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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE
- A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos.
- Donor’s tax shall not apply unless and until there is a completed gift.
- The transfer of property by gift is perfect from the moment the donor knows of the acceptance by the donee.
Donor’s tax is an excise tax imposed on the privilege to transfer property by way of gift inter vivos by any person, resident, or non-resident based on a pure act of liberality without any or less than adequate consideration and without any legal compulsion to give.
What is the nature of a donor’s tax?
Jurisprudence says:
A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos. (Rev. Fr. Lladoc vs. Commissioner of Internal Revenue, G.R. No. L-19201, June 16, 1965)
What transfers are subject to donor’s tax?
The law says:
Article 729. When the donor intends that the donation shall take effect during the lifetime of the donor, though the property shall not be delivered till after the donor’s death, this shall be a donation inter vivos… (Article 729, New Civil Code)
Section 98. Imposition of Tax. –
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(B) The tax 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. (Section 98, National Internal Revenue Code)
As such, donor’s tax shall not apply unless and until there is a completed gift.
The law says:
The transfer of property by gift is perfect from the moment the donor knows of the acceptance by the donee; it is completed by the 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 donor’s tax. (Section 12, R.R. No. 12-2018)
When does an incomplete gift become complete?
The law says:
A gift that is incomplete because of reserved powers, becomes complete either when:
- The donor renounces the power; or
- 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 donor’s death. (Section 12, R.R. No. 12-2018)
Related article: What are the distinctions between a donation inter vivos and a donation mortis causa?
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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