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Donors TAX
A donors tax is levied, assessed, collected and paid upon the transfer by any person, resident or nonresident, of the property by gift. [ Sec. 98(A), NIRC]. It
shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or
intangible [Sec. 98(B), NIRC].
NATURE OF DONORS TAX
Donors tax is not a property tax but a tax imposed on the transfer of property by way of gift inter vivos. [Sec 11, RR 2-2003 citing Lladoc v. CIR (1965)]
BASIC PRINCIPLE
The donors tax is imposed on donations inter vivos or those made between living persons to take effect during the lifetime of the donor. It supplements the
estate tax by preventing the avoidance of the latter through the device of donating the property during the lifetime of the deceased.
It shall not apply unless and until there is a completed gift. The transfer of property by gift is perfected from the moment the donor knows of the acceptance
by the donee; it is completed by delivery, either actually or constructively, of the donated property, to the donee. Thus, the law in force at the time of the
perfection/completion of the donation shall govern the imposition of the donors tax. [Sec. 11, RR 2-2003]
PURPOSE OR OBJECT
(1) To supplement estate tax;
(2) To prevent avoidance of income tax through the device of splitting income among numerous donees, who are usually members of a family or into
many trusts, with the donor thereby escaping the effect of the progressive rates of income tax.
REQUISITES OF VALID DONATION
(1) A donation is an act of liberality whereby a person (donor) disposes gratuitously of a thing or right in favor of another (donee) who accepts it. [Art. 725,
NCC]
(2)In order that the donation of an immovable may be valid, it must be made in a public document specifying therein the property donated. The acceptance
may be made in the same Deed of Donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. If
the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.
[Sec. 11, RR 2-2003]
Art. 725, Civil Code. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.
The requisites of a valid donation are:
(1) Donative intent of the donor
(2) Capacity of the donor
(3) Delivery of the donated property
(4) Acceptance of the donee
(5) Donation must be in the proper form
(a) Movable: orally or in writing if value is equal to or less than P5,000. Otherwise, it shall be in writing.
(b) Immovable: must be made in a public document.
A gift that is incomplete because of reserved powers becomes complete when either:
(1) the donor renounces the power OR
(2) his right to exercise the reserved power ceases because of the happening of some event or contingency or the fulfillment of some condition, other
than because of the donors death. [Sec. 11, RR 2-2003]
Note: Renunciation by a surviving spouse of his/her share in the CPG or ACP after the dissolution of marriage in favor of the heirs or any other person is
SUBJECT to donors tax. General renunciation by ANY heir is NOT subject to donors tax UNLESS it is specifically and categorically done in favor of IDENTIFIED
heirs to the exclusion of other co-heirs. [Sec. 11, RR 2- 2003]
TUZON V CA
Public officers not personally liable for injuries occasioned by performance of official duty within scope of official authority; erroneous interpretation of
Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects, without just cause, to perform his official duty
may file an action for damages and other relief against the latter, without prejudice to any disciplinary administrative action that may be taken.
In the present case, it has not even been alleged that the Mayor Tuzon's refusal to act on the private respondent's application was an attempt to compel him
to resort to bribery to obtain approval of his application. It cannot be said either that the mayor and the municipal treasurer were motivated by personal spite
or were grossly negligent in refusing to issue the permit and license to Jurado.
It is no less significant that no evidence has been offered to show that the petitioners singled out the private respondent for persecution. Neither does it
appear that the petitioners stood to gain personally from refusing to issue to Jurado the mayor's permit and license he needed. The petitioners were not
Jurado's business competitors nor has it been established that they intended to favor his competitors. On the contrary, the record discloses that the resolution
was uniformly applied to all the threshers in the municipality without discrimination or preference.
The private respondent complains that as a result of the petitioners' acts, he was prevented from operating his business all this time and earning substantial
profit therefrom, as he had in previous years. But as the petitioners correctly observed, he could have taken the prudent course of signing the agreement
under protest and later challenging it in court to relieve him of the obligation to "donate." Pendente lite, he could have continued to operate his threshing
business and thus avoided the lucrocesante that he now says was the consequence of the petitioners' wrongful act. He could have opted for the less obstinate
but still dissentient action, without loss of face, or principle, or profit.
PIROVANO V CIR
FACTS:
De la Rama Steamship Co. insured the life of Enrico Pirovano, who was then its President and General Manager until the time of his death. The Company then
received the total sum of P643,000.00 as proceeds of the said life insurance policies. The Company renounced all its rights on the money in favor of the
decendent's children.
After a case that marred Estefania Pirovano, the guardian and the Company (see Pirovano vs. De la Rama Steamship Co., 96 Phil. 335.), the Company paid in
favor of the children.
The CIR then assessed donees' gift tax against Pirovano and donor's tax against the Company. Pirovano contested with the CIR which she lost and thus
appealed with the CTA.
The CTA held that donees' gift tax were correctly assessed.
ISSUE: Whether Pirovano should pay the donees' gift tax.
RULING:
YES. Pirovano contends that the Court itself declared that the donation was renumenatory and not simple and it was made for a full and adequate
compensation for the valuable services by decedent to the Company; hence, the donation does not constitute a taxable gift under the provisions of Section
108 of the National Internal Revenue Code (old law).
The Court states that it is a donation; that the consideration for the donation was, therefore, the company's gratitude for his services, and not the services
themselves and whether the donation was simple or renumenatory, it was still a gift taxable under the law.
TANGHO V BOARD OF TAX APPEALS
FACTS:
The BIR found that petitioners had an investment in shares issued to them from their family corporation. The CIR regarded these transfers as undeclared gifts
made in the respective years, and assessed against petitioners. After paying the basic tax, petitioners asked for the reassessment stating that each of them
received by way of gift inter vivos, that those who got married were given additional money as propter nuptias and those who did not received it by inter
vivos. Petitioners also contend that the cash donated came from conjugal funds, claiming for exemption.
The CIR refused to revise his original assessment. Upon petition to the CTA, the CTA still upheld the CIR's assessment.
ISSUE: Whether petitioners are liable for tax.
Whether petitioners can claim tax exemptions twice from the conjugal funds.
RULING:
YES. As petitioners failed to pay taxes for the past ten years they are now scarcely in a position to complain if their contentions are not accepted as truthful
without satisfactory corroboration. Any other view would leave the collection of taxes at the mercy of explanations concocted ex post facto by evading
taxpayers, drafted to suit any facts disclosed upon investigation, and safe from contradiction because the passing years have erased all
trace of the truth.
TAXATION 2-CADC
NO. The Court took a look at the Spanish Civil Code of 1889, which was the governing law in this case. The provisions state that the donations of property "by
the husband" from the "donations by both spouses by common consent" differs. The lawful donations by the husband to the common children are valid and
are chargeable to the community property, irrespective of whether the wife agrees or objects thereof. To be a donation by both spouses, taxable to both, the
wife must expressly join the husband in making the gift; her participation therein cannot be implied.
A donation by the husband alone does not become in law a donation by both spouses merely because it involves property of the conjugal partnership.
A donation of property belonging to the conjugal partnership, made during its existence, by the husband alone in favor of the common children, is taxable to
him exclusively as sole donor.
LLADOC V CIR
Facts: Sometime in 1957, M.B. Estate Inc., of Bacolod City, donated 10,000.00 pesos in cash to Fr. Crispin Ruiz, the parish priest of Victorias, Negros
Occidental, and predecessor of Fr. Lladoc, for the construction of a new Catholic church in the locality. The donated amount was spent for such purpose.
On March 3, 1958, the donor M.B. Estate filed the donor's gift tax return. Under date of April 29, 1960. Commissioner of Internal Revenue issued an
assessment for the donee's gift tax against the Catholic Parish of Victorias of which petitioner was the parish priest.
Issue: Whether or not the imposition of gift tax despite the fact the Fr. Lladoc was not the Parish priest at the time of donation, Catholic Parish priest of
Victorias did not have juridical personality as the constitutional exemption for religious purpose is valid.
Held: Yes, imposition of the gift tax was valid, under Section 22(3) Article VI of the Constitution contemplates exemption only from payment of taxes assessed
on such properties as Property taxes contra distinguished from Excise taxes The imposition of the gift tax on the property used for religious purpose is not a
violation of the Constitution. A gift tax is not a property by way of gift inter vivos.
The head of the Diocese and not the parish priest is the real party in interest in the imposition of the donee's tax on the property donated to the church for
religious purpose
ABELLO V CIR
FACTS:
During the 1987 national elections, petitioners, who are partners in the ACCRA law firm, contributed P882,661.31 each to the campaign funds of Senator
Edgardo Angara, then running for the Senate. The BIR then assessed each of the petitioners P263,032.66 for their contributions. Petitioners questioned the
assessment claiming that political or electoral contributions are not considered gifts under NIRC therefore, not liable for donors tax. The claim for exemption
was denied by the Commissioner.
The BIR denied their motion. They then filed a petition with the CTA, which was granted.
On appeal, the CA again held in favor of the BIR.]
ISSUE: Whether the contributions are liable for donor's tax.
RULING:
Yes. The NIRC does not define transfer of property by gift. However, the Civil Code, by reference, considers such as donations. The present case falls squarely
within the definition of a donation. There was intent to do an act of liberality or animus donandi was present since each of the petitioners gave their
contributions without any consideration.
Taken together with the Civil Code definition of donation, Section 91 of the NIRC is clear and unambiguous, thereby leaving no room for construction.
Petitioners contribution of money without any material consideration evinces animus donandi. The fact that their purpose for donating was to aid in the
election of the donee does not negate the presence of donative intent.
Petitioners raise the fact that since 1939 when the first Tax Code was enacted, up to 1988 the BIR never attempted to subject political contributions to donors
tax.
This Court holds that the BIR is not precluded from making a new interpretation of the law, especially when the old interpretation was flawed. It is a wellentrenched rule that "erroneous application and enforcement of the law by public officers do not block subsequent correct application of the statute" (PLDT v.
Collector of Internal Revenue, 90 Phil. 676), "and that the Government is never estopped by mistake or error on the part of its agents" (Pineda v. Court of First
Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. v. Pineda, 98 Phil. 711, 724)
The applicable donors tax rate is dependent upon the relationship between the donor and the donee.(1) If the donee is a stranger to the donor, the tax rate is
500,000
1,000,000
3M
5M
10M
2000
14,000
44,000
204,000
404,000
4%
6%
8%
10%
12%
200,000
500,000
1M
3M
5M
1,0004,000
15%
10M
TAXATION 2-CADC
On August 2, 1973, the Justice Secretary rendered an opinion that ownership rights of Americans over Public agricultural lands, including the right to dispose
or sell their real estate, would be lost upon expiration on July 3, 1974 of the Parity Amendment. Thus, private respondent sold its Basilan land holding to
Siltown Realty Phil. Inc., (Siltown) for P500,000 on January 21, 1974. Under the terms of the sale, Siltown would lease the property to private respondent for 25
years with an extension of 25 years at the option of private respondent.
Private respondent books of accounts were examined by BIR for purposes of determining its tax liability for 1974. This examination resulted in the April 23,
1975 assessment of private respondent for deficiency income tax which it duly paid. Siltowns books of accounts were also examined, and on the basis
thereof, on October 10, 1980, the Collector of Internal Revenue assessed deficiency donors tax of P1,020,850 in relation to said sale of the Basilan
landholdings.
Private respondent contested this assessment on November 24, 1980. Another assessment dated March 16, 1981, increasing the amount demanded for the
alleged deficiency donors tax, surcharge, interest and compromise penalty and was received by private respondent on April 9, 1981. On appeal, CTA upheld
the assessment. On review, CA reversed the decision of the court finding that the assessment was made beyond the 5-year prescriptive period in Section 331
of the Tax Code.
Issue: Whether or not petitioners right to assess has prescribed.
Held: Applying then Sec. 331, NIRC (now Sec. 203, 1997 NIRC which provides a 3-year prescriptive period for making assessments), it is clean that the October
16, 1980 and March 16, 1981 assessments were issued by the BIR beyond the 5-year statute of limitations. The court thoroughly studied the records of this
case and found no basis to disregard the 5-year period of prescription, expressly set under Sec. 331 of the Tax Code, the law then in force.
For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of limitations in
the collection of taxes. Thus, the law or prescription, being a remedial measure, should be liberally construed in order to afford such protection. As a corollary,
the exceptions to the law on prescription should perforce be strictly construed.
EXEMPT GIFTS
In the case of gifts made by a RESIDENT [Sec. 101(A), NIRC]:
(1)Dowries or gifts made on account of marriage and before its celebration or within one year thereafter.
(a) Must be given by parents to their child/children (legitimate, illegitimate, adopted)
(b) ApplicableonlyforthefirstP10,000.
(2) Gifts to or for the use of:
(a) National Government or any entity created by any of its agencies which is not conducted for profit, or
(b) Any political subdivision of the said Government
(3) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust
or philanthropic organization or research institution or organization.
The donee shall be:
(a) a non-stock entity,
(b) paying no dividends,
(c) governed by trustees who receive no compensation, and
(d) devoting all its income, whether students fees or gifts, donations, subsidies or other forms of philanthropy, to the accomplishment and promotion of
the purposes enumerated in its Articles of Incorporation.
A condition for the exemption is that no more than 30% of the gifts shall be used by the donee for administration purposes. In BIR Ruling no. 097-2013 (March
20, 2013), the condition shall be annotated at the back of the TCT/OCT, in case of donation of real property. Failure to comply with this condition will result in
the application of donors tax.
In the case of gifts made by a NONRESIDENT [Sec. 101(B), NIRC]:
(1) Gifts made to or for the use of the
(a) National Government or any entity created by any of its agencies which is not conducted for profit, or
(b) any political subdivision of the said government
2)Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust
or philanthropic organization or research institution or organization, provided not more than 30% of said gifts will be used by such donee for administration
purposes
Note: Donations made to entities exempted under special laws, e.g.:
(1) Aquaculture Department of the Southeast Asian Fisheries Development Center of the Philippines
(2) Development Academy of the Philippines
(3) Integrated Bar of the Philippines
(4) International Rice Research Institute
(5) National Museum
(6) National Library
(7) National Social Action Council
(8) Ramon Magsaysay Foundation
(9) Philippine Inventors Commission
(10)
Philippine American Cultural Foundation
(11)
Task Force on Human Settlement on the donation of equipment, materials and services
PERSONS LIABLE
Every person, whether natural or juridical, resident or non-resident, who transfers or causes to transfer property by gift, whether in trust or otherwise, whether
the gift is direct or indirect and whether the property is real or personal, tangible or intangible. (Sec. 98, NIRC
RETUNS AND PAYMENT OF TAX
Contents of the Donors Tax Return, which shall be made under oath, in triplicate [Donors tax return, BIR Form no. 1800]:
(1) Each gift made during the calendar year which is to be included in computing net gifts;
(2) The deductions claimed and allowable;
(3) Any previous net gifts made during the same calendar year;
(4) The name of the donee;
(5) Relationship of the donor to the donee;
(6) Such further information as the Commissioner may require.
When Filed [Sec. 103(B), NIRC]
(a) Filed within thirty (30) days after the date the gift is made or completed.
(b)The tax due thereon shall be paid at the same time that the return is filed.
.
Where Filed and Paid (Sec. 103(B), NIRC)Unless the Commissioner otherwise permits, it shall be filed and the tax paid to any of the following having
jurisdiction over the place where the donor was domiciled at the time of the transfer:(a) An authorized agent bank(b) The Revenue District Officer(c)
Revenue Collection Officer or(d)Duly authorized Treasurer of the city or municipality, or If there be no legal residence in the Philippines, with the Office
of the Commissioner (presently RDO no. 39 South Quezon City).
In the case of gifts made by a non-resident, the return may be filed with:
(a) The Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer, or
(b) Directly with the Office of the Commissioner.
TAX BASIS
.
The tax for each calendar year shall be computed on the basis of the total net gifts made during the calendar. (Sec. 99, NIRC