Transfer the lots through a sale rather than a donation: Cheaper?

Hi! That’s a really good question, especially for parents who want to pass on property while avoiding unnecessary costs.
The short answer? It used to be true that a Deed of Sale was cheaper, but nowadays, the difference between the total expenses of a sale and a donation is minimal. Let’s break it down so you can decide which works better for your situation.

Donation vs. Sale – What’s the difference now?
1. Deed of Donation
* Donor’s Tax:
* The first ₱250,000 is exempt per year, per donee.

* Anything above is taxed at a flat 6%, based on the zonal value or fair market value, whichever is higher.

* Documentary Stamp Tax (DST): 1.5%

* Registration fees and Transfer Tax still apply

* Tax is generally paid by the donor (you), but this can be arranged otherwise

2. Deed of Sale
* Capital Gains Tax (CGT): 6% of the selling price, zonal value, or fair market value (whichever is highest)

* Documentary Stamp Tax (DST): 1.5%

* Transfer Tax and registration fees

* Usually, the seller pays the CGT, but in family arrangements, this can also be handled internally

So, are the costs the same?
Yes, more or less. Since both involve a 6% tax rate (Donor’s Tax vs. Capital Gains Tax), and both include DST and other fees, the difference in total expenses is often minimal, especially when dealing with transfers between parents and children.

So the choice now becomes less about cost and more about:
* Intent – Is this a true sale or a transfer of ownership out of generosity?

* Clarity – How do you want it recorded for future estate or legal purposes?

* BIR scrutiny – Using a Deed of Sale without an actual sale could raise red flags.

If you’re simply transferring land to your children as part of early estate planning, and there’s no actual payment involved, a Deed of Donation may be the more transparent and appropriate route.

However, if you’re concerned about flexibility or future plans, a Deed of Sale can still be used, as long as it’s done properly and documented clearly.

In either case, it’s best to consult a real estate lawyer or tax specialist who can assess your situation based on the current values, structure of the subdivision, and your long-term intentions.