is a requirement for
value filing an estate tax return?
38. Which of the following is NOT a A) Value of the gross estate
component of the gross estate? B) List of beneficiaries
A) Life insurance proceeds C) Executor's personal information
B) Property owned by the surviving spouse D) A will
C) Real estate E) None of the above
D) Personal belongings Answer: A) Value of the gross estate
E) Stocks and bonds 43. What is the purpose of the estate tax
Answer: B) Property owned by the return?
surviving spouse A) To distribute assets
39. What is the maximum percentage of B) To report the gross estate and
deductions allowed for property previously deductions
taxed if the prior decedent died more than C) To determine beneficiaries
4 years but less than 5 years before the D) To assess property value
current decedent? E) None of the above
A) 20% Answer: B) To report the gross estate and
B) 40% deductions
C) 60% 44. Which of the following is NOT included in
D) 80% the gross estate?
E) 100% A) Life insurance proceeds
Answer: A) 20% B) Property owned by the surviving spouse
C) Real estate
 D) Personal belongings 49. What is the maximum percentage of
E) Stocks and bonds deductions allowed for property previously
Answer: B) Property owned by the taxed if the prior decedent died within 1
surviving spouse year?
45. What is the tax credit for estate taxes paid A) 20%
to a foreign country limited by? B) 40%
A) The total estate value in that country C) 60%
B) The total estate value worldwide D) 80%
C) The amount of deductions claimed E) 100%
D) The gross estate value Answer: E) 100%
E) None of the above 50. Which of the following is true regarding
Answer: B) The total estate value the transfer of inheritance by a fiduciary
worldwide heir?
46. Which of the following deductions applies A) It is always taxable
to both citizens and nonresidents? B) It is exempt from taxation
A) Standard deduction C) It requires court approval
B) Claims against the estate D) It can be transferred without
C) Property previously taxed restrictions
D) Transfers for public use E) None of the above
E) Share in the conjugal property Answer: A) It is always taxable
Answer: B) Claims against the estate 51. What is the role of the Commissioner in
47. What is the fair market value of the family the estate tax process?
home deducted from the gross estate? A) To collect taxes
A) Up to ₱5,000,000 B) To approve estate tax returns
B) Up to ₱10,000,000 C) To provide guidance on tax deductions
C) Up to ₱15,000,000 D) To determine the estate tax amount
D) No limit E) All of the above
E) Only the amount paid for the home Answer: E) All of the above
Answer: B) Up to ₱10,000,000 52. Which of the following is NOT a
48. Which of the following is a condition for requirement for the estate tax return?
deducting unpaid mortgages from the A) Value of the gross estate
gross estate? B) List of all debts
A) The mortgage must be paid in full C) List of beneficiaries
B) The mortgage must be documented D) Deductions allowed
C) The mortgage must be for property E) Additional relevant information
included in the estate Answer: B) List of all debts
D) Both B and C 53. What happens if the estate tax return is
E) None of the above filed late?
Answer: D) Both B and C A) No penalties apply
B) The estate is exempt from tax
 C) The executor may face penalties E) None of the above
D) The return is automatically accepted Answer: A) To reduce the taxable estate
E) None of the above value
Answer: C) The executor may face 58. Which of the following is NOT a
penalties component of the gross estate?
54. Which of the following is a valid reason for A) Life insurance proceeds
extending the time to file the estate tax B) Property owned by the surviving spouse
return? C) Real estate
A) Executor's illness D) Personal belongings
B) Lack of documentation E) Stocks and bonds
C) Disagreement among heirs Answer: B) Property owned by the
D) All of the above surviving spouse
E) None of the above 59. What is the maximum percentage of
Answer: D) All of the above deductions allowed for property previously
55. What is the consequence of not paying the taxed if the prior decedent died more than
estate tax before distributing assets? 4 years but less than 5 years before the
A) Beneficiaries can receive their shares current decedent?
B) Executors can distribute shares without A) 20%
proof of payment B) 40%
C) Executors are liable for unpaid taxes C) 60%
D) The estate is exempt from tax D) 80%
E) None of the above E) 100%
Answer: C) Executors are liable for unpaid Answer: A) 20%
taxes 60. Which of the following is a requirement for
56. Which of the following is true regarding the estate tax return?
the payment of estate tax? A) Value of the gross estate
A) It can be paid after asset distribution B) List of beneficiaries
B) It must be paid at the time of filing the C) Executor's personal information
return D) A will
C) It can be ignored if the estate is small E) None of the above
D) It is optional for the executor Answer: A) Value of the gross estate
E) None of the above 61. What is the consequence of failing to pay
Answer: B) It must be paid at the time of estate tax on time?
filing the return A) Immediate penalties
57. What is the purpose of the estate tax B) No consequences
deductions? C) The estate is exempt from tax
A) To reduce the taxable estate value D) The executor is released from liability
B) To increase the estate value E) The estate can be settled without tax
C) To exempt certain properties payment
D) To simplify the tax return process Answer: A) Immediate penalties
62. Which of the following is a requirement for C) Property previously taxed
filing an estate tax return? D) Transfers for public use
A) Value of the gross estate E) Share in the conjugal property
B) List of beneficiaries Answer: B) Claims against the estate
C) Executor's personal information 67. What is the fair market value of the family
D) A will home deducted from the gross estate?
E) None of the above A) Up to ₱5,000,000
Answer: A) Value of the gross estate B) Up to ₱10,000,000
63. What is the purpose of the estate tax C) Up to ₱15,000,000
return? D) No limit
A) To distribute assets E) Only the amount paid for the home
B) To report the gross estate and Answer: B) Up to ₱10,000,000
deductions 68. Which of the following is a condition for
C) To determine beneficiaries deducting unpaid mortgages from the
D) To assess property value gross estate?
E) None of the above A) The mortgage must be paid in full
Answer: B) To report the gross estate and B) The mortgage must be documented
deductions C) The mortgage must be for property
64. Which of the following is NOT included in included in the estate
the gross estate? D) Both B and C
A) Life insurance proceeds E) None of the above
B) Property owned by the surviving spouse Answer: D) Both B and C
C) Real estate 69. What is the maximum percentage of
D) Personal belongings deductions allowed for property previously
E) Stocks and bonds taxed if the prior decedent died within 1
Answer: B) Property owned by the year?
surviving spouse A) 20%
65. What is the tax credit for estate taxes paid B) 40%
to a foreign country limited by? C) 60%
A) The total estate value in that country D) 80%
B) The total estate value worldwide E) 100%
C) The amount of deductions claimed Answer: E) 100%
D) The gross estate value 70. Which of the following is true regarding
E) None of the above the transfer of inheritance by a fiduciary
Answer: B) The total estate value heir?
worldwide A) It is always taxable
66. Which of the following deductions applies B) It is exempt from taxation
to both citizens and nonresidents? C) It requires court approval
A) Standard deduction D) It can be transferred without
B) Claims against the estate restrictions
 E) None of the above 13. Executors are personally liable for unpaid
Answer: A) It is always taxable estate taxes.
True or False Questions (30) True / True
1. The estate tax in the Philippines is a flat 14. The estate tax return must include a
rate of 6%. detailed list of deductions.
True / True True / True
2. The gross estate includes only real 15. The fair market value of the estate is
property owned by the deceased. determined at the time of death.
True / False True / True
3. Nonresident decedents are taxed on their 16. Transfers for public use are exempt from
entire gross estate, regardless of location. estate taxation.
True / False True / True
4. Transfers made in contemplation of death 17. The maximum deduction for property
are included in the gross estate. previously taxed is 100% if the prior
True / True decedent died within one year.
5. The standard deduction for citizens is True / True
₱5,000,000. 18. Executors can distribute shares of the
True / False estate without proof of tax payment.
6. Claims against the estate can be deducted True / False
from the gross estate. 19. The estate tax return must be certified by
True / True a CPA if the gross value exceeds
7. The family home is fully exempt from ₱5,000,000.
estate tax regardless of its value. True / True
True / False 20. The estate tax can be paid in installments
8. Executors can distribute assets before if the estate lacks sufficient cash.
paying the estate tax. True / True
True / False 21. The tax imposed by the estate tax can be
9. The estate tax return must be filed within reduced by any estate tax paid to a foreign
one year of the decedent's death. country.
True / True True / True
10. The Commissioner can grant extensions 22. The family home is exempt from estate tax
for filing the estate tax return. if its value exceeds ₱10,000,000.
True / True True / False
11. Life insurance proceeds are included in the 23. Executors must notify the Commissioner of
gross estate. any unpaid taxes before registering
True / True property transfers.
12. The estate tax must be paid at the time True / True
the return is filed. 24. The estate tax must be paid before any
True / True distribution of assets to beneficiaries.
True / True
25. The Commissioner has one year to respond
to an executor's request for a
determination of estate tax.
True / False
26. The estate tax return must include the
value of the gross estate at the time of
death.
True / True
27. Executors can distribute shares of the
estate before the estate tax is paid.
True / False
28. The estate tax is only applicable to citizens
of the Philippines.
True / False
29. The estate tax return must be filed with
the Office of the Commissioner if the
decedent had no legal residence in the
Philippines.
True / True
30. The estate tax return must include a list of
all debts owed by the decedent.
True / True
Multiple-Choice Questions (70)- Donors Tax E) None of the above
1. What is the general rate of donor's tax in Answer: B) The difference in value is
the Philippines? treated as a gift
A) 4% 7. Which of the following gifts is exempt from
B) 5% donor's tax?
C) 6% A) Gifts to for-profit organizations
D) 7% B) Gifts to political candidates
E) 8% C) Gifts to non-profit organizations with
Answer: C) 6% administrative costs exceeding 30%
2. Which of the following is considered a gift D) Gifts to the National Government
for donor tax purposes? E) Gifts to family members
A) A sale of property at fair market value Answer: D) Gifts to the National
B) A transfer of property for inadequate Government
consideration 8. How is the fair market value of a gift
C) A loan to a friend determined?
D) A rental agreement A) Based on the original purchase price
E) None of the above B) Based on the assessed value by local
Answer: B) A transfer of property for authorities
inadequate consideration C) Based on the price it would sell for at
3. What is the exempt threshold for donor's the time of the gift2
tax in the Philippines? D) Based on the donor's estimate
A) PHP 100,000 E) None of the above
B) PHP 200,000 Answer: C) Based on the price it would sell
C) PHP 250,000 for at the time of the gift
D) PHP 500,000 9. What is the filing deadline for the donor's
E) PHP 1,000,000 tax return?
Answer: C) PHP 250,000 A) Within 15 days of the gift
4. If a donor gives gifts worth PHP 600,000 in B) Within 30 days of the gift
a year, what is the taxable portion? C) Within 60 days of the gift
A) PHP 250,000 D) Within 90 days of the gift
B) PHP 350,000 E) No deadline
C) PHP 400,000 Answer: B) Within 30 days of the gift
D) PHP 600,000 10. Where should the donor's tax return be
E) PHP 0 filed?
Answer: B) PHP 350,000 A) With the Bureau of Internal Revenue
5. Which of the following is NOT subject to only
donor's tax? B) At any bank
A) Gifts to non-profit organizations1 C) With the Philippine Embassy for
B) Gifts to the National Government nonresidents
C) Gifts for campaign purposes D) Both B and C
D) Gifts to family members E) None of the above
E) Gifts to friends Answer: D) Both B and C
Answer: B) Gifts to the National 11. What is the consequence of failing to file a
Government donor's tax return on time?
6. What is the tax treatment for property A) No penalties apply
transferred for less than its fair market B) The donor is exempt from tax
value? C) The donor may face penalties
A) It is not considered a gift D) The return is automatically accepted
B) The difference in value is treated as a E) None of the above
gift Answer: C) The donor may face penalties
C) It is fully exempt from tax 12. Which of the following is true regarding
D) It is taxed at a lower rate contributions for campaign purposes?
 A) They are subject to donor's tax B) A reduction in the Philippine tax based
B) They are exempt from donor's tax on foreign taxes paid
C) They are taxed at a higher rate C) A complete exemption from donor's tax
D) They are not reported D) A tax refund
E) None of the above E) None of the above
Answer: A) They are subject to donor's tax Answer: B) A reduction in the Philippine
13. What is the maximum allowable tax based on foreign taxes paid
administrative cost for non-profit 18. How is the tax credit for foreign donor's
organizations to remain exempt from taxes limited?
donor's tax? A) It cannot exceed the total amount of
A) 10% gifts
B) 20% B) It cannot exceed the amount of foreign
C) 30% taxes paid
D) 40% C) It cannot exceed the total donor's tax
E) 50% owed in the Philippines
Answer: C) 30% D) Both B and C
14. If a donor is a resident of a foreign country E) None of the above
with no transfer tax, how is the donor's tax Answer: D) Both B and C
treated in the Philippines? 19. If a donor gives a gift worth PHP 1,000,000
A) The donor is fully exempt from tax and pays PHP 50,000 in foreign donor's
B) The donor is taxed at a higher rate tax, how much can they deduct from their
C) The donor is taxed only on tangible Philippine tax if the total donor's tax owed
property is PHP 100,000?
D) The donor is taxed on intangible A) PHP 50,000
property B) PHP 100,000
E) None of the above C) PHP 25,000
Answer: D) The donor is taxed on D) PHP 75,000
intangible property E) PHP 0
15. What is the definition of "deficiency" in the Answer: A) PHP 50,000
context of donor's tax? 20. What is the treatment of intangible
A) The total tax owed property for donor's tax purposes?
B) The amount reported on the return A) It is always taxable
C) The amount by which the tax owed B) It is exempt if the donor is a foreign
exceeds what was reported resident with no transfer tax
D) The amount of deductions C) It is taxed at a higher rate
E) The total value of the gifts D) It is not considered a gift
Answer: C) The amount by which the tax E) None of the above
owed exceeds what was reported Answer: A) It is always taxable
16. Which of the following is NOT included in 21. Which of the following is a requirement for
the definition of a gift? filing a donor's tax return?
A) Voluntary transfer of property A) A list of gifts made during the year
B) Transfer for inadequate consideration B) The name of the person receiving the
C) Transfer of property as part of a gift
business deal C) Any previous net gifts made that year
D) Transfer of property without expecting D) All of the above
anything in return E) None of the above
E) None of the above Answer: D) All of the above
Answer: C) Transfer of property as part of 22. What is the consequence of transferring
a business deal property for less than its fair market
17. What is the tax credit for foreign donor's value?
taxes? A) It is not considered a gift
A) A reduction in the total amount of gifts
 B) The difference is treated as a gift for tax D) The name of the person receiving the
purposes3 gift
C) It is fully exempt from tax E) Any other information required by law
D) It is taxed at a lower rate Answer: C) The donor's income tax return
E) None of the above 28. What is the consequence of failing to pay
Answer: B) The difference is treated as a donor's tax on time?
gift for tax purposes A) No penalties apply
23. Which of the following is true regarding B) The donor is exempt from tax
gifts to non-profit organizations? C) The donor may face penalties
A) They are always taxable D) The return is automatically accepted
B) They are exempt if administrative costs E) None of the above
do not exceed 30%4 Answer: C) The donor may face penalties
C) They are exempt regardless of the 29. Which of the following is true regarding
amount the treatment of gifts to the National
D) They are taxed at a higher rate Government?
E) None of the above A) They are always taxable
Answer: B) They are exempt if B) They are exempt from donor's tax
administrative costs do not exceed 30%5 C) They are taxed at a higher rate
24. What is the fair market value of a gift used D) They are not reported
for tax calculation? E) None of the above
A) The price it was purchased for Answer: B) They are exempt from donor's
B) The price it would sell for at the time of tax
the gift6 30. What is the definition of "gross estate" in
C) The assessed value by local authorities the context of donor's tax?
D) The donor's estimate A) All real and personal property owned by
E) None of the above the donor
Answer: B) The price it would sell for at B) Only tangible property owned by the
the time of the gift donor
25. What is the filing location for nonresidents C) Only intangible property owned by the
making taxable gifts? donor
A) Any bank D) Property located outside the Philippines
B) The Bureau of Internal Revenue E) None of the above
C) The Philippine Embassy or directly Answer: E) None of the above (Gross estate
with the Commissioner relates to estate tax, not donor’s tax.)
D) The local government office 31. If a donor gives a gift worth PHP 300,000,
E) None of the above what is the taxable amount?
Answer: C) The Philippine Embassy or A) PHP 50,000
directly with the Commissioner B) PHP 100,000
26. What is the maximum percentage of a gift C) PHP 250,000
that can be used for administrative costs D) PHP 300,000
in a non-profit organization? E) PHP 0
A) 10% Answer: A) PHP 50,000
B) 20% 32. What is the treatment of gifts made to
C) 30% political candidates?
D) 40% A) They are subject to donor's tax
E) 50% B) They are exempt from donor's tax
Answer: C) 30% C) They are taxed at a higher rate
27. Which of the following is NOT a D) They are not reported
requirement for the donor's tax return? E) None of the above
A) A list of gifts made during the year Answer: A) They are subject to donor's tax
B) Deductions claimed
C) The donor's income tax return
33. Which of the following is true regarding 38. Which of the following is NOT a
the valuation of real property for donor's requirement for the donor's tax return?
tax? A) A list of gifts made during the year
A) It is based on the purchase price B) Deductions claimed
B) It is based on the assessed value only C) The donor's income tax return
C) It is based on the zonal value or D) The name of the person receiving the
assessed value gift
D) It is not subject to valuation E) Any other information required by law
E) None of the above Answer: C) The donor's income tax return
Answer: C) It is based on the zonal value 39. What is the consequence of failing to pay
or assessed value donor's tax on time?
34. What is the maximum allowable deduction A) No penalties apply
for administrative costs for non-profit B) The donor is exempt from tax
organizations? C) The donor may face penalties
A) 10% D) The return is automatically accepted
B) 20% E) None of the above
C) 30% Answer: C) The donor may face penalties
D) 40% 40. Which of the following is true regarding
E) 50% the treatment of gifts to the National
Answer: C) 30% Government?
35. What is the consequence of transferring A) They are always taxable
property for less than its fair market B) They are exempt from donor's tax
value? C) They are taxed at a higher rate
A) It is not considered a gift D) They are not reported
B) The difference is treated as a gift for tax E) None of the above
purposes7 Answer: B) They are exempt from donor's
C) It is fully exempt from tax tax
D) It is taxed at a lower rate 41. What is the definition of "gross estate" in
E) None of the above the context of donor's tax?
Answer: B) The difference is treated as a A) All real and personal property owned by
gift for tax purposes the donor
36. Which of the following is true regarding B) Only tangible property owned by the
the filing of donor's tax returns? donor
A) They must be filed within 30 days of the C) Only intangible property owned by the
gift donor
B) They can be filed at any time D) Property located outside the Philippines
C) They are not required for gifts under E) None of the above
PHP 250,000 Answer: E) None of the above
D) They must be filed only by residents 42. If a donor gives a gift worth PHP 300,000,
E) None of the above what is the taxable amount?
Answer: A) They must be filed within 30 A) PHP 50,000
days of the gift B) PHP 100,000
37. What is the treatment of intangible C) PHP 250,000
property for donor's tax purposes? D) PHP 300,000
A) It is always taxable E) PHP 0
B) It is exempt if the donor is a foreign Answer: A) PHP 50,000
resident with no transfer tax 43. What is the treatment of gifts made to
C) It is taxed at a higher rate political candidates?
D) It is not considered a gift A) They are subject to donor's tax
E) None of the above B) They are exempt from donor's tax
Answer: A) It is always taxable C) They are taxed at a higher rate
D) They are not reported
 E) None of the above Answer: A) It is always taxable
Answer: A) They are subject to donor's tax 49. Which of the following is NOT a
44. Which of the following is true regarding requirement for the donor's tax return?
the valuation of real property for donor's A) A list of gifts made during the year
tax? B) Deductions claimed
A) It is based on the purchase price C) The donor's income tax return
B) It is based on the assessed value only D) The name of the person receiving the
C) It is based on the zonal value or gift
assessed value E) Any other information required by law
D) It is not subject to valuation Answer: C) The donor's income tax return
E) None of the above 50. What is the consequence of failing to pay
Answer: C) It is based on the zonal value donor's tax on time?
or assessed value A) No penalties apply
45. What is the maximum allowable deduction B) The donor is exempt from tax
for administrative costs for non-profit C) The donor may face penalties
organizations? D) The return is automatically accepted
A) 10% E) None of the above
B) 20% Answer: C) The donor may face penalties
C) 30% 51. Which of the following is true regarding
D) 40% the treatment of gifts to the National
E) 50% Government?
Answer: C) 30% A) They are always taxable
46. What is the consequence of transferring B) They are exempt from donor's tax
property for less than its fair market C) They are taxed at a higher rate
value? D) They are not reported
A) It is not considered a gift E) None of the above
B) The difference is treated as a gift for tax Answer: B) They are exempt from donor's
purposes8 tax
C) It is fully exempt from tax 52. What is the definition of "gross estate" in
D) It is taxed at a lower rate the context of donor's tax?
E) None of the above A) All real and personal property owned by
Answer: B) The difference is treated as a the donor
gift for tax purposes B) Only tangible property owned by the
47. Which of the following is true regarding donor
the filing of donor's tax returns? C) Only intangible property owned by the
A) They must be filed within 30 days of the donor
gift D) Property located outside the Philippines
B) They can be filed at any time E) None of the above
C) They are not required for gifts under Answer: E) None of the above
PHP 250,000 53. If a donor gives a gift worth PHP 300,000,
D) They must be filed only by residents what is the taxable amount?
E) None of the above A) PHP 50,000
Answer: A) They must be filed within 30 B) PHP 100,000
days of the gift C) PHP 250,000
48. What is the treatment of intangible D) PHP 300,000
property for donor's tax purposes? E) PHP 0
A) It is always taxable Answer: A) PHP 50,000
B) It is exempt if the donor is a foreign 54. What is the treatment of gifts made to
resident with no transfer tax political candidates?
C) It is taxed at a higher rate A) They are subject to donor's tax
D) It is not considered a gift B) They are exempt from donor's tax
E) None of the above C) They are taxed at a higher rate
 D) They are not reported C) It is taxed at a higher rate
E) None of the above D) It is not considered a gift
Answer: A) They are subject to donor's tax E) None of the above
55. Which of the following is true regarding Answer: A) It is always taxable
the valuation of real property for donor's 60. Which of the following is NOT a
tax? requirement for the donor's tax return?
A) It is based on the purchase price A) A list of gifts made during the year
B) It is based on the assessed value only B) Deductions claimed
C) It is based on the zonal value or C) The donor's income tax return
assessed value D) The name of the person receiving the
D) It is not subject to valuation gift
E) None of the above E) Any other information required by law
Answer: C) It is based on the zonal value Answer: C) The donor's income tax return
or assessed value 61. What is the consequence of failing to pay
56. What is the maximum allowable deduction donor's tax on time?
for administrative costs for non-profit A) No penalties apply
organizations? B) The donor is exempt from tax
A) 10% C) The donor may face penalties
B) 20% D) The return is automatically accepted
C) 30% E) None of the above
D) 40% Answer: C) The donor may face penalties
E) 50% 62. Which of the following is true regarding
Answer: C) 30% the treatment of gifts to the National
57. What is the consequence of transferring Government?
property for less than its fair market A) They are always taxable
value? B) They are exempt from donor's tax
A) It is not considered a gift C) They are taxed at a higher rate
B) The difference is treated as a gift for tax D) They are not reported
purposes9 E) None of the above
C) It is fully exempt from tax Answer: B) They are exempt from donor's
D) It is taxed at a lower rate tax
E) None of the above 63. What is the definition of "gross estate" in
Answer: B) The difference is treated as a the context of donor's tax?
gift for tax purposes A) All real and personal property owned by
Certainly, let's continue with the remaining the donor
multiple-choice questions and the true/false section: B) Only tangible property owned by the
58. Which of the following is true regarding donor
the filing of donor's tax returns? C) Only intangible property owned by the
A) They must be filed within 30 days of the donor
gift D) Property located outside the Philippines
B) They can be filed at any time E) None of the above
C) They are not required for gifts under Answer: E) None of the above
PHP 250,000 64. If a donor gives a gift worth PHP 300,000,
D) They must be filed only by residents what is the taxable amount?
E) None of the above A) PHP 50,000
Answer: A) They must be filed within 30 B) PHP 100,000
days of the gift C) PHP 250,000
59. What is the treatment of intangible D) PHP 300,000
property for donor's tax purposes? E) PHP 0
A) It is always taxable Answer: A) PHP 50,000
B) It is exempt if the donor is a foreign 65. What is the treatment of gifts made to
resident with no transfer tax political candidates?
 A) They are subject to donor's tax B) It is exempt if the donor is a foreign
B) They are exempt from donor's tax resident with no transfer tax
C) They are taxed at a higher rate C) It is taxed at a higher rate
D) They are not reported D) It is not considered a gift
E) None of the above E) None of the above
Answer: A) They are subject to donor's tax Answer: A) It is always taxable
66. Which of the following is true regarding True or False Questions (30)
the valuation of real property for donor's 1. Donor's tax is levied on the transfer of
tax? property by way of gift.
A) It is based on the purchase price True / True
B) It is based on the assessed value only 2. A gift must involve a physical transfer of
C) It is based on the zonal value or property to be considered a gift for tax
assessed value purposes.
D) It is not subject to valuation True / False
E) None of the above 3. The general rate of donor's tax is 6% on
Answer: C) It is based on the zonal value the total taxable gifts exceeding PHP
or assessed value 250,000.
67. What is the maximum allowable deduction True / True
for administrative costs for non-profit 4. Gifts made to political candidates are
organizations? subject to donor's tax.
A) 10% True / True
B) 20% 5. The difference in value for property
C) 30% transferred for less than its fair market
D) 40% value is treated as a gift.
E) 50% True / True
Answer: C) 30% 6. Gifts to non-profit organizations are
68. What is the consequence of transferring exempt from donor's tax if administrative
property for less than its fair market costs do not exceed 30%.
value? True / True
A) It is not considered a gift 7. Nonresidents are not allowed to donate to
B) The difference is treated as a gift for tax the National Government without being
purposes taxed.
C) It is fully exempt from tax True / False
D) It is taxed at a lower rate 8. The fair market value of a gift is
E) None of the above determined at the time of the gift.
Answer: B) The difference is treated as a True / True
gift for tax purposes 9. The donor's tax return must be filed within
69. Which of the following is true regarding 30 days of the gift date.
the filing of donor's tax returns? True / True
A) They must be filed within 30 days of the 10. Intangible property is always taxable
gift under donor's tax.
B) They can be filed at any time True / True
C) They are not required for gifts under 11. Donors can claim a tax credit for foreign
PHP 250,000 donor's taxes paid.
D) They must be filed only by residents True / True
E) None of the above 12. The maximum allowable administrative
Answer: A) They must be filed within 30 cost for non-profit organizations to remain
days of the gift exempt from donor's tax is 30%.
70. What is the treatment of intangible True / True
property for donor's tax purposes? 13. Gifts made to the National Government
A) It is always taxable are exempt from donor's tax.
True / True
14. The tax credit for foreign donor's taxes True / False
cannot exceed the total donor's tax owed in 29. The donor's tax applies to both residents
the Philippines. and non-residents.
True / True True / True
15. A deficiency in donor's tax refers to the 30. Gifts made to non-profit organizations
amount owed that exceeds what was with administrative costs exceeding 30%
reported on the return. are exempt from donor's tax.
True / True True / False
16. Gifts made for campaign purposes are
exempt from donor's tax.
True / False
17. The fair market value of real property is
determined using the zonal value or
assessed value.
True / True
18. Donors must file a return that includes a
list of gifts made during the year.
True / True
19. The donor's tax return must include the
name of the person receiving the gift.
True / True
20. Gifts to non-profit organizations are
always taxable regardless of the amount.
True / False
21. The filing location for nonresidents making
taxable gifts is the Philippine Embassy or
directly with the Commissioner.
True / True
22. The donor's tax return must be filed only
by residents of the Philippines.
True / False
23. The treatment of intangible property for
donor's tax purposes is the same for
residents and nonresidents.
True / True
24. The maximum allowable deduction for
administrative costs for non-profit
organizations is 50%.
True / False
25. Gifts made to family members are subject
to donor's tax.
True / True
26. The donor's tax must be paid at the time
the return is filed.
True / True
27. The fair market value of a gift is based on
the price it would sell for at the time of the
gift.
True / True
28. Donors can deduct the full amount of
foreign donor's taxes paid from their
Philippine tax.