TAXATION LAW REVIEWER

Donor’s Tax
The Law that governs the imposition of donor’s tax
The donor’s tax is not a property, but a tax imposed on the transfer of property by
way of gift inter vivos.
The donor’s tax shall 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 done.
It is completed by the delivery, either actually or constructively, of the donated
property to the done.
Thus, the law in force at the time of the perfection/completion of the donation shall govern
the imposition of the donor’s tax.
Renunciation by the surviving spouse of his/her share in the conjugal partnership or absolute
community after the dissolution of the marriage in favor of the heirs of the deceased spouse
or any other person/s is subject to donor’s tax.
General Renunciation by an heir, including the surviving spouse, of his or her share in the
hereditary estate left by the decedent is not subject to donor’s tax, unless specifically and
categorically done in favor of identified heir/s to the exclusion or disadvantage of the other
co-heirs in the hereditary estate.
Note:
The general law is the donor’s tax of 30% of the net gift is imposed on donations made in a
stranger.
A stranger is anyone who is not:
A brother/ sister (Whether by whole or half-blood);
Spouse
Ancestor and
Lineal descendant, or
Relative by consanguinity in the collateral line within the fourth degree of
relationship)
Donation above P100 made to a “ non-stranger” is subject to a donor’s tax at rates provided
in the Tax Code.
DONATIONS OR GIFTS AS TAX DEDUCTIONS
DONEES
The Government of the Philippines or any of its agancies or any political subdivision
therof exclusively for public purposes; or
Accredited domestic corporation or associations organized and operated exclusively
for religious charitable scientific, youth and sports development, cultural or
educational purposes or for the rehabilitation of veterans, or to social welfare
institutions, or to non-government organization (Sec 34 (H)(1) NIRC).

PARTIAL DEDUCTIBILITY

An amount not in excess of ten percent (10%) in the case of an individual donor; and
five percent (5%) in the case of a corporate donor.
This is based on taxpayer’s taxable income derived from trade, business or profession.
FULL DEDUCTIBILITY
DONEES
Donations to Government of the Philippines or to any of its agencies or political
subdivisions including GOCC’s, exclusively to finance, to provide for, or to be used in
the undertaking priority activities in education, health, youth and sports
development, human settlements, science and culture, and in economic
development according to National Priority Plan determined by National Economic
and Development Authority(NEDA), in consultation with appropriate government
agencies, including its regional development councils and private philanthropic
persons and institutions.
Donations to certain foreign institutions or international organizations in pursuance
of or in compliance with agreements, treaties, or commitments entered into the
Government of the Philippines and the foreign institutions or international
organizations or in pursuance of special laws.
VATABILITY
Donations in kind from abroad will be subjected to VAT upon arrival in the
Philippines. Section 107(A) of the NIRC of 1997, as amended states that there shall be
levied, assessed and collected on every importation of goods a VAT based on the
total value used by Bureau of Customs.
The tax to be paid by the importer prior to the release of such foods from customs
custody. (e.g. Donations to DSWD and NDRRMC, it is Philippine government who will
pay the VAT)
 Donation of goods or properties originally intended for sale or for use in the course
of trade or business. Under Section 106(B) of the NIRC, transfer, use of consumption
not in the course of business of goods or properties originally intended for sale or for
use in the course of business is a transaction deemed sale. (e.g. donation made by a
manufacturing company of goods they manufactured for sale a subject 12% VAT)
EXEMPT DONATIONS
Gifts made to or for the use of the National Government or any entity created by any
of its agencies which is not conducted for profit, or to any political subdivision of the
said Government, including Government Owned and/or Controlled Corporations
(GOCC’s), National Disaster Risk Reduction and Management Council (NDRRMC) and
Department of Social Welfare and Development (DSWD).
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 provided not more
than 30% of the said gifts shall be used by the donee for administrative purposes.
Gifts to other entities exempted under special laws like Philippine National Red Cross
and International Rice Research Institute.
“NET GIFT “ shall mean the net economic benefit from the transfer that accrues to the done.
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.
COMPUTATION OF THE DONOR’S TAX
The computation of the donor’s tax is on a cumulative basis over a period of one (1)
calendar
year.
Husband and wife are considered as separate and distinct taxpayer’s for purposes of
the donor’s tax
If what was donated is a conjugal or community property and only the husband
signed the deed of donation there is only one donor for donor’s tax purposes,
without prejudice to the right of the wife to question the validity of the donation
without her consent pursuant to the pertinent provisions of the Civil Code of the
Philippines and the Family Code of the Philippines.
The transfer of the total net gifts made during the calendar year not exceeding P 100,
000 shall not be subject to tax.
The entire value of the net gifts for each calendar year is divided into brackets
pursuant to NIRC.
TIME AND PLACE OF FILING AND PAYMENT
 The donor’s tax return shall be filed within thirty (30) days after the date the gift is
made of completed and the tax due thereon shall be paid at the same time that the
return is filed.
Unless the Commission otherwise permits, the return shall be filed and the tax paid
to an authorized agent bank the Revenue District Officer, Revenue Collection Officer
or duly authorized Treasurer of the city or municipality where the donor was
domiciled at the time of the transfer, or if there be no legal residence in the
Philippines, with the Office of the Commissioner.
REMEDIES
(Section 202-231)
Definition of terms
Assessment
Is the official action or process undertaken by the BIR in determining the amount of
tax due from a taxpayer
A formal notice to the taxpayer stating that the amount thereon is due as a tax
containing a demand for the payment thereof.
It contains not only a computation of the tax liabilities but also demands for payment
within a prescribed period.
It should state the facts and the law on which the assessment is based, otherwise the
same is void.
Is deemed made when the notice to that effect is released, mailed or sent to te
taxpayer for the purpose of giving effect to the assessment.
JEOPARDY ASSESSMENT
Is a tax assessment made by an authorized Revenue Officer without the benefit of a
complete or partial audit, in light of the RO’s belief that the assessment and
collection of a deficiency tax will be jeopardized by delay caused by the Taxpayer’s
failure to:
1. Comply with audit and investigation requirements to present his books of
accounts and/or pertinent records, or
2. Substantiate all or any of the deductions, exemptions or credits claimed in his
return.
SELF-ASSESSMENT
One in which the tax is assessed by the taxpayer himself. The amount of the tax
assessed is reflected in the tax return is filed by him and the tax assessed is paid at
the time he files the return.
 DEFIENCY ASSESSMENT
An assessment made by the tax assessor whereby the correct amount of the tax is
determined after an examination or investigation is conducted. The liability is
determined and is therefore assessed for the following reasons:

1. The amount ascertained exceeds that which is shown as tax by the taxpayer in his
return;
2. No amount of tax is shown in the return; or
3. The taxpayer did not file any return at all.
ILLEGAL AND VOID ASSESSMENT
An assessment wherein the tax assessor has no power to act all.
ERRONEOUS ASSESSMENT
An assessment wherein the assessor has the power to assess but errs in the exercise
of that power
PROCEDURE IN THE ISSUANCE OF A DEFICIENCY TAX ASSESSMENT
PRELIMINARY ASSESSMENT NOTICE (PAN)
Is a communication issued by the BIR (Regional Assessment Division), or any other
concerned BIR Office informing a Taxpayer who has been audited of the findings of
the Revenue Officer following the review of these findings.
If after evaluation made by the Commissioner or his duly authorized representative, it
is determined that there exists sufficient basis to assess the taxpayer for any
deficiency tax or taxes, the said Office shall issue to the taxpayer a Preliminary
Assessment Notice (PAN) for the proposed assessment.
If the Taxpayer disagrees with the findings stated in the PAN he shall then have
fifteen (15) days from his receipts of the PAN to file a written reply contesting the
proposed assessment or
If the taxpayer fails to respond within fifteen (15) days from date of receipt of the PAN,
he shall be considered in default, in which case, a Formal Letter of Demand and Final
Assessment Notice (FLD/FAN) shall be issued calling for payment of the taxpayer’s
deficiency tax liability, inclusive of the applicable penalties.
Is mandatory and should be issued prior to the issuance of FLD/FAN except when any
of the circumstances enumerated under Section 228 of the NIRC is present. Non-
observance of which would render any FLD/FAN issued void for lack of due process
Exception to the Prior Issuance of a Preliminary Assessment Notice (PAN)
Pursuant to Section 228 of the Tax Code, as amended, a PAN shall not be required in any
of the following cases.
 1. When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax appearing on the face of the tax return filed by the taxpayer,
or
2. When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
3. When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax liabilities
for the taxable quarter r quarters of the succeeding taxable year, or
4. When the excise tax due on excisable articles has not been paid, or
5. When an article locally purchased or imported by an exempt person, such as, but not
limited to vehicles, capital equipment, machineries and spare parts, has been sold,
traded or transferred to non-exempt persons
In the above-cited cases, a Final Letter of Demand (FLD) Final Assessment Notice (FAN)
shall be issued outright.
Final Assessment Notice (FAN)
The Formal Letter of Demand and Final Assessment Notice (FLD/FAN) shall be
issued by the Commissioner or his duly authorized representative.
The FLD/FAN calling for payment of the taxpayer’s deficiency tax or taxes shall
state the facts, the law, rules and regulations or jurisprudence on which the
assessment is based, otherwise, the assessment shall be void.
Is a declaration of deficiency taxes issued to a Taxpayer who fails to respond to a
Pre-Assessment Notice within a prescribed period of time, or whose reply to the
PAN was found to be without merit
Requisites for Validity of Assessment (FLD/FAN)
1. There must have been issued a preliminary assessment notice (PAN) unless it
excepted under Section 228 of the NIRC, as amended,
2. It must have been issued within the prescriptive period set by law, and
3. The letter demand calling for the payment of the tax deficiency shall state the facts,
the law and regulations, or jurisprudence on which the assessment is based
Protesting a Deficiency
A Taxpayer must be given an opportunity, if he/she/it so chooses, to explain his/her/his
objection to an assessment and present necessary document in support of his/her its
objection, before a Final Decision on Disputed Assessment (FDDA) is issued.
Reply/Protest against the Preliminary Assessment (PAN) must be files within fifteen
(15) days from receipt of the PAN, however, the same is optional and not mandatory
Within thirty (30) days from receipt of the FLD/FAN, the taxpayer shall either
 1. Accept the assessment, fully or partially, and pay the amount due on the
assessment accepted, or
2. Protest (Administrative Protest Proper) the assessment fully or partially by filing
either of the following remedy, and the filing of one precludes the filing of the
other remedy
A. Request for Reconsideration if the taxpayer is not going to submit any
other additional evidence or documents and merely pleas for re-evaluation
of an assessment, or
B. Request for Reinvestigation on the basis of newly discovered evidence or
if the taxpayer intends to present or submit additional evidence or
documents.
Content of the Protest:
1. The nature of the protest (whether it is one for reconsideration or reinvestigation)
specifying newly-discovered or additional evidence he intends to present if it is for
reinvestigation.
2. The date of the assessment notice; and
3. The applicable law, rules and regulations or jurisprudence on which his protest is
based.

Protest by Way of a Request for Reinvestigation

The taxpayer shall submit at the relevant supporting documents in support of
his/her/its protest within sixty (60) days from the date of the filing of the taxpayer’s
letter of protest
 The term “relevant supporting documents” should be understood as
those documents necessary to support the legal basis in disputing a
tax assessment as determined by the taxpayer. The BIR can only
inform the taxpayer to submit additional documents but it cannot
demand what type of supporting documents should be submitted.
Otherwise, the BIR may require the taxpayer to produce documents
that a taxpayer cannot submit thus putting the taxpayer at the mercy
of the BIR

Evaluation of the protest shall be based exclusively on the documents within this
period, and no further documents shall be accepted after the expiration of the said
period.
The assessment shall become final and executory fails to submit the relevant
supporting documents within this 60 days period, he/she/it shall be barred in
disputing the correctness of the assessment issued, and thereafter, a Collection
Letter as well as other collection remedies such as but not limited to garnishment
warrant of distraint (personal property)and levy (real property) shall be issued
against the taxpayer.