Art. 725. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. (Civil Code)
It is a tax imposed on the exercise of the donor’s right during lifetime to transfer property to others in the form of a gift. Hence, donor’s tax is not a property tax but an excise tax imposed on the transfer of property by way of gift inter-vivos.
Donor’s Tax is a direct tax because it is a tax imposed on the donor and determined with reference to all donor’s gifts. Applies to both natural and juridical person
Completion and Perfection of Donation: The donor’s tax shall apply if there is already completed gift. The transfer of property is perfected from the moment the donor knows the acceptance by the donee. On the other hand, it is completed by delivery of the donated property to the donee. The Law that governs the imposition of donor’s tax is the law at the time of the perfection/completion of the donation.