There are several things to consider if you want to give a loved one a piece of property. It is surely a generous gift, but it’s best to be aware of the implications, taxes, and costs that go with the act of giving.
Property Report talked to Crispin Garcimo, licensed real estate broker for HiveScout Realty and Legal Counsel for Garcimo Law, for some pointers on the matter.
1. Under Art. 749 of the Civil Code of the Philippines, for the donation of an immovable property to be valid, it must be made in a public document (notarized Deed of Donation). The property being donated and the value of charges to be paid must be indicated in the document. Donation also requires that the donation be accepted by the donee. Those who are planning to give real estate as a gift or donation are advised to consult a certified public accountant or lawyer for information and guidance on tax incentives, documentation, validity, etc.
2. Aside from the document mentioned above, the Bureau of Internal Revenue (BIR) will also require the following: Tax Identification Number (TIN) of Donor and Donee/s, Certified True Copy/ies of the Original/Transfer/Condominium Certificates of Title of the donated property, Certified True Copy/ies of the Tax Declaration issued by the Local Assessor’s Office for land and improvement and Sworn Declaration of No Improvement or Certificate of No Improvement issued by the Assessor’s Office, if applicable. For other requirements, please visit the official website of the BIR.
3. The property owner must take note of the rate of tax to be paid by the donor; it is appraised based on the fair market value. Donor’s Tax applies and will be computed on a cumulative basis over a period of one year. If the donation is not tax-exempt, the Donor’s Tax must be paid within 30 days from the date of the donation to avoid paying penalties.
4. Tax-exempt donations are those made to the national government or entities created by government agencies as long as it’s not for profit, those made in favor of educational, charitable, religious, cultural, or social welfare corporations, institution-accredited NGOs, trust or philanthropic organizations or research institutions. Check the website of the BIR for the list of entities considered as Donor’s Tax-exempt under special laws.
5. Before donating property, make sure that the documentary requirements are complete and the owner’s duplicate copy of the title is not missing. Ask for the assistance of a lawyer in drafting the deed of donation and real estate documentation, and in complying with the required formalities and tax exemption requirements, if applicable. Non-compliance with the requirements may affect the validity of the donation. It may also result in the payment of additional costs, tax burdens, and penalties.
6. The registered owner of the property being donated must be in possession of the title to be able to make a donation or give the property away. The donee must also have the capacity to exercise the rights and perform the obligations as a property owner, such as payment of real estate taxes, safeguarding and maintaining the property, etc.
7. There is a provision in the Family Code of the Philippines that prohibits donation between husband and wife. This prohibition also applies to persons living together as husband and wife, even without a valid marriage.
8. The following donations are considered void under the Civil Code of the Philippines: donations between persons who are guilty of adultery or concubinage at the time of the donation (the donor’s spouse may file a court case to nullify this); donations between persons found guilty of the same criminal offense; donations made to public officers or his wife, descendants, and ascendant.
9. Donations to minors and those who cannot enter into a contract may be accepted by their parents or legal representative who will sign the deed of donation.
Gifts or donations of real estate that will take effect upon the death of the donor will be governed by the rules on succession.