Quick answer

Donor's tax is a tax on the transfer of property by a person to another by way of gift or donation during the donor's lifetime (an inter vivos transfer). It complements the estate tax, which covers transfers at death; without a donor's tax, people could avoid estate tax by giving everything away before dying. Under the TRAIN law, the donor's tax is computed at a flat rate of six percent (6%) based on the total gifts made during the calendar year in excess of an annual exemption. The rate applies uniformly regardless of the relationship between the donor and the donee (the old distinction between relatives and strangers was removed). The annual exemption means the first portion of total gifts each year (a fixed amount set by the TRAIN law) is exempt, and only the excess is taxed at 6%. The tax is based on the fair market value of the property donated at the time of the gift; for real property, this is the higher of the BIR zonal value or the assessor's fair market value. Certain donations are exempt or have special rules, such as gifts to the national government, and gifts to accredited non-stock, non-profit institutions (subject to conditions). A donation must comply with the civil-law formalities to be valid (for example, a donation of land must be in a public document with acceptance), separate from the tax. The donor's tax return is filed and the tax paid within thirty days after the date the gift is made. So giving away property is taxed at a flat 6% above the annual exemption, and the donor must file and pay promptly.

What Donor's Tax Is

Donor's tax is a tax on giving property as a gift during one's lifetime (inter vivos). It complements the estate tax so gifts before death cannot escape taxation.

The Flat 6% Rate

Under the TRAIN law, donor's tax is a flat 6% on total gifts in the year in excess of an annual exemption. The rate is the same regardless of the relationship between donor and donee.

Valuation and Filing

The tax is based on the fair market value at the time of the gift (for land, the higher of zonal or assessor's value). Some donations are exempt (e.g., to the national government, accredited non-profits). File and pay within thirty days of the gift.

Practical Takeaways

Frequently Asked Questions

What is donor's tax? A tax on the transfer of property by gift or donation during the donor's lifetime. It complements the estate tax, which covers transfers at death.

How much is donor's tax? Under the TRAIN law, a flat six percent (6%) on the total gifts made during the calendar year in excess of an annual exemption, regardless of the relationship between the donor and the donee.

How is the gifted property valued? At its fair market value at the time of the gift. For real property, this is the higher of the BIR zonal value or the assessor's fair market value.

When is the donor's tax return filed? The return is filed and the tax paid within thirty days after the date the gift is made. A donation of land must also comply with civil-law formalities, such as a notarized deed with acceptance.

This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.

If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.