1. Overview: What Donor’s Tax Is

Donor’s tax is a national internal revenue tax imposed on gratuitous transfers of property (i.e., transfers without adequate or full consideration) made during the donor’s lifetime. It applies whether the transfer is made by a deed of donation, by a waiver or condonation of a right, by a bargain sale (sale for less than fair market value), or by any arrangement that results in a person receiving property or a benefit for free or for less than its value.

The donor’s tax is a tax on the act of donating and is generally borne by the donor, even if the donee (recipient) agrees to shoulder the payment.

2. Legal Framework and Governing Concepts

Donor’s tax is governed primarily by the National Internal Revenue Code (NIRC), as amended, and the regulations and issuances of the Bureau of Internal Revenue (BIR).

Key concepts used throughout donor’s tax compliance include:

Donor: the person who gives.
Donee: the person who receives.
Gift: property or a right transferred gratuitously.
Net Gift: the taxable base after applying exemptions and allowable reductions provided by law (notably the annual exemption threshold).
Calendar-Year Aggregation: multiple gifts in the same year are combined to determine tax due.

3. What Counts as a “Donation” or “Gift”

A taxable gift generally exists when ownership or a valuable benefit is transferred without full and adequate consideration.

3.1 Common transactions treated as gifts

Outright donation of cash or property Example: donating ₱1,000,000 cash to a friend.
Donation of real property Example: donating a house and lot to a child.
Donation of shares of stock Example: donating shares in a corporation to a relative.
Condonation (forgiveness) of a debt If A is owed ₱500,000 by B and A forgives the debt without consideration, that forgiveness can be treated as a gift.
Bargain sale / sale for inadequate consideration If property worth ₱5,000,000 is “sold” for ₱1,000,000, the ₱4,000,000 difference may be treated as a gift (subject to valuation rules and proof of consideration).
Transfer with retained benefit to the donee Some arrangements that effectively enrich a person without full payment can be scrutinized as indirect gifts.

3.2 Transactions generally not treated as gifts (depending on facts)

Transfers for full and adequate consideration (arm’s-length sale).
Certain settlements of obligations supported by valid consideration.
Certain waivers/renunciations may or may not be treated as gifts depending on whether a specific person is favored and how the renunciation operates under succession rules.

Because the donor’s tax is fact-sensitive, documentation (contracts, proof of payment, board resolutions, appraisals) matters.

4. Who Is Taxed: Residents, Citizens, and Nonresident Aliens

Donor’s tax treatment depends on the donor’s status and the location (“situs”) of the property donated.

4.1 Philippine citizens and resident aliens

As a rule, a citizen or resident alien donor is taxed on gifts of property wherever situated (Philippine or foreign), subject to applicable foreign tax credits (when allowed) and supporting proof requirements.

4.2 Nonresident aliens

A nonresident alien is generally taxed only on gifts of property situated in the Philippines.

For intangible personal property (e.g., shares, receivables, bonds), special situs and reciprocity rules may apply in cross-border situations—meaning the Philippines may exempt certain intangible gifts by a nonresident alien if the donor’s country grants a similar exemption to Filipinos under comparable conditions.

5. What Property Is Covered

Donor’s tax can apply to:

Real property (land, buildings, condominium units)
Tangible personal property (vehicles, jewelry, equipment)
Intangible property (shares of stock, bonds, receivables, intellectual property rights, and similar rights)

6. Tax Base and Valuation: Determining the Value of the Gift

6.1 General rule: Fair Market Value (FMV)

The taxable amount is generally based on the fair market value of the property at the time of donation.

6.2 Real property valuation (Philippine practice)

For real property in the Philippines, BIR practice typically uses the higher of:

the BIR zonal value (Schedule of Values), and
the fair market value per the local assessor (tax declaration).

If improvements exist (house/building), those values are included.

6.3 Shares of stock

Listed shares: commonly valued using market-based benchmarks (e.g., trading/closing price around the donation date, depending on applicable BIR rules and documentation).
Unlisted shares: commonly valued using a book-value based approach supported by financial statements (often the latest audited FS or other prescribed basis).

6.4 Other personal property

Typically valued at FMV supported by:

appraisal reports,
purchase documents, or
other objective valuation evidence.

6.5 Donations with liabilities / encumbrances

If the donated property is subject to a mortgage or liability and the donee assumes the obligation, the net economic benefit transferred is considered. The structuring and contract terms (who assumes what, and whether consideration exists) affect the taxable amount.

6.6 “Tax paid by donee” issue (tax-on-tax)

If the donee pays donor’s tax on the donor’s behalf, the payment can be treated as an additional gift by the donor, which may require a “gross-up” computation in practice.

7. Donor’s Tax Rate and Annual Exemption

7.1 Calendar-year exemption threshold

A key feature of Philippine donor’s tax is the annual exemption: the first ₱250,000 of total net gifts made during the calendar year is generally not subject to donor’s tax. Gifts are aggregated across the year.

7.2 Flat rate

After the annual exemption threshold, donor’s tax is generally imposed at a flat 6% on the excess of net gifts.

Basic formula (typical): Donor’s Tax = 6% × (Net Gifts for the Year − ₱250,000)

7.3 Aggregation rule (multiple donations in a year)

If you donate multiple times in one year, you compute tax considering the total gifts for that year (not per donation). Practically, this means later donations may trigger tax even if earlier donations did not.

8. Exempt Donations and Special Exclusions

Certain donations may be exempt, depending on the donee and purpose, provided legal requirements and documentation are met.

Common categories recognized in Philippine donor’s tax practice include:

Donations to the National Government or its agencies/instrumentalities (and in some cases, local government units), subject to conditions.
Donations to qualified/accredited non-profit, charitable, religious, educational, cultural, or social welfare institutions, subject to accreditation/qualification rules and limitations on the use of the donation.
Donations for certain priority programs (where the law grants exemption), subject to strict documentation and compliance.

Important: Exemption often depends not just on who receives the donation, but also on how the donated property is used, and whether the recipient is qualified/accredited at the time of donation. Improper documentation can cause the donation to be treated as taxable.

9. Filing Requirements: Returns, Forms, and Documentation

9.1 Donor’s Tax Return (BIR Form)

The donor generally files a Donor’s Tax Return (BIR Form 1800) for donations subject to donor’s tax rules. In many real-world transactions—especially those involving real property or shares—filing is functionally required to secure BIR clearances for transfer.

9.2 Core documentary requirements (typical)

Exact requirements vary by revenue district and transaction type, but commonly requested documents include:

For all donations

Duly accomplished BIR Form 1800
Deed of Donation (notarized), or relevant instrument
Valid government IDs of donor and donee
TIN of donor and donee (or proof of application, as applicable)
Proof of relationship (if relevant to documentation)
Proof of payment (BIR payment confirmation / bank validation)

Additional for real property

Certified true copy of title (TCT/CCT) and tax declaration
Zonal value reference / confirmation (as applicable)
Location map / property details (sometimes requested)
If with improvements: building/structure tax declaration and supporting docs

Additional for shares of stock

Stock certificates (or proof of ownership)
Secretary’s certificate / board resolutions (as applicable)
Latest audited financial statements (for valuation of unlisted shares)
General information sheet or corporation documents (sometimes requested)
Proof of transfer compliance in the corporate books

9.3 Certificate Authorizing Registration (CAR / eCAR)

For transfers of real property (and often certain transfers of shares), the BIR typically issues a CAR/eCAR, which is required by the Register of Deeds or other entities to process the change in ownership. The CAR is usually issued after filing, payment (if any), and verification of supporting documents.

9.4 Other taxes and charges that may arise

A donation can trigger other obligations, depending on the instrument and property, such as documentary stamp tax (DST) on certain documents/transfers under the NIRC. Local government fees (transfer tax, registration fees) may also apply in real property transfers, depending on the LGU and registry requirements.

10. Deadlines: When to File and Pay

10.1 Statutory deadline

The donor’s tax return is generally filed and the tax paid within thirty (30) days from the date the gift is made.

10.2 What is the “date of gift”?

Typically, it is the date the donation becomes effective and complete—often tied to:

the date of notarization/execution of the deed (for many donations), and/or
the date of acceptance by the donee (where acceptance is required and evidenced), and/or
the date the donor actually transfers control/ownership (fact-specific for certain properties).

Because late filing penalties are significant, donors commonly treat the notarization/effectivity date as the practical trigger unless the instrument clearly provides otherwise.

11. Payment Methods and Where to File

Filing is generally done with the BIR Revenue District Office (RDO) having jurisdiction over the donor (for individuals) or as otherwise prescribed for the transaction, with payment through:

Authorized Agent Banks (AABs) of the RDO (if applicable),
BIR’s electronic payment channels, or
other BIR-authorized facilities depending on the prevailing system and the taxpayer’s enrollment status.

In practice, real property and share transfers often follow RDO/RD-specific checklists and queues for CAR processing.

12. Penalties for Late Filing or Late Payment

When donor’s tax is not filed and/or paid on time, the NIRC authorizes the BIR to impose civil penalties, and in serious cases, criminal action.

12.1 Surcharge

A 25% surcharge is commonly imposed for:

late filing, or
late payment, or
failure to file in the proper place (depending on circumstances and BIR findings).

A 50% surcharge may be imposed in cases involving:

willful neglect to file, or
false/fraudulent return.

12.2 Interest

Interest accrues on the unpaid amount from the due date until full payment. The interest rate under the NIRC framework is commonly expressed as twice the legal interest rate (commonly applied as 12% per annum in many tax computations), subject to how the legal interest rate is defined/updated under applicable rules.

12.3 Compromise penalties

The BIR may impose compromise penalties (administrative settlements) depending on the violation category, without prejudice to the basic tax, surcharge, and interest.

12.4 Other consequences

Delay in issuance of CAR/eCAR, preventing transfer/registration.
Possible assessment, audit exposure, and documentary scrutiny (particularly for undervaluation or disguised sales).
In aggravated cases, potential criminal liability for tax evasion-type conduct, subject to due process and evidentiary standards.

13. Practical Compliance Notes and Risk Areas

13.1 Undervaluation and documentation gaps

Donations of real property and shares are frequently reviewed for:

undervalued declarations,
missing acceptance or incomplete deeds,
inconsistent valuation support,
questions suggesting a donation may actually be a sale.

13.2 Donation vs. sale distinction

A transfer labeled “donation” may be recharacterized if facts show substantial consideration was paid. Conversely, a “sale” for a token amount may be treated partly as a donation.

13.3 Timing issues

Because the return is due within 30 days of the gift, delays in signing, notarization, acceptance, or submission can quickly create exposure to surcharge and interest.

13.4 Multiple gifts in a year

The annual exemption is not “per donee”; it is tied to the donor’s total gifts for the year. Proper aggregation avoids underpayment.

13.5 Cross-border gifts

Donations involving foreign property, foreign donees, or nonresident alien donors raise issues on:

situs,
reciprocity for intangibles,
documentation and proof of foreign tax paid (if credits are claimed),
currency conversion and valuation dates.

14. Step-by-Step Guide (Typical Workflow)

Plan the transfer Identify property, donee, and whether any liabilities exist.
Prepare the Deed of Donation Include complete property descriptions, conditions (if any), and donee’s acceptance.
Gather valuation documents Zonal value/tax declaration for real property; financial statements for unlisted shares; appraisals for high-value movables.
Compute donor’s tax Aggregate year-to-date gifts, apply the ₱250,000 annual exemption, then apply 6% to the excess.
File BIR Form 1800 and pay (within 30 days)
Submit documents for CAR/eCAR (if applicable) Respond to BIR queries; correct deficiencies.
Register the transfer Register of Deeds (for real property) or corporate books/SEC-related processes (for shares), plus LGU requirements where applicable.

15. Illustrative Examples

Example A: Cash donation (single donation)

Donated cash: ₱1,000,000 in June
Net gifts for the year: ₱1,000,000
Less annual exemption: ₱250,000
Taxable net gifts: ₱750,000
Donor’s tax: 6% × ₱750,000 = ₱45,000
Due: within 30 days from date of gift

Example B: Multiple donations in one calendar year

January donation: ₱200,000 (no tax due yet under the threshold)
September donation: ₱400,000
Total gifts for the year: ₱600,000
Less annual exemption: ₱250,000
Taxable: ₱350,000
Donor’s tax: 6% × ₱350,000 = ₱21,000 Tax is computed on the year’s total, not separately “per donation.”

16. Key Takeaways

Donor’s tax applies to lifetime transfers for free or for less than full value.
The Philippines generally uses a ₱250,000 annual exemption and a 6% flat rate on excess net gifts.
The donor’s tax return is typically due within 30 days from the date of the gift.
Late compliance commonly results in surcharge, interest, and compromise penalties, and can block issuance of CAR/eCAR, delaying registration and transfer.
Real property and share donations are documentation-heavy; valuation and completeness of the deed are frequent audit points.