RIGHT TO OWN PHILIPPINE PROPERTY

For all our foreign owners who are looking to buy property in the beautiful Philippines, we have listed below additional information on "Philippine Real Estate Ownership Laws", which we are sure you will find very helpful.

The general rule is that only Filipino citizens and corporations or partnerships, at least 60% Philippine owned are entitled to acquire land in the Philippines. As an exception to this rule, an alien acquisition of Philippine real estate is allowed in the following cases. Acquisition before the 1935 constitution. Acquisition thru hereditary succession if the foreign acquire is a legal heir. Purchase of not more than 40% interest as a whole in a condominium project. Purchase by a former natural born Filipino citizen subject to the limitations prescribed by law.  Filipinos who are married to aliens retain their Filipino citizenship, unless by their act or omission they are deemed to have renounced their Filipino citizenship.

NEW DUAL CITIZENSHIP LAWS AFFECTING PROPERTY OWNERSHIP

Dual citizenship is now newly available for the following. Dual citizenship means having two citizenships and passports from two different countries. 1) Former Filipino citizens born in the Philippines, but that have immigrated to another country and obtained citizenship of that country. 2) A foreign spouse married to a Filipino citizen. Dual citizenship allows the citizenship holder full rights of possession of Philippine real property. Currently this is a new law stating that there is a limit of 1,000 sqm for residential house & lot ownership while for condo ownership remains no restriction.

FOREIGNER MARRIED TO A FILIPINO

If holding title as an individual, a typical situation would be that a foreigner married to a Filipino citizen would hold title in the Filipino spouse's name. The foreign spouse's name cannot be on the Title but can be on the contract to buy the property. In the event of death of the Filipino spouse, the foreign spouse is allowed a reasonable amount of time to dispose of the property and collect the proceeds or the property will pass to any Filipino heirs and or relatives.

FOREIGN OWNERSHIP AS A PHILIPPINE CORPORATION

Foreign nationals and or corporations may 100% own a Philippine condominium or town home. For private land, residential home with land lot and or commercial building with land lot ownership, the foreign national and/or corporation forms a Philippine Corporation to take ownership of the property. A Philippine Corporation by law will be a maximum of 40% foreign owned, and a minimum of 60% Filipino owned with a minimum of five incorporators. The corporation by law shall have a main bank account tied to it upon incorporation. A foreign national may be the sole person on the Philippine corporation bank account. Thus allowing the foreign national total control over the funds derived and paid out from the Philippine Corporation and from the income or sale of the asset or real estate property.

FORMER FILIPINO CITIZEN

"Balikbayan", who is a former natural born Filipino citizen, and now is a citizen of another country is entitled to own for residential purpose 1,000 square meters of residential land, and one hectare of agricultural or farm land. For business purpose 5,000 square meters of urban land or three hectares of rural land.

FOREIGN LEASING OF PHILIPPINE REAL ESTATE PROPERTY

A foreign national and or corporation may enter into a lease agreement with Filipino landowners for an initial period of up to 50 years, and renewable for another 25 years. Or lease the property in your Philippine Corporation name for an unlimited period.

PHILIPPINE REAL ESTATE SALES TRANSACTION & CLOSING COST

Buyer's transaction or closing costs include the following. Documentary Stamp Tax - P5.00 per P1,000 of contract price, or zonal value or fair market value, which ever is higher. Transfer Tax - P5.00 per P1,000 of contract price, or zonal value or fair market value, which ever is higher. Registration Fee - P1.50 per P1,000 of contract price, or zonal value or fair market value, which ever is higher. The seller is responsible for transaction closing cost of capital gains tax.

TAKING TITLE TO THE PHILIPPINE REAL ESTATE

The "Deed of Sale" is the document showing legal transfer of real estate property ownership. The deed of sale is then taken to the Registry of Deeds to be officially recorded. "Tax Declarations" are sometimes used but are not very enforceable in court because there may be many others with a tax declaration claming ownership of the same property. A property may be Titled by taking the Tax Declaration to the Registry of Deeds to process to be officially titled. Always purchase property with a proper deed of sale if possible, and if there is not one, a tax declaration is your last choice. Owners must be active in enforcing their property rights. Possession is 90 percent ownership. If the property owner can only show a tax declaration as an evidence of ownership, that means the land is untitled and not registered under the Torrens system, the buyer will not get as much protection, as his title will not be absolute and can yield to one who has a better right, like the person actually possessing and occupying or tilling the land, and who subsequently applies for the titling of the land in his name. It is possible for two or more tax declarations issued to different persons with exactly the same technical description, or referring to the same property.

REAL ESTATE ACQUISITION AND DISPOSITION DEFINITIONS

Acquisition is the act of procuring or getting a hold of real estate property. Disposition is the manner of alienation, transfer of possession and ownership thereof as prescribed by the Philippine law. The acquisition and disposition of real estate is embodied in written agreements or contracts voluntarily entered into and subscribed by the selling and buying parties thereof, before a public officer designated as the Notary Public of the City or Province where the subject property is located. Thereafter, the instrument embodying the particular real estate transaction is required by law to be recorded in the Registry of Deeds in the City or Province where the real estate property is involved and located. The Philippines uses the "Torrens" system of real estate ownership. See below for more information.

TORRENS SYSTEM OF REAL ESTATE OWNERSHIP

An adapted form of the "Torrens" system of land registration is used in the Philippines. The system was adapted to assure a buyer that if he buys a land covered by an Original Certificate of Title (OCT) or the more familiar Transfer Certificate of Title (TCT) issued by the Registry of Deeds, the same will be absolute, indefeasible and imprescriptibly. The registered owner will never lose his ownership to squatters no matter how long such land was illegally occupied.

CONDOMINIUM DEVELOPMENT OWNERSHIP LAW

Presidential Decree No. 957, which regulates the sale of subdivision and condominium developments, and providing penalties for violations thereof. The National Housing Authority has exclusive jurisdiction to regulate real estate trade and business, a function, which is presently exercised by the Housing and Land Use Regulatory Board (HLURB). Certain conditions are required before a license to sell condominium development units and or subdivision development lots and homes is issued to a Filipino or Foreign owned individual or corporation. The requirements include a certificate of registration, a performance bond, and an approval of the building plans and specifications. Violation of these rules could mean fines, cancellation of license and or imprisonment.

TYPICAL TRANSACTION COSTS – PURCHASES FROM INDIVIDUALS

Capital gains tax 6% of actual sale price. This is paid by the seller but in some cases it might be expected that the buyer pays. This percentage could differ if the property asses is being used by a business or is a title owned by a corporation, in this case the percentage is 7.5%

Document stamp tax 1.5% of the actual sale price. This is paid by the seller but in some cases it might be expected that the buyer pays.

Transfer tax 0.5% of the actual sale price.

Registration fee 0.25% of the actual sale price.