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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
- Net gift shall mean the net economic benefit from the transfer that accrues to the donee.
- The donor’s tax rate for each calendar year shall be 6% computed on the basis of the total gifts.
- For gifts not over Php250,000.00, these are exempt from donor’s tax rates. On the other hand, gifts over Php250,000.00 are subject to 6% donor’s tax rate whether given by a relative or a stranger.
Net gift shall mean the net economic benefit from the transfer that accrues to the donee.
The law says:
For purposes of the donor’s tax, “NET GIFT” shall mean the net economic benefit from the transfer that accrues to the donee. Accordingly, if a mortgaged property is transferred as a gift, but imposing upon the done the obligation to pay the mortgage liability, then the net gift is measured by deducting from the fair market value of the property the amount of mortgage assumed. (Section 12, R.R. No. 12-2018)
Accordingly, if the mortgaged property is transferred as a gift, but imposing upon the donee the obligation to pay the mortgage liability, then the net gift is measured by deducting from the fair market value of the property the amount of mortgage assumed.
What is the Donor’s Tax rate?
The donor’s tax rate for each calendar year shall be 6% computed on the basis of the total gifts in excess of Php250,000.00 exempt gifts made during the year, regardless of whether the donation is made to a relative or to a stranger.
The law says:
SEC. 99. Rates of Tax Payable by Donor. –
(A) In General. – The tax for each calendar year shall be six percent (6%) computed on the basis of the total gifts in excess of Two hundred fifty thousand pesos (₱250,000) exempt gift made during the calendar year. (Section 99, National Internal Revenue Code, as amended by TRAIN Law)
It is important to note that the application of the rate is imposed on donations on or after the effectivity date of the TRAIN Law which is January 1, 2018. (Section 11, R.R. No. 12-2018)
As such, the summary of donor’s tax rates are as follows:
For gifts not over Php250,000.00, these are exempt from donor’s tax rates. On the other hand, gifts over Php250,000.00 are subject to 6% donor’s tax rate whether given by a relative or a stranger.
How is net gift computed?
The donor’s tax for each calendar year shall be computed on the basis of the total net gifts made during the calendar year in accordance with the tax rate prescribed in the law.
The tax imposed on the cumulative basis during the calendar year, that is the 6% rate is applied on the aggregate net gifts during the calendar year, but donor’s taxes paid during the calendar year are credited against the donor’s tax due on the latest donation during the same calendar year. Thus, all donations made in one calendar year by a donor are taxed at the same time rate as if they had been made at one time. A new computation of donor’s tax is made for gifts made by the donor in another calendar year.
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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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