Donor's Tax

Donor's tax is tax on the transfer of

property by any person through
gift.
 Value of the Donation
 Real property – fair market value as determined by
BIR or fair market value as fixed by the provincial or
city assessors, whichever is higher.
 Stocks, bonds and other securities
- If traded in the stock exchange - fair market value is the
mean between the highest and lowest quoted selling
price of the securities
- If not traded – If common stock, the book value; if
preferred stock, the par value
 Tax Rate

 Exempt from donor's tax =

P250,000
 In excess of P250,000 = 6%

 Cumulative for one year

 Regardless of the relationship of

donor and donee.

 Example
Juan donated the following in 2018:
 January 1, 2018 – to his daughter as wedding

gift, P2,000,000
 April 1, 2018 – to his father and mother as

travel cost on their Europe tour, P1,000,000.

 August 15, 2018 – to his best friend for

hospitalization cost of his godson, P500,000.

 Solution
January 1, 2018
 Gift to daughter P2,000,000
Less: Exemption (250,000)
Taxable gift P1,750,000
 Tax Rate x 6%
 Donor's tax due P105,000
 April 1, 2018
 Gift on 1/1 P1,000,000
Gift to parents 2,000,000
Less: Exemption (250,000)
Taxable gift P2,750,000
 Tax Rate x 6%
 Donor's Tax due P165,000
 Donor's tax paid on 1/1 (105,000)
 Donor's tax to be paid P 60,000
 August 15, 2018
 Gift on 1/1 P1,000,000
Gift on 4/1 2,000,000
Gift on 8/15 500,000
Less: Exemption (250,000)
Taxable gift P3,250,000
 Tax Rate x 6%
 Donor's Tax due P195,000
 Donor's tax paid as of 4/1 (165,000)
 Donor's tax to be paid P 30,000
 Transfer for Insufficient Consideration

 When property is transferred for less

than an adequate and full payment, then
the difference between the fair market
value of the property and the payment
made shall be deemed a “donation”.
 The excess shall be subjected to donor's
tax.
 Example
 Mr. Generoso sold a 3000 sq. meter land in Quezon
City to his best friend for P5,000,000. The fair market
value of the land is P15,000,000. How much should be
reported as gift, if any?
 Answer: Fair market value P15,000,000
Less: Selling price 5,000,000
Should be reported as Gift P10,000,000
Less: Exemption 250,000
Taxable gift P 9,750,000
Donor's tax to be paid x 6%
Donor's tax to be paid P585,000
 Capital Gain Tax
 Selling price P5,000,000
Capital gain tax on real property x 6%
 Capital gain tax to be paid P300,000

 Mr. Generoso should be paying donor's tax of

P585,000 and capital gain tax of P300,000.
 Capital Gains Tax


on Sale of Real Property

The sale of Real Property in the Philippines
classified as a capital asset is taxed 6%
capital gains tax based on the highest among
the following values:
 Zonal Value as determined by the BIR

 Assessed value as per assessor’s office

 Selling Price
Sample Problem – Capital Gains Tax on


Sale of Real Property

 Mr. Don Alak sold his residential house and lot at a
Selling Price of P5M.
 The Zonal Value as per BIR at the time of sale was
P4.5M while the assessed value amounted to P6M.
The house and lot was purchased at a cost of P3M.
 Capital Gains Tax computed as follows:
 Assessed Value of house and lot P6,000,000
Capital Gains Tax Rate x 6%
Capital Gains Tax to be paid P360,000
 Exemption from 6% CGT on Sale of
Real Property
If the seller of the real property uses the proceeds to
purchase a new principal residence, the sale would be
exempt from the 6% capital gains tax provided that:
 seller must be a citizen or resident alien
 sale involves the principal residence of the seller
 proceeds are used to purchase a new principal
residence
 BIR is notified by the taxpayer of his intention to avail
of the exemption within 30 days of the sale
 t
 Exemption from 6% CGT on Sale of
Real Property (con't.)
 Re-acquisition of the new residence must be within 18
months from the date of sale
 Capital gains tax is held in escrow in favor of the
government
 Exemption can be availed once every 10 years
 The historical cost or adjusted basis of the principal
residence shall be carried over to the new principal
residence.
 Example
 Let us assume that Don Alak used all the proceeds to
purchase a new residence.
 What amount should be deposited in escrow? – the
total capital gains tax amounting to P360,000.
 How much is the exemption? – if Don Alak is able to
comply with all the requisites, the sale would be
exempt from the 6% capital gains tax and all of the
P360,000 deposited in escrow would be returned to
him.
 If not all amount of the sale was used:

 How much is the exemption if only P4M

of the proceeds of sale was used to
purchase a new residence?
 Exemption from CGT:

P4M/P5M x P360,000 = P288,000.

 CGT to be given to the BIR:

P360,000 – P288,000 = P72,000

 Capital Gains Tax on Sale of Unlisted
Domestic Stocks
For all types of individual taxpayers and also for
domestic corporations, the CGT on the sale of unlisted
domestic stocks would be 15% of the gain.
 Example:
 Ben Mel sold stocks of Rams Corp which cost
P300,000 for P700,000. How much is the capital gains
tax?
P400,000 x 15% = P60,000 Capital Gains Tax