Transferring a family home to a child is common in the Philippines—either as an outright gift (donation) or an onerous transfer (deed of sale). The “best” route depends on your goals (estate planning, tax efficiency, family dynamics, financing needs) and the property’s facts (value, title status, existing encumbrances, marital property regime). This article explains both paths end-to-end: legal bases, tax treatment, documentary requirements, timelines, pitfalls, and a practical decision framework.

Big-Picture Comparison

Factor	Donation (Deed of Donation)	Deed of Sale
Nature	Gratuitous transfer inter vivos	Onerous transfer for consideration
Main national tax	Donor’s Tax (generally 6% on net gifts above ₱250,000 in the calendar year)	Capital Gains Tax (CGT) (6% of the higher of zonal value/assessor’s FMV/selling price)
Other national tax	Documentary Stamp Tax (DST) on donation instrument	DST on deed of sale
Local tax	Transfer Tax (LGU) within prescribed period	Transfer Tax (LGU) within prescribed period
Basis for tax	FMV at time of donation (BIR zonal or assessor’s schedule, whichever is higher)	Higher of BIR zonal value, assessor’s FMV, or selling price
Estate planning impact	Reduces estate; subject to future collation/reduction if inofficious	Reduces estate; still subject to collation issues if simulated/partial gift
Bank financing	Rarely applicable	Possible (if donee/child will finance purchase/mortgage)
Risk of reclassification	—	If price is grossly low vs FMV, difference may be treated as a taxable gift (“transfer for less than adequate consideration”)

Key insight: Selling to a child at a token price does not eliminate taxes. CGT is still computed on the higher of the zonal/assessor’s value; and the difference between FMV and the token price can be hit with donor’s tax.

Route 1: Transfer by Donation

Legal Essentials

Form: Must be in a public instrument (notarized Deed of Donation) that describes the property and states the donor’s intent to give. The donee must accept in the same deed or a separate notarized instrument.
Capacity & consent:
- Donor must have capacity to donate and ownership/disposal power.
- If the property is conjugal/community, the spouse must consent.
- Donations to minors require acceptance by a legal guardian; conservatorship may be needed for special cases.
Restrictions:
- Cannot donate future property (what you may inherit later).
- Donations that impair the legitime of compulsory heirs are inofficious and may be reduced upon the donor’s death (collation/reduction).

Taxes & Fees (Typical)

Donor’s Tax: Generally 6% on total net gifts exceeding ₱250,000 per calendar year (add all your gifts that year).
DST (Donation): Payable on the deed.
Local Transfer Tax: Usually up to 0.5% (province) or up to 0.75% (cities/MM) of the higher of zonal/assessor’s FMV (rates vary by LGU).
Registration Fees: LRA/Registry of Deeds schedule based on value.
Notarial Fees: Market-based.

Deadline anchors:

Donor’s Tax Return (BIR Form 1800): typically within 30 days from the date of donation.

DST (BIR Form 2000-OT): generally on or before the 5th day after the close of the month when the deed was executed.

Local Transfer Tax: commonly within 60 days of the deed (check your LGU ordinance).

(Deadlines are strict; verify the exact current instruction on each BIR form you file.)

Documentary Checklist (Common)

Notarized Deed of Donation (with donee’s acceptance).
Valid IDs/TINs of donor and donee.
Owner’s Duplicate Title (TCT/CTO/CCT), latest tax declaration, real property tax (RPT) clearance.
Marriage certificate (if conjugal/community property) for spousal consent.
Proofs of FMV (BIR zonal valuation printout; assessor’s certification).
BIR Forms: 1800 (donor’s tax) + 2000-OT (DST), payment proofs.
Certificate Authorizing Registration (CAR) to be issued by BIR after compliance.
LGU Transfer Tax receipt.
Registry of Deeds (RD) requirements: CAR, deed, IDs, original title, RPT receipts, tax dec, official receipts for taxes/fees.
Assessor’s Office: for issuance of new Tax Declaration in the child’s name.

Process Flow (Donation)

Prepare & notarize Deed of Donation (+ acceptance).
File & pay: Donor’s tax (Form 1800) and DST (2000-OT); submit documentary set to BIR RDO where the property is located.
Secure CAR from BIR.
Pay LGU Transfer Tax (Treasurer’s Office).
Register at RD to transfer title; then proceed to Assessor to issue new tax declaration.

Route 2: Transfer by Deed of Sale

Legal Essentials

Form: Notarized Deed of Absolute Sale (or Conditional Sale) with proper property description and true consideration.
Capacity & consent:
- Seller must own and be able to dispose.
- Spousal consent if conjugal/community property.
- If the child buyer is minor, a guardian/adult representative is typically needed; for mortgages, banks usually require legal capacity.

Taxes & Fees (Typical)

Capital Gains Tax (CGT): 6% of the higher of BIR zonal value, assessor’s FMV, or contract price.
DST (Sale): Based on consideration or FMV, usually about 1.5% effective rate (statutorily ₱15 per ₱1,000).
Local Transfer Tax: Same ranges as above.
Registration & Notarial Fees as applicable.

Deadline anchors:

CGT Return (BIR Form 1706): typically within 30 days from the sale date.

DST (BIR Form 2000-OT): generally on or before the 5th day after the close of the month of sale.

Local Transfer Tax: commonly within 60 days of the deed (confirm with LGU).

“Sale at a Token Price” Warning

Under “transfer for less than adequate and full consideration” rules, the shortfall between FMV and the token price can be treated as a taxable gift (subject to donor’s tax), on top of CGT/DST computed on FMV.
BIR also scrutinizes simulated sales (where no real payment occurs). A fully simulated sale can be void under the Civil Code.

Documentary Checklist (Common)

Notarized Deed of Sale.
Valid IDs/TINs (seller & buyer).
Owner’s Duplicate Title, latest tax declaration, RPT clearance.
Proofs of FMV (zonal/assessor).
BIR Forms: 1706 (CGT) + 2000-OT (DST), payment proofs.
CAR from BIR.
LGU Transfer Tax receipt.
Registry of Deeds & Assessor filings for new Title and Tax Declaration.
If mortgaged, bank’s partial release/approval or deed of release as required.

Process Flow (Sale)

Execute & notarize Deed of Sale.
File & pay CGT (1706) and DST (2000-OT); submit docs to property-location RDO.
Secure CAR.
Settle LGU Transfer Tax.
Register at RD; secure new title; update Tax Declaration.

Choosing the Better Route

Use this decision framework:

You want to gift now and reduce future estate tax exposure: → Donation is straightforward. Mind the 6% donor’s tax after the ₱250,000 annual exclusion and the legitime rules.
You want the child to obtain title via bank financing or demonstrate actual consideration: → Deed of Sale is practical. Expect 6% CGT plus DST and local taxes.
You’re considering a “sale” at a low price to save tax: → Risky. CGT still uses FMV/zonal if higher, and the difference vs price may be a taxable gift.
There are multiple children and you want fairness: → Donation or sale to one child may later be collated during estate settlement. Consider equalizing gifts or using a family settlement/trust structure.
Property is conjugal/community: → Spousal consent is mandatory for both donation and sale.
Donee is a minor: → Donation is possible but ensure proper acceptance and, where needed, guardianship formalities.

Special Topics & Nuances

1) Collation, Inofficious Donations, and Heir Disputes

Donations to children are subject to collation when the estate is settled to protect the legitime of all compulsory heirs (spouse, legitimate/illegitimate children, parents/ascendants depending on survivors).
Inofficious excess (beyond what the donor could freely dispose) can be reduced after death to restore legitimes.

2) Family Home & Estate Planning

Lifetime donation can help decongest the estate.
Remember: Estate tax is generally 6% of the net estate at death (with allowable deductions, including a family home deduction up to a statutory cap). Donations inter vivos, however, do not enjoy a similar family-home exemption for donor’s tax.

3) Undervaluation & Penalties

BIR uses the higher of zonal value or assessor’s market value (or price, if higher). Understating price doesn’t lower tax.
Late filing triggers surcharges, interest, and penalties.

4) Residency, Citizenship, and Ownership

Foreigners generally cannot own land. A Filipino citizen or qualified dual citizen can. If the child is a former Filipino who reacquired citizenship, ensure the RA 9225 documentation is in order before transfer.
For condominium units, foreign ownership limits are different (up to 40% foreign ownership in the project), but the underlying land restrictions remain.

5) Encumbrances & Liens

Check the title for annotations (mortgages, liens, lis pendens). You may need a bank clearance/release or to structure a simultaneous loan assumption.

6) Marital Property Regimes

If the donor/seller is married under Absolute Community or Conjugal Partnership, spousal consent is needed. Under Complete Separation of Property, prove the property is exclusive (e.g., acquired before marriage or by exclusive means).

7) Withholding & VAT

CGT on sale of a capital asset by an individual replaces income tax on that sale; VAT does not apply to such capital assets. (Different rules apply to ordinary assets used in business or by real estate dealers.)

Step-by-Step Timeline (Both Routes)

Title & tax due diligence (Day 0–5):
- Get certified true copy of Title; latest Tax Declaration; confirm RPT is current; obtain zonal value & assessor’s FMV.
- Check annotations/encumbrances.
Draft & notarize the instrument (Day 3–10):
- Donation: Deed of Donation + Acceptance.
- Sale: Deed of Absolute Sale.
- Secure spousal consent if required.
BIR one-time transactions (Day 5–30+):
- File correct BIR forms (Donation: 1800; Sale: 1706) and DST (2000-OT); pay taxes.
- Submit complete documentary set to the RDO where the property is situated.
- Obtain CAR (processing time varies; completeness is key).
LGU Transfer Tax (within LGU deadline, often ≤60 days):
- Pay at the City/Municipal/Provincial Treasurer; get receipt.
Registry of Deeds (post-CAR):
- Present CAR, deed, title, IDs, RPT proof, transfer tax receipt, pay registration fees; lodge for new Owner’s Duplicate Title under the child’s name.
Assessor’s Office:
- Have the Tax Declaration issued under the child’s name.

Practical Checklists

Donation – Before You Sign

Spousal consent confirmed (if applicable)
Donee acceptance provided (same deed or separate notarized acceptance)
Heir/legitime impact considered; plan for fairness
FMV proofs (zonal/assessor) on file
BIR Form 1800 & 2000-OT prepared

Sale – Before You Sign

Price aligned with at least FMV to reduce donor’s-tax risk on the spread
If financing, bank pre-approval or terms settled
BIR Form 1706 & 2000-OT prepared
Spousal consent (if applicable) and lienholder clearances

Frequently Asked Questions

Q: Can we just “sell” for ₱1.00 to avoid donor’s tax? A: No. CGT uses FMV if higher, and the difference between FMV and ₱1.00 can be treated as a taxable gift.

Q: Is donation always cheaper than sale? A: Not always. Donation triggers donor’s tax (6% of net gifts after ₱250k exclusion), while sale triggers CGT (6% of FMV) plus DST. Compute both scenarios using actual values.

Q: Do we still need CAR for donation? A: Yes. BIR issues a Certificate Authorizing Registration for both donation and sale before the RD will transfer title.

Q: Will donation avoid estate tax? A: It reduces the future estate because ownership shifts now, but inofficious donations can be reduced at death to protect legitimes.

Q: Can a minor child be a donee or buyer? A: Yes, but acceptance/representation must comply with guardianship rules; banks typically won’t lend to minors.

Worked Example (Illustrative)

FMV (zonal/assessor): ₱10,000,000
Option A – Donation:
- Net gifts this year exceed ₱250,000 → Donor’s tax ≈ ₱10,000,000 × 6% = ₱600,000
- DST (donation) + LGU transfer tax + registration fees apply.
Option B – Sale to Child at ₱10,000,000 (FMV):
- CGT ≈ ₱10,000,000 × 6% = ₱600,000
- DST (sale) ≈ ~1.5% of ₱10,000,000 → ~₱150,000
- LGU transfer tax + registration fees apply.
- If you “sold” at ₱5,000,000 instead, CGT still uses ₱10,000,000; and the ₱5,000,000 spread may be hit with donor’s tax.

Always recompute with your property’s actual zonal/assessor values and check current form instructions.

Actionable Takeaways

Compute both routes with real FMVs to compare 6% donor’s tax vs 6% CGT + DST, plus LGU/registration costs.
Avoid token-price sales; you risk both CGT at FMV and donor’s tax on the spread.
Secure spousal consent for conjugal/community property.
Prepare for collation if there are other compulsory heirs; consider equalizing measures.
File on time (BIR forms 1800, 1706, 2000-OT), then obtain CAR, pay LGU transfer tax, register at RD, and update the tax declaration.
For special cases (minors, dual citizens, liens, trust planning), structure first before executing the deed.

Plain-English Bottom Line

Donation is often best for pure gifts and estate planning simplicity.
Deed of Sale is best when real consideration (or bank financing) makes sense.
Whatever you choose, taxes ride on FMV, not on what you write in the deed—plan accordingly.