In the Philippines, a Deed of Donation is a legal document used to transfer the ownership of real property from one person (the donor) to another (the donee) out of pure liberality or gratitude. Unlike a Sale, where money is exchanged, a donation is generally "gratuitous." However, this does not mean the process is free.
The transfer of land via donation involves specific legal formalities under the Civil Code of the Philippines and strict taxation requirements under the National Internal Revenue Code (NIRC).
I. Essential Legal Requirements
For a donation of real property to be valid and enforceable, it must comply with Article 749 of the Civil Code. Failure to follow these steps results in a void donation.
- Written Instrument: The donation must be made in a public document (notarized).
- Specific Description: The Deed must clearly describe the property being donated (Technical Description from the Title).
- Acceptance: The donee must accept the donation. This acceptance can be done within the same Deed of Donation or in a separate instrument.
- Notification of Acceptance: If the acceptance is made in a separate document, the donor must be notified in an authentic form, and this step must be noted in both instruments.
Required Documents for Processing
To successfully transfer the title at the Register of Deeds, you will typically need:
- Original Copy of the Deed of Donation (duly notarized).
- Owner’s Duplicate Copy of the Transfer Certificate of Title (TCT).
- Certified True Copy of the Latest Tax Declaration (Land and Improvement).
- Tax Clearance (issued by the City/Municipal Treasurer).
- Certificate Authorizing Registration (CAR) from the BIR.
- Affidavits of No Improvement (if the land is vacant).
- DAR Clearance (if the land is agricultural).
II. The Cost of Donation (Taxes and Fees)
Transferring land through donation triggers several financial obligations. These are generally divided into national taxes (BIR) and local fees (LGU/Register of Deeds).
1. Donor’s Tax (National Tax)
Under the TRAIN Law (Republic Act No. 10963), the Donor’s Tax rate is a flat 6%.
- Basis: The tax is computed based on the Total Net Gift in excess of ₱250,000 exempt gift per year.
- Valuation: The property is valued at its Fair Market Value (FMV) at the time of donation. Specifically, the BIR uses the higher value between the Zonal Value (determined by the BIR) and the Assessed Value (found in the Tax Declaration).
2. Documentary Stamp Tax (DST)
Donations of real property are subject to DST.
- Rate: 1.5% of the FMV or the Zonal Value, whichever is higher.
3. Local Transfer Tax
This is paid to the City or Provincial Treasurer’s Office where the property is located.
- Rate: Usually ranges from 0.50% to 0.75% of the property’s value, depending on the local ordinance of the municipality or city.
4. Registration Fees
Paid to the Land Registration Authority (LRA) / Register of Deeds for the issuance of a new title in the donee's name.
- Rate: Follows a graduated table of fees based on the property value (usually approximately 0.25%).
5. Notarial Fees
Since the deed must be notarized, a fee is paid to the Notary Public. This is usually 1% to 2% of the property value, though it is often negotiable for high-value properties.
III. Step-by-Step Process Flow
| Step | Agency | Output |
|---|---|---|
| 1. Preparation | Notary Public | Notarized Deed of Donation |
| 2. Tax Payment | Bureau of Internal Revenue (BIR) | Payment of Donor's Tax & DST |
| 3. Clearance | Bureau of Internal Revenue (BIR) | Certificate Authorizing Registration (CAR) |
| 4. Local Tax | City/Municipal Treasurer | Tax Clearance & Transfer Tax Receipt |
| 5. Transfer | Register of Deeds (RD) | Cancellation of old Title; Issuance of new Title |
| 6. Update | Assessor’s Office | New Tax Declaration in Donee's Name |
IV. Critical Considerations
- Donor’s Tax Exemptions: Donations to certain entities (e.g., the Philippine Government, certain educational, charitable, or religious institutions) may be exempt from donor's tax, provided they meet the "30% administrative expense" rule under the NIRC.
- The "Legitime" Rule: Under Philippine Succession Law, a donor cannot donate more than what they can give by will. If a donation impairs the legitime (the portion of the estate reserved by law for compulsory heirs, like children), the donation may be considered "inofficious" and can be reduced or revoked after the donor's death.
- Void Donations: Donations between spouses during the marriage are generally void (Art. 87, Family Code), except for moderate gifts on occasions of family rejoicing. Donations between persons living together as husband and wife without a valid marriage are also void.