Below is a comprehensive discussion of how the TRAIN Law (Republic Act No. 10963) reformed the donor’s tax regime in the Philippines, particularly focusing on donor’s tax for transfers to “strangers.” While this article aims to provide an in-depth overview, please note it is for general information only and should not be construed as legal advice.

1. Overview: Donor’s Tax in Philippine Law

Donor’s tax is a tax imposed on the privilege of transferring property or money to another person during the donor’s lifetime and without adequate consideration. In the Philippines, donor’s tax is governed by the National Internal Revenue Code of 1997 (NIRC), as amended.

Historically, the tax rate, exemptions, and how donors were taxed varied depending on the relationship between donor and donee. Before the TRAIN Law, donations made to “strangers” were taxed at a higher flat rate of 30%, while donations to relatives followed a tiered or progressive tax schedule. This distinction created complexity and often proved disadvantageous for gifts made outside of the family circle.

2. Definition of a “Stranger”

Under the old rules, a “stranger” was broadly defined as anyone who was not:

A brother, sister (whether by whole or half-blood),
Spouse,
Ancestor, and
Lineal descendant; or
A legally recognized relative by adoption within the same degree.

Because the law imposed a specific (and substantially higher) donor’s tax rate on donations to “strangers,” this definition mattered greatly to both donors and donees.

3. The TRAIN Law and Key Changes to Donor’s Tax

Enacted in December 2017 and becoming effective in 2018, the Tax Reform for Acceleration and Inclusion (TRAIN) Law or Republic Act No. 10963 fundamentally changed many provisions in the NIRC. One of its hallmark reforms was simplification of the donor’s tax system:

Uniform Donor’s Tax Rate at 6%
Prior to the TRAIN Law, the NIRC imposed a progressive schedule for donations to relatives (with multiple brackets) and a high flat rate of 30% for donations to strangers. Under the TRAIN Law, this was replaced with a single, unified donor’s tax rate of 6%. This applies regardless of whether the donee is a relative or a stranger.
Annual Exemption Threshold
The first ₱250,000 of total donations per calendar year is now exempt from donor’s tax. Any amount of net gifts above ₱250,000 in a taxable year is subject to the 6% donor’s tax.

Note: The ₱250,000 threshold is not “per donee” but is the total amount of net gifts made by the donor in the entire calendar year. If a donor’s aggregated donations do not exceed ₱250,000 for that year, no donor’s tax is due.
Removal of the “Stranger” Distinction
Because the donor’s tax rate is now a flat 6% across all types of donees, the previous 30% rate on gifts to strangers is effectively gone. In other words, there is no longer a separate rate for strangers under the TRAIN Law—everyone is subject to the same taxation scheme once donations exceed the ₱250,000 annual threshold.

4. Donor’s Tax Exemptions and Exclusions

Under Philippine law—both prior to and after the TRAIN amendments—certain transfers have always been either exempt or excluded from donor’s tax. These include:

Gifts to the National Government (or any of its agencies, instrumentalities, or political subdivisions), provided the donation is used exclusively for public purposes.
Gifts to Non-Profit Organizations (like charitable, religious, educational entities), subject to compliance with specific requirements under Section 101(A)(3) of the NIRC. For the gift to be exempt:
- The non-profit must be duly accredited,
- The donation must be used exclusively for the non-profit’s purpose, and
- No part of the net income inures to the benefit of any private individual.
Specific exemptions under special laws (for instance, donations to cultural agencies, philanthropic institutions, certain scholarship grants, etc.), depending on the applicable legislation.

The ₱250,000 Standard Exemption

As noted, all donors—regardless of the recipient—can avail of the first ₱250,000 of net gifts as tax-free. This effectively replaces the previously more complicated exemptions and varied rates and extends a uniform, simpler approach under the TRAIN regime.

5. “Stranger” Under the TRAIN Law: Revisited

With the TRAIN Law in effect, you may still see references to “stranger” in older provisions or older resources. Practically speaking:

There is no longer any special or higher donor’s tax rate applied to a stranger.
If the total gifts to any (or multiple) donees exceed ₱250,000 in one calendar year, the entire amount in excess of ₱250,000 is taxed at 6%.

Hence, while the law once made it crucial to determine whether a donee was a “stranger” (due to the 30% rate), that distinction no longer has a bearing on the rate of donor’s tax under current rules.

6. Compliance Requirements for Donor’s Tax

While the TRAIN Law simplified the rates and exemptions, donors must still comply with the statutory obligations for filing and payment. Key points include:

Who Files the Donor’s Tax Return?
The donor is responsible for filing the donor’s tax return (BIR Form No. 1800, as may be updated by subsequent Revenue Regulations).
When to File?
Generally, the donor’s tax return must be filed within thirty (30) days after the date the gift is made.
Place of Filing and Payment
The return is filed and donor’s tax is paid with an Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over the legal residence of the donor. Where no AAB is available, the return can be filed directly with the Revenue Collection Officer of the RDO.
Documentary Requirements
- Duly accomplished Donor’s Tax Return (BIR Form No. 1800).
- Proof of transfer or donation (e.g., Deed of Donation).
- Documents showing the value of the property donated (e.g., Certificate of Title for real property, appraised value for personal property, etc.).
- Other documents as required under pertinent Revenue Regulations (e.g., tax clearance for real property, proof of exemption if claiming exemption, etc.).
Penalties for Late Filing
Failure to file on time subjects the taxpayer to surcharges, interest, and possible compromise penalties. Thus, ensuring timely compliance is crucial to avoid additional liabilities.

7. Illustrative Examples

Donation of ₱200,000 to a Friend
- Total donation within the year: ₱200,000 (below ₱250,000 threshold).
- No donor’s tax due because the aggregate amount donated for the year has not exceeded ₱250,000.
Donation of ₱1,000,000 to a Non-Relative
- Total donation within the year: ₱1,000,000 (above ₱250,000 threshold by ₱750,000).
- The taxable net gift = ₱750,000.
- Donor’s tax due = 6% of ₱750,000 = ₱45,000.
Multiple Donations in a Calendar Year
- Donor gives ₱100,000 to a sibling and ₱200,000 to a close friend (stranger), then an additional ₱100,000 to the friend later in the same year.
- Total = ₱400,000. The first ₱250,000 is exempt, and the remainder ₱150,000 is taxed at 6%.
- Donor’s tax = 6% of ₱150,000 = ₱9,000.

In all scenarios, it no longer matters if the donee is a spouse, relative, or stranger. Once the total net gift in a year exceeds ₱250,000, the 6% tax applies to the excess.

8. Special Considerations and Common Questions

Donations to Accredited NGOs
Donations to accredited non-stock, non-profit corporations (for charitable, religious, educational, cultural, etc. purposes) are exempt, provided all documentary and accreditation requirements are met. Proper documentation is critical; otherwise, the donation may be subject to the 6% donor’s tax.
Donations of Real Property
For donations of real property, the basis is generally the property’s fair market value (FMV) or zonal value, whichever is higher. This fair market value is used in determining if the total donation in a calendar year exceeds ₱250,000.
Donations of Shares or Other Personal Property
Shares of stock or other personal property must be valued per established rules (e.g., book value for non-publicly listed shares, closing price for publicly-listed shares, or appraised value for personal property).
Interaction with Estate Tax
Donor’s tax applies to inter vivos (lifetime) transfers, while estate tax applies upon the death of the transferor. The TRAIN Law also simplified estate tax to a uniform 6%, mirroring the changes in donor’s tax. Though related, these are separate taxes with distinct filing periods and requirements.
Stranger vs. Relative Post-TRAIN
The law’s modernization and simplification have effectively rendered the “stranger vs. relative” donor’s tax rate distinction obsolete for direct tax rate purposes. However, some older implementing regulations or references might still mention the term “stranger.” In practice, it no longer changes the rate or your tax liability.

9. Practical Tips

Plan Your Donations
If you anticipate making significant gifts, factor in the ₱250,000 annual threshold. Spreading out donations across different calendar years might reduce or eliminate donor’s tax liability.
Keep Detailed Records
Accurate record-keeping helps track the aggregated total donations within a calendar year. This is crucial to determine if you have exceeded the ₱250,000 threshold.
File Promptly
Even if you believe your donation is exempt (e.g., charitable donation, or under the annual ₱250,000 threshold), stay vigilant about documentary requirements. If an exemption is claimed, BIR typically requires proof of the exempt status.
Consult the Revenue Regulations
The Bureau of Internal Revenue (BIR) regularly updates its regulations, forms, and documentary requirements. Be sure to consult the most recent Revenue Regulations (e.g., RR No. 12-2018 and subsequent issuances) for specific filing procedures.
Seek Professional Advice
For high-value gifts, donations involving multiple properties, or complex questions (e.g., partial donations, intangible assets), consult a tax professional or lawyer for tailored guidance.

10. Conclusion

The TRAIN Law’s introduction of a uniform 6% donor’s tax rate—together with a ₱250,000 annual exemption—has significantly simplified donor’s tax in the Philippines. Under the revised regime:

There is no separate or higher donor’s tax rate for donations to “strangers.”
The ₱250,000 annual threshold applies to all donations by the same donor in a calendar year.
Once that threshold is exceeded, the 6% rate kicks in for any donee.

This streamlined approach replaces the complicated multi-tier rates and the former 30% rate on “strangers,” making compliance more straightforward for taxpayers. Still, donors must remain diligent in ensuring they file required returns, observe deadlines, and retain sufficient documentation—especially if claiming any exemptions beyond the standard threshold.

Should you be considering or receiving significant donations, it is advisable to keep current with BIR regulations and, if in doubt, consult a Philippine tax professional or attorney for nuanced guidance.