Donor’s Tax in the Philippines
The Computation Base: “Assessed Value” vs “Fair Market Value”
Executive summary. For Philippine donor’s tax, the starting point is fair market value (FMV)—never the “assessed value” shown on the Real Property Tax (RPT) statement—because the National Internal Revenue Code (NIRC) expressly says the tax is imposed on the net gifts computed at the current FMV of the property donated. “Assessed value” is relevant only for local taxation. When the Bureau of Internal Revenue (BIR) measures FMV it must compare three figures and adopt the highest: (1) the BIR zonal value; (2) the Provincial/City Assessor’s schedule of fair market values; and (3) the actual consideration stated in the Deed of Donation. The taxpayer then subtracts any statutory deduction or exemption, applies the donor’s tax rates in §99 as amended by the TRAIN Law, files BIR Form 1800, and pays within thirty (30) days from the date of gift.
The discussion below covers every moving part—statutory text, revenue regulations, local‐government valuation rules, illustrative computations, common audit issues, and leading Supreme Court pronouncements.
1. Governing Statutes, Regulations, and Rulings
| Instrument | Key Provisions on Valuation |
|---|---|
| NIRC of 1997, as amended, §99–101 | FMV of the property at the time the gift is made; net gifts; rate schedules; filing deadline |
| Revenue Regulations (RR) No. 12-2018 | Implements TRAIN donor’s-tax rates; interprets FMV rule |
| Revenue Memorandum Order (RMO) No. 15-2003 (and successive RMO updates) | Methodology for computing & publishing BIR zonal values |
| LOCAL GOVERNMENT CODE (RA 7160), §212-214 | Mandates each assessor to issue a schedule of FMV of real properties every three years |
| Administrative Circulars & BIR Rulings (e.g., BIR Ruling DA-082-20) | Clarify when book value may be used for shares without recent appraisal; confirm that “assessed value” is not the FMV basis |
2. Core Definitions
| Term | Meaning in Donor’s-Tax Context |
|---|---|
| Fair Market Value (FMV) | The price at which property may be reasonably sold between a willing buyer and a willing seller, neither being under compulsion. For real property, FMV is deemed to be the highest of: (a) BIR zonal value; (b) local assessor’s schedule of FMV; or (c) actual consideration. |
| Assessed Value | FMV × assessment level (e.g., 20% for residential land). Used only for local RPT computations. Never a donor’s-tax base. |
| Zonal Value | Per-square-meter values periodically set by the BIR for each street/barangay. Published in RMOs and on the BIR website. |
| Net Gift | FMV of the property donated minus allowable deductions (e.g., P250,000 personal exemption per donor per calendar year; actual proven debts on the donated property). For donations inter vivos to beneficiaries other than “strangers,” deduct split-interest charitable gifts as well. |
| Stranger | A donee who is not within the 4th civil-degree relationship by consanguinity to the donor. “Stranger gifts” are taxed at a flat 6 %. |
3. Valuation Mechanics: Step-by-Step
3.1 Real Property
Identify the property classification (residential, commercial, agricultural).
Secure documents: latest Certified True Copy of Transfer Certificate of Title/Tax Declaration; printout of latest zonal values.
Compute three candidate FMVs
- Zonal Value: lot area × BIR zonal value per m².
- Schedule FMV: lot area × assessor’s FMV per m² from the LGU schedule.
- Actual Consideration: value stated in Deed of Donation (often “P1.00 and love and affection” – deemed unreliable, BIR disregards).
Pick the highest. This becomes the gross gift.
Subtract deductions (if any) → Net Gift.
3.2 Shares of Stock
| Type of Share | FMV Basis |
|---|---|
| Listed | Closing price on the date of donation or the latest available trading day. |
| Unlisted Common | Book value per latest audited FS preceding donation or BIR-accepted appraisal if one exists. |
| Unlisted Preferred | Par value, unless a higher redemption price or appraised value exists. |
3.3 Other Personal Property
- Motor vehicles: Higher of depreciated book value or appraised selling price published by automotive guides.
- Jewellery, art, collectibles: Recent arm’s-length sale price; else professional appraisal.
4. Donor’s-Tax Rate Table (TRAIN, effective 1 Jan 2018)
| Bracket (Net Gift) | Tax Due |
|---|---|
| P 250,000 & below (aggregate per calendar year) | 0 % |
| Over P 250,000 | 6 % of the excess |
Exception: If the donee is a stranger, the entire net gift (no first-P250k exemption) is taxed at 6 %.
5. Illustrative Computations
5.1. Donation of Residential Lot
| Item | Amount (PHP) |
|---|---|
| Area | 300 m² |
| Zonal value | 300 m² × ₱25,000 /m² = ₱7,500,000 |
| Assessor’s schedule FMV | 300 m² × ₱21,000 /m² = ₱6,300,000 |
| Deed value | “₱1.00” – disregarded |
| Gross gift (highest FMV) | ₱7,500,000 |
| Less exemption (first ₱250,000) | ₱250,000 |
| Net gift | ₱7,250,000 |
| Donor’s tax (6 %) | ₱435,000 |
5.2. Cash & Share Gift to a Stranger
| Item | Amount |
|---|---|
| Cash | ₱1,000,000 |
| Unlisted common shares (book value) | ₱2,000,000 |
| Net gift | ₱3,000,000 |
| Stranger rate | 6 % × 3,000,000 |
| Tax due | ₱180,000 |
Note: No ₱250k exemption because donee is a stranger.
6. Deductions, Exemptions & Special Cases
P250,000 annual exemption per donor aggregate (except stranger gifts).
Fully exempt donations
- To the national government, political subdivisions, or agencies.
- To accredited non-profit educational and charitable institutions complying with NIRC §101(A).
- Dowries (gifts made within one year before marriage) up to ₱10,000 under the Civil Code—but still subject to donor’s tax if over ₱250,000; the dowry exemption is now largely academic.
Donation subject to “conditional” clause: FMV determined on date of perfection, not on date condition occurs, per BIR Ruling.
Split-interest gifts (e.g., usufruct retained by donor) – special valuation under §102 using actuarial tables; outside practical scope, BIR seldom issues rulings.
Tax-free exchange: Gift of property to a corporation in exchange for shares is not a donation if there is transfer of control and adequate consideration; otherwise subject to donor’s tax.
7. Filing & Payment Compliance
Form: BIR Form 1800 (Donor’s Tax Return).
Who files: The donor, or executor/administrator if donor dies before filing.
Where: Revenue District Office (RDO) having jurisdiction over the donor’s place of residence; if non-resident, at RDO No. 39 (Large Taxpayers South).
When: Within 30 days from the date the gift is made.
Attachments:
- Deed of Donation, notarized.
- Sworn computation of FMV (with zonal valuation printout, assessor’s certification).
- Certified true copy of TCT/Tax Declaration or stock certificates.
- Proof of exemption (e.g., SEC certificate of donee; BIR ruling for donee institution).
Surcharge/interest: 25 % surcharge for late filing; 12 % p.a. interest on the unpaid tax.
8. Reconciling “Assessed Value” Confusion
| Myth | Legal Reality |
|---|---|
| “I can use the assessed value (taxable value) shown on my RPT receipt because it is lower.” | Wrong. The NIRC orders FMV, not assessed value. BIR examiners ignore municipal assessment levels. |
| “The LGU schedule of FMV is the assessed value.” | The schedule lists market values per land class; assessed value arises only after multiplying by an assessment level (15-35 %). |
| “If there is no BIR zonal value, I may use assessed value.” | Partly true: if no zonal value, FMV defaults to the assessor’s schedule FMV, never the assessed value. |
9. Audit Hotspots & Jurisprudence
- Undervaluation – BIR issues Assessment Notices when the declared FMV is lower than zonal. SC in Spouses Gamboa v. CIR (G.R. 168471, Feb 2007) sustained deficiency donor’s tax where “love and affection” valuation ignored.
- Back-to-back estate & donor’s tax – If donor dies within a year of donation, asset steps up in value for estate tax, but donor’s tax already paid is not creditable.
- Indirect gifts – Commissioner v. Castro, G.R. 231428 (Oct 2021) held that waiver of valuable rights may constitute a taxable donation even without a formal deed.
- Conditional donations to LGUs – Exempt if beneficial ownership transfers to the State, per City of Baguio v. De Leon, G.R. 215519 (Jan 2020).
- Shares valuation dispute – CIR v. Court of Appeals & Aichi Corp., G.R. 212449 (Aug 2019) ruled that book value is proper where no recent appraisal and shares are thinly traded.
10. Planning Tips & Compliance Checklist
| Action Item | Rationale |
|---|---|
| Check zonal value updates (RMOs) before executing deeds. | Zonal values can jump 30-50 %; timing matters. |
| Aggregate gifts per calendar year to maximize ₱250k exemption. | The exemption is per donor, not per donee. |
| Document valuations (professional appraisal for art, jewelry). | Shifts burden of proof to BIR if disputed. |
| File within 30 days; pay electronically via e-FPS or AAB. | Avoid 25 % surcharge & 12 % interest. |
| Secure CAR (Certificate Authorizing Registration) early. | Required for transfer of titles/shares in Registry of Deeds, SEC. |
| Review related-party gifts to avoid re-classification as capital gains disguise. | Prevents dual assessment (CGT + donor’s tax). |
11. Interaction with Other Taxes
| Tax | Relationship to Donor’s Tax |
|---|---|
| Capital Gains Tax (CGT) | Not imposed on donations; a transfer “for less than adequate consideration” is a donation, so donor’s tax applies instead. |
| Documentary Stamp Tax (DST) | Deed of Donation of real property: ₱15 DST under RA 1125; for shares: DST under §174 at 0.75 % of par/fair value. |
| Estate Tax | Separate tax triggered at donor’s death; gifts made within five (5) years are no longer subject to “colation” under the TRAIN-era estate tax, but property donated mortis causa is taxed as part of the estate. |
12. Frequently Asked Questions
Q: Can I assign a lower value if the zonal value is outdated? A: No. Unless the taxpayer obtains a BIR ruling proving substantial depreciation or market crash (rarely granted), the published zonal value controls until officially revised.
Q: Is a Cash Gift of ₱200,000 to my nephew subject to tax? A: Nephew is within the 4th degree; aggregate gifts for the year do not exceed ₱250,000 → no donor’s tax, but still file Form 1800 marked “EXEMPT”.
Q: Are online transfers of cryptocurrency covered? A: Yes. Crypto is intangible personal property; FMV is the peso equivalent of the exchange price at the time of transfer. Include printout of exchange rate.
Q: What if I forgot to file? A: BIR may assess deficiency donor’s tax within three (3) years from filing (or ten (10) years if no return filed). Voluntary disclosure program (VDP) under RR 21-2023 may mitigate penalties.
13. Conclusion
For donor’s tax purposes in the Philippines, fair market value—not “assessed value”—is king. The valuation hierarchy (zonal > schedule FMV > price stated) is non-negotiable, and overlooking it can result in hefty deficiency assessments. Mastery of the FMV rules, timely filing, and meticulous documentation are the donor’s first line of defense. While the 6 % flat rate since TRAIN has simplified computation, valuation disputes remain the fertile ground for audit. By internalizing the principles outlined above, practitioners and taxpayers alike can navigate donor’s-tax compliance confidently and legally optimize wealth transfers during one’s lifetime.
This article is current as of July 16, 2025 and reflects all NIRC amendments and BIR issuances up to this date. It is intended for general guidance; for specific scenarios, consult a Philippine tax professional or the BIR.