Donor’s tax in the Philippines is a flat 6% under the TRAIN law, computed on the total net gifts in excess of ₱250,000 given within a calendar year, regardless of the relationship between the donor and the recipient.
Under the TRAIN law, donor’s tax in the Philippines is a flat 6%, computed on the total net gifts made by a donor in excess of ₱250,000 within a single calendar year. This applies whether the donee is a relative, a stranger, or a corporation, and regardless of the type of property donated — cash, real property, shares of stock, or other assets.
The Current Donor’s Tax Rate
Before 2018, the Philippines used a complicated schedule of donor’s tax rates that ranged from 2% to 15% for gifts to relatives, and a flat 30% for gifts to “strangers” (people not related to the donor by blood or marriage within the fourth degree). Republic Act No. 10963, the Tax Reform for Acceleration and Inclusion (TRAIN) law, simplified this system effective January 1, 2018. Today, there is only one rate: 6% of the total net gifts in excess of ₱250,000 per calendar year, applied uniformly no matter who the recipient is.
This means the days of worrying whether a donee counted as a “relative” or a “stranger” for tax purposes are over — the computation is now the same regardless of the relationship.
What Counts as a Taxable Gift
Donor’s tax applies to any transfer of property by gift, whether the property is real, personal, tangible, or intangible, made during the donor’s lifetime (as opposed to a transfer upon death, which is instead subject to estate tax). Common examples include:
- Cash given to a child, relative, or friend beyond ordinary support
- A parcel of land or a condominium unit transferred without (or for less than adequate) consideration
- Shares of stock transferred to another person for free or at a bargain price
- Forgiveness or cancellation of a debt, treated as a gift to the debtor for the amount forgiven
Donations are computed on a cumulative basis per calendar year. If you make several donations in the same year, all of them are added together, and the ₱250,000 exemption applies once to the combined total — not separately to each donation or each donee.
How to Compute Donor’s Tax — Step by Step
- Step 1: Determine the fair market value of the property donated at the time of donation (zonal value or assessed value for real property, whichever is higher, or the fair market value for other property).
- Step 2: Add up all gifts made by the same donor within the calendar year to arrive at the gross gifts.
- Step 3: Deduct any allowable deductions, such as encumbrances on the property assumed by the donee, to arrive at the net gift.
- Step 4: Subtract the ₱250,000 annual exemption from the net gift.
- Step 5: Multiply the resulting amount by 6% to get the donor’s tax due.
Worked Example
Suppose a parent donates a piece of land worth ₱2,000,000 (based on zonal value) to a child in a given year, with no other donations made that year:
- Gross gift: ₱2,000,000
- Less exemption: ₱250,000
- Net taxable gift: ₱1,750,000
- Donor’s tax due (6% x ₱1,750,000): ₱105,000
If the same parent had also given ₱300,000 in cash to another child earlier that same year, the two gifts would be added together (₱2,300,000 total), and the tax recomputed on the combined net gift after the single ₱250,000 exemption — not computed separately for each gift.
Who Is Responsible for Paying the Tax
Donor’s tax is imposed on and paid by the donor, not the person receiving the gift. If several donors jointly own a property and donate their shares together (for example, spouses donating conjugal property), each donor computes and files their own donor’s tax return based on their respective share of the gift, each entitled to their own ₱250,000 annual exemption.
Exemptions from Donor’s Tax
Certain donations are exempt from donor’s tax regardless of amount, including:
- Donations to or for the use of the National Government or any of its agencies that are not conducted for profit
- Gifts to qualified charitable, religious, cultural, or educational organizations, provided that not more than a set portion of the gift is used for administration expenses, and subject to the donee institution’s accreditation status
- Donations made in consideration of marriage before its celebration were treated more favorably under older law, though TRAIN removed several of the old itemized exemptions, so this specific treatment should be confirmed for the year in question
Because the rules on which institutions qualify as exempt donees change over time and require BIR accreditation or a certificate of exemption, it is worth confirming a specific donee’s exempt status with the BIR or the donee institution before assuming a donation is tax-free.
Donor’s Tax vs. Estate Tax
Donor’s tax and estate tax are often confused because both are transfer taxes at a flat 6% rate, but they apply to different situations. Donor’s tax covers transfers made during the donor’s lifetime, while estate tax covers the transfer of a deceased person’s property to their heirs at death. Because both use the same 6% rate, some families consider whether to transfer property through lifetime donations or through inheritance as part of broader estate planning — though the right choice depends on the value of the property, the family’s overall plans, and other costs involved in each option, and should be discussed with a lawyer or tax professional given the specific facts.
Nonresident and Foreign Donors
For a citizen or resident donor, donor’s tax applies to gifts of property wherever located, whether in the Philippines or abroad. For a nonresident alien donor, donor’s tax applies only to property situated in the Philippines at the time of the donation. Intangible personal property, such as shares in a domestic corporation, is generally treated as Philippine-situated property even if the donor is a nonresident, unless a tax treaty or the principle of reciprocity provides otherwise.
Filing Deadline and Where to File
The donor’s tax return (BIR Form No. 1800) must be filed and the tax paid within 30 days after the date the gift is made. The return is generally filed with an Authorized Agent Bank, Revenue District Office, or through the BIR’s electronic filing channels covering the place where the donor is domiciled at the time of the donation. Each separate donation within the year technically requires its own return within 30 days of that donation, even though the tax is ultimately computed on a cumulative, year-to-date basis.
Additional Costs When Donating Real Property
If the gift involves real property, donor’s tax is usually not the only cost to budget for. Expect to also pay:
- Registration fees with the Registry of Deeds to transfer the title into the donee’s name
- Local transfer tax imposed by the city or municipality where the property is located
- Notarial fees for the deed of donation
These amounts vary by local government unit and by the value of the property, so they should be estimated separately from the 6% national donor’s tax itself.
Practical Notes for Planning a Donation
A few practical points come up often when families plan a donation. First, spreading a large gift across several calendar years to repeatedly use the ₱250,000 exemption is sometimes suggested as a way to reduce the overall tax, and while the exemption does reset each calendar year, any such plan should still reflect a genuine, properly documented series of separate donations rather than an artificial arrangement, since the BIR can look at the substance of the transaction. Second, a deed of donation should always be properly notarized and, for real property, should be prepared with the correct zonal value on file with the BIR at the time of the transfer, since valuations can change from year to year. Third, where the property donated is conjugal or community property of a married couple, both spouses generally need to consent to and sign the deed, since neither spouse can donate the couple’s shared property alone without the other’s consent except in limited circumstances recognized by law.
Penalties for Late Filing or Non-Payment
Missing the 30-day filing deadline or failing to pay the correct donor’s tax exposes the donor to the standard penalties under the Tax Code: a 25% surcharge on the unpaid tax, plus 12% annual interest on the unpaid amount from the due date until fully paid, and a possible compromise penalty. These penalties apply on top of the donor’s tax itself, so late donations can end up costing significantly more than the 6% headline rate suggests.
Frequently Asked Questions
Is donor's tax the same regardless of whether the donee is a relative or a stranger? Yes. Since the TRAIN law took effect, the 6% rate and the ₱250,000 exemption apply uniformly whether the recipient is a child, another relative, a friend, or an unrelated party — the old higher rate for strangers no longer exists.
Who pays the donor's tax, the person giving or the person receiving the gift? The donor pays. Even though the donee receives the property, the law imposes the 30-day filing and payment obligation on the person who made the gift.
What happens if I donate several properties to different people within the same year? All gifts made by the same donor within a calendar year are added together for purposes of computing the tax, and the ₱250,000 exemption is applied once to the combined total, not separately to each gift or each recipient.
Does donor's tax apply if I sell property to a relative below its market value? Yes, potentially — if the transfer is for less than adequate and full consideration, the difference between the fair market value and the price paid may be treated as a taxable gift subject to donor's tax, in addition to whatever other taxes apply to the sale itself.
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.