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Donor's Tax in the Philippines
Donor's tax is a tax imposed on the gratuitous transfer of property by a living donor to a donee. In the Philippines, this tax is governed by the National Internal Revenue Code (NIRC), as amended by the Tax Reform for Acceleration and Inclusion (TRAIN) Law. The tax rate and computation depend significantly on the relationship between the donor and the donee.
How is Donor's Tax Calculated?
The computation follows distinct formulas for two categories:
- Donations to Relatives: Relatives are those within the fourth degree of consanguinity (blood relationship). This includes parents, children, siblings, grandparents, grandchildren, uncles, aunts, nephews, nieces, and first cousins. For such donations, an annual exemption of PHP 250,000 applies to the donor's total cumulative gifts to all relatives within a calendar year. Only the combined amount exceeding this exemption is taxed at a rate of 6%. Each new donation to a relative may increase the taxable base if the cumulative total exceeds the exemption.
- Donations to Strangers: Strangers are individuals beyond the fourth degree of consanguinity. No annual exemption applies. The tax rate is a flat 30%. Crucially, this rate is applied to the total cumulative value of all donations made to strangers within the same calendar year. The tax due for a specific donation is the tax on the new cumulative total minus the tax on the prior cumulative total (which is calculated automatically).
Step-by-Step Calculation Example
Example 1: Donation to a Relative
Mr. Cruz donates PHP 1,000,000 to his niece in June 2026. He had already donated PHP 200,000 to his son in January.
- Cumulative Donations to Relatives: PHP 200,000 (prior) + PHP 1,000,000 (current) = PHP 1,200,000.
- Apply Annual Exemption: PHP 1,200,000 - PHP 250,000 = PHP 950,000 taxable base.
- Compute Cumulative Tax: 6% of PHP 950,000 = PHP 57,000.
- Tax Due for This Donation: PHP 57,000 (cumulative tax) - PHP 0 (tax on prior donations of PHP 200,000, which is below the PHP 250,000 exemption) = PHP 57,000.
Example 2: Multiple Donations to Strangers
Ms. Santos donates PHP 500,000 to a friend in March. In October, she donates another PHP 300,000 to a different friend.
- Cumulative Donations to Strangers (after October): PHP 500,000 (prior) + PHP 300,000 (current) = PHP 800,000.
- Compute Cumulative Tax: 30% of PHP 800,000 = PHP 240,000.
- Tax Due for This Donation: PHP 240,000 (cumulative tax) - PHP 150,000 (tax on prior donations of PHP 500,000, which is 30% of PHP 500,000) = PHP 90,000 additional tax due for the October donation.
Frequent Scenarios and Important Notes
- Spousal Donations: Donations between legally married spouses are completely exempt from donor's tax. This calculator does not apply to such cases.
- Documentation: A Deed of Donation is the primary legal document used to formalize the gift. It serves as proof of the transfer and is often required for updating titles.
- Tax Payment: The donor is responsible for filing the donor's tax return (BIR Form 1800) and paying the tax due within 30 days from the date of each donation.
- Exempt Donations: Donations to the Philippine government, accredited educational, charitable, religious, and cultural institutions are generally exempt.
Next Steps: Prepare a Deed of Donation
After determining your tax liability, the next crucial step is to properly document the donation. A Deed of Donation legally records the intention of the donor, the acceptance by the donee, and a detailed description of the donated property. Using a professionally drafted document ensures all essential elements are covered, helping to avoid future disputes and facilitating the transfer of ownership.