Introduction

In the Philippines, donating property to a church or religious institution is a common practice rooted in cultural, spiritual, and philanthropic motivations. A Deed of Donation serves as the formal legal instrument to effectuate such a transfer, ensuring the donation is valid, enforceable, and compliant with Philippine laws. This article provides a comprehensive overview of the costs associated with drafting and executing a Deed of Donation specifically to a church, within the Philippine legal framework. It covers the legal requirements, procedural steps, various expenses, potential exemptions, and practical considerations to guide donors through the process.

The Philippine Civil Code (Republic Act No. 386) primarily governs donations, supplemented by the National Internal Revenue Code (Republic Act No. 8424, as amended) for tax implications, and relevant administrative regulations from bodies like the Bureau of Internal Revenue (BIR) and the Registry of Deeds. Donations to churches, as non-profit religious organizations, often qualify for favorable tax treatment, but costs can still arise from professional services, government fees, and ancillary expenses.

Legal Basis for Donations to Churches

Under Article 725 of the Civil Code, a donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it. For donations to be valid, they must comply with formalities depending on the value and nature of the property:

Movable Property: Donations exceeding PHP 5,000 must be in writing (Article 748). Simple donations may be oral if accompanied by simultaneous delivery.
Immovable Property: Must be in a public instrument (notarized deed) and accepted in the same or another public instrument (Article 749). Failure to comply renders the donation void.

Churches, registered as religious corporations under the Corporation Code (Batas Pambansa Blg. 68) or as non-stock, non-profit entities, are eligible donees. They must have legal personality to accept donations, often through their bishop, priest, or authorized board. Special rules apply if the church is part of a larger diocese or denomination, requiring ecclesiastical approvals.

Donations to churches are encouraged under Philippine law, aligning with constitutional protections for religious freedom (1987 Constitution, Article III, Section 5). However, donors must ensure the property is free from liens and that the donation does not violate laws on inofficious donations (those impairing legitimes of compulsory heirs under Articles 752-759).

Types of Donations and Their Cost Implications

The costs vary based on the type of donation:

Inter Vivos Donations: Effective during the donor's lifetime. These are irrevocable once accepted, subject to revocation only for specific grounds like ingratitude (Article 765).
Mortis Causa Donations: Take effect upon the donor's death, treated as testamentary dispositions and subject to probate rules, potentially increasing costs due to estate proceedings.
Conditional or Modal Donations: Where the donee must fulfill certain conditions (e.g., using the property for religious purposes), adding complexity to drafting and thus higher legal fees.
Donations of Intellectual Property or Rights: Less common for churches but possible (e.g., copyrights to religious texts), with costs focused on valuation and registration.

For churches, donations often involve real property (land for chapels), cash, or personalty (vehicles, equipment). The nature affects costs, with immovable property incurring higher registration and tax fees.

Breakdown of Costs in Drafting and Executing the Deed

Drafting a Deed of Donation involves several cost components. While exact amounts fluctuate based on location, property value, and service providers, the following outlines typical expenses as of current Philippine practices:

1. Attorney's Fees for Drafting

Lawyers typically charge for preparing the deed, ensuring compliance with legal formalities, and advising on tax implications.
Range: PHP 5,000 to PHP 50,000 or more, depending on complexity.
- Simple cash donation: PHP 5,000–10,000.
- Immovable property: PHP 20,000–50,000, including title review and due diligence.
Factors influencing cost: Lawyer's experience, location (higher in Metro Manila), and additional services like negotiations with the church.
Pro bono services may be available from church-affiliated lawyers or legal aid clinics, reducing this to zero.

2. Notarial Fees

The deed must be notarized to be a public instrument.
Standard Rate: Under the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC), notaries charge based on the document's value:
- For deeds valued up to PHP 100,000: PHP 200–500.
- Above PHP 100,000: 1–2% of the property's fair market value or zonal value, whichever is higher, but capped practically at PHP 1,000–5,000 for most donations.
Additional fees for acknowledgments, copies, and travel if the notary visits the donor.

3. Documentary Stamp Tax (DST)

Imposed under Section 196 of the Tax Code on deeds conveying real property.
Rate: 1.5% of the consideration or fair market value, whichever is higher. For donations (no consideration), it's based on the property's zonal value (BIR valuation) or assessed value.
- Example: For a property valued at PHP 1,000,000, DST = PHP 15,000.
Exemptions: Donations to government or educational institutions may apply, but for churches, DST is generally payable unless qualified under specific BIR rulings.

4. Donor's Tax

Under Section 98 of the Tax Code, donor's tax is levied on the net gift.
Rate: Progressive, from 2% to 15% for gifts exceeding PHP 250,000 annually (as amended by TRAIN Law, Republic Act No. 10963).
- Exemptions: Up to PHP 250,000 per year is tax-free.
Special Exemption for Churches: Donations to accredited non-government organizations (NGOs), including religious institutions, may be exempt if the church is a qualified donee institution (QDI) under BIR Revenue Regulation No. 13-98. Churches must be registered with the Philippine Council for NGO Certification (PCNC) or have BIR certification for tax-deductible donations.
- If exempt, donor's tax is zero, and the donor may claim income tax deductions (Section 34(H) of the Tax Code).
Filing: BIR Form 1800 must be filed within 30 days of donation, with payment if applicable.

5. Registration Fees with the Registry of Deeds

Mandatory for immovable property to bind third parties (Article 709, Civil Code).
Fees (under Land Registration Authority rates):
- Entry fee: PHP 30–100.
- Registration fee: 0.25% of assessed value, minimum PHP 300.
- Annotation and miscellaneous: PHP 500–2,000.
Total: PHP 1,000–10,000 for average properties.
Transfer Certificate of Title (TCT) issuance: Additional PHP 500–1,000.

6. Capital Gains Tax (CGT) and Other Taxes

CGT (6% of gross selling price or fair market value) does not apply to donations, as there is no sale. However, if the property was acquired by the donor through purchase, the donation is deemed a disposition, but exemptions may apply for QDIs.
Value-Added Tax (VAT): Not applicable to donations.
Local Transfer Tax: Some local government units (LGUs) impose 0.5–0.75% on transfers, but exemptions for charitable donations exist under the Local Government Code (Republic Act No. 7160).

7. Ancillary and Incidental Costs

Appraisal Fees: If valuation is needed, PHP 5,000–20,000 from a licensed appraiser.
Survey Fees: For land donations, if boundaries need verification, PHP 10,000–50,000.
Certification Fees: From BIR (e.g., Certificate Authorizing Registration, CAR): PHP 100–500, plus processing time costs.
Travel and Miscellaneous: Photocopying, postage, and transportation, typically PHP 500–2,000.
Estate Planning Integration: If part of a will, additional costs for holographic or notarial wills (PHP 5,000–15,000).

Exemptions and Incentives for Church Donations

Philippine law provides incentives to encourage charitable giving:

Tax Exemptions: As noted, donor's tax exemption for QDIs. Churches must issue a Certificate of Donation for the donor to claim deductions.
Income Tax Deductions: Donors (individuals or corporations) can deduct the donation amount from gross income, up to 10% for individuals and 5% for corporations, if the church is PCNC-accredited.
Estate Tax Considerations: For mortis causa donations, inclusion in the gross estate but potential deductions.
VAT and Percentage Tax Exemptions: Churches are generally exempt as non-profit entities (Section 109 of the Tax Code).
Property Tax Exemptions: Donated property used for religious purposes is exempt from real property tax (1987 Constitution, Article VI, Section 28(3)).

To avail exemptions, the church must comply with BIR requirements, including annual information returns.

Procedural Steps and Timeline

Consultation and Drafting: Engage a lawyer to draft the deed, including details like donor/donee identities, property description, and conditions.
Execution and Notarization: Sign before a notary; church representative accepts.
Tax Payment and BIR Clearance: File donor's tax return; obtain CAR.
Registration: Submit to Registry of Deeds; secure annotated TCT.
Timeline: 1–3 months, depending on BIR processing (often delayed).

Potential Challenges and Risks

Revocation Risks: If conditions are unmet, the donor may revoke.
Fraud or Undue Influence: Courts may void donations if proven (e.g., under Article 1397 for fraud).
Heir Disputes: Compulsory heirs may challenge if legitimes are impaired.
Cost Overruns: Delays in government offices can add indirect costs.

Conclusion

The total cost to draft and execute a Deed of Donation to a church in the Philippines can range from PHP 10,000 for simple movable property donations to over PHP 100,000 for complex immovable ones, largely influenced by property value and exemptions. By leveraging tax incentives and careful planning, donors can minimize expenses while fulfilling their charitable intent. It is advisable to consult a qualified attorney and tax expert to navigate specifics, ensuring compliance and maximizing benefits under Philippine law.