Giving property away in the Philippines is subject to donor's tax. Under the TRAIN law the rate is a flat 6% computed on the total gifts made during the calendar year in excess of 250,000 pesos, regardless of the relationship between donor and donee. The donor's tax return, BIR Form 1800, must be filed within 30 days after the gift is made.
Parents often think the simplest way to pass property to a child is to donate it now rather than leave it in an estate. Sometimes that is right. But a donation is a taxable transfer with its own rate, deadline, and formalities — and getting the form wrong can make the donation void, not merely taxable. This commentary explains how donor’s tax works and what a valid deed of donation requires.
The Rate: 6% Above ₱250,000 a Year
Under Republic Act No. 10963 (the TRAIN law), the donor’s tax for each calendar year is six percent (6%) computed on the total gifts in excess of ₱250,000 of exempt gifts made during that calendar year. Two consequences follow:
- The first ₱250,000 of total gifts in a year is effectively exempt; and
- The relationship between donor and donee no longer matters. Before TRAIN, gifts to strangers were taxed at a punitive flat rate; now a gift to a child and a gift to a friend carry the same 6%.
The threshold is cumulative for the calendar year, not per gift. Each donation is computed taking into account previous net gifts made in the same year.
The Return and the 30-Day Deadline
The donor — not the recipient — files BIR Form 1800, the donor’s tax return, within 30 days after the date the gift is made. It is filed with an authorised agent bank of the Revenue District Office having jurisdiction over the donor’s place of domicile at the time of the donation. A separate return is filed for gifts made on different dates during the year, while a single return covers several gifts to different donees made on the same date.
The Form of the Deed: Why This Matters More Than the Tax
The Civil Code imposes formalities that are conditions of validity, not mere formality:
- A donation of immovable property must be made in a public instrument — a notarized deed — specifying the property donated and the value of any charges the donee must satisfy.
- The acceptance by the donee must be made in the same deed or in a separate public instrument, and if separate, the donor must be notified in authentic form, with that step noted in both instruments.
A donation of land in a private document is void. This is the trap: families sometimes sign a simple “deed of donation” without a notary and assume the transfer is done, only to discover years later that nothing passed at all.
When a Cheap Sale Is Treated as a Gift
Selling property to a relative for a token price does not avoid the tax. Under Section 100 of the Tax Code, where property is transferred for less than an adequate and full consideration, the amount by which the fair market value exceeds the consideration is deemed a gift and taxed accordingly. There is an exception for bona fide transactions made at arm’s length in the ordinary course of business. Note that real property classified as a capital asset, which is subject to the 6% capital gains tax, is treated separately under this rule.
Donate Now or Leave It in the Estate?
Both donor’s tax and estate tax now sit at 6%, so the rate alone rarely decides it. The real differences are the deductions and the timing: an estate enjoys the ₱5,000,000 standard deduction and the family home deduction, which a lifetime donation does not, while a donation moves the property now and avoids a future settlement. A donation also cannot be used to defeat the legitime of compulsory heirs — inofficious donations may be reduced after the donor’s death. The right answer depends on the size of the estate and the family situation, which is worth modelling before signing anything.
Frequently Asked Questions
How much is donor's tax in the Philippines? Under the TRAIN law it is a flat 6% computed on the total gifts made during the calendar year in excess of 250,000 pesos. The relationship between the donor and the donee no longer affects the rate.
When is the donor's tax return due? BIR Form 1800 must be filed within 30 days after the date the gift is made, with an authorised agent bank of the Revenue District Office having jurisdiction over the donor's place of domicile at the time of the donation.
Does a deed of donation of land have to be notarized? Yes. A donation of immovable property must be made in a public instrument, and the donee's acceptance must appear in the same deed or in a separate public instrument with notice to the donor. A donation of land in a private document is void.
Can I avoid tax by selling property to my child for a low price? No. Under Section 100 of the Tax Code, where property is transferred for less than adequate and full consideration, the difference between the fair market value and the price is deemed a gift and taxed, subject to an exception for bona fide arm's-length business transactions.
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 are weighing a donation against leaving property in your estate, our firm can model the tax and prepare a deed that will hold up. 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.