What is a Donor's Tax?

Donor’s or Gift Tax is a tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer. 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.

Donor’s or Gift Tax- is tax imposed on the privilege of transmitting property by and from a living person to another by way of donation. 

What is the nature of a donor's tax?

The donor’s tax is not a property tax, but is a tax imposed on the transfer of property by way of gift inter vivos. (Lladoc vs. Commissioner of Internal Revenue, L-19201, June 16, 1965; 14 SCRA, 292)

What are the purposes of a donor's tax?

(a) To supplement estate tax;

(b) 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.

What law shall govern the imposition of the donor's tax?

The donor’s tax 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 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. [Sec 11, RR 2-2003]

Who are subject to donor's tax?

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.