The donation of real property (land, buildings, condominium units, or any immovable property) in the Philippines is a common estate-planning tool, a means of family support, or an act of philanthropy. However, it triggers several tax consequences under the National Internal Revenue Code (NIRC) of 1997, as amended by the TRAIN Law (Republic Act No. 10963), the CREATE Law, and subsequent revenue issuances.
The question whether such donation is “subject to tax deductions” must be answered in layers:
(1) Is the donation itself subject to donor’s tax?
(2) Can the donor claim an income tax deduction for the value donated?
(3) Are there cases where the donation is completely tax-free or enjoys preferential treatment?
1. Donor’s Tax on Donation of Real Property
Donation of real property is subject to donor’s tax under Sections 98–104 of the NIRC.
Current Rate (as amended by TRAIN Law, effective January 1, 2018):
- A uniform rate of 6% on the total net gifts made during the calendar year in excess of P250,000 exempt amount.
- The P250,000 exemption is per donor, per calendar year, regardless of the number of donees or relationship.
- The distinction between relatives and strangers was abolished. Whether the donee is a child, spouse, sibling, or a complete stranger, the rate is the same 6%.
- Tax base = Fair Market Value (FMV) as shown in the latest BIR zonal value or the assessed value in the tax declaration, whichever is higher, minus encumbrances assumed by the donee (if any).
Computation Example:
Mr. Santos donates a condominium unit in 2025 with BIR zonal value of P15,000,000 to his daughter.
He made no other donations in 2025.
Donor’s tax due:
Net gift = P15,000,000
Less: Exempt amount = P250,000
Taxable net gift = P14,750,000
Donor’s tax = P14,750,000 × 6% = P885,000
The donor’s tax return (BIR Form 1800) must be filed and paid within 30 days after the date of the deed of donation.
2. Exemptions from Donor’s Tax (Completely Tax-Free Donations)
Section 101 of the NIRC, as amended, provides the following exemptions:
A. Gifts to the National Government or any of its agencies/instrumentalities not conducted for profit, or to any political subdivision (province, city, municipality, barangay).
B. Gifts to accredited non-stock, non-profit educational and/or charitable, religious, cultural, social welfare corporations/institutions, foundations, NGOs, trusts, philanthropic or research organizations, provided not more than 30% of the gift is used for administrative purposes.
C. Gifts certified by the Philippine Council for NGO Certification (PCNC) or those accredited by DSWD, DepEd, etc., also qualify.
D. Encumbrances on the property assumed by the donee and certain allowable deductions.
If the donation falls under A or B above and the donee issues a Certificate of Donation (BIR Form 2322) with proper accreditation, the donation is 100% exempt from donor’s tax.
3. Income Tax Deduction for the Donor
This is the core of the query: Can the donor deduct the value of the donated real property from his/her gross income?
The answer depends on the donee.
A. Donations to Qualified Donees (Section 34(H), NIRC)
Individuals and corporations may claim deductions for charitable contributions:
Full Deduction (Unlimited)
- Donations to the National Government or any political subdivision for priority government projects.
- Donations to foreign institutions or international organizations pursuant to treaties.
- Donations to accredited non-stock, non-profit corporations/organizations exclusively for certain purposes (scientific, educational, cultural, youth/sports development, health, social welfare, etc.).
Limited Deduction
- Donations to accredited NGOs that do not qualify for full deduction are deductible up to 10% (individual) or 5% (domestic/resident foreign corporation) of the donor’s taxable income before the donation.
Important: The deduction is based on the amount actually paid or the fair market value of the property donated, whichever is lower in certain cases, but for real property it is generally the FMV used for donor’s tax purposes.
B. Donations to Private Individuals or Relatives (Not Qualified Donees)
No income tax deduction whatsoever is allowed.
Even if the donation is to a legitimate child or spouse, the donor cannot deduct the value of the real property from his/her income tax.
4. Other Taxes and Fees on Donation of Real Property
Even if donor’s tax is exempt or paid, the following are still due:
Documentary Stamp Tax (DST) – 1.5% of the FMV or consideration, whichever is higher (Section 196, NIRC). Attached to the Deed of Donation. The donee is legally liable, but in practice the donor often shoulders it.
Local Transfer Tax – 0.5% to 0.75% of FMV depending on the province/city (Local Government Code).
Registration Fees with the Register of Deeds and capital gains tax is not imposed on pure donations (Revenue Regulations No. 13-2022 clarified that donation is not a “deemed sale” for CGT purposes).
Capital Gains Tax is not due on the donation itself. However, the donee’s holding period and cost basis for future sale will be the donor’s original acquisition cost (stepped-up basis does not apply in donation, unlike in inheritance).
5. Tax Implications for the Donee
- The donee does not pay donor’s tax (that is the donor’s liability).
- The donee becomes liable for real property tax from the date of donation.
- When the donee eventually sells the property, capital gains tax (6% of gross selling price or FMV, whichever is higher) will be based on the donor’s original acquisition cost plus improvements (no step-up in basis). This often results in a higher CGT for the donee compared to inherited property.
6. Special Types of Donations
Donation Mortis Causa – This is actually a testamentary disposition and is governed by estate tax rules, not donor’s tax.
Donation with Reservation of Usufruct – Common in family settings. The naked ownership is donated, while the donor retains usufruct for life. Donor’s tax is computed only on the value of the naked ownership (using BIR usufructuary tables).
Irrevocable Donation to Children with Substitution – Often used to avoid estate tax. If properly structured and accepted during the donor’s lifetime, it is subject to donor’s tax (usually 6%), but removes the property from the donor’s estate.
7. Summary Table: Tax Treatment of Real Property Donation
| Donee Type | Donor’s Tax | Income Tax Deduction for Donor | DST Payable | Local Transfer Tax |
|---|---|---|---|---|
| Relatives (spouse, children, etc.) | 6% on amount > P250,000 | None | Yes | Yes |
| Strangers | 6% on amount > P250,000 | None | Yes | Yes |
| Government / Political Subdivision | Exempt (if for public purpose) | Full deduction | Yes | Usually waived |
| Accredited NGO / Charitable Inst. | Exempt (if ≤30% admin use) | Full or limited deduction | Yes | Yes |
Conclusion
Donation of real property in the Philippines is almost always taxable at 6% donor’s tax unless the donee is the government or an accredited charitable/educational institution.
Only when the donation is made to qualified donees can the donor claim an income tax deduction — and in those cases, the donation is also exempt from donor’s tax.
For family transfers, the donation is subject to donor’s tax with only the P250,000 annual exemption and offers no income tax deduction to the donor.
Thus, while charitable donations of real property can generate significant tax savings (both donor’s tax exemption and income tax deduction), donations to family members or private individuals remain fully subject to donor’s tax with no offsetting income tax benefit. Proper planning — including accreditation of family foundations or use of usufructuary arrangements — can optimize the tax outcome.