Whether Donation is Taxable/Nontaxable

Zero Rated/VAT Exempt/VAT Taxable

2 Problems on Donation
2 Problems on VAT
NOTES:
! Allowances and Returns are deductible provided
they are given in the current month or quarter of
sale
! Trade discounts are deductible, while cash
discounts are not
! The only things you can deduct in quarter are:
-vat paid in quarter
-excess of input tax of last quarter
! The only things you can deduct in month are:
-excess of input tax of last month/quarter (if
beg month)

1. S, B, E, T, or L

Vat Exclusive
Tax Base
GSP
Contract Price

2.
Sale
of
service
3.
Import
of
goods, whether
for personal or
business

Gross Receipt

To compute for
VAT

*0.12

Landed Cost

Vat Inclusive
Invoice Price
Sales Invoice
Per Sales Doc
Official
Receipt
Import
Declaration

*3/28

! Any sale of Capital Asset, not subject to VAT:

-not used in business
-not inventory
-not depreciated
VATABLE
Residential Lot
>1,919,500

! Only those collected in Cash (O.R) are Vatable

! Collectibles not subject to VAT; unlike sales of
goods, collectibles subject to VAT
Landed Cost:
Cost of Importation
Incidental Costs:
Customs Duties
Insurance
Storage Fees
Warehousing Cost
Other Customs Charges prior to release
Excise Tax
Presumptive Input Tax (4%)
Input tax allowance given to manufacturers of
sardines, mackerel, milk, refined sugars and
noodles on their purchase of agricultural products
that will form part of the finished goods.
Purchase of Agricultural Products*4%
Transitional Input Tax (2%)
Input tax allowance given to trader or
manufacturer who are becoming liable for VAT for
the first time
! Business JUST RECENTLY been registered
Trans IT = WHICHEVER IS HIGHER
Inventory*2%
Actual Input VAT paid
for inventory
! If silent, Exclusive of VAT
! NON VAT registered cannot avail excess input vat
credit, so if sales is more than 2,000,000, vat
payable should only be based on 2,000,000 even if
there is input tax
DONATION

Residential House and

Lot
>3,199,200

! If commercial Lot or House and Lot, irrespective

of amount, VATABLE
! VAT can also be paid in installment if INITIAL PMT
is not more than 25% of GSP
Initial PMT:
-down pmt
-installment pmt made in yr of sale
-Excess of M assumed by B over cost to S (MC)
-Earners Money
GSP:
-Cash rec By S
-FMV rec By S
-Mortgage assumed by B
-Installment oblig of B
SALES OF SERVICES
Gross Receipts:
-Cash and CE
-Advances
-All constructive receipts

! If the donor dies without knowing the acceptance of

donee, the donation does not take effect (Even if
acceptance was made during lifetime of donor, but not
communicated to him before his death)
! Incapacitated donor
! Donations subject to suspensive condition (happening of
an event)
! Donation mortis causa
! Donation exceeding P5,000 made orally
! Revocable donation subject to estate tax
! P100,000 Donation
! Renunciation of inheritance to all siblings
! Incapacitated donee
VAT Exempt Transactions
1. Sale or importation of: agricultural and marine food
products in their original state, livestock and poultry of a
kind generally used as, or yielding or producing foods for
human consumption; and breeding stock and genetic
materials therefor.
(Additional Note: Even if they have undergone simple
process of preparation or preservation for the market. Eg.
Freezing, drying, salting, broiling, roasting, smoking or
stripping. Polished and/or Husked rice, corn grits, raw

cane sugar and molasses and ordinary salt and copra

shall be considered in their original state)
2. Sale or importation of fertilizers; seeds, seedlings
and fingerlings; fish, prawn, livestock and poultry
feeds, including ingredients, whether locally
produced or imported, used in the manufacture of
finished
feeds.
(except specialty feeds for race horses, fighting
cocks, aquarium fish, zoo animals and other
animals generally considered as pets).
3. Importation
of personal
and
household
effects belonging to the residents of the
Philippines returning from abroad and nonresident citizens coming to resettle in the
Philippines: Provided, That such goods are
exempt from customs duties under the Tariff and
Customs Code of the Philippines;
4. Importation of professional instruments and
implements, wearing apparel, domestic animals, and
personal household effects.
(Additional Note: Should belong to persons coming to
settle in the PH, for their own use and NOT FOR SALE,
BARTER or EXCHANGE.)
5. Services subject to percentage tax under Title V;
6. Services by agricultural contract growers and
milling for others of palay into rice, corn into grits
and sugar cane into raw sugar;
7. Medical,
dental,
hospital
and
veterinary
services except those rendered by professionals;
8. Educational services rendered by private
educational institutions, duly accredited by
DEPED, CHED, the TESDA and those rendered
by government educational institutions;
9. Services rendered by individuals pursuant to an
employer-employee relationship;
10. Services rendered by regional or area
headquarters established in the Philippines by
multinational corporations which act
as
supervisory, communications and coordinating
centers for their affiliates, subsidiaries or
branches in the Asia-Pacific Region and do not
earn or derive income from the Philippines;
11. Transactions which are exempt under international
agreements to which the Philippines is a signatory or
under special laws, except those under Presidential
Decree No. 529 (Petroleum Exploration Concessionaires
under the petroleum act of 1949.)
12. Sales by agricultural cooperatives duly registered
with the Cooperative Development Authority to
their members as well as sale of their produce,
whether in its original state or processed form, to
non-members; their importation of direct farm
inputs, machineries and equipment, including
spare parts thereof, to be used directly and
exclusively in the production and/or processing of
their produce.

13. Gross receipts from lending activities by credit or

multi-purpose cooperatives duly registered with the
Cooperative Development Authority
(Additional Note: whose lending operation is LIMITED
TO THEIR MEMBERS.)
14. Sales by non-agricultural, non-electric and noncredit cooperatives duly registered with the
Cooperative Development Authority: Provided,
That the share capital contribution of each
member does not exceed Fifteen thousand pesos
(P15,000) and regardless of the aggregate capital
and net surplus rateably distributed among the
members;
15. Export sales
registered;

by persons

who

are not VAT-

16. Sale of real properties not primarily held for sale to

customers or held for lease in the ordinary course of trade
or business,
(Additional Note: RESIDENTIAL: Lot less than or equal
to P1,919,500. House and Lot and other residential
dwellings less than or equal to P3,199,200.
COMMERCIAL: Vattable regardless of selling price)
17. LEASE of a RESIDENTIAL UNIT with a monthly
rental not exceeding P12,800 regardless of the amount of
aggregated rentals received by the lessor during the
year.
18. Sale, importation, printing or publication of books and
any newspaper, magazine, review or bulletin which
appears at regular intervals with fixed prices for
subscription and sale and which is not devoted principally
to the publication of paid advertisements;
19. Sale, importation or lease of passenger or cargo
vessels and aircraft, including engine, equipment and
spare parts thereof for domestic or international transport
operations;
20. Importation of fuel, goods and supplies by persons
engaged in international shipping or air transport
operations;21. Importation of life-saving equipment, safety and
rescue equipment and communication and navigation
safety equipment, steel plates and other metal plates
including marine-grade aluminum plates used for shipping
transport operations; Provided, that the exemption shall
be subject to the provisions of Sec. 19 of RA 9295,
otherwise known as The Domestic Shipping
Development Act of 2004 (RR 4-2007).
22. Importation of capital equipment, machinery and
spare parts, life-saving and navigational safety
equipment, steel plates and other metal plates including
marine-grade aluminum plates used in the construction,
repair, renovation or alteration of any merchant marine
vessel operated or to be operated in the domestic trade.
Provided, that the exemption shall be subject to the
provisions of Sec. 19 of RA 9295, otherwise known as
The Domestic Shipping Development Act of 2004 (RR
4-2007).
23. Services of banks, non-bank financial intermediaries
performing quasi-banking functions, and other non-bank

financial intermediaries (i.e.; money changers and

pawnshops); and
24. Sale or lease of goods or properties or the
performance of services other than the transactions
mentioned in the preceding paragraphs, the gross annual
sales and/or receipts do not exceed the amount of
P1,919,500;
25. Vat on Purchase of SPECIFIED Goods and Services
by a Senior Citizen and PWD.
26. (Additional) Transport
international carriers.

of

Passengers

by

Summary
1. Export sales of non-VAT registered business
2. Agricultural and marine food products in their
original state
3. Agricultural and marine food production inputs
4. Agricultural contract growers services
5. Transport of passengers by international carriers
6. Importation of supplies by international transports
7. Importation of personal and household effects and
instruments
8. Medical services, except professional services
9. Employees services
10. Inventors sales of invented products
11. Books, Newspapers, Magazines, etc
12. Private educational institutions accredited by
Government
13. Regional or area headquarters
14. Transactions under international agreement or special
laws
15. Sales of duty registered cooperatives
16. Sale of low-cost and socialized housing

1. Sales to Export-Oriented enterprises which

the Code considers as export sales at the
level of the supplier of raw materials or
packaging materials.
(Additional Note:
the export-oriented
enterprises export sales must exceed 70%
of total annual production.)
2. Sales of gold to the Bangko Sentral ng
Pilipinas.
3. Sales considered as exportation of goods
under a special law such as Executive
Order No. 226 (Omnibus Investments Code
of 1987) and Republic Act No. 7916 (PEZA
Law)
4. (Additional) Sale of goods, supplies,
equipment and fuel and/or Services
rendered
to
persons
engage
in
international shipping or international air
transport service. (Includes leases of
property for use for Services)
5. (Additional) Sale of raw materials or
packaging materials to a non-resident
buyer for delivery to a resident local
export-oriented enterprise to be used in
further processing in the PH of the said
buyers goods and paid for in acceptable
foreign currency and accounted for in
accordance with the rules and regulations
of the BSP.
c. Foreign currency denominated sales of goods.
d. Sales/services to entities, the exemption of
which, under a special law or an international
agreement
with
the
Government
of
the
Philippines, effectively zero rates such sales.
Zero-rated Transactions Sale of Services
(Additional)
a. Services
performed
in
the
Philippines
(processing, manufacturing, or repacking of
goods) for other persons doing business
outside the Philippines paid for in foreign
currency.
b. Services by subcontractors and/or contractors
in further processing for an enterprise whose
export sales exceed 70% of total annual
production.
c. Transport of passengers and cargo by air and
sea vessels from the Philippines to a foreign
country
d. Sale of power or fuel generated through
renewable sources of energy.

17. Lease of low-cost residential units

! Transactions based on Probational Receipts
! BOI-registered are VAT exempt
Zero-rated Transactions
a. Sale of goods which are
VAT-registered resident to
Philippines (Export Sales).
b. Sale of goods which
"Deemed" Export sales by a
to certain entities who are
Philippines:

directly shipped by a
a place outside the
are considered as
VAT-registered person
also residents of the

Requisites for Zero Rated EXPORT SALES

The business is
1. VAT-registered
2. Engaged in sake and actual shipment
from Philippines to foreign
3. Required to present certification that
payments are made in acceptable
foreign currency
If satisfied,
1. entitled for refund
2. Entitled to tax credit cert
Summary

1.
2.
3.
4.

Export Sales
Foreign currency denominated sales
Effectively zero-rated sales
Gross receipts of Domestic Corporation for
foreign sales of goods or services

Export Sales
1. Actual sales to foreign
2. Constructive exportation
a) Sale to export-oriented enterprise
b) Considered export sales under 1987 OIC
3. Sale of gold to BSP
4. Sales to international shipping or air
transporting companies
Actual Exportation is evidenced by:
-Philippine Port F.O.B value (from invoices)
-Bills of lading
-Inward letters of credits
-Certification of inward payments in
acceptable foreign currency
-Landing cert
Constructive Export
Local sales of goods and properties to:
1. Sale to export-oriented enterprises
2. Sale of goods, supplies, equipment and fuel
to persons engaged in international
shipping/transport operations
3. Foreign currency denominated sales
4. Sales to tax-exempt persons or entities
(effective zero-rated sales)
Considered export sales in 1987 OIC and special
laws
1. Sales to bonded manufacturing warehouses
of export-oriented manufacturers
2. Sales to export processing zones
3. Sales to foreign military bases, diplomatic
missions and/or other instrumentalities
granted with tax immunities, of locally
manufactured, assembled or repacked
products whether paid for foreign
currency or not
4. Sales to nonresident Filipinos and
balikbayans paid for in convertible
foreign currency inwardly remitted through
Philippine banking system
5. Commission income on export sales of
export registered trader
6. Consigned goods actually sold by foreign
consignees
! If EXPORT SALES is SAME currency as home, VAT
EXEMPT
Effectively Zero-rated Sales
Local sale of goods and properties to entity
granted indirect tax exemption:
1. Sale of power or fuel generated through
renewable sources of enercgy:
a) Biomass, solar wind, hydropower,
geothermal ocean energy
b) Energy sources using technologies: fuel
cells and hydrogen fuels

2. Sales and services to entities granted

indirect tax exemption under special
laws/international agreement:
a) Enterprises registered with SBMA - Subic
Bay Metropolitan Authority
b) Enterprises registered with PEZA Philippine Economic Zone Authority
c) Asian Development Bank
d) International Rice Research Institute (IRRI)
e) United States Agency for International
Development
f) World Health Organization
g) U.S Navy Supply Depot, Department of
Navy
h) International Labor Organization
! Export sales of PEZA and other ecozoneregistered enterprises enjoying preferential tax
rate of 5% in lieu of all taxes are VAT-EXEMPT
DONORS TAX
Tax Exempt/Non-Taxable/Allowed deductions
Available to ALL donors (1. Resident or citizen, or 2.
Non-resident, not a citizen)
1. 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.
(Exempt and deductible)
2. Gifts in favor of an educational, 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. (Exempt and
deductible)
a. Requisites for donors tax exemption: the
done organization:
i. Must be an accredited non-stock and
non-profit organization
ii. Shall not use more than 30% of the gifts
received for admin purposes
iii. Governed
by
trustees
with
no
compensation
iv. Does not pay dividends
v. Devotes all of its revenue to the
accomplishment and promotion of its
purposes enumerated in articles of
incorporation
3. Encumbrances mortgage or indebtedness on
the property which is assumed by the done shall
be a deduction to gross gift. (eg. Mortgage,
security interest, costs of rights, accrued and
unpaid taxes. (Deduction only(?))
4. Diminution decrease in the value of property
donated as a result of a condition made by the
donor to the done to give a portion of the donated
property to another person. (In GENERAL, the
diminution would still be taxable, EXEMPT when
given to a tax-exempt donee, according to
Valencia, roxas, see page 349)

5. (Additional, and according to BIR) Tax Credit for

Donor's Taxes Paid to a Foreign Country (Exempt
and deductible as tax credit)
Available to a resident or citizen donors ONLY:
1. Dowry or donation on account of marriage if:
a. Made before the celebration of marriage
or within one year after the celebration of
marriage
b. Made by a natural or adopting parents
c. To legitimate, recognized natural or
adopted children
d. To the extent of the first P10,000.
(Exempt and deductible)
Note: Each spouse may claim a separate
exemption in case of their childs marriage if they
donated a conjugal property

Philippines (Sec.
amended)

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

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 said gifts will be used by
such donee for administration
purposes

B. In the Case of Gifts Made by a

Nonresident not a Citizen of the

NIRC

as

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

Gifts
in
favor
of
an
educational and/or charitable,
religious, cultural or social
welfare
corporation,
institution, accredited nongovernment
organization,
trust
or
philantrophic
organization
or
research
institution or organization,
provided not more than 30%
of said gifts will be used by
such donee for administration
purposes

A. In the Case of Gifts made by a Resident

(Sec. 101 (A), NIRC as amended)
Dowries or donations made on
account of marriage before its
celebration or within one year
thereafter, by parents to each
of their legitimate, recognized
natural, or adopted children to
the extent of the first P10,000

(B),

NONTAXABLE DONATION

101

C. Tax Credit for Donor's Taxes Paid to a

Foreign Country (Sec. 101 (C), NIRC as
amended)

In General. - The tax imposed

by this Title upon a donor who
was a citizen or a resident at
the time of donation shall be
credited with the amount of
any donor's tax of any
character
and
description
imposed by the authority of a
foreign country.

Limitations on Credit. - The

amount of the credit taken
under this Section shall be
subject to each of the
following limitations:

- The amount of the credit in

respect to the tax paid to any
country shall not exceed the same
proportion of the tax against which
such credit is taken, which the net
gifts situated within such country
taxable under this Title bears to
his
entire
net
gifts;
and
- The total amount of the credit
shall not exceed the same

proportion of the tax against

which such credit is taken, which
the donor's net gifts situated
outside the Philippines taxable
under this title bears to his entire
net gifts.

b) Religious
c) Cultural
or
corporation

social

welfare

d) Accredited NGOs
e) Trust or philanthropic

VOID DONATIONS

f)

1. Donation between persons who were

guilty of adultery or concubinage at
the time of donation
2. Donation between persons found
guilty of the same criminal offense
in consideration thereof
3. Those made to a public officer or his
wife, descendants and ascendants,
by reason of his office.
4. Donations made to incapacitated
persons shall be void, though
simulated under the guise of
another contract or through a
person who is interposed

Research institution or organization

Condition: Not more than 30% of the said

gifts shall be used by the above
institutions
or
organization
for
administration purposes, and paying
dividends
5. Political contributions duly reported
to the COMELEC
6. Under the special laws, donations
given to the following organizations
are exempt from donors tax, but
not limited to the following:
a) Ramon
Magsaysay
Foundation

Award

b) Rural Farm School

5. Every donation between husband
and wife during the marriage shall
be void

c) Philippine Red Cross

d) Philippine Inventors Commission

TAX EXEMPT DONATIONS

FOR RESIDENTS AND NONRESIDENTS
1. Dowries or gifts to the extent of first
P10,000 made by residents to their
children on account of marriage
given before or within 1 year
thereafter
2. The first P100,000 of the aggregate
net gifts to relatives every year
3. Donations
to
the
Government
and
its
subdivisions

e) Philippine-American
Foundation
f)

a) Educational and/or charitable

Rice

Research

g) Integrated Bar of the Philippines

h) Development
Philippines

Academy

of

the

i)

National Museum, National Library,

and the archives of the National
Historical Institute

j)

National Commission
and the Arts

National
political

4. Donations given to the following

institutions or organizations as
provided by the NIRC:

International
Institute

Cultural

of Culture

k) National Social Action Council

l)

National
Water
Management Fund

Quality

Development
Philippines

the

u) Museum
Costumes

n) Task Force on Human Settlement

v) University of the Philippines

o) Tubattaha Reefs Natural Park

w) Philippine Normal University

p) Intramuros Administration

x) Peoples Survival Fund

q) Girls Scout of the Philippines

y) Peoples Television Network, Inc.

r) Irrevocable donations of Americanowned private lands acquired

under
the
Laurel-Langley
Agreement in favor of the National
Government or any of its political
subdivision or any charitable or
scientific organization with a
nationwide scope of activities and
widely recognized as such as the
Philippine National Red Cross,
Community Chest, Boy Scouts of
the Philippines, and the Philippine
Heart Foundation

z) Donations of foreign origin to

international civic organizations, or
institutions for civic, religious or
charitable purposes

t) Aqua-culture Department of the

Southeast
Asian
Fisheries

the

of

m) Southern Philippines Development

Administration

s) Aurora Pacific Economic Zone and

Freeport Authority

of

Center

Philippine

! Court ordered transfer are not gifts

! Court-ordered payments out of the
estate of an incompetent or a minor for
the
benefit
of
relatives
whom
incompetent or minor is not legally
obligated to support are gifts