Below is a comprehensive discussion of the taxes and processes involved in transferring real property by donation in the Philippines. This discussion focuses on the relevant national and local taxes (often collectively referred to as “property transfer tax” in casual usage), the legal framework, and the procedural requirements. This is for general informational purposes and should not be construed as legal advice. Always consult a qualified legal or tax professional for your specific circumstances.

1. Overview of Donated Property and Transfer Taxes

In the Philippines, the transfer of real property (land, house and lot, condominium, etc.) by way of donation (also known as a “gift”) is generally subject to taxes. While people informally refer to any tax on a donated property as a “property transfer tax,” the Philippine tax system actually imposes different taxes and fees under different laws and government units:

Donor’s Tax (national tax administered by the Bureau of Internal Revenue, or BIR)
Documentary Stamp Tax (DST) (also administered by the BIR)
Local Transfer Tax (imposed by the local government unit (LGU))
Registration Fees (for registering the transfer with the Registry of Deeds)

Each of these has its own legal basis, rate, and process.

2. Donor’s Tax

2.1. Legal Basis

National Internal Revenue Code (NIRC), as amended by Republic Act (RA) No. 10963 (TRAIN Law)
The pertinent provisions are found under Title III (Donor’s Tax) of the NIRC.

2.2. Who Is Liable

Donor’s Tax is imposed on the donor (the person who gives the property) and is based on the total value of gifts made to a donee (recipient) in a calendar year.

2.3. Current Rate

Flat Rate of 6% under the TRAIN Law (effective January 1, 2018).
- Prior to the TRAIN Law, progressive rates applied. Now, the rate has been simplified to a single 6% rate.

2.4. Tax Base and Computation

Donor’s Tax Base: The fair market value (FMV) of the donated property at the time of donation, minus allowable deductions (if any).
- For real property, the BIR uses whichever is higher between:
  - The fair market value as determined by the City or Municipal Assessor (the local assessment value, also known as the “Assessed Value” or “Market Value” in the tax declaration), or
  - The value as determined by the BIR’s Commissioner’s Value or Zonal Value.
Donor’s Tax Rate: 6% of the net gift (FMV – allowable deductions) in excess of Php 250,000 per year for each donee if the donation is made by a resident donor. (Nonresident donors are subject to different rules regarding property situated in the Philippines, but generally the same 6% applies.)

Example:

Fair Market Value of property = Php 3,000,000

Less: Personal/exemption threshold (if applicable) = Php 250,000

Net gift = Php 2,750,000

Donor’s Tax = 6% of 2,750,000 = Php 165,000

2.5. Filing and Payment Deadlines

Donor’s Tax Return (BIR Form 1800) must be filed within thirty (30) days after the date the donation (gift) is made.
Payment of the Donor’s Tax must also be made on or before the same due date (within 30 days from donation).
Late filing or payment may result in surcharges, interest, and penalties.

2.6. Common Exemptions and Exclusions

Certain donations are exempt from Donor’s Tax, including:

Dowries and gifts for marriage (up to certain limits and under specific conditions).
Gifts made to certain government entities or recognized non-profit educational and charitable institutions (subject to compliance with specific conditions under the NIRC).
Personal and family exemptions (the first Php 250,000 worth of gifts in a calendar year, in general).

Always verify the conditions for exemption with the BIR or a tax professional, as these can be narrowly interpreted.

3. Documentary Stamp Tax (DST)

3.1. Legal Basis

Title VII of the NIRC.

3.2. DST on Donation of Real Property

For donations of real property, the BIR also levies the Documentary Stamp Tax. While DST is commonly associated with the sale of property, certain transfers by donation also trigger DST. Generally, the DST on the conveyance of real property is Php 15.00 for every Php 1,000 or fraction thereof of the property’s fair market value (or zonal value, whichever is higher).

3.3. Filing and Payment

Filed and paid using BIR Form 2000-OT (“Documentary Stamp Tax Declaration/Return”).
The DST return and payment must be made within five (5) days after the close of the month when the donation was made.

4. Local Transfer Tax

4.1. Legal Basis

Local Government Code (LGC) of 1991 (Republic Act No. 7160)
Each local government unit (province, city, or municipality within Metro Manila) has the power to impose transfer taxes.

4.2. Rate

Varies by LGU, typically ranges from 0.25% to 0.75% of the property’s fair market value (depending on local ordinances).
Some LGUs use the same basis as the BIR for fair market value, while others have their own updated assessment schedule.

4.3. Payment and Process

Obtain the local tax declaration or official assessment from the City/Municipal Assessor’s Office.
File and pay the transfer tax at the City/Municipal Treasury Office or Provincial Treasurer (depending on jurisdiction).
Present proof of payment (official receipt) when processing the new title at the Registry of Deeds.

5. Registration Fees (Registry of Deeds)

After paying the Donor’s Tax, DST, and local transfer tax, the donor and donee must proceed to the Registry of Deeds (ROD) to have the donation recorded and to secure a new title in the name of the donee. Key steps:

Prepare Documents:
- Deed of Donation (notarized)
- Acceptance of Donation (if not included in the deed itself, but typically included in the same deed)
- Proof of tax payments (BIR and LGU receipts)
- Tax Clearance (may be required by some RODs)
- Latest real property tax clearance (from LGU)
Present Documents to the Registry of Deeds
Payment of Registration Fees (based on a schedule of fees set by the Land Registration Authority)
Issuance of New Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) in the name of the donee.

6. Practical Considerations

6.1. Fair Market Value and Zonal Values

Because donor’s tax and local transfer tax are computed on the property’s fair market value, it is essential to verify:

Assessor’s Market Value and
BIR Zonal Value

The higher of these two typically determines your tax base. You can obtain the official zonal values from the BIR’s website or local Revenue District Office (RDO).

6.2. Timing

The 30-day deadline to file and pay donor’s tax is strict. Prepare ahead of time to avoid penalties.
Documentary Stamp Tax has a monthly remittance schedule, but effectively you should pay it close to the donation date or soon after to avoid penalties.

6.3. Multiple Donations

If the donor donates property to multiple recipients (donees) in a single calendar year, the total net gifts (sum of the values to all donees) may affect the donor’s tax bracket. Although after the TRAIN Law the rate is flat, computing total net gifts is still relevant for exemptions and threshold amounts.

6.4. Family Transfers

Transfers of property among family members via donation still trigger donor’s tax unless they fall under specific exemptions. An often-cited strategy is to make a “Sale” at a lower consideration to reduce taxes, but the BIR generally compares the declared selling price to the fair market value (FMV) and may still impose either capital gains tax (if it is truly a sale) or donor’s tax (if it is deemed a donation disguised as a sale). Always consult tax professionals to avoid legal issues.

6.5. Exempt Entities

Donations to recognized charitable, religious, or educational institutions may be exempt, but careful documentation is required (such as a Certificate of Donee Institution from the BIR). Make sure the donee institution has the proper certifications to be tax-exempt.

7. Typical Step-by-Step Process

To summarize, here is a general workflow when donating real property:

Draft the Deed of Donation (and Acceptance clause).
- It must be in writing, signed by the donor, and accepted by the donee in the same instrument or a separate one.
- Have it notarized.
Obtain supporting documents:
- Certified true copy of the current Transfer Certificate of Title (or CCT for condos).
- Latest tax declaration (City/Municipal Assessor’s Office).
- Tax clearances from the local Treasurer’s Office (proving current real property taxes are paid).
Compute Donor’s Tax:
- Compare the BIR Zonal Value and the Local Assessor’s Market Value to determine the tax base.
- Apply the 6% donor’s tax on the net gift in excess of allowable threshold (if any).
File Donor’s Tax Return (BIR Form 1800) and pay the tax:
- Within 30 days from date of donation.
- Obtain the BIR-received/stamped Donor’s Tax Return and Official Receipt.
File Documentary Stamp Tax Return (BIR Form 2000-OT) and pay the DST:
- On or before the 5th day of the succeeding month after the donation, but ideally done concurrently with the Donor’s Tax to avoid any confusion or penalties.
Settle Local Transfer Tax with the LGU:
- Present Deed of Donation and relevant documents.
- Obtain Official Receipt for the transfer tax.
Register the Deed of Donation with the Registry of Deeds:
- Submit notarized Deed of Donation (with Acceptance), official receipts for donor’s tax, DST, local transfer tax, and all required clearances.
- Pay the registration fees.
Issuance of the new title:
- The Registry of Deeds will cancel the old title (if donating the entire property) and issue a new Transfer Certificate of Title in the name of the donee.

8. Common Pitfalls and How to Avoid Them

Late Filing
- Missing the 30-day deadline for filing Donor’s Tax can lead to hefty surcharges and penalties.
- Mark your calendar and prepare early.
Wrong Valuation
- Underdeclaration of fair market value can result in penalties. Always check the correct zonal value and municipal assessor’s valuation.
Inadequate Documentation
- The Deed of Donation must clearly state the donor’s intent and the donee’s acceptance.
- Notarization is essential.
Assuming Family Donations Are Automatically Exempt
- Gifts to children, siblings, or other relatives are not automatically tax-free unless they fall within specific exemption thresholds or conditions.
Overlooking Local Transfer Taxes
- People often focus on Donor’s Tax alone and forget local transfer tax. This tax is mandatory for the transfer to be registered.

9. Conclusion

In the Philippines, transferring property via donation involves multiple layers of tax compliance—primarily the Donor’s Tax (a national tax) at a flat 6% rate, the Documentary Stamp Tax, and the Local Transfer Tax. Timely filing, accurate valuation, and proper documentation are key to ensuring a smooth and legally valid transfer. While the process can be straightforward when planned well, complexities can arise, particularly if multiple properties, different jurisdictions, or exemptions are involved.

For detailed guidance, always consult with:

A tax professional or lawyer experienced in property and estate planning.
The Bureau of Internal Revenue (BIR) for clarifications on donor’s tax and documentary stamp tax.
The City or Municipal Assessor’s Office and Treasurer’s Office for local transfer tax and valuation queries.

Ensuring compliance with these rules will make the donation valid and protect both donor and donee from future legal complications.

Disclaimer: This discussion is for general informational purposes and does not constitute legal or tax advice. Laws, regulations, and implementing rules may change. Always consult a qualified professional or the appropriate government offices for the most current information and personalized guidance.