FFE Magazine

A guide to buying properties in the Philippines Part 1

Photo from roryfirks

Acquiring property in the Philippines is trickier than most people assume. Real estate entities have tried to simplify and make the process convenient yet government policies are meticulous in detail and strict in application especially towards foreigners who might often mistake the country’s friendliness and accommodation for lenience. Filipino citizenship is of utmost importance in enjoying the full privileges of buying and owning a property in the Philippines. Hence, expatriates and foreign nationals who wish to invest in the country may face certain challenges at the beginning of the entire process.

 

Surely, this sounds daunting. However, acquiring properties in the Philippines can be just as easy and simple if given the proper information and guidelines to do so.

 

For Filipino Citizens

 

Only Filipino citizens and corporations with at least 60% of its capital owned by Filipinos are entitled to acquire land in the Philippines.

 

For Balikbayans

 

Philippine born individuals who have become naturalized citizens of another country are, still legally recognized as Filipinos citizens. They may still acquire land under their own name but are limited to area coverage or land mass.

 

According to the provisions under Batas Pambansa 185 (referring to the acquisition of land for residential use) individuals:

 

* May not exceed 1,000 square meters of urban land and 1 hectare of rural land.

 

* If the individual has already owned residential land in the past, Filipinos can purchase or acquire additional urban or rural properties presently as long as when added does not exceed the maximum area.

 

* The individual must not acquire more than two lots and must be never be situated in the same location as long as when added does not exceed the maximum area.

 

* Individuals who have already acquired urban land will be disqualified from acquiring rural land and vice versa.

 

* All acquired land should only be for residential purposes.

 

According to Republic Act 8179 (referring to the acquisition of land for business or commercial use) individuals:

 

* May not exceed 5,000 square meters of urban land and 3 hectares of rural land.

 

* If the individual has already owned business or commercial land in the past, Filipinos can purchase or acquire additional urban or rural properties presently as long as when added does not exceed the maximum area.

 

* The individual must not acquire more than two lots and must be never be situated in the same location as long as when added does not exceed the maximum area.

 

* Individuals who have already acquired urban land will be disqualified from acquiring rural land and vice versa. But if the individual has disposed of the rural land, the individual may still acquire another rural land and vice versa provided that is used for business

 

* All acquired land should only be for business or commercial purposes.

 

To remove area restrictions, former Filipinos naturalized in another country may opt for Dual citizenship. When the application is approved, all the rights and privileges entitled to Philippine citizens are restored.

 

How to apply for Dual Citizenship:

 

File a “Petition for Dual Citizenship and Issuance of Identification Certificate (IC) pursuant to RA 9225” at the Bureau of Immigration (BI) and for the cancellation of your alien certificate of registration.

 

  • If overseas, file a petition in the nearest embassy or consulate

 

  • Bring the a birth certificate, not photocopied, authenticated by the National Statistics Office

 

  • If overseas and does not have a copy of the birth certificate, request for a copy on the NSO website and they will send it to you.

 

  • Submit a “Petition for Citizenship and Issuance of Identification Certificate (IC) pursuant to RA 9225” to a Philippine embassy, consulate or the Bureau of Immigration.

 

  • Pay a $50.00 processing fee, schedule and take an “Oath of Allegiance” before a consular officer.

 

  • The Bureau of Immigration inManilareceives the petition from the embassy or consular office. The BI issues and sends an Identification Certificate of citizenship to the embassy or consular office.

For Foreigners

 

Restrictions on foreigners

 

Land cannot be acquired by non-Filipinos. They are only allowed to own certain properties such as apartments and condominium projects, if the foreign proportion does not exceed 40%. This means that foreigners can buy the unit, and become an immediate stockholder of the condominium project but will only own a share of 40%.

 

Renting is also allowed to foreigners. They may lease commercial land on a long-term basis, 50 years, and renew it every 25 years. For private land properties, initial leasing is 25 years and renewable for another 25 years. Houses and buildings can also be rented or owned, but not the land on where it is built.

 

Ways of acquiring land in the Philippines:

 

* The easiest and quickest option for foreigners to own land in the Philippines is to marry a local and have the land title under their Filipino spouse’s name. This would mean that the ownership is shared by the couple with equal rights, or 51% of it in favour of the Filipino spouse. Foreigners, however, should take the precautionary effort of creating another agreement in case of separation, certified by the local authority.

 

* In the event that the Filipino spouse passes away, the foreign spouse inherits the land as the legal heir. The foreign spouse may pass the ownership to their children and has the option of selling the property as well. The children, whether legitimate or illegitimate, Filipino or non-Filipino citizen, may also acquire the land as considered legal successors if willed.

 

* Another option is to have foreign corporations enter partnerships or cooperate with local bodies, making 60% of the company owned by the Filipino. The joint corporation should needs at least five employees, including the foreigner, to be considered valid.

 

* Holders of a Special Resident Retiree’s Visa (SRRV), a non-immigrant resident visa that offers privileges to foreigners, are also an exception to this rule. Holders of this visa are allowed to purchase a condominium unit or lease a house and its lot. The retirees may also reside in the Philippines permanently without entry or departure limitations and travel tax.

 

Buying Land

 

Regardless of what kind of buyer you are, you will have to go through the same legal processes and registrations.

 

The steps in the acquisition of land are the following:

 

  • Present a Deed of Absolute Sale (DOAS), between owner and buyer that, through a lawyer, has been notarized.

 

  • Through the Bureau of Internal Revenue (BIR), a Land Tax Declaration should be secured and submitted to the city or municipal Assessor’s office.

 

  • The buyer then pays real estate tax to the City Treasurer’s Office.

 

  • The Assessors office assesses the market value of the property and all transfer taxes are paid by the buyer to the Assessors Office.

 

  • Capital Gains Tax and Documentary Stamp tax are paid to BIR.

 

 

  • The Registry of Deeds (RD) cancels old title and issues a new one in the name of the buyer.

 

 

  • The buyer, now the new owner, obtains a photocopy of the new title and requests tax declaration from the Assessors office.

 

 

  • Legal ownership is only accepted when there is an evidence of the Transfer Certificate of Title (TCT). For single houses and bare lots, title registration is done at the Registry of Deeds.

 

Buyers should ensure the following requirements for land transfer registration (TCT or CCT):

 

  • A certified copy of the title

 

  • Notarized copies of the Deed of Sale

 

  • Latest tax declaration of the property

 

 

  • Certificate from the Bureau of Internal Revenue that the capital gains tax and documentary stamps have been paid

 

  • Receipt of payment of the transfer tax and registration fees

 

 

Fees, Costs, & Taxation

 

In preparation to buying, buyers should do an in depth research and estimation of all possible expenses. Depending on the nature of the business agreement, all buyers confront a few standard monetary practices required by the Land Registration Act of the Philippines, the National Internal Revenue Code of 1997, and Republic Act 9337 or E-Vat/R-Vat law.

 

For registration costs, buyers need to pay for  a Transfer tax which 0.5% to 0.75% of the selling price, zonal value or fair market value, which ever is higher; the registration fee which 0.25% of the selling price zonal value or fair market value, which ever is higher.

 

Other costs would include government taxes, VAT, transfer fees, legal fees, and miscellaneous fees. Legal fees are usually dependant on negotiations. Some legal fees can even reach to 10% of the property value.

 

Some expenses that buyers don’t need to worry about are documentary Stamp Tax which is 1.5% of the selling price of the selling price zonal value or fair market value, which ever is higher, Capital Gains Tax, withholding tax, and the agent / Broker’s commission. This will all be handled by seller.

 

General Tips on Buying Real Estate

 

Although real estate properties are profitable and wonderful investments, buyers should always make sure that they research and examine the nature of the property they want to acquire. Due diligence is always necessary to give a buyer a sense of security and protection before real estate disputes occur.

 

One of the soundest advices to buyers is to double, triple, and quadruple check and be aware of all their documents and if all have been authenticated, certified and notarized. Assuring authenticity legalizes the buyer’s ownership at all times.

 

Acquiring properties requires a lot of paperwork. To avoid confusion, we have made a checklist for you about the different documents necessary in your potential investment.

 

 

 

 

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