GUIDE NOTES ON DONORS TAX Diaz; (2) 1/3 was given to their grandson, Angel Diaz; and

(3) the last 1/3 was reserved and retained by the Gavino for
DONORS TAX their support. In dispute was the nature of the deed of
donation, i.e., whether it was inter vivos or mortis causa.
Q: What is donors tax?
[NOTE: See the text of the decision for an extensive
* Donors tax is a tax imposed upon the right or privilege to differentiation between donations inter vivos and mortis
gratuitously transfer property, real or personal, tangible or causa.] Relevant portion of the decision reads:
intangible, between two or more persons who are living at
the time of transfer. If the donation is made in contemplation of the donor's
death, meaning that the full or naked ownership of the
** In the 1940s, Enrico Pirovano was President and General donated properties will pass to the donee only because of
Manager of de la Rama Steamship Co. The corporation the donor's death, then it is at that time that the donation
insured the life of Pirovano with various insurance takes effect, and it is a donation mortis causa which should
companies designating itself as the beneficiaries of said be embodied in a last will and testament (Bonsato vs. Court
policies. Pirovano died. The corporation received a certain of Appeals, 95 Phil. 481).
sum as proceeds of the life insurance policies. Such
amount was later donated by the corporation to Pirovanos But if the donation takes effect during the donor's lifetime or
minor children. Ultimately, the issue was whether the sum independently of the donor's death, meaning that the full or
was subject to donors tax. According to Pirovano v. CIR, a naked ownership (nuda proprietas) of the donated
donation made by a corporation to the heirs of a deceased properties passes to the donee during the donor's lifetime,
officer out of gratitude for his past services is subject to the not by reason of his death but because of the deed of
donees gift tax. [Pirovano v. CIR, GR No. L-19865, 31 July donation, then the donation is inter vivos (Castro vs. Court
1965.] of Appeals, L-20122, April 28, 1969, 27 SCRA 1076).

Q: Differentiate between a donation inter vivos (subject to The Supreme Court held that it was a donation inter vivos,
donors tax) and a donation mortis causa (or a transfer in upon examination of the warranty, acceptance, and
contemplation of death, subject to estate tax). reservation clauses of the deed. Particularly as regards the
acceptance clause, the Supreme Court said:
* In the case of Alejandro v. Geraldez, the Gavino Spouses
owned a parcel of land which, in 1949, was the subject The acceptance clause is another indication that the
matter of a deed of donation. As a result of the execution of donation is inter vivos. Donations mortis causa, being in the
said deed, the parcel of land was divided into three equal form of a will, are never accepted by the donees during the
parts: (1) 1/3 was donated to their granddaughter, Andrea donors' lifetime. Acceptance is a requirement for donations

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 1

 inter vivos. [Alejandro v. Geraldez, GR Nos. L-33849 & L- (3) That the transfer should be void if the transferor should
33968, 18 Aug. 1977.] survive the transferee.

** In the case of Gestopa v. CA, Diego Danlag owned six Essentially ruling that all the above characteristics were not
parcels of land. With the consent of his wife, he executed a present, the Supreme Court categorized the Donation as
deed of donation over said parcels of land in favor of his one inter vivos, and stated that the prohibition to alienate in
illegitimate child, Mercedes Danlag. Controversy arose as said Donation did not necessarily defeat the inter vivos
to whether the deed of donation was inter vivos or mortis character of the donation. [Austria-Magat v. CA, GR No.
causa. The Supreme Court held that it was a donation inter 106755, 1 Feb. 2002.]
vivos for the following reasons: (1) the granting clause of
the deed showed that Diego donated the properties out of **** In del Rosario v. Ferrer, in August 1968, the Gonzales
love and affection for Mercedes; (2) the reservation clause Spouses executed a document entitled Donation Mortis
in respect of the lifetime usufruct indicated that Diego Causa in favor of their 2 children, Asuncion and Emiliano,
intended to transfer the naked ownership over the and 1 granddaughter, Jarabini covering a property. The
properties; (3) Diego reserved sufficient properties for his deed specifically stated that the donation was irrevocable
maintenance in accordance with his standing in society; and contained an acceptance clause. In September 1968,
and (4) Mercedes accepted the donation. [Gestopa v. CA, the wife died. In December 1968, the husband executed a
GR No. 111904, 5 Oct. 2000.] deed of assignment of his rights and interests in the subject
property to their daughter Asuncion. The husband died in
*** The case of Austria-Magat v. CA differentiated between June 1972.
a donation inter vivos and donation mortis causa. Sometime
in 1975, Basilisa Comerciante, mother of 5, executed a The Supreme Court ruled that although the deed was
document entitled Donation in favor of her 4 living denominated as Donation Mortis Causa, irrevocability is
children. The issue lies on the characterization of the a quality absolutely incompatible with the idea of
Donation. Citing jurisprudence, the Supreme Court laid out conveyances mortis causa, where revocability is precisely
the characteristics of a donation mortis causa, to wit: the essence of the act. Given that the donation in this case
(1) It conveys no title or ownership to the transferee before was irrevocable or one given inter vivos, the husbands
the death of the transferor; or, what amounts to the same subsequent assignment of his rights and interests in the
thing, that the transferor should retain the ownership (full or property to Asuncion should be regarded as void for, by
naked) and control of the property while alive; then, he had no more rights to assign. He could not give
(2) That before his death, the transfer should be revocable what he no longer had. Nemo dat quod non habet. [del
by the transferor at will, ad nutum; but revocability may be Rosario v. Ferrer, GR No. 187056, 20 Sept. 2010.]
provided for indirectly by means of a reserved power in the
donor to dispose of the properties conveyed; and

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 2

 ****** In Puig v. Peaflorida, Doa Carmen Ubalde
expressly and consistently declared her conveyance to be ** A gift that is incomplete because of reserved powers
one of donation mortis causa and further forbade the becomes complete when either:
registration of the deed until after her death. The Supreme (i) The donor renounces the power; or
Court held that [a]all these features concordantly indicated (ii) His right to exercise ceased because of the happening
that the conveyance was not intended to produce any of some event or contingency or the fulfillment of some
definitive effects, nor to finally pass any interest to the condition, other than the death of the donor. [RR No. 02-
grantee, except from and after the death of the grantor. 03]
[Puig v. Peaflorida, GR No. L-15939, 31 Jan, 1966.]
Q: What transfer may be considered as donations?
******* BIR Ruling No. 089-2011 addressed the issue of
whether a general renunciation made by the sole heir of the * The following transfers may be treated as donations:
decedent, which made the four grandchildren the heirs next (a) debt condoned or remitted (in which case the amount
in line as the direct heirs, created a taxable event for which of the debt is a gift from the creditor to the debtor and
donors tax should be paid. The BIR ruled that in the need not be included in the latters gross income) [Sec.
transaction above, there was no donation to speak of. 50, RR No. 02-40];
Hence, no donors tax could be assessed on the (b) transfers made in trust for another person; and
transaction. [BIR Ruling No. 089-2011, 21 Mar. 2011.] (c) renunciation by the surviving spouse of his/her share in
the conjugal partnership or absolute community after the
******** BIR Ruling No. 109-2011 interpreted certain dissolution of the marriage in favor of the heirs of the
provisions of the Special Purpose Vehicle Act of 2002 in deceases spouse or any other person.
relation to the 1997 Tax Code. It ruled that the transfer of
property from the Philippine Distressed Asset Asia Pacific, ** Further to item (c) above, note, however, that a general
Inc., pursuant to the SPV Law, as amended, was not renunciation by an heir, including the surviving spouse, of
subject to donors tax. [BIR Ruling No. 109-2011, 7 Apr. his/her share in the hereditary estate left by the decedent
2011.] is not subject to donors tax, unless the renunciation is
specifically and categorically done in favor of identified
Q: What is the law that governs the imposition of donors tax? heir/s to the exclusion or disadvantage of the other co-
heirs in the hereditary estate. [RR No. 02-03]
* The gift is perfected from the moment of acceptance by
the donee, and it is completed at the time of delivery. The Sec. 98, Imposition of Tax
delivery can either be constructive or actual. Hence, it is
the law at the time of the perfection and/or completion that (A) There shall be levied, assessed, collected and paid
will govern the imposition of the donors tax. upon the transfer by any person, resident or nonresident,

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 3

of the property by gift, a tax, computed as provided in (1) citizenship and residency of the donor at the time of
Section 99. donation; and
(B) The tax shall apply whether the transfer is in trust or (2) location of the property donated.
otherwise, whether the gift is direct or indirect, and
whether the property is real or personal, tangible or Q: How does one arrive at the valuation of a donation?
intangible.
* The same rules apply as in valuation of a decedents
Sec. 99, Rates of Tax Payable by Donor gross estate.

99(A) In General - The tax for each calendar year shall be (1) Gross gifts is computed on a cumulative basis.
computed on the basis of the total net gifts made during (2) Donors tax is based on the net gifts.
the calendar year in accordance with the following
schedule: Net gifts is computed as follows: gross gifts minus
allowable deductions. ZG Law 7/29/17 4:02 PM
If the net gift is: Formatted: Bullets and Numbering
99(B) Tax Payable by Donor if Donee is a Stranger - When ZG Law 7/29/17 4:02 PM
the donee or beneficiary is stranger, the tax payable by Formatted: Bullets and Numbering
Over But Not Over The Tax Shall Plus Ofdonor
the the Excess
shall be thirty percent (30%) of the net gifts. For ZG Law 7/29/17 4:02 PM
be Over
the purpose of this tax, a 'stranger,' is a person who is not Formatted: Bullets and Numbering
P 100,000 Exempt a: ZG Law 7/29/17 4:02 PM
P 100,000 200,000 0 2% P100,000 Formatted: Bullets and Numbering
200,000 500,000 2,000 4% (1) Brother, sister (whether by whole or half-blood),
200,000 ZG Law 7/29/17 4:02 PM
500,000 1,000,000 14,000 6% spouse, ancestor
500,000 and lineal descendant; or Formatted: Bullets and Numbering
1,000,000 3,000,000 44,000 8% (2) Relative by consanguinity in the collateral line within
1,000,000 ZG Law 7/29/17 4:02 PM
3,000,000 5,000,000 204,000 10% the fourth
3,000,000 of relationship.
degree
Formatted: Bullets and Numbering
5,000,000 10,000,000 404,000 12% 5,000,000 ZG Law 7/29/17 4:02 PM
Q: Who is a stranger?
10,000,000 1,004,000 15% 10,000,000 Formatted: Bullets and Numbering
* When the donee is a stranger, the tax payable by the ZG Law 7/29/17 4:02 PM
Q: What are the factors that affect the donor shall be 30% of the net gifts. Stranger shall be any Formatted: Bullets and Numbering
determination/computation of gross gift? person who is not: (1) a brother, sister (whether by whole or ZG Law 7/29/17 4:02 PM
half-blood) spouse, ancestor and lineal descendant; or (2) a Formatted: Bullets and Numbering
* These are: relative by consanguinity in the collateral line within the ZG Law 7/29/17 4:02 PM
fourth degree of relationship. Formatted: Bullets and Numbering

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 4

99(C) Political Contributions - Any contribution in cash or * The case of CIR v. B.F. Goodrich Phils., Inc. dealt with
in kind to any candidate, political party or coalition of the sale by B.F. Goodrich to Siltown Realty of a rubber
parties for campaign purposes shall be governed by the plantation in Basilan for a price less than its declared fair
Election Code, as amended. market value. The BIR wanted to assess BF Goodrich for
deficiency donors tax representing the difference between
Q: Are political contributions considered gifts and therefore the fair market value and the actual purchase price of the
liable for donors tax? property. The BIR also contended that BF Goodrich filed a
false income tax return.
* In the case of Abello v. CIR, partners of the ACCRA law The Supreme Court said that real property may be sold for
firm contributed amounts to the 1987 senatorial campaign less than adequate consideration for a bona fide purpose
fund of Angara. The issue at bar was whether such political and that in such event, the sale remains an arms length
contributions were subject to donors tax. The Supreme transaction. On the issue of falsity of the return filed, the
Court found that all the elements of donation were present, Supreme Court ruled that although donors tax is different
namely: (1) the reduction of the patrimony of the donor; (2) from capital gains tax (as reported in the income tax
the increase in the patrimony of the donee; and (3) the return), the 1974 income tax return was sufficient
intent to do an act of liberality or animus donandi. Hence, compliance with the legal requirement to file a donors tax
the political or electoral contributions were subject to return. In other words, the fact that the sale transaction
donors tax. [Abello v. CIR, GR No. 120721, 23 Feb. 2005.] may have partly resulted in a donation does not change
the fact that [BF Goodrich] already reported its income for
Sec. 100, Transfer for Less than Adequate and Full 1974 by filing an income tax return. [CIR v. B.F. Goodrich
Consideration Phils., Inc., GR No. 104171, 24 Feb. 1999.]

Where property, other than real property referred to in Sec. 101, Exemption of Certain Gifts
Section 24(D), is transferred for less than an adequate and
full consideration in money or money's worth, then the The following gifts or donations shall be exempt from the
amount by which the fair market value of the property tax provided for in this Chapter:
exceeded the value of the consideration shall, for the
purpose of the tax imposed by this Chapter, be deemed a * BIR Ruling No. 124-2011 ruled that the donation of lots
gift, and shall be included in computing the amount of by Diamond Cement and Industrial Corporation Ayala
gifts made during the calendar year. Corporation (DCIC-AC) to relocatees of the Department
of Transportation and Communications Laguindingan
Q: Cite an example of a transfer for less than adequate and International Airport Project in Misamis Oriental was not
full consideration. included among those donations exempt from donors

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 5

 tax under Section 101 of the 1997 Tax Code. [BIR Ruling
No. 124-2011, 12 Apr. 2011] Q: What are the tax implications of a donation in favor of an
educational and/or charitable, religious, cultural or social
101(A) In the Case of Gifts Made by a Resident welfare corporation, institution, accredited nongovernment
organization, trust or philanthropic organization or research
(1) Dowries or gifts made on account of marriage and institution or organization?
before its celebration or within one year thereafter by
parents to each of their legitimate, recognized natural, or * (1) Such donation is exempt from payment of donors tax
adopted children to the extent of the first Ten thousand subject to the condition that not more than 30% of said
pesos (P10,000): donation shall be used by the done for administration
(2) Gifts made to or for the use of the National purposes. In case of donation of real property, the
Government or any entity created by any of its agencies Register of Deeds shall annotate this condition at the back
which is not conducted for profit, or to any political of the TCT/OCT because failure to comply with said
subdivision of the said Government; and condition shall be a ground for the revocation of the
(3) Gifts in favor of an educational and/or charitable, exemption from the payment of the donors tax.
religious, cultural or social welfare corporation,
institution, accredited nongovernment organization, trust (2) The deed of donation is likewise not subject to
or philanthropic organization or research institution or documentary stamp tax prescribed under Section 196 of
organization: Provided, however, That not more than the 1997 Tax Code (Stamp Tax on Deeds of Sale and
thirty percent (30%) of said gifts shall be used by such Conveyances of Real Property), but only to the
donee for administration purposes. For the purpose of the documentary stamp tax of PhP 15 imposed under Section
exemption, a 'non-profit educational and/or charitable 188 of the same code (Stamp Tax on Certificates).
corporation, institution, accredited nongovernment
organization, trust or philanthropic organization and/or (3) If the donor is a VAT-registered person and the
research institution or organization' is a school, college or donation is an ordinary asset, the donation is subject to
university and/or charitable corporation, accredited VAT pursuant to RR No. 16-2005, as amended, the same
nongovernment organization, trust or philanthropic being considered a transaction deemed sale. If the donor
organization and/or research institution or organization, is not a VAT-registered person, the donation is exempt
incorporated as a nonstock entity, paying no dividends, from VAT.
governed by trustees who receive no compensation, and
devoting all its income, whether students' fees or gifts, (4) If the same property acquired by donation is
donation, subsidies or other forms of philanthropy, to the subsequently conveyed by way of sale or exchange, the
accomplishment and promotion of the purposes sale will be subject to corporate income tax on the gain
enumerated in its Articles of Incorporation. realized which is determined by deducting from the gross

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 6

 selling price the historical cost or the adjusted basis Exchange Commission, shall be the government's partner
thereof, as it would be in the hands of the donor, pursuant in a system of accreditation, to determine the qualification
to Sections 27 and 101 of the 1997 Tax Code, and of domestic corporations or associations or NGOs
consequently to creditable expanded withholding tax organized and operated exclusively for religious, charitable,
under Section 2-98, as amended. scientific, youth and sports development, cultural or
educational purposes, or for the rehabilitation of veterans,
If the donee-institution donates the subject property to a or to NGOs for accreditation as donee institutions." [EO No.
non-exempt done, it shall be liable for donors tax 720, 11 Apr. 2008]
pursuant to Section 98 of the 1997 Tax Code. [BIR Ruling
No. 128-2013, 4 Apr. 2013.] A PCNC accreditation endows an entity with a "donee
institution status" such that charitable contributions to these
Q: What is the benefit derived by a donor in case the donee is qualified donee institutions are allowed as business
accredited by the Philippine Council for NGO Certification deductions for income tax purposes.
(PCNC)?
Q: What are the requirements for the above?
* Gifts, donations, and other contributions made by
residents to an educational institution or a foundation are * A donor engaged in business shall give a Notice of
exempt from donor's tax, subject to the condition that not Donation on every donation worth at least PhP 50,000 to
more than 30% of said gift shall be used for administration the Revenue District Office which has jurisdiction over his
purposes. [Sec. 101(A)(3), 1997 Tax Code.] place of business within 30 days after receipt of the
qualified donee institutions duly issued Certificate of
Moreover, for income tax purposes, an accreditation of the Donation, which shall be attached to said Notice of
educational institution or foundation by accrediting entities, Donation.
such as the PCNC, allows a donor to deduct the charitable
contribution as a business expense. [RR No. 13-98 dated 8 On the other hand, the Certificate of Donation states that
Dec. 1998; BIR Ruling No. 029-10, 12 Aug. 2010; BIR not more than 30% of the donation/gifts for the taxable year
Ruling No. [NSNP-(S30H-010)061-10], 5 July 2010; BIR shall be used by the qualified donee institution for
Ruling No. 017-10, 1 July 2010] administration purposes.

The PCNC is a private, voluntary, non-stock, non-profit ** The Certificate of Donation must indicate/contain (1)
corporation established by six of the country's largest NGO donee certification, and (2) donors certificate of values.
networks. (RMC No. 86-14]

"The PCNC, duly registered with the Securities and

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 7

101(B) In the Case of Gifts Made by a Nonresident not a (b) The total amount of the credit shall not exceed
Citizen the same proportion of the tax against which such
credit is taken, which the donor's net gifts situated
(1) Gifts made to or for the use of the National outside the Philippines taxable under this title
Government or any entity created by any of its agencies bears to his entire net gifts.
which is not conducted for profit, or to any political
subdivision of the said Government. * The case of CIR v. Central Luzon Drug Corporation dealt
(2) Gifts in favor of an educational and/or charitable, with the 20% discount required by law to be given to
religious, cultural or social welfare corporation, senior citizens. The Supreme Court held that the 20%
institution, foundation, trust or philanthropic organization discount is a tax credit for the establishment concerned.
or research institution or organization: Provided, [NOTE: This was the old doctrine. Today, the 20%
however, That not more than thirty percent (30%) of said discount is a tax deduction from the gross income or gross
gifts shall be used by such donee for administration sales of the establishment concerned. However, the
purposes. discussion on tax credit for donors taxes paid to a foreign
country remains instructive.] It stated:
101(C) Tax Credit for Donors Taxes Paid to a Foreign While a tax liability is essential to the availment or use of
Country any tax credit, prior tax payments are not. On the
contrary, for the existence or grant solely of such credit,
101(C)(1) In General. - The tax imposed by this Title upon neither a tax liability nor a prior tax payment is needed.
a donor who was a citizen or a resident at the time of The Tax Code is in fact replete with provisions granting or
donation shall be credited with the amount of any donor's allowing tax credits, even though no taxes have been
tax of any character and description imposed by the previously paid.
authority of a foreign country. For example, in computing the estate tax due, Section
86(E) allows a tax credit -- subject to certain limitations --
101(C)(2) Limitations on Credit. - The amount of the credit for estate taxes paid to a foreign country. Also found in
taken under this Section shall be subject to each of the Section 101(C) is a similar provision for donors taxes --
following limitations: again when paid to a foreign country -- in computing for
the donors tax due. The tax credits in both instances
(a) The amount of the credit in respect to the tax allude to the prior payment of taxes, even if not made to
paid to any country shall not exceed the same our government. [CIR v. Central Luzon Drug Corporation,
proportion of the tax against which such credit is GR No. 159647, 15 Apr. 2005.]
taken, which the net gifts situated within such
country taxable under this Title bears to his entire Sec. 102, Valuation of Gifts Made in Property
net gifts; and

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 8

If the gift is made in property, the fair market value thereof filed with the Philippine Embassy or Consulate in the
at the time of the gift shall be considered the amount of country where he is domiciled at the time of the transfer,
the gift. In case of real property, the provisions of Section or directly with the Office of the Commissioner.
88(B) shall apply to the valuation thereof.
Q: How and when are donors tax returns filed?
Sec. 103, Filing of Return and Payment of Tax
* The case of CIR v. B.F. Goodrich Phils., Inc. dealt with
103(A) Requirements. - Any individual who makes any the sale by B.F. Goodrich to Siltown Realty of a rubber
transfer by gift (except those which, under Section 101, plantation in Basilan for a price less than its declared fair
are exempt from the tax provided for in this Chapter) market value. The BIR wanted to assess BF Goodrich for
shall, for the purpose of the said tax, make a return under deficiency donors tax representing the difference between
oath in duplicate. The return shall se forth: the fair market value and the actual purchase price of the
property. The BIR also contended that BF Goodrich filed a
(1) Each gift made during the calendar year which is to false income tax return. ZG Law 7/29/17 4:02 PM
be included in computing net gifts; The Supreme Court said that real property may be sold for Formatted: Bullets and Numbering
(2) The deductions claimed and allowable; less than adequate consideration for a bona fide purpose
(3) Any previous net gifts made during the same and that in such event, the sale remains an arms length
calendar year; transaction. On the issue of falsity of the return filed, the
(4) The name of the donee; and Supreme Court ruled that although donors tax is different
(5) Such further information as may be required by from capital gains tax (as reported in the income tax
rules and regulations made pursuant to law. return), the 1974 income tax return was sufficient
compliance with the legal requirement to file a donors tax
103(B) Time and Place of Filing and Payment. - The return return. In other words, the fact that the sale transaction
of the donor required in this Section shall be filed within may have partly resulted in a donation does not change
thirty (30) days after the date the gift is made and the tax the fact that [BF Goodrich] already reported its income for
due thereon shall be paid at the time of filing. Except in 1974 by filing an income tax return. [CIR v. B.F. Goodrich
cases where the Commissioner otherwise permits, the Phils., Inc., GR No. 104171, 24 Feb. 1999.]
return shall be filed and the tax paid to an authorized
agent bank, the Revenue District Officer, Revenue ** The case of Sumipat v. Banga discussed the time and
Collection Officer or duly authorized Treasurer of the city place of filing and payment of donors tax. Sumipat, with
or municipality where the donor was domiciled at the time the consent of his wife, executed a document entitled
of the transfer, or if there be no legal residence in the Deed of Absolute Transfer and/or Quitclaim over three
Philippines, with the Office of the Commissioner. In the parcels of land, in favor of his five illegitimate children with
case of gifts made by a nonresident, the return may be another woman. The Supreme Court found that the deed

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 9

 was actually a deed of donation, but that it was patently situated in the Philippines: Provided, still further, that no
void for non-compliance with certain requirements. There tax shall be collected under this Title in respect of
was also no proof of filing of a donors tax return and intangible personal property: (a) if the decedent at the
payment of the applicable donors taxes, which the time of his death or the donor at the time of the donation
Supreme Court considered as mandatory. In fact, the was a citizen and resident of a foreign country which at
registrar of deeds is mandated not to register in the the time of his death or donation did not impose a transfer
registry of property any document transferring real tax of any character, in respect of intangible personal
property by way of gifts inter vivos unless a certification property of citizens of the Philippines not residing in that
that the taxes fixed and actually due on the transfer has foreign country, or (b) if the laws of the foreign country of
been paid or that the transaction is tax exempt from the which the decedent or donor was a citizen and resident at
Commissioner of Internal Revenue, in either case, is the time of his death or donation allows a similar
presented. [Sumipat v. Banga, GR No. 155810, 13 Aug. exemption from transfer or death taxes of every character
2004.] or description in respect of intangible personal property
owned by citizens of the Philippines not residing in that
Sec. 104, Definitions - For purposes of this Title, the terms foreign country.
'gross estate' and 'gifts' include real and personal The term 'deficiency' means: (a) the amount by which tax
property, whether tangible or intangible, or mixed, imposed by this Chapter exceeds the amount shown as
wherever situated: Provided, however, That where the the tax by the donor upon his return; but the amount so
decedent or donor was a nonresident alien at the time of shown on the return shall first be increased by the
his death or donation, as the case may be, his real and amount previously assessed (or Collected without
personal property so transferred but which are situated assessment) as a deficiency, and decreased by the
outside the Philippines shall not be included as part of his amounts previously abated, refunded or otherwise repaid
'gross estate' or 'gross gift': Provided, further, That in respect of such tax, or (b) if no amount is shown as the
franchise which must be exercised in the Philippines; tax by the donor, then the amount by which the tax
shares, obligations or bonds issued by any corporation or exceeds the amounts previously assessed, (or collected
sociedad anonima organized or constituted in the without assessment) as a deficiency, but such amounts
Philippines in accordance with its laws; shares, previously assessed, or collected without assessment,
obligations or bonds by any foreign corporation eighty- shall first be decreased by the amount previously abated,
five percent (85%) of the business of which is located in refunded or otherwise repaid in respect of such tax.
the Philippines; shares, obligations or bonds issued by
any foreign corporation if such shares, obligations or
bonds have acquired a business situs in the Philippines;
shares or rights in any partnership, business or industry
established in the Philippines, shall be considered as

TAX 2 SYLLABUS ASSOCIATE DEAN LILY K. GRUBA S/Y 2017-2018 10