Tags: donor’s tax computation Philippines, how to compute donor’s tax, documentary stamp tax on donation, donor’s tax deadline, conjugal property donation
In the Philippines, donating property—whether real estate, personal assets, or cash—can be a generous and noble act, especially when done within the family. However, generosity must also be balanced with tax compliance. When you make a donation, the law requires you to compute and pay the donor’s tax and documentary stamp tax (DST) within specific deadlines. Failure to do so can lead to penalties, surcharges, and interest.
This blog will walk you through the computation of donor’s tax and DST, clarify deadlines, and tackle common issues through practical examples, especially involving conjugal or community properties.
1. What Is Donor’s Tax?
Donor’s tax is a tax on the gratuitous transfer of property from one person (the donor) to another (the donee) without any compensation. Governed by the National Internal Revenue Code (NIRC), donor’s tax applies whether the property is real, personal, tangible, or intangible.
Key Points:
- Applies whether the donation is to a relative or a stranger.
- Paid by the donor.
- Includes both inter vivos gifts and certain transactions deemed donations.
2. Who Pays and When?
The Donor is responsible for filing and paying the tax.
Deadline:
- Within thirty (30) days from the date the donation is made.
Late filing will subject the donor to:
- Surcharge: 25% of the amount due (or 50% if there is willful neglect).
- Interest: 12% per annum (subject to change based on the interest rate set by the Bangko Sentral ng Pilipinas).
- Compromise Penalty
3. Donor’s Tax Rates
Under the TRAIN Law (Republic Act No. 10963), which took effect on January 1, 2018, donor’s tax rates are now simplified.
- Flat rate of 6% on donations exceeding P250,000 per year, per donor.
Exemptions:
- Donations of not more than P250,000 per year.
- Donations to the national government, accredited non-profits, or educational institutions for specified purposes.
4. Example 1: Simple Real Property Donation
Scenario: Maria donates a parcel of land in Davao City to her son. The property has a fair market value (FMV) of P2,500,000 as per the BIR's zonal value.
Computation:
- FMV of donated property: P2,500,000
- Less: Exempt amount: P250,000
- Taxable amount: P2,250,000
- Donor’s Tax (6%): P135,000
Maria must file and pay P135,000 within 30 days from the date of donation.
5. What About the Documentary Stamp Tax (DST)?
In addition to donor’s tax, donations are also subject to Documentary Stamp Tax.
DST Rate for Donations:
- P15.00 for every P1,000 or fractional part thereof of the donated property's FMV.
Continuing Example:
- FMV: P2,500,000
- DST: (P2,500,000 / 1,000) × P15 = P37,500
DST Filing Deadline:
- On or before the 5th day of the following month after the donation.
6. Common Issues in Donations of Property
A. Donations of Conjugal or Community Property
When spouses donate property acquired during marriage, they must both consent, and the donor’s tax computation takes into account joint ownership.
Example 2: Donation of Conjugal Property to a Child
Spouses Juan and Ana own a house and lot valued at P6,000,000 (conjugal property). They decide to donate it to their daughter.
Analysis:
- Total value: P6,000,000
- Since the property is conjugal, each spouse is deemed to donate P3,000,000.
- Each gets a P250,000 exemption.
- Taxable per spouse: P2,750,000
- Donor’s Tax per spouse: 6% of P2,750,000 = P165,000
- Total Donor’s Tax: P165,000 × 2 = P330,000
DST:
- FMV = P6,000,000
- DST = (6,000,000 / 1,000) × P15 = P90,000
B. Donation to Strangers
If the donation is made to someone who is not a relative within the fourth degree of consanguinity, the same 6% flat rate applies under the TRAIN law. Previously, this had higher rates, but the new law equalized them.
7. Steps in Filing and Paying Donor’s Tax
A. Prepare the following:
- Deed of Donation
- Sworn Statement of FMV
- BIR Form 1800 (Donor’s Tax Return)
- Certificate of Title (if real property)
- Tax Identification Number (TIN) of donor and donee
B. File at the BIR Revenue District Office (RDO) having jurisdiction over the donor’s residence at the time of donation.
C. Pay the tax at an Authorized Agent Bank (AAB) or through eFPS/eBIR systems, if applicable.
8. Steps in Filing and Paying DST
A. Prepare the following:
- Deed of Donation
- BIR Form 2000-OT
- FMV documents
B. File and pay at the appropriate RDO or AAB.
9. Penalties for Non-Compliance
- Donor’s Tax Late Filing: Surcharge (25% or 50%) + Interest (12% per annum)
- DST Late Filing: Surcharge + Interest + Compromise penalty
BIR may also impose documentary requirements (e.g., proof of donor's capacity, ownership documents) that delay transfer of title if taxes are unpaid.
10. Can You Avail Installment or Exemptions?
In some cases, donors may be granted tax exemptions (like donations to qualified donees), but this must be properly documented and filed.
Installment payments for donor’s tax are generally not allowed, but you may negotiate with the BIR for compromise or abatement in cases of financial hardship, subject to approval.
11. Donation vs. Sale: Tax Planning Insights
Some try to disguise a sale as a donation (or vice versa) to reduce taxes. However, the BIR scrutinizes such transactions and can reclassify them, triggering capital gains tax, value-added tax, or donor’s tax accordingly.
12. Tips for Proper Donation and Compliance
- Secure proper valuation of the property.
- Keep official receipts and filing proofs.
- Always consider the donor’s residency and the donee’s relationship.
- For conjugal properties, obtain spousal consent.
- Work with a tax professional or lawyer for proper guidance.
Conclusion
Donating property is not just a legal act—it’s a financial one too. Understanding how to compute donor’s tax and DST, recognizing deadlines, and filing the correct forms are essential steps to avoid penalties and ensure a smooth transfer. Especially in cases involving conjugal property, clarity and proper documentation are key.
Whether you’re a generous parent gifting land to your children, or a professional managing estate planning, being informed about donor’s tax compliance can help you give meaningfully and legally.
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