Overview of Donor's Tax in the Philippines

Donor's Tax is imposed upon any person, natural or juridical, resident or nonresident, who transfers or causes to transfer by gift or donation, whether direct or
indirect, in trust or otherwise, real, personal, tangible or intangible property. (It is a
tax imposed on the privilege of transmitting property by living person to another by
way of donation.)
It must comply with the formalities of donation.

If the amount of personal property is P 5, 000. 00 or less the donation

may be made orally.
If the amount of personal property is more than P 5, 000. 00 the
acceptance shall be in writing.
Donation of real property must be made in a public instrument
irrespective of the amount.

Acceptance by the donee of the donation.

Acceptance must be made during the lifetime of the donor.

If the amount of personal property is P 5, 000. 00 or less, acceptance
may be made orally.
If the amount of personal property is more than P 5, 000. 00, the
acceptance shall be in writing.
In the case of donation of real property, acceptance must be made in
the same deed of donation or in a separate public instrument.

VOID DONATIONS:
1. Those made between persons who are guilty of adultery or concubinage at the
time of the donation.
2. Those made between persons found guilty of the same criminal offense, in
consideration thereof.
3. Those made to a public officer or his wife, descendants by reason of his office.
***Note: Under Article 87 of the Family Code- Husband and wife are prohibited from making
donation to each other, except for moderate gifts during family rejoicing.

Hereunder are some features for your better appreciation.

A tax upon one's gratitude to others
Donor's tax in the Philippines is imposed upon gratuitous transfers of property from
one person to another during their lifetime. Gratuitous means that the property is

transferred free of charge or that the donee (the recipient) does not pay for it in
receiving the property from the donor (the giver). One cited reason for the
imposition of donor's tax in the Philippines is to mitigate the gap between the rich
and the poor so that the amount that the more able one's will give or donate will be
lessened by the donor's tax imposed.
Imposed also on indirect donations
A donation need not be explicit to be taxable. Section 100 of the Tax Code imposes
a tax on transfers for insufficient consideration. This means that if you sell a
property for a price much lower than the market value of that property or a similar
property, donor's tax in the Philippines will apply. This may happen to parties
making unrealistic sales or transfers of property making it appear to be a sale for an
insufficient selling price or consideration to avoid donor's tax in the Philippines or
death taxes-estate tax in the Philippines.
Imposed upon valid donations or transfer
To be taxable, a donation or transfer must be validly made to produce the legal
effects of a transfer of title. Validity of donation or transfer would depend on the
capacity of the parties to make a valid donation or transfer, and the formalities of
the deed of donation or deed of transfer. Void donations are not subject to donor's
tax because it does not transfer the title of the property, thus, no gratuitous
transfer.
Imposed upon the donor of the property
In donor's tax in the Philippines, it is the donor or giver who is bound to pay the tax
and not the donee. The agreement in the deed of donation that the donee or
recipient of the property will be the one to pay the donor's tax is not binding with
respect to the tax authority- BIR. It is but logical to make the donor liable because if
it has the means to donate a property free of charge, then, it reasonably follows
that it is capable of paying the tax.
Tax Rate is either a progressive rate of 2%-15% or 30%
Donor's tax computation would depend on whether the donor and the donee are
relatives or not-strangers as the Tax Code calls them. As defined in the Tax Code,
relatives of the donor refers to a brother or sister-by whole or half blood, spouse,
ancestor, lineal descendant, or relative by consanguinity in the collateral line within
the fourth civil degree of relationship. Donations to relatives are taxed at 2%-15%,
each and every donation aggregated, and allowed deductions for dowry,
diminutions, and encumbrances to a certain extent. Donations of the donor to the
relatives of not exceeding P100k within the calendar year are not taxable.
Strangers are those individuals not enumerated under relatives. For donor's tax
purposes, donations of corporations and other juridical entities are donations to

strangers. Donor's tax in the Philippines for donations to strangers is at 30% of the
gross amount of taxable donation and the tax is paid every after donation without
the need if the aggregation as compared to donations to relatives.

Exemptions from donor's tax in the Philippines

Taxation is the rule, exemption is the exception applies to donors tax. Certain
exemptions are authorized by laws based on the donation itself or based on the
status of the donee. Example of tax exempt donations are donations on account of
marriage up to P10k, donations to accredited donee institutions under certain
conditions, donations to specific entities- Integrated Bar of the Philippines, Ramon
Magsaysay Award Foundation, and many more to mention.
Filing of donor's tax returns
A donor's tax return in the Philippines or BIR Form No 1800 is required to be files
and paid not later than the 30th day following the date of every donation made.
Failure to file and pay donors tax is subject to penalties-25% surcharge (50% if
fraudulent), 20% interest, and compromise penalties ranging from P200.00P25,000.00.