In the Philippines, the transfer of property through donation is a taxable event governed by the National Internal Revenue Code (NIRC), as significantly amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Law (Republic Act No. 10963).

Donor’s tax is an excise tax imposed on the privilege of transmitting property from a living person to another without adequate consideration. It is not a tax on property, but rather on the act of donation.

1. Understanding the Tax Rate and Basis

Since the effectivity of the TRAIN Law on January 1, 2018, the donor’s tax system has been greatly simplified.

Fixed Rate: A flat rate of 6% is applied to the total gifts in excess of ₱250,000 made during a calendar year.
Exemption Threshold: The first ₱250,000 of the total net gifts made within one calendar year is exempt from tax.
Scope: * Residents and Citizens: Taxable on all donations, whether the property is located within or outside the Philippines.
Non-Resident Aliens: Taxable only on donations of property located within the Philippines (subject to reciprocity rules for intangible personal property).

2. Step-by-Step Calculation

The tax is calculated on a cumulative basis within a single calendar year.

Determine the Gross Gift: Identify the fair market value (FMV) of the property at the time of the donation. For real property, use whichever is higher between the Zonal Value (BIR) and the Assessed Value (Provincial/City Assessor).
Deduct Allowable Deductions: Subtract items such as encumbrances (mortgages) assumed by the donee or specific exemptions provided by law (e.g., donations to the government for public use or accredited non-profit institutions).
Calculate the Net Gift: Subtract the deductions from the Gross Gift.
Apply the Threshold: Subtract the ₱250,000 annual exempt amount.
Compute the Tax: Multiply the remaining amount by 6%.
Cumulative Adjustment: If you have made previous donations within the same calendar year, you must add the current gift to the previous ones, compute the tax on the total, and then subtract any donor’s tax already paid in previous months of that year.

3. Formal Requirements: The Deed of Donation

For a donation of real property to be valid and eventually registered, it must be made in a public instrument (a notarized Deed of Donation).

The donor must sign the deed expressing the intent to donate.
The donee must sign the deed (or a separate document) expressing acceptance of the gift during the lifetime of the donor.
For movable property exceeding ₱5,000, the donation and acceptance must be in writing to be valid.

4. Filing and Payment Procedures

The Bureau of Internal Revenue (BIR) strictly enforces the deadlines for donor’s tax.

Form: Use BIR Form No. 1800 (Donor’s Tax Return).
Deadline: The return must be filed and the tax paid within thirty (30) days after the date the gift is made.
Place of Filing: * The return is filed with the Authorized Agent Bank (AAB) or the Revenue District Office (RDO) having jurisdiction over the residence of the donor at the time of the donation.
For non-residents, filing is done with the Philippine Embassy/Consulate or directly with the Office of the Commissioner (RDO No. 39).

5. Mandatory Attachments

When filing the return, the following documents are typically required:

Notarized Deed of Donation.
Proof of Tax Declaration (for real property).
BIR Certificate of Zonal Value.
Certified True Copy of the Original/Transfer Certificate of Title (OCT/TCT).
Proof of previous donor's tax payments within the same year (if applicable).
Proof of identity of the donor and donee (TIN).

6. Post-Payment: The eCAR

Once the donor’s tax is paid and the BIR processes the return, they will issue an Electronic Certificate Authorizing Registration (eCAR). This document is essential. The Register of Deeds will not transfer the title of a donated property from the donor to the donee without the presentation of a valid eCAR.

7. Transfers for Less Than Adequate Consideration

Under Section 100 of the NIRC, if property (other than real property classified as capital gains) is transferred for less than its fair market value, the difference between the FMV and the actual selling price is deemed a gift and is subject to donor’s tax. However, if the sale is made in the ordinary course of business (a bona fide transaction at arm's length), it may be exempt from this "deemed gift" rule.