Disclaimer: The following article provides general legal information on donor’s tax in the Philippines. It does not constitute legal advice. For specific questions or concerns, it is recommended to consult a licensed attorney or certified tax practitioner.

Overview of Donor’s Tax in the Philippines

Donor’s tax—sometimes referred to as gift tax—is a tax imposed on the privilege of an individual or a juridical person (i.e., a corporation or similar legal entity) to transfer property during his or her lifetime without consideration or compensation. In the Philippines, donor’s tax is governed primarily by the National Internal Revenue Code (NIRC) of 1997, as amended, specifically under Title III (Donor’s Tax), and by various regulations issued by the Bureau of Internal Revenue (BIR).

Legal Framework and Recent Amendments

National Internal Revenue Code (NIRC) of 1997: This is the foundational law governing all national internal revenue taxes in the Philippines, including donor’s tax.
Republic Act No. 10963 (TRAIN Law): Enacted in December 2017 and implemented beginning January 1, 2018, the TRAIN Law introduced significant reforms to the Philippine tax system. With regard to donor’s tax, it simplified and streamlined the rates, imposing a flat rate of 6% under certain conditions.
BIR Issuances: The BIR issues Revenue Regulations (RR), Revenue Memorandum Circulars (RMC), and Revenue Memorandum Orders (RMO) clarifying and implementing donor’s tax provisions. Revenue Regulations No. 12-2018 and subsequent issuances, for instance, provide guidelines for donor’s tax under the TRAIN Law.

What Constitutes a Donation or Gift

A donation (or gift) is generally understood under Philippine law (specifically, the Civil Code of the Philippines) as an act of liberality whereby a person (the donor) disposes of a thing or right in favor of another (the donee), who accepts it, without any consideration or for significantly less than the property’s fair market value.

Key elements of a valid donation:

Donative Intent: The donor intends to transfer ownership without equivalent consideration.
Object of Donation: The property or right must be something transferrable by law.
Acceptance by the Donee: The donee must formally accept the donation to make it valid.
Form Requirements: Donations of real property require a public instrument; donations of personal property above certain values must be in writing.

When Donor’s Tax Arises

Donor’s tax arises from inter vivos transfers—transfers made while the donor is still alive. Transfers mortis causa—property transfers upon death—are subject to estate tax, not donor’s tax.

Donor’s tax is imposed on any gratuitous transfer of property or rights between living persons, whether through a formal donation or other gratuitous means, such as a debt waiver or forgiveness (under certain conditions).

Taxable Base and Exemptions

Taxable Base

The taxable base for donor’s tax is the total net gifts made during a calendar year. The net gift is computed by deducting any allowable deductions from the total value of the property donated.

Exemptions from Donor’s Tax

Certain donations are partially or fully exempt from donor’s tax, including:

Donations to the National Government or its political subdivisions for public use, or donations to accredited charitable, religious, educational, scientific, and cultural organizations.
- Section 101(A)(2) of the NIRC provides specific stipulations about the donee institution’s BIR-accredited tax-exempt status.
Dowries or gifts made on account of marriage (subject to certain limitations under the old rules—but note that TRAIN Law changed how total gifts are aggregated; consult the BIR’s latest guidelines for clarity).
Minimal Value Gifts: The first PHP 250,000 worth of donations in any calendar year is effectively exempt because of the threshold for computing the 6% tax under current law.

Current Donor’s Tax Rate

Pursuant to the TRAIN Law (effective January 1, 2018), the donor’s tax rate became simpler and more uniform:

A yearly aggregate donation (total gifts in a calendar year) of up to PHP 250,000 is exempt from donor’s tax.
Any amount in excess of PHP 250,000 is subject to a flat 6% donor’s tax.

Before the TRAIN Law, donor’s tax varied depending on the relationship of the donor to the donee and the total net gifts. The TRAIN Law eliminated the multiple brackets and replaced them with a single rate.

Persons Liable for Donor’s Tax

It is the donor who is primarily liable to pay the donor’s tax. If the donor is a nonresident alien, different rules apply regarding which properties are considered situated in the Philippines. Generally, only those properties deemed located in the Philippines are subject to donor’s tax for nonresident aliens.

For resident aliens and Philippine citizens (regardless of where they reside), donor’s tax applies to worldwide donations of property.

Valuation of Donated Property

Accurate valuation is crucial in determining the taxable base for donor’s tax. The property’s value is measured by:

Real Property: The basis is the higher of either:
- The fair market value (FMV) determined by the Commissioner of Internal Revenue (zonal value), or
- The fair market value as determined by the Provincial/City Assessor’s office (assessed value).
Shares of Stock:
- Listed (Publicly Traded): The fair market value is the weighted average of the stock’s closing price on the date of donation.
- Unlisted (Privately Held): The fair market value typically is based on the corporation’s net asset value or book value, or in some instances, a valuation method as prescribed by relevant BIR regulations.
Personal Property (Tangible or Intangible): Generally valued at fair market value at the time of donation.
- For example, vehicles should be valued based on their current book value (or any appraisal recognized by the BIR).
- Artworks, jewelry, or collectibles should be appraised.

Filing Requirements and Procedures

BIR Form: Donors must file BIR Form 1800 (Donor’s Tax Return) for every donation made.
Who Files: The donor or the donor’s authorized representative must file the return.
Deadline for Filing:
- The donor’s tax return, along with payment, must be filed within thirty (30) days after the date the gift is made.
Payment:
- Donor’s tax is paid upon filing the return. Late filing and payment incur surcharges and interest.

For multiple donations within a calendar year, each donation triggers a filing requirement within 30 days of each transfer. However, the computation of tax accounts for the aggregate of all taxable gifts during that year (i.e., the PHP 250,000 exemption covers the total of all gifts in that same year, not each individual donation).

Record-Keeping and Supporting Documents

The donor should maintain and submit the following documentation to support the BIR Form 1800:

Notarized Deed of Donation, indicating the objects of donation and acceptance.
Proof of Ownership (e.g., original title for real property, stock certificates for shares).
Certified True Copy of Transfer Certificate of Title or Condominium Certificate of Title (for real property).
Latest Tax Declaration (for real property) and other relevant property valuations or appraisals.
Certification from the Donee for acceptance, or BIR certifications if the donee is a tax-exempt institution.
Acknowledgment Receipts or proofs of transfer, especially for donations of cash or other personal property.

Consequences of Non-Compliance

Failing to properly pay and file donor’s tax can lead to:

Surcharges of up to 50% of the tax due.
Interest at the legal rate (12% per annum in many cases, but subject to change) for late payment.
Penalties or the possible inability to transfer the property’s title to the donee (particularly relevant in the case of real property, as the Registry of Deeds often requires a Certificate Authorizing Registration (CAR) from the BIR).

Common Questions and Clarifications

Are gifts given to family members always taxed?
- If the total net gifts to all donees in a calendar year exceed PHP 250,000, the amount beyond that threshold is subject to a 6% donor’s tax. There is no special, lower rate for family members under the TRAIN Law—unlike pre-TRAIN laws that differentiated between strangers and relatives.
Is there any special treatment for marriage gifts (dowries)?
- Historically, there was a specific exemption (up to certain limits) for gifts made on account of marriage. After the TRAIN Law, these exemptions effectively merged under the single threshold. Verify the current BIR guidelines for any transitional provisions or confirm with a practitioner.
What if the donor is a nonresident?
- For nonresident aliens with no intention to reside in the Philippines, donor’s tax generally applies only to property deemed situated in the Philippines. Real estate and certain tangible personal properties within the Philippines will be included in the donor’s tax base. Consult BIR issuances for details on intangible property.
Can donor’s tax be waived or reduced?
- Outside of statutory exemptions (e.g., donations to qualified government agencies or accredited nonprofit organizations), no general waivers exist. The best approach is to plan charitable and other transfers carefully within the statutory framework.
Why file a donor’s tax return if the donation is exempt?
- In many cases (e.g., donation of real property), the donor still needs to file a return and secure a BIR ruling or clearance certifying that no tax is due. This is often necessary to annotate the transfer or issuance of a new certificate of title in the donee’s name.

Practical Tips and Best Practices

Plan Donations Strategically: If the donor intends to donate multiple properties or large sums, it might be beneficial to time donations or spread them out across calendar years to maximize the PHP 250,000 annual exemption.
Maintain Thorough Records: Keep valuations, deeds, appraisals, and receipts in order. Proper documentation ensures smooth processing with the BIR.
Consult Professionals: If the donation involves complex assets, such as family corporations, high-value artworks, or overseas property, it is prudent to seek counsel from tax professionals and lawyers.
Stay Updated: Tax laws, regulations, and policies can evolve. Always confirm that you are referencing the latest BIR Revenue Regulations and Circulars.

Conclusion

Donor’s tax is a crucial consideration for individuals and entities making lifetime gifts in the Philippines. Its framework has evolved under the TRAIN Law, simplifying the tax rate to a single 6% rate above an annual exemption threshold of PHP 250,000. Compliance involves timely filing of donor’s tax returns, accurate valuation of donated assets, proper documentation, and payment of any applicable tax within the mandated periods.

While the concept of donor’s tax in the Philippines is relatively straightforward under the uniform rate, details such as exemptions, filing requirements, valuation methods, and the specifics of property type can complicate matters. Therefore, donors who plan to make significant or repeated donations should keep thorough records and, if necessary, seek professional advice to ensure compliance and optimize their tax position.