Issuing Receipts in Relation to Donor's Tax in the Philippines: A Comprehensive Legal Overview

Introduction

In the Philippine tax system, donor's tax represents a fiscal imposition on the gratuitous transfer of property during the donor's lifetime, embodying the state's interest in regulating wealth transfers to ensure equitable revenue generation. Governed primarily by the National Internal Revenue Code of 1997 (NIRC), as amended by Republic Act No. 10963 (the Tax Reform for Acceleration and Inclusion or TRAIN Law) and subsequent issuances, donor's tax applies to inter vivos gifts exceeding certain thresholds. A critical yet often overlooked aspect of donor's tax compliance involves the issuance and maintenance of receipts, which serve dual purposes: substantiating the donation for tax reporting by the donor and enabling potential income tax deductions where applicable. This article explores the intricacies of issuing receipts in the context of donor's tax, drawing from statutory provisions, revenue regulations, and administrative guidelines, to provide a thorough examination within the Philippine legal framework.

Legal Basis for Donor's Tax

Donor's tax finds its foundation in Section 98 of the NIRC, which imposes a tax on the transfer of property by gift. The tax is excise in nature, levied on the donor's privilege to dispose of property without consideration. Key amendments under the TRAIN Law, effective January 1, 2018, simplified the regime by introducing a flat rate and a uniform exemption threshold, irrespective of the donor-donee relationship. Prior to this, rates were graduated (ranging from 2% to 15% for relatives and up to 30% for strangers), but the current system prioritizes administrative efficiency.

Complementary provisions include:

Section 99, detailing the computation of the tax base as the fair market value (FMV) of the property at the time of donation.
Section 100, addressing transfers for less than adequate consideration, which may be treated as partial donations.
Section 104, covering valuation rules for real property (based on zonal values or assessed values) and other assets.

Revenue Regulations (RR) No. 6-2018 and subsequent clarifications from the Bureau of Internal Revenue (BIR) further operationalize these rules, emphasizing documentation requirements, including receipts, to prevent underreporting or evasion.

Tax Rate, Exemptions, and Scope

The donor's tax rate is a flat 6% on the net gifts exceeding P250,000 in a calendar year. "Net gifts" refer to the aggregate FMV of all donations minus the annual exemption and any allowable deductions (e.g., encumbrances on donated property assumed by the donee). Key exemptions include:

Gifts totaling P250,000 or less per calendar year.
Donations to the government or its political subdivisions for public purposes.
Contributions to accredited non-government organizations (NGOs), educational institutions, or charitable entities, provided they meet criteria under Section 34(H) of the NIRC for deductibility (though this exemption applies to income tax deductibility rather than donor's tax itself; donor's tax may still apply unless statutorily exempt).
Gifts in contemplation of marriage (up to P10,000 per donee, limited to descendants or ascendants).
Political contributions certified by the Commission on Elections (COMELEC).

The scope encompasses both residents and non-residents, with non-resident aliens taxed only on Philippine-situs property. Notably, donations of intangible personal property (e.g., shares of stock) by non-residents may be exempt under reciprocity rules if the donor's home country grants similar exemptions to Filipinos.

Filing and Payment Procedures

Compliance with donor's tax requires the donor to file BIR Form No. 1800 (Donor's Tax Return) within 30 days from the date of donation. For multiple donations in a year, a consolidated return is filed by April 15 of the following year, but tax on each gift over the threshold must be paid timely to avoid penalties. Payment is made via authorized agent banks, BIR Revenue Collection Officers, or electronic platforms like eBIRForms.

Documentation is pivotal: The return must be supported by a Deed of Donation (notarized for validity under civil law), proof of FMV (e.g., appraisals or stock quotes), and, crucially, receipts acknowledging the transfer. Failure to file or pay incurs a 25% surcharge, 12% interest per annum, and potential compromise penalties under RR No. 7-2018. Criminal liability may arise under Section 255 of the NIRC for willful neglect.

The Role of Receipts in Donor's Tax Compliance

Receipts play an indispensable role in donor's tax, serving as evidentiary tools for both the donor and donee. While donor's tax is primarily the donor's obligation, receipts issued by the donee substantiate the transaction's legitimacy, FMV, and date—essential for accurate tax computation and audit defense.

Types of Receipts Relevant to Donations

Acknowledgment Receipts: Issued by the donee to confirm receipt of the donation. For cash gifts, this may be a simple receipt; for property, it accompanies the Deed of Donation. These must detail the donor's name, donee's name and Taxpayer Identification Number (TIN), description of the gift, FMV, date, and a certification that the donation is gratuitous.
Official Receipts (ORs): Mandated under RR No. 18-2012 for all persons subject to internal revenue taxes. Charitable institutions, though exempt from certain taxes, must issue BIR-registered ORs for donations to maintain their tax-exempt status and enable donor deductions. ORs must be serially numbered, printed with the entity's name, TIN, address, and the phrase "This is your Official Receipt for Income Tax Purposes."
Certificate of Donation: For donations qualifying for income tax deductions under Section 34(H), donees issue a Certificate of Donation (BIR Form No. 2322), which includes the FMV and attests to the donee's accreditation. This is distinct from standard receipts but serves a similar substantiating function.

Issuance Requirements

By Donees: Accredited donee institutions (e.g., those certified by the Philippine Council for NGO Certification or PCNC) must issue receipts within 30 days of receipt. RR No. 13-98 prescribes that receipts for deductible contributions must state that no part of the net income inures to private individuals, ensuring compliance with the non-inurement rule.
Electronic Receipts: Under RR No. 16-2005 and the Ease of Paying Taxes Act (RA 11976, effective 2024), e-receipts are permissible if generated via BIR-approved systems, enhancing efficiency for large-scale donations.
For Corporate Donors: Corporations donating as part of corporate social responsibility must secure receipts to claim deductions limited to 5% of taxable income (10% for individuals), per Section 34(H)(2).

Substantiation for Income Tax Deductions and Exemptions

While donor's tax is separate from income tax, receipts bridge the two by enabling deductions that reduce the donor's overall tax liability. To claim a deduction:

The donation must be to a qualified donee (e.g., government, accredited NGOs, or institutions under RR No. 1-2003).
Substantiation requires original receipts or certificates retained for at least three years (extendable during audits).
For full deductibility (up to the donor's taxable income), the donee must utilize at least 85% of donations for program purposes, as monitored by the BIR.

Non-compliance with receipt issuance can lead to disallowance of deductions, resulting in deficiency assessments. For donees, failure to issue proper receipts risks revocation of tax-exempt status under Section 236 of the NIRC.

Common Issues and Compliance Challenges

Several issues arise in practice:

Valuation Disputes: Receipts must reflect accurate FMV; discrepancies (e.g., undervaluation to minimize tax) invite BIR audits. Real property donations require zonal value confirmation from BIR Revenue District Offices.
Cross-Border Donations: Non-resident donors must ensure receipts comply with Philippine rules for situs property; reciprocity exemptions require foreign law certifications.
Related-Party Donations: Gifts to relatives may trigger scrutiny for disguised sales; receipts help prove gratuitousness.
Penalties for Non-Issuance: Donees face fines of P1,000 to P50,000 per violation under RR No. 7-2012. Donors risk 50% fraud penalties if unsubstantiated.
Digital and Crypto Donations: Emerging issues include receipts for cryptocurrency gifts, valued at FMV on donation date per BIR guidelines; donees must adapt receipt systems accordingly.
Audit and Litigation: In cases like CIR v. Isabela Cultural Corporation (G.R. No. 172231, 2007), the Supreme Court emphasized receipts as prima facie evidence of donations, underscoring their legal weight.

To mitigate risks, donors should consult Registered Tax Agents, while donees maintain BIR-registered books.

Conclusion

Issuing receipts in the context of donor's tax in the Philippines is not merely administrative but integral to ensuring transparency, compliance, and fiscal equity. From substantiating FMV for tax computation to facilitating income tax relief, receipts embody the evidentiary backbone of donation transactions. As tax laws evolve—potentially with further digitalization under the Medium-Term Fiscal Framework—stakeholders must prioritize meticulous documentation. Ultimately, adherence to these requirements upholds the integrity of the Philippine tax system, balancing the donor's philanthropic intent with the state's revenue needs. For specific applications, consultation with the BIR or legal experts is advisable to navigate nuances and updates.