1) The basic idea: two separate taxable transfers

When you inherit shares, the transfer from the decedent to the heirs is governed by estate tax rules. If, after inheriting, you later transfer (give) those shares to your sibling(s), that later transfer is a donation governed by donor’s tax rules.

Even if the shares already “paid estate tax” as part of the estate settlement, a later gratuitous transfer by an heir is generally a new taxable event for donor’s tax purposes.

2) Governing law and key concepts (Philippine context)

A. Donation under civil law vs. donor’s tax under tax law

Under civil law, a donation is essentially a gratuitous transfer of property, accepted by the donee, with formalities depending on the type and value of property.
Under tax law, donor’s tax is an excise tax on the privilege of transferring property by gift.

For shares of stock, the donor’s tax focus is not the contract label but the economic reality: was property transferred for less than full and adequate consideration?

B. “Gift” includes bargain sales

A transfer for less than full and adequate consideration can be treated as a gift to the extent of the difference between fair market value (FMV) and the consideration actually paid. This matters if you “sell” inherited shares to a sibling at a discount.

3) Who pays donor’s tax and who files?

Donor (the person giving the shares) is primarily liable to:
- file the donor’s tax return, and
- pay donor’s tax.

In a sibling-to-sibling transfer:

The donor sibling files and pays.
The donee sibling typically signs acceptance and provides information/documents, and will often be required for corporate transfer and BIR processing.

4) Donor’s tax rate and exemption (current framework as of the TRAIN-era rules)

A. Rate

Philippine donor’s tax is generally imposed at a flat rate on total net gifts for the calendar year.

B. Annual exemption threshold

There is a ₱250,000 annual exemption for total gifts made by a donor within the calendar year. Donor’s tax generally applies only to the excess over ₱250,000 for that year.

Practical implication: If you make multiple gifts in the same year (cash + shares + other property), you aggregate them to determine whether you exceed the threshold.

5) What exactly is taxed when you donate shares?

A. The tax base: “net gifts” for the year

For shares donated to siblings, the starting point is typically the fair market value (FMV) of the shares donated, then aggregated with other gifts made during the year, less applicable exclusions/exemptions (including the ₱250,000 annual threshold).

B. Valuation rules for shares of stock (core practical rules)

Because shares aren’t “land with zonal values,” the common valuation rules are:

Shares listed and traded in a local stock exchange

FMV is generally determined using the market price around the date of donation (commonly the average of high/low or another exchange-based measure accepted for tax purposes, depending on BIR requirements at the time of filing).

Shares not listed/not traded (closely held corporations)

FMV is commonly determined by book value per share based on the latest available audited financial statements prior to the donation date (or another BIR-accepted valuation method depending on circumstances and documentation).

Key point: For unlisted shares, the BIR focus is often on documented book value (audited FS) and the donor must be ready to submit the supporting computations.

6) Donating “inherited shares” raises sequencing issues

Scenario 1: Shares already transferred into your name (post-estate settlement)

This is the cleanest sequence:

Settle estate, pay estate tax (as applicable), and have the shares recorded in the heirs’ names in the corporate books / stock transfer book.
After you are the registered owner, execute a Deed of Donation of Shares in favor of sibling(s).
File donor’s tax return and obtain the BIR clearance/eCAR for the donation.
Present BIR documents to the corporation for recording the transfer to the donee.

Scenario 2: You want to “give your inheritance share” directly to a sibling during settlement

This often happens via waiver/renunciation or deed of extrajudicial settlement with assignment. Tax treatment can depend on the form:

A general renunciation (not in favor of a specific person) may be treated differently from
A specific renunciation explicitly in favor of a named sibling, which is commonly treated as a taxable donation to that sibling.

Because this distinction can determine whether donor’s tax applies, the drafting of settlement documents is crucial.

7) Documentation: what instruments you usually need

A. Deed of Donation (Shares of Stock)

A typical deed should include:

Full details of donor and donee (names, addresses, TINs)
Corporate details (company name, SEC registration where applicable)
Stock details:
- class of shares, certificate number(s), number of shares, par value (if any)
Statement of gratuitous transfer and acceptance
Effective date of donation
Representations on ownership (donor is the registered owner or has the right to transfer)
Notarization (commonly required in practice for BIR processing)

B. Supporting corporate documents

Depending on whether the corporation is closely held or listed:

Stock certificates
Secretary’s Certificate / Board resolution requirements (if any)
Stock transfer form / deed of assignment (some corporations require standard forms)
Proof of valuation (audited FS for unlisted; market price proof for listed)

C. Estate settlement papers (because the shares are inherited)

BIR and the corporation may require:

Deed of Extrajudicial Settlement / court order (as applicable)
Proof of estate tax compliance and BIR clearance/eCAR for the estate transfer
Documents showing the shares were transferred into the heir’s name (if already done)

8) Filing and payment: donor’s tax return and deadlines

A. Return

Donor’s tax is filed using the BIR Donor’s Tax Return (commonly BIR Form 1800 in the existing framework).

B. Deadline

Donor’s tax is generally filed and paid within 30 days from the date of donation.

C. Where filed

Typically filed with the appropriate Revenue District Office (RDO), and paid through an Authorized Agent Bank (AAB) (or other BIR-allowed payment channels, depending on the taxpayer’s classification and the system available).

D. BIR clearance / eCAR

For transfers of property, the BIR typically issues an Electronic Certificate Authorizing Registration (eCAR) or similar authorization as a condition to recognize/record the transfer. For shares, the eCAR is commonly required by corporations before they record changes in ownership in the stock and transfer book.

9) Other taxes and charges you must watch for (besides donor’s tax)

Even when donor’s tax is the headline item, share transfers can trigger other tax/administrative items depending on structure:

A. Documentary Stamp Tax (DST)

DST may apply to:

the document/instrument used to effect the transfer, and/or
the transfer of shares itself, depending on the applicable DST provision and the nature of the instrument and shares.

DST issues are often the “gotcha” in share transfers because:

the rate and base can depend on whether shares have par value, are no-par, and what instrument is used,
the BIR may require DST payments as part of processing/issuance of clearances.

B. Capital gains tax / stock transaction tax (STT)

Capital gains tax on sale of unlisted shares and stock transaction tax on listed shares generally apply to sales (transfers for consideration), not pure donations.
However, if a transfer is structured as a sale at a token price, the BIR may treat part of it as a donation (difference between FMV and consideration), and the transaction could raise mixed-character issues.

10) Computing donor’s tax: practical illustrations

Example 1: Straight donation of inherited unlisted shares

You donate shares with FMV (book value basis) of ₱2,000,000
You made no other gifts this year.

Taxable net gifts (simplified):

₱2,000,000 – ₱250,000 = ₱1,750,000
Donor’s tax (flat 6% framework): ₱105,000

Example 2: Multiple gifts in the same year

January: you donated cash of ₱200,000 to a sibling
June: you donate shares worth ₱400,000

Aggregate gifts = ₱600,000 Less annual exemption ₱250,000 → taxable = ₱350,000 Donor’s tax at 6% → ₱21,000

11) Common pitfalls in sibling donations of inherited shares

Trying to “shortcut” estate settlement
- If shares are still in the decedent’s name, the corporation and BIR processes usually require estate compliance first.
Mistaking estate-tax payment as covering later donations
- Estate tax compliance for inheritance does not automatically exempt a later donor transfer.
Using “waivers” that are actually specific renunciations
- A specific renunciation in favor of a particular sibling is commonly treated as a taxable donation.
Wrong valuation for unlisted shares
- The BIR commonly expects book value based on latest audited FS (or other substantiated valuation). Incomplete valuation support can delay clearance.
Missing the 30-day deadline
- Late filing/payment can trigger surcharge, interest, and compromise penalties under the tax code.
Ignoring DST
- DST can be required even when the parties are focused on donor’s tax.
Corporate transfer not recorded
- For shares, ownership is effectively proven by registration in the corporate books; without recording, the donee may face problems exercising shareholder rights.

12) Penalties for noncompliance (high-level)

If donor’s tax returns are filed late or tax is paid late, exposure can include:

Surcharge (commonly 25% for late filing/payment; potentially higher in cases treated as willful or fraudulent),
Interest computed per annum under the tax code’s interest rule (the statutory reference is “double the legal interest rate” framework), and
Compromise penalties depending on the BIR’s applicable schedule and the nature of the violation.

13) Drafting and compliance checklist (shares donated to siblings)

Before donation

Confirm the shares are in the donor’s name (or address the settlement/renunciation path carefully).
Determine whether shares are listed or unlisted and gather valuation basis:
- listed: proof of market price around donation date
- unlisted: latest audited FS and book value computation

Execute documents

Deed of Donation of Shares (with acceptance)
Supporting corporate transfer forms / secretary certifications as required

Tax compliance

Prepare donor’s tax return
Compute donor’s tax on aggregate gifts for the year (apply ₱250,000 threshold)
Address DST requirements if applicable
File and pay within 30 days

Post-filing

Secure BIR clearance/eCAR for the share transfer
Submit to corporation and ensure transfer is recorded in the stock and transfer book
Obtain updated stock certificates in donee’s name (or equivalent proof of ownership)

14) Special notes for family arrangements involving multiple siblings

A. Partition vs. donation

If siblings are dividing an estate and reallocating who ends up with which assets, the line between:

a partition (dividing what heirs are entitled to), and
a donation/assignment (one heir transferring part of their entitlement to another) can become tax-significant.

B. Using consideration to avoid donor’s tax (and why it often fails)

Attempting to label a transfer as a “sale” for a nominal price can:

still trigger donor’s tax on the undervalued portion, and
create additional tax/documentary issues.

15) Bottom line

Donating inherited shares to siblings is generally straightforward in concept but procedural in execution:

Donor’s tax is typically due on the FMV of the shares donated, aggregated with other gifts for the year, net of the ₱250,000 annual exemption, and taxed under the flat donor’s tax rate framework.
The key friction points are (1) sequencing with estate settlement, (2) correct valuation, (3) documentary stamp tax, and (4) obtaining BIR authorization (eCAR) so the corporation can record the transfer.