Establishing intent to donate

In determining whether a transaction involves gratuitous transfer that is subject to donor’s tax under Section 98 of the Tax Code, not only the legal documents, but also other external factors surrounding the transactions are considered. Thus, in case where a request to include or affix the names of minor children as transferees, in addition to the parents who are the original buyers, in the Certificate Authorizing Registration (CAR), the BIR shall look into the true intent of the parties to the transaction to determine its liability to donor’s tax.

In the instant case, it was alleged that there was no transfer of property from the parent to their children since they do not own the subject property, hence, the inclusion of their names in the CAR is not subject to donor’s tax. Moreover, it was claimed that the minor children used their allowance, which came from their parents, to purchase the properties.

In its decision, the CTA held that there is a clear “animus donandi” or intent to give when the names of minor children who are not earning any income are included in the CAR and certificate of titles of the property. It held that while it is true that minor children can save money from their allowances and buy properties from their savings, considering the children’s age and the price of property, the children will not be able to save a substantial amount, even if they receive enormous allowances from the parents. Moreover, it is highly unlikely for an individual to own real property at such an early age and without a source of income; thus the CTA deemed the transaction to be a donation.

(Hordon H. Evono and Maribel C. Evono v. Department of Finance, CIR and the Republic of the Philippines, CTA EB No. 705 re CTA Case No. 7573, June 4, 2012)

Tax Brief - July 2012

Punongbayan and Araullo