Donation of property is a common way to transfer ownership to family members, especially during the owner’s lifetime. In the Philippines, donations are governed by the Civil Code and have significant tax implications. This guide explains the legal requirements, tax consequences, and process for donating real property.
What is a Donation?
A donation is an act of liberality where a person (donor) freely transfers property to another (donee) without receiving anything in return. Donations may be:
- Donation inter vivos — made during the donor’s lifetime
- Donation mortis causa — takes effect upon the donor’s death (treated as part of the will)
Requirements for a Valid Donation of Real Property
- Must be in a public document (notarized)
- Must state the property clearly (TCT number, description, boundaries)
- Donor must have legal capacity
- Donee must accept the donation (can be in the same or separate document)
- Donation must not exceed what the donor can give after reserving support for themselves and their family
Donor’s Tax
Under the TRAIN Law, donor’s tax is 6% of the value of the donation exceeding PHP 250,000 per year. The tax is paid by the donor (or the donee if the donor fails to pay).
| Amount | Tax Rate |
|---|---|
| First PHP 250,000 per year | 0% (exempt) |
| Any amount over PHP 250,000 | 6% |
Donation vs Sale
A common issue arises when a sale is disguised as a donation to avoid taxes. The BIR may question transactions that appear to be donations but involve payments. Always consult a lawyer before structuring property transfers.
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Disclaimer: This article is for general information only and is not legal advice. Consult a qualified lawyer for your specific situation.