Donor’s tax on Philippine real property is a flat 6% of the net gift — the property’s value in excess of ₱250,000 — regardless of the relationship between donor and donee. The value used is the higher of the BIR zonal value or the local assessor’s fair market value, and the return (BIR Form 1800) must be filed and the tax paid within 30 days of the donation.
Since the TRAIN Law took effect, computing donor’s tax on real property is simpler than it used to be: there is one flat rate, applied after one standard exemption, regardless of whether the donee is a child, a sibling, a friend, or a stranger. The complexity that remains is almost entirely about valuation — getting the taxable base right — and about the paperwork that has to accompany the return.
The Current Rate: 6% Flat, No Relationship Distinction
Under Section 99 of the National Internal Revenue Code, as amended by the TRAIN Law (Republic Act No. 10963), donor’s tax is computed at a flat rate of 6% of the total net gifts made by a donor during the calendar year, in excess of a ₱250,000 annual exemption. This replaced the old system of graduated rates for relatives and a separate, higher flat rate for donations to “strangers.” Today, whether you are donating land to your child or to a friend, the rate is the same 6%.
The ₱250,000 exemption is per donor, per calendar year — not per gift and not per donee. If a donor makes several donations within the same year, all of them are added together, and only the first ₱250,000 of the combined total is exempt.
Step 1: Determine the Property’s Value for Tax Purposes
This is where most computation errors happen. The value you and the donee agree to write in the deed of donation is not necessarily the value the BIR will use. For real property, the taxable value is the higher of:
- The fair market value as determined by the Commissioner of Internal Revenue — commonly referred to as the BIR zonal value for that location, or
- The fair market value shown in the schedule of values of the provincial or city assessor (the value used for real property tax purposes)
If the deed states a value lower than either of these, the BIR will disregard the stated value and use the higher official figure instead. For a house and lot, the land and the improvement (the house) are typically valued separately — land using the zonal value applicable to that specific location and classification, and the improvement using the assessor’s valuation for the building — and the two are added together to get the total value of the donated property.
Step 2: Compute the Net Gift and Apply 6%
Once you have the property’s value, the computation itself is straightforward:
- Net gift = Total value of the property donated during the year, minus any allowable deductions (such as an encumbrance or mortgage the donee assumes), minus the ₱250,000 annual exemption
- Donor’s tax = 6% × Net gift
For example, if a parent donates a residential lot with a combined zonal and assessed value of ₱3,000,000, and this is the only donation made that year:
- Net gift = ₱3,000,000 − ₱250,000 = ₱2,750,000
- Donor’s tax = ₱2,750,000 × 6% = ₱165,000
If the donee assumes an existing ₱500,000 mortgage on the property as part of the donation, that assumed obligation is generally treated as a deduction from the gross gift before the tax is computed, since it reduces what the donee actually receives for free.
Step 3: Do Not Forget Documentary Stamp Tax and Transfer Costs
Donor’s tax is not the only cost of donating real property. A deed of donation transferring real property is also subject to documentary stamp tax under the Tax Code, computed on the same higher-of-zonal-or-assessed value used for donor’s tax. Beyond BIR taxes, expect additional costs at the local government and Registry of Deeds level: a local transfer tax charged by the province or city, registration fees to transfer the title, and the notarial fee for the deed itself. None of these replace the donor’s tax — they are layered on top of it, and all should be budgeted for before the donation is executed.
Donation vs. Sale: Why the Distinction Can Matter
Some families consider transferring property through a sale instead of a donation, sometimes in the mistaken belief that this avoids tax altogether. It does not. A sale of real property is subject to capital gains tax, typically computed on the higher of the selling price or the same zonal or assessor value used for donor’s tax, plus its own documentary stamp tax, so switching from a donation to a nominal or below-market “sale” does not automatically produce a lower total tax bill — and, as noted above, if the price is significantly below fair market value, the BIR can treat the difference as a taxable donation anyway. The right structure depends on the family’s overall goals: whether the property is meant to form part of a future estate plan, whether the transferor wants to retain some control or income from the property during their lifetime, and whether there are other assets and heirs to think about. These questions are worth discussing with a lawyer or tax professional before signing anything, since undoing a completed and already-taxed transfer is far more difficult than planning it correctly from the outset.
Step 4: File BIR Form 1800 and Pay Within 30 Days
The donor’s tax return, BIR Form 1800, must be filed by the donor (not the donee) within 30 days after the date the donation is made — not 30 days after the deed is notarized if that date differs, and not 30 days after registration. If a donor makes more than one donation on different dates within the same year, a separate return is generally required for each date; gifts made on the same date can be reported together in one return.
The return is filed with the Revenue District Office that has jurisdiction over the donor’s place of residence at the time of the donation (for a donation between spouses or involving conjugal or community property, special rules on capacity may also come into play, since Philippine law restricts certain donations between spouses during the marriage). Once the tax is paid and the return processed, the BIR issues a Certificate Authorizing Registration, which the Registry of Deeds requires before it will transfer the title into the donee’s name.
What If You File Late?
Missing the 30-day deadline exposes the donor to a surcharge (25% under the Tax Code’s general penalty provisions for late filing, higher if the BIR treats the omission as willful) plus interest that continues to accrue on the unpaid tax until it is settled, on top of the tax itself. Because the surcharge and interest are computed on the whole unpaid amount, a delay of even a few months can meaningfully increase the final bill — another reason to compute the tax and set aside funds for it before, not after, the deed is signed.
Situations That Change the Computation
- Multiple donations in one year: All gifts by the same donor within the calendar year are cumulative for purposes of the ₱250,000 exemption and the tax base — you cannot reset the exemption by spreading a large donation across several smaller deeds within the same year.
- Donation of an undivided share: If only a fractional or undivided interest in a property is donated (for example, a co-owner donating their one-half share), the tax is computed only on the value of that share, not the whole property.
- Sale at less than full value: A “sale” of real property for a price significantly below its fair market value can be treated by the BIR as partly a donation, with donor’s tax assessed on the difference, unless it qualifies as a bona fide arm’s-length transaction.
- Donation of naked ownership with a reserved usufruct: A donor who transfers ownership of the property but reserves the right to use it or receive its income during their lifetime is still making a taxable donation, though how that reserved right affects the taxable base is a valuation question best confirmed with a tax professional before the deed is finalized.
Frequently Asked Questions
Is donor’s tax higher if the recipient is not a relative? No. Since the TRAIN Law took effect, the flat 6% rate applies regardless of the relationship between the donor and the donee — the old higher rate for donations to non-relatives no longer applies.
Who pays the donor’s tax, the donor or the person receiving the property? The donor is legally responsible for filing the return and paying the tax, even though the donee is the one who benefits from the property. Parties sometimes agree privately that the donee will shoulder the cost, but the BIR looks to the donor as the taxpayer of record.
Can I just declare a lower value in the deed of donation to reduce the tax? No. The BIR uses the higher of the zonal value or the assessor’s fair market value for real property regardless of what the deed states, so understating the value in the deed does not lower the actual tax due and can create separate problems if discovered.
Are any donations of real property exempt from donor’s tax? Yes, certain donations are exempt, such as gifts to the national government or its political subdivisions and gifts to qualified accredited charitable, religious, or educational institutions, subject to conditions on how the donated property is used. Ordinary donations between private individuals, including family members, do not qualify for this exemption.
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.