IVANA ALAWI: From the streets to the farm. Kabuhayan para kay Jesus. Donor's Tax

In a widely shared vlog, actress and social media influencer Ivana Alawi touched hearts by gifting a beggar named Tatay Joselito a house and lot, along with livestock (pigs and poultry) and financial aid to start a livelihood.

While these acts are incredibly noble, they trigger specific legal and financial obligations under the National Internal Revenue Code (NIRC) of the Philippines. Below is a discussion of the case and the tax strategies involved.

1. The Case: Livelihood and Property Donation
In this scenario, Ivana Alawi acted as a Donor and the recipient (the beggar) as the Donee. The donation consisted of:

Real Property: A parcel of land and a house.

Personal Property: Livestock (pigs, poultry) and cash for the business.

Tax Implications
Under the TRAIN Law (Republic Act No. 10963), which has been in effect since 2018, the following rules apply:

Donor’s Tax Rate: A flat rate of 6% is imposed on the total value of gifts exceeding ₱250,000 within a calendar year.

Exemption Threshold: The first ₱250,000 of the total annual donations is tax-exempt.

Valuation: * For the house and lot, the tax is based on the Fair Market Value (FMV) at the time of donation (the higher value between the Zonal Value and the Assessor's FMV).

For livestock and cash, the tax is based on the actual value or purchase cost.

Strangers vs. Relatives: Previously, "strangers" (like a beggar) were taxed at 30%. Under the current law, the 6% rate applies regardless of the relationship.

2. Recommendation to Legally Minimize/Avoid Tax
While "tax evasion" is illegal, "tax avoidance" (using legal means to minimize liability) is allowed. Here are the strategies commonly used in the Philippines:

A. Coursing through an Accredited Donee Institution
The most effective way to avoid Donor's Tax is to not give the property directly to the individual.

The Method: Donate the funds or the property to a BIR-accredited non-stock, non-profit organization (NGO) or a social welfare institution (e.g., DSWD-accredited foundations).

The Benefit: Donations to qualified NGOs are 100% exempt from Donor’s Tax. The NGO can then facilitate the livelihood program for the family.

Income Tax Deduction: For a high-earner like Alawi, this also allows her to deduct the donation from her gross income (usually capped at 10% for individuals), lowering her own income tax.

B. Spreading Donations (Staggering)
The ₱250,000 exemption refreshes every calendar year.

The Method: If the total value is ₱1,000,000, the donor could donate ₱250,000 worth of assets in December and the remaining ₱750,000 in January.

Limitation: This is difficult for real estate (land) because titles are usually transferred in one go, but it works well for cash or livestock.

C. Identifying "De Minimis" or Nominal Gifts
Small, incidental gifts are generally not scrutinized. However, for a house and lot, this is impossible because the Register of Deeds will require a Certificate Authorizing Registration (CAR) from the BIR, which is only issued after the Donor’s Tax is paid.

D. Usufruct Agreement (Alternative)
Instead of donating the ownership of the land, the donor can grant a Usufruct.

The Method: The beggar gets the right to live on the land and use the income from the farm (pigs/poultry) for life, but Ivana retains the title.

The Benefit: This may result in a much lower valuation for tax purposes compared to a full transfer of title.