Below is a comprehensive guide on donor’s tax exemptions for qualified relatives in the Philippines, drawn from Philippine tax law and related administrative issuances. It covers the legal framework, definitions, scope of exemptions, how to compute liabilities, and the procedures for compliance. While this article provides a detailed overview, it is always recommended that you consult the latest regulations or seek professional advice for specific cases.

1. Legal Framework

1.1. National Internal Revenue Code (NIRC) of 1997, as Amended

The principal law governing donor’s tax in the Philippines is the National Internal Revenue Code (NIRC) of 1997, as amended by various laws, most notably the Tax Reform for Acceleration and Inclusion (TRAIN) Law (Republic Act No. 10963). The relevant donor’s tax provisions are found in Sections 98 to 104 of the NIRC.

1.2. TRAIN Law (RA No. 10963)

Effective January 1, 2018, the TRAIN Law introduced significant changes to donor’s tax, including tax rates, the donor’s tax threshold, and the rules for exempt transfers. These changes simplified donor’s tax calculations and aligned them with estate tax provisions under the amended NIRC.

2. Definition of Donor’s Tax

Donor’s tax is a tax on the privilege of transmitting property by gift, inter vivos (i.e., while the donor is still alive). This tax is separate and distinct from estate tax (the tax on the right to transmit property at death) and other transfer taxes.

2.1. Tax Rate and Threshold

Under the TRAIN Law:

Flat rate of 6% on the total value of gifts made in excess of PHP 250,000 during the calendar year.
The first PHP 250,000 of net donations for the calendar year (i.e., the total donations made within that year minus allowable deductions/exemptions) is exempt from donor’s tax.

3. Qualified Relatives and Exempt Donations

3.1. Definition of “Qualified Relative”

Historically, certain transfers to qualified relatives were either exempt from donor’s tax or subject to different tax rules. Since the TRAIN Law amendments, the rules have become more uniform. However, the NIRC still recognizes specific exemptions or reduced rates under certain conditions.

Under Section 100 of the old NIRC (now generally restated or amended in Section 101 of the NIRC, as amended), certain transfers to relatives up to the fourth civil degree of consanguinity may qualify for additional donor’s tax benefits. Relatives typically include:

Direct line ascendants (parents, grandparents)
Direct line descendants (children, grandchildren)
Collateral relatives within the fourth degree (siblings, nephews/nieces, uncles/aunts, first cousins, etc.)

However, it is crucial to understand that not all relatives within the fourth civil degree automatically entitle the donor to complete exemption under the new law. Instead, the current regime imposes a uniform donor’s tax rate of 6%, with only specific exclusions or exemptions allowed by law.

3.2. Specific Exemptions

The following notable exemptions remain relevant even post-TRAIN:

Donations to the National Government (including its agencies and instrumentalities) and to qualified non-profit institutions, subject to certain documentary and registration requirements, are fully exempt from donor’s tax. (These are not “relatives” per se, but are among the recognized exceptions.)
Gifts in favor of an educational and/or charitable, religious, cultural, or social welfare corporation, institution, foundation, trust, or philanthropic organization—provided no part of the net income of which inures to the benefit of any individual—and subject to compliance with the conditions set forth in the NIRC. These are also exempt from donor’s tax.
Donations between spouses do not generally trigger donor’s tax in certain circumstances if the donation pertains to moderate or minor amounts for family expenses, and the transfer is not deemed a “transfer of property subject to tax.” However, larger transfers may still be subject to donor’s tax. It is important to check current Bureau of Internal Revenue (BIR) rulings to determine if a donation between spouses would be considered subject to donor’s tax or recognized as part of the conjugal or community property regime.
Transfers for insufficient consideration (i.e., when property is sold at a price below fair market value to relatives) can be considered partly a sale and partly a donation. The difference between the fair market value and the selling price may be subject to donor’s tax (less the allowable 250,000 PHP annual exemption and other conditions).
Nominal gifts on special occasions to family members (for example, token gifts for birthdays, Christmas, weddings, etc.) are usually not subjected to donor’s tax, provided their value does not exceed the threshold (PHP 250,000 total exempt portion per calendar year, across all gifts made by a donor). Once the total annual donations exceed PHP 250,000, the 6% donor’s tax rate applies to the excess.

3.3. Deduction vs. Exemption

Under previous laws, certain gifts to qualified relatives (particularly those in the direct line) were taxed at a different rate or carried some level of exemption. Under current law (TRAIN), the concept of a separate tax schedule for “strangers” vs. “relatives” has been replaced with a unified rate of 6%. Hence, you still enjoy a general exemption of PHP 250,000 for the entire year, but no special “zero” rates purely because the recipient is a relative (beyond the standard ones enumerated above).

4. Donor’s Tax Computation for Gifts to Relatives

Below is a simplified procedure for computing donor’s tax (for an individual donor) when gifting property to a relative:

Determine the Total Fair Market Value (FMV) of the property (real property, personal property, or a combination).
- For real property: The applicable FMV is the higher of (a) the zonal value set by the BIR or (b) the fair market value as determined by the local assessor (i.e., the assessed value in the Tax Declaration).
- For personal property (e.g., shares of stock, vehicles, jewelry), use the actual market value or appraised value.
Aggregate All Donations Made During the Calendar Year.
- If you have made multiple donations over the year, sum the FMVs of all donations.
Apply the PHP 250,000 Exemption Threshold.
- Subtract the cumulative amount of 250,000 PHP from the total value of all donations within the same calendar year.
Compute the 6% Donor’s Tax on the amount exceeding PHP 250,000.
- Donor’s Tax = (Net Donation Value Over 250,000 PHP) * 6%
File the Donor’s Tax Return (BIR Form 1800 for domestic donations) within thirty (30) days from the date the gift is made.
Pay the Donor’s Tax to an Authorized Agent Bank (AAB) of the Revenue District Office (RDO) where the donor is required to file.

5. Filing and Documentary Requirements

Donor’s Tax Return (BIR Form 1800)
- Must be filed within 30 days from the date of donation.
Supporting Documents
- Deed of Donation (executed and notarized).
- Proof of FMV or basis of valuation (e.g., Certificate of Zonal Value, Tax Declaration, valuation for personal property, etc.).
- Receipt of payment of donor’s tax from the AAB (once payment is made).
- Relevant certifications for donations to the government or accredited non-profits (e.g., Certificate of Donee Institution) if you are claiming an exemption on that basis.
Payment of the Tax
- Donor’s tax becomes due upon the donor at the time the donation is completed (i.e., acceptance of the gift by the donee).
- Late filing or late payment may incur penalties (surcharges, interests, and compromise penalties), so ensure compliance within the prescribed deadline.
Proof of Relationship (as needed)
- In some cases, the BIR may request proof of relationship (e.g., birth certificates, marriage certificates) if the donor/donee claims that the transaction is between qualified relatives under certain exemptions or conditions.

6. Common Pitfalls and Practical Reminders

Misconception About “Relative Exemption”
- With the TRAIN Law’s unified rate, many people assume that donating to relatives is automatically tax-free or taxed at a lesser rate. In reality, the law imposes a 6% donor’s tax after the aggregate 250,000 PHP exemption is used up—regardless of whether the donee is a relative (unless otherwise specifically exempt under law, such as certain minimal gifts or donations to government and accredited institutions).
Deeds of Donation vs. Deeds of Sale
- Sometimes donors attempt to disguise a donation as a sale for a low purchase price to reduce donor’s tax exposure. Be aware that the BIR may treat this as a donation if the consideration is “manifestly inadequate” (i.e., the difference between fair market value and contract price is significant). This triggers donor’s tax on the difference.
Joint Properties Between Spouses
- Any transfer of property between spouses may not necessarily be exempt from donor’s tax if it goes beyond normal or nominal gifts. Clarify property relations (absolute community, conjugal partnership, or separation of property) to know whether a donation occurs.
Annual Aggregation
- Remember that the 250,000 PHP threshold is per donor, per calendar year—and across all donees. If multiple donations exceed the threshold, you must pay 6% tax on the total value in excess of 250,000.
Timely Filing
- Many donors overlook the requirement to file and pay donor’s tax within 30 days of the donation, leading to penalties and interest. Always track the date of notarization or actual acceptance by the donee.
Documentary Stamp Tax (DST)
- Certain donations may also trigger documentary stamp tax. Check current BIR rules to determine if DST applies to the donated property (e.g., shares of stock).

7. Frequently Asked Questions

Q1. Is donating to my adult child or grandchild entirely tax-free?

Not necessarily. While you can donate up to PHP 250,000 per calendar year (to any combination of recipients) without incurring donor’s tax, amounts over that threshold are taxed at 6%. There is no extra “exemption” just because the donee is in the direct line, unless it is a minimal or token gift or it falls under some other special rule.

Q2. Do I need to pay donor’s tax if I am transferring a family home to my children?

If the fair market value of the property, minus allowable deductions, exceeds PHP 250,000, donor’s tax at 6% applies. You must file the donor’s tax return within 30 days after executing the donation. Consult with a tax advisor, especially if the transfer is part of an estate planning strategy.

Q3. What if I donate property to my niece or nephew?

The same rules apply. You, as the donor, have a cumulative annual exemption of PHP 250,000. Once your total donations exceed that amount in a calendar year, the 6% donor’s tax applies to the excess. There are no additional or separate exemptions solely because the donee is a niece or nephew.

Q4. How is the 250,000 PHP exemption applied if I donate to multiple people in the same year?

Aggregate all donations for the year. You have one total exemption of 250,000 PHP for the calendar year. If, for example, you donated 150,000 PHP to your daughter and 150,000 PHP to your niece within the same year, your total donation is 300,000 PHP. Your taxable base is (300,000 – 250,000) = 50,000 PHP. You would apply 6% to that taxable base of 50,000, for a donor’s tax of 3,000 PHP.

8. Conclusion

Donor’s tax in the Philippines has undergone several reforms, most notably under the TRAIN Law, which introduced a single 6% rate and a standard 250,000 PHP exemption per calendar year. While certain exemptions still exist—particularly for donations to the government or accredited charitable institutions—gifts to qualified relatives do not automatically exempt you from donor’s tax beyond the standard threshold.

To ensure compliance:

Understand how donor’s tax is triggered (any donation beyond the 250,000 PHP annual exemption).
Keep thorough documentation (deeds, proofs of FMV, relationship documents if necessary).
File and pay within 30 days of the donation to avoid penalties.

Should you need clarity on specific situations—such as large inter vivos transfers to immediate family members, partial sale/partial donation arrangements, or transfers involving joint/spousal property—it is prudent to seek professional advice or refer to the latest BIR rulings and regulations.

References:

National Internal Revenue Code (NIRC) of 1997, as amended.
Revenue Regulations and Revenue Memorandum Orders issued by the BIR pertaining to donor’s tax.
Republic Act No. 10963 (TRAIN Law), effective January 1, 2018.

This article aims to provide general information and should not be relied upon as definitive legal advice. For personalized guidance on donor’s tax exemptions and compliance in the Philippines, it is best to consult a tax attorney or certified public accountant knowledgeable about the most recent issuances of the Bureau of Internal Revenue.