Who can buy property in the Philippines?
The Philippines is an island nation, famous for its friendly community, tropical climate and stunning beaches. Spreading over 7000 islands, between the Pacific Ocean and the South China Sea, combines economic growth with extremely reasonable cost of living, making it an ideal expat destination.
The Philippines combines economic growth with a tropical atmosphere, making it an enticing option.
Foreigners have the opportunity to purchase property in the Philippines, although there are limitations on foreign property ownership. According to Philippine laws, foreigners are prohibited from owning land but can own buildings or condominium units.
Establishing a local corporation offers a route for land ownership. However, it is essential for the corporation to adhere to the 40% foreign ownership rule, ensuring that Filipinos maintain majority ownership with at least a 60% stake in the corporation.
How can foreigners buy property in the Philippines?
There are three ways foreigners can buy property in the Philippines:
Buying property through a corporation;
Buying a condominium unit;
Buying a freestanding house (and leasing the land).
1. Buying property through a corporation
The safest but most complex method for a foreigner to buy property in the Philippines is through a corporation, such as a domestic corporation. Companies are legal entities in the Philippines that can own both land and buildings, which gives foreigners the unique opportunity to buy real estate through this entity.
How much does it cost to set up a corporation?
The primary government agency responsible for registering your company is the Philippine Securities and Exchange Commission (SEC). The minimum initial capital is GBP £ 155,000 to establish a fully foreign-owned corporation. However, you can reduce this by partnering with Filipino investors and complying with the 60% locally owned shares. When doing so, you only need a minimum initial capital of ₱ 5,000. In addition, there is also the payment of registration fees, which you can easily calculate using the SEC Registration Calculator.
When incorporating, ensure you have a business bank account in the Philippines, which you can do in two weeks. Once all your documents are ready, you can fairly quickly register with the SEC. It does not take much longer to incorporate since the entire registration process with the SEC usually only takes at least three weeks.
2. Buying a condominium unit
The most straightforward approach to property ownership is acquiring a condominium unit within a multi-condo project. Most foreigners choose to buy a condominium unit because they are allowed to own a unit in their name. As per the Condominium Act of the Philippines or Republic Act (RA) 4726, foreign citizens have the right to purchase condo units in any condominium project, provided that foreign ownership does not surpass 40% while 60% of the branches of the condominium must hold by Filipino citizens.
It’s important to note that Philippine law prohibits land ownership by foreigners. Still, condominiums are a way for them to invest in real estate in the country since foreigners are allowed to rent it out. Through this, you can still generate income even if you are outside the Philippines. In addition, condominium ownership is limited to an initial 50 years. However, it can be renewed for another 25 to 50 years.
3. Buying a freestanding house (and leasing the land)
While foreigners cannot buy land in the Philippines, there is no prohibition against purchasing only the building itself. Foreigners can buy only the freestanding house rather than the ground it is on. Foreigners may then enter into long-term leases with the landowner to enjoy their homes without any legal troubles.
In the Philippines, foreigners can take a lease agreement for 25 years, with the possibility of renewal for another 25 years. However, if it is intended for investment, you should register the lease with the Department of Trade and Industry, allowing you up to a 50-year lease with a potential extension of 25 years. Subleasing will, however, depend on the agreement between you and the landowner.
We have a list of best locations to buy property in the Philippines, click here.
How to invest in real estate in the Philippines?
Investing in real estate in the Philippines can be a lucrative opportunity for both local and foreign investors. However, it’s important to note that foreign land ownership is restricted; foreigners can own condominium units or buildings but not the land on which they stand. Whether you’re interested in residential properties, commercial spaces, or land development, the Philippines offers many investment opportunities. Here are three ways on how to invest in real estate in the Philippines.
Buy and sell: Purchase low-cost properties, improve them, and sell at a profit for potential substantial returns.
Buy and hold: Acquire properties to rent out and generate income while waiting for their value to be appreciated.
Rental properties: Lease residential or commercial spaces to tenants for a steady income.
Transaction fees and property taxes in the Philippines
In addition to the purchase price of the property, it is crucial to take note of the various fees and taxes you might incur. Here is a detailed breakdown of these financial obligations:
This refers to the negotiable cost that the buyer has to pay to have the Deed of Absolute Sale notarized, which usually hovers around 1-2% of the property value.
After paying the seller the property’s purchase price, you would naturally want to have the property title in your name. To transfer the land title, it’s necessary to pay the Transfer Tax. The Transfer Tax rate is 0.5% of the property’s sales price, zonal value, or fair market value, whichever is the highest. In the case of a donation or inheritance, a Donor’s Tax or Estate Tax must be paid as a Transfer Tax, which has a tax rate of 6%.
Documentary Stamp Tax (DST)
When you buy real property in the Philippines, you need to execute a Deed of Sale, and this is where the Documentary Stamp Tax is necessary. The DST on the Deed of Sale is typically imposed at a rate of 1.5% of the property’s selling price or fair market value, whichever is higher. It is the buyer who is usually responsible for paying this tax.
Property owners in the Philippines must pay an annual Real Property Tax (RPT). This tax is imposed by the LGU where the property is located and is due on January 1 every year. The Real Property Tax rate differs based on the location. According to the Local Government Code of 1991, there are two different Real Property Tax tax rates:
You can use our Real Property Tax calculator to compute the RPT tax you must pay in the Philippines.
This refers to the tax that the seller has to pay for the transaction of real estate properties that are categorized as capital assets, such as residential properties. The CGT amounts to 6% from the individual purchase or 10% from developers of the property’s actual gross selling price or its fair market value, whichever is higher.
The final step is land title registration. You would have to visit the Register of Deeds, where you can find the property. Here, you should show the payment of the previously mentioned taxes. The Title Registration Fee amount varies per location, but it is typically at a rate of 0.25% of the selling price. Once you have paid the Title Registration Fee, the buyer can acquire a title in his name, confirming his legal ownership.
