Donor’s Tax

Part I- Theory
1. It is a tax imposed on the gratuitous transfer of property between two or
more person who are living at the time of the transfer.
A. Value added Tax
B. Donor’s Tax
C. Excise Tax
D. Other Percentage Tax

2. For Donor’s tax purposes, who of the following is considered as stranger?

A. Spouse
B. Brother
C. Friends
D. Sister
Reason: A stranger is a person who is NOT:
 Brother/sister
 Spouse
 Ancestor
 Lineal Descendant
 Relative by consanguinity in the collateral line within 4 th civil degree of
relationship.

3. What is the BIR Form for the Donor’s Tax in the Philippines?
A. 1800
B. 1701
C. 1901
D. 2000
Reason: BIR Form 1800 is designated for reporting Donor’s tax in the Philippines
and is the official form required for this type of filing.

4. Which type of donation is generally exempt from Donor’s tax?

A. Donations to religious institutions
B. Direct tax
C. Gift through creation of trust
D. Donations to immediate family members
Reason: Gifts/Donation to educational, charitable and religious institutions are
typically exempt from Donor’s tax.
5. What is the current flat rate for Donor’s tax in the Philippines as of the latest
tax code?
 A. 30%
B. 15%
C. 20%
D. 6%
Reason: Under the TRAIN Law (Tax Reform for Acceleration and Inclusions), The
Philippines now imposes a 6% Donor’s Tax on the total gifts or donations above
250,000 regardless of the relationship between the donor and the done.

6. When is the deadline for filing the Donor’s tax return?

A. Within 15 days after the donation is made
B. Within 30 days after the donation is made
C. Within 60 days after the donation is made
D. Within 30 days before the donation is made
Reason: The Bureau of Internal Revenue (BIR) mandates that Donor’s tax return
must be filed within 30 days after the donation is made to ensure timely reporting
and compliance.

7. Which of the following best describes Donor’s tax?

A. It’s a tax on the estate of a deceased person
B. It’s a tax on income earned by business
C. It’s a tax on transfer of property made without payment
D. It’s a tax on property held by foreign citizens.
Reason: Donor’s tax is levied on the transfer of property from one person to another
without anything in return.

8. Which of the following statements is correct?

Statement 1: Donations to registered charitable institutions are generally
exempt from Donor’s tax.
Statement 2: Donations to friends are automatically exempt from Donor’s tax
if they exceed the limit of 250,000
A. Both statements are correct
B. Both statements are incorrect
C. Only statement 1 is correct
D. Only statement 2 is correct
Reason: Only S1 is correct because registered charitable institutions are typically
exempt from Donor’s tax, while S2 is incorrect because donations to friends are
only exempt up to 250,000, anything above that is taxed at 6%.
 9. A husband and wife, under the regime of conjugal partnership of gains,
decide to transfer a jointly owned property to the wife alone. Is this subject to
Donor’s tax?
A. Yes, fully subject to Donor’s tax
B. Yes, partially subject to Donor’s tax
C. No, because it’s only applicable in a separation of property
D. No, because they are in conjugal partnership
Reason: Under the regime of conjugal partnership of gains, spouses’ own property
collectively during marriage. Any transfer that includes them that involves jointly
owned property is exempt from Donor’s tax.

10.Donor’s tax should be paid by the?

A. Donor
B. Donee
C. Administrator
D. Executor
Reason: The Donor is legally responsible for settling the tax based on the value of
the donation, as per the rules on gift of taxation. The Donee, Administrator, or
Executor does not have the responsibility to pay this tax.

11.Which of the following is not subject to Donor’s tax?

A. Donation Mortis Causa
B. Donation which will take effect upon birth of the donee
C. A creditor who, out of his affection, cancelled the debt of the debtor
D. A parcel of land in U.S.A. donated by a non-resident Filipino to a foreigner
Reason: Donation mortis causa, this type of donation is intended to take effect upon
the death of the donor. It is typically subject to estate tax, rather than donor’s tax.

12.When must acceptance occurs for a donation to be considered valid?

A. During the lifetime of the Donor only
B. During the lifetime of the Donee only
C. During the lifetime of the Donor and the Donee
D. None of the above
Reason: This acceptance is only possible if both the Donor and the Donee are alive.
If the donor passes away before the donee can accept, the donation cannot take
effect, Similarly, if the donee is deceased, they cannot accept the donation.
Therefore, both must be alive for the donation to be valid.

13.What is the tax liability, if any, of a multinational corporation not doing

business in the Philippines that donates shares to a Filipino citizen?
 A. The donation is not subject to donor’s tax
B. The donation is subject to 30% donor’s tax based on net gift
C. The donation is subject to graduated rates based on net gift
D. The donation is subject to 30% donor’s tax based on gross gift
Reason: Donation from multinational corporation that is not doing business in the
Philippines is not subject to Donor’s tax. Donor’s tax generally applies only to
donations made within the country or by the Philippine resident.

14.What is the basis for computing donor’s tax on a gift?

A. Fair Market Value
B. Original Cost
C. Sentimental Value
D. Appreciation rate
Reason: As a rule, the value of the property/right that donated shall be the Fair
Market Value existing at the time when the gift was made.

15.A Filipino citizen donates property located in the Philippines to a foreign

national. Which of the following statements is true regarding Donor’s tax?
A. The donation is exempt from donor’s tax because the donee is a foreigner
B. The donation is subject to donor’s tax because the property is located in
the Philippines
C. The donation is only subject to tax if the done resides in the Philippines
D. The donation is only subject to donor’s tax if the donor is a non-resident
Reason: Donor’s tax applies to the transfer of property located in the Philippines,
regardless of the donee’s nationality. Since the property is in the Philippines, the
donation is subject to Donor’s Tax.

16.What is the effect of not paying donor’s tax in a taxable donation?

A. The donation is automatically voided
B. The donee must pay the tax instead
C. There are no consequences
D. The donor is subject to penalties and interest for late payment
Reason: Failure to file and pay donor’s tax on a taxable donation is subject to
penalties---25% Surcharge(50% if Fraudulent), and 20% Interest.

17.If a donor makes multiple gifts to the same donee in a single year, How is the
Donor’s tax calculated?
A. Each gift is taxed separately based on itd vale
B. The largest gift is taxed, and the others are exempt
C. The total value of all gifts is summed and taxed as a single donation
 D. The gifts are ignored for tax purposes if made within the same month
Reason: When a donor makes multiple gifts to the same donee within a year, the
total value of all gifts is combined, and the donor’s tax is assessed on the
cumulative amount.

18.Contracts without the essential element of consideration are considered as.

A. Void
B. Rescissible
C. Donation
D. Unenforceable
Reason: A donation does not require consideration in the traditional sense.

19.Which statement is correct?

Statement 1: The Donor’s tax rate is 6% for all donations above 250,000 per
year.
Statement 2: The 6% rate applies only if the donee is a family member.

A. Both statements are correct

B. Both statements are incorrect
C. Only S1 is correct
D. Only S2 is correct
Reason: The flat rate of 6% applies to all donations exceeding 250,000 regardless
of the donee’s relationship to the donor.

20.Which of the following best describes a “net gift” in the context of donor’s
tax?
A. The total value of the gift before any deductions.
B. The fair market value of the gift minus any associated liabilities or
obligations
C. The amount received by the donee after paying taxes
D. The gift value is determined by the donor’s original purchase price.
Reason: A “net gift” is defined as the value of the gift after subtracting any
liabilities, such as debts or mortgages associated with the property being donated.
Part II- Problem
Mr. A. made the following donation in the year:
 March 25 1,500,000
 The donation is a car to his nephew during his birthday. It is already owned
by Mr. A. for two years and still has unpaid mortgages amounting to
300,000 which will now be shouldered by his nephew.

1. How much is the the Donor’s Tax of Mr. A.

A. 40,000 C. 50,000
B. 36,000 D. 57,000

Solution:
Gross Gift 1,500,000
Less: unpaid mortgages (300,000)
Net Gift 1,200,000
Less: Exemption (250,000)
Taxable net gift 950,000
Rate 6%
Donor’s Tax payable 57,000
Mr. B. made the following donations for the year:
 Feb. 14 300,00
 June 17 450,000 with 700,000 encumbrance
 Sept. 17 240,000
 Dec. 21 1,400,000 with a 240,000 encumbrance

2. How much is the donor’s tax due on the first donation?

A. 2,000 C. 3,000
B. 4,000 D. 5,000

3. How much is the donor’s tax due on the second donation?

A. 20,700 C. 25,200
B. 22,800 D. 21,600

4. How much is the donor’s tax due on the third donation?

A. 14,400 C. 10,800
B. 9,700 D. 12,400

5. How much is the donor’s tax due on the fourth donation?

A. 60,000 C. 70,200
B. 55,400 D. 69,600

Solutions:
First Donation
Gross Gift 300,000
Less: encumbrance 0
Net Gift 300,000
Less: Exemption (250,000)
Taxable net gift 50,000
Rate 6%
Donor’s Tax payable 3,000
Second Donation
Gross Gift (300,000 † 450,000 750,000
Less: encumbrance (70,000)
Net Gift 680,000
Less: Exemption (250,000)
Taxable net gift 430,000
Rate 6%
Donor’s Tax due 25,800
Donor’s tax paid 3,000
Donor’s tax payable 22,800
Third Donation
Gross Gift (300,000 † 450,000 † 240,000) 990,000
Less: encumbrance (70,000)
Net Gift 920,000
Less: Exemption (250,000)
Taxable net gift 670,000
Rate 6%
Donor’s Tax due 40,200
Donor’s tax paid (3,000†22,800) ( 25,800)
Donor’s tax payable 14,400

Fourth Donation
Gross Gift (300,000 † 450,000†240,000†1,400,000) 2,390,000
Less: encumbrance (310,000)
Net Gift 2,080,000
Less: Exemption (250,000)
Taxable net gift 1,830,000
Rate 6%
Donor’s Tax due 109,800
Donor’s tax paid (3,000†22,800†14,400) (40,200)
Donor’s tax payable 69,600