Donor’s Tax for Stranger Donations in the Philippines: A Comprehensive Guide

Disclaimer: This article is for general information only and does not constitute legal advice. Always consult a qualified tax professional or lawyer for advice specific to your situation.

1. Introduction

Donations or gifts are transfers of property from one person (the “donor”) to another (the “donee”) without any consideration or compensation. In the Philippines, such transfers are subject to donor’s tax under specific rules provided by the National Internal Revenue Code of 1997 (NIRC), as amended by subsequent laws (most notably the TRAIN Law, or Republic Act No. 10963).

A key concept that often arises is the distinction between donations to a relative and donations to a stranger. Although the TRAIN Law (effective January 1, 2018) has simplified donor’s tax rates, it is important to understand the historical background and current regulations that govern “stranger donations.”

2. Legal Basis

National Internal Revenue Code of 1997 (NIRC), as amended
- Sections 98 to 104 of the NIRC contain the general provisions on donor’s tax.
TRAIN Law (Republic Act No. 10963)
- Effective January 1, 2018, it revised certain provisions of the NIRC, including those on donor’s tax.
BIR Revenue Regulations
- The Bureau of Internal Revenue (BIR) periodically issues regulations and clarifications on the calculation, filing, and payment of donor’s tax.

3. Definition of “Stranger” Under the Old Rules

Prior to the TRAIN Law amendments, the NIRC provided a schedule of donor’s tax rates that differentiated between:

Donations made to relatives (within the fourth civil degree of consanguinity or affinity). This included:
- Parents, children, grandchildren, grandparents
- Siblings
- Aunts, uncles, nephews, nieces (up to the fourth degree)
- In-laws (within the fourth degree), such as mother- or father-in-law, brother-in-law, sister-in-law
Donations made to a stranger, i.e., anyone who does not fall within the legally defined “relative” up to the fourth civil degree.

Under the old rules (prior to January 1, 2018), a flat rate of 30% donor’s tax applied to donations made to a stranger. Meanwhile, a different graduated schedule applied to donations made to relatives.

4. Donor’s Tax Rates Under the TRAIN Law

When the TRAIN Law took effect on January 1, 2018, the donor’s tax regime changed substantially:

Single Donor’s Tax Rate of 6%
- Donations in excess of Php 250,000 per calendar year (aggregate of all donations) are subject to a flat 6% donor’s tax rate, regardless of whether the donee is a relative or a stranger.
- This effectively removed the old distinction between stranger donations and donations to relatives for tax rate purposes.
Annual Exclusion
- The first Php 250,000 worth of donations in a calendar year is exempt from donor’s tax. Only the amount beyond Php 250,000 is taxed at 6%.
Donations to Exempt Donees
- Donations to certain qualified donees (e.g., accredited non-stock, non-profit educational or charitable institutions) may still be exempt, subject to the conditions prescribed by law and BIR regulations.

Key Takeaway on “Stranger” Concept Post-TRAIN

Although the law no longer imposes a separate 30% rate for strangers, the concept of “stranger” still arises in legal discussions or in determining the proper classification of donations before 2018 or for other legal purposes (e.g., estate planning context). As far as current donor’s tax computations (post-TRAIN) are concerned, the tax rate for all donations in excess of Php 250,000 is a flat 6%, irrespective of relationship.

5. Coverage and Exclusions

Even though the TRAIN Law consolidated the tax rates, certain donations may be excluded from donor’s tax or be exempt under special laws or BIR issuances. Examples of exempt donations include:

Donations to the National Government or its agencies/instrumentalities, or to local government units, for public use.
Donations to accredited non-stock, non-profit educational and/or charitable, religious, cultural organizations, provided they comply with the conditions for exemption under the Tax Code.
Dowries or gifts on account of marriage (although these are only exempt up to certain thresholds under old rules; the TRAIN Law effectively changed how these are treated—consult a tax professional for precise details).
Specific exemptions under international treaties, special laws, or executive orders.

6. Computation of Donor’s Tax (Post-TRAIN)

Determine the total amount of donations made by the donor within a calendar year.
Subtract the Php 250,000 allowable deduction (annual exclusion).
Apply the 6% tax rate on the amount that exceeds Php 250,000.

Illustrative Example:

Total donations made in 2023 by Donor A to Stranger B = Php 1,000,000
Less: Php 250,000 exclusion = Php 750,000 taxable
Donor’s Tax = Php 750,000 × 6% = Php 45,000

7. Filing and Payment Requirements

1. BIR Form

The appropriate BIR form to be used is BIR Form 1800 (Donor’s Tax Return) for most types of donations.

2. Deadline for Filing

The donor’s tax return must be filed and paid within thirty (30) days from the date of donation.
Payment is due at the time of filing.

3. Documentary Requirements
Depending on the nature of the donation, typical documentary requirements may include:

Deed of Donation (Notarized)
Proof of acceptance by the donee
Sworn Declaration of the value of the donated property
If the donation involves real property:
- Certified true copy of the Transfer Certificate of Title / Condominium Certificate of Title
- Tax Declaration
- Certificate Authorizing Registration (CAR) upon payment of donor’s tax

4. Penalties for Late Filing or Non-Payment

Surcharge: A percentage of the basic tax, depending on the violation (late filing or willful neglect).
Interest: 12% per annum (or the prevailing rate under the NIRC), accruing until fully paid.
Compromise penalties may also apply.

8. Common Issues and Considerations

Proper Valuation of Donated Property
- Real property should be valued at the higher of (a) Fair Market Value as determined by the BIR Commissioner’s zonal valuation, or (b) Fair Market Value under the local government’s Tax Declaration at the time of donation.
- For shares of stock, consider the book value or the fair market value on the date of donation, depending on whether they are listed or unlisted shares.
Timing of Multiple Donations
- Donor’s tax is computed cumulatively on donations made within the same calendar year. If a donor makes multiple donations throughout the year, the total must be considered to see if it exceeds the Php 250,000 threshold.
Donations to Business Entities
- If the donation is made to a corporation or partnership (not a qualified donee institution), the same donor’s tax rules apply. There is no special exemption simply because it is a juridical entity rather than an individual, unless exempt under special laws.
Interaction with Estate Planning
- Sometimes donations are used as an estate planning tool. Even though the distinction between stranger and relative no longer affects the rate under the TRAIN Law, one must still ensure compliance with the annual filing and payment requirements to avoid penalties.
Record-Keeping
- Maintaining clear records of all donations is crucial—both for computing the correct amount of donor’s tax and for substantiating exemptions if any part of the donation is claimed as exempt.

9. Historical Perspective vs. Current Rules

Before January 1, 2018
- The distinction between a “stranger” and a “relative” was critical.
- Donations to relatives followed a graduated tax table, while donations to strangers were subject to a flat 30% rate.
After January 1, 2018 (TRAIN Law)
- The single 6% rate for donations in excess of Php 250,000 per calendar year applies uniformly.
- The distinction between “stranger” and “relative” has been effectively rendered moot in terms of setting the tax rate (but still arises in historical contexts, certain property law contexts, and older estate planning structures).

10. Practical Tips and Reminders

Consult a Professional
- Tax computations, especially involving large or complex donations, can be intricate. Early consultation helps prevent errors and penalties.
Monitor Accumulated Donations
- Keep track of every donation you make within a calendar year. Once the total surpasses Php 250,000, the excess becomes taxable at 6%.
Comply with the 30-Day Rule
- Even if your donation does not exceed Php 250,000, it is prudent to check BIR regulations on record-keeping or possible filing requirements, especially if the donation needs to be registered (e.g., real estate property transfers).
Stay Updated
- The BIR periodically issues new circulars, revenue regulations, and rulings that can affect donor’s tax rules. Stay informed or seek professional help whenever you engage in substantial donations.
Keep Documents Organized
- For donated real property, you will need the Certificate Authorizing Registration (CAR) to change the title. Without settling donor’s tax, a new title cannot be issued in the donee’s name.

11. Conclusion

Under current law in the Philippines, donations to strangers no longer trigger a special 30% donor’s tax rate—the TRAIN Law has done away with the old distinction. Today, a flat 6% donor’s tax applies to all donations in excess of Php 250,000 per calendar year, whether made to a relative or a stranger. Nonetheless, the concept of “stranger donation” remains relevant for understanding older transactions (pre-2018) or in other legal contexts.

When making any donation, it is crucial to:

Understand the applicable tax laws and exemptions.
File and pay the correct donor’s tax within the 30-day period.
Keep all documentation to prove compliance and to facilitate smooth registration or transfer of the donated property.

Finally, consulting a tax professional or legal expert is advisable to ensure full compliance with the requirements of the Bureau of Internal Revenue and to avoid unnecessary penalties.