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How can a foreigner buy property in the Philippines?

House and Lot for Sale - Capital Gains Tax

The tropical temperature, stunning scenery and beaches, and delicious food entice foreign visitors to visit and stay in the Philippines. While ex-pats and retirees like the country’s inexpensive cost of living, tropical climate, and friendly locals.

According to InternationalLiving.com, which specializes in retirement abroad, most ex-pats can live comfortably in the Philippines for roughly $1,525 per month. This estimate includes food, activities, basic healthcare, and housing expenditures. Most ex-pats and foreigners rent or enter long-term lease agreements of real property in the country; owning one is more cost-effective; however, they are not permitted to buy or own land or property in the country.

The ownership of any land in the Philippines is exclusive and confined to only Filipino citizens or nationals, as stated in the Philippine Constitution of 1987. Foreigners are typically not permitted to buy or possess property in the Philippines, however, foreigners can lawfully own a residence.

SIX WAYS ON HOW CAN FOREIGNERS BUY PROPERTY IN PHILIPPINES

Buying a property in the Philippines is one of those things that you should really think about. Whether it be for investment purposes or just as an extra place to stay, here are some points on how foreigners can buy properties.

Possess land before the establishment of the 1935 Philippine Constitution

A foreign person who was able to acquire and possess land before the establishment of the 1935 Philippine Constitution shall maintain ownership rights on such property.

Although the 1935 Constitution has already been superseded by the 1987 Philippine Constitution, the new Constitution recognizes the right of a non-Filipino person to use and possess property, including land, as long as it was purchased before the 1935 Constitution.

The Parity Amendment to the 1935 Constitution, on the other hand, empowered Americans to dispose of, exploit, develop, and use public domain agricultural, forest, and mineral properties. Americans can extract and use the Philippines’ oceans, minerals, coal, petroleum, and other possible energy sources under the same amendment but on July 3, 1974, the rights provided to citizens of the United States or businesses or associations controlled by these citizens were terminated.

An inheritance or hereditary succession

The Philippine Constitution of 1987 forbids foreign citizens from acquiring land in the Philippines but Article XII, Section 7 of the same Constitution has a modest provision that permits heirs to obtain the property, even if the successor is a foreigner.

This implies that if a foreigner married a Filipino spouse and his or her husband or wife dies, the foreigner will become the legal owner of his or her property as the legal or natural heir. The same may be said regarding the children. Even though he or she is not a Filipino citizen, every natural child may it be legitimate or illegitimate can inherit the property of his or her Filipino father or mother.

 Article XII, Section 7 simply implies that when the foreigner is officially included and instituted in the “Last will” of a property owner, he is permitted to receive a real estate property or residential land under Philippine laws and the same laws apply in circumstances of “intestate succession,” or where the landowner dies without leaving a “Last Will.” Under intestate succession, the foreigner is permitted by Philippine law in acquiring real property, may it be farmland or private land.

However, a foreigner who is not connected or a family member to the landowner in any way cannot be lawfully designated as the heir who will inherit the land in the final will.

Purchase a condominium unit

A condominium is the most convenient and cost-effective option for foreigners to purchase and own a residential property in the Philippines rather than renting or entering a long-term lease agreement.

Foreign nationals are permitted to acquire condominium units in any condominium building under the Philippine Condominium Act, or Republic Act (RA) 4726, as long as foreign ownership of such project does not exceed 40%.

For example, a condominium project has a 100-unit complex.  In that complex, only 40%, or 40 of such condominium units should be reserved for foreigners, regardless of nationality. The remaining 60% or 60 units should be owned by Filipino citizens or natural-born Philippine citizens.

The administration of the condominium corporations or companies or the condominium homeowners’ association is in charge of regulating foreign ownership of condominium units. They are in charge of frequently and rigorously ensuring that foreigners hold no more than 40% of the condo units sold in that property.

Buy a property through a local corporation

The formation of a domestic corporation is a recognized and legal means for foreigners to own land in the Philippines. This merely necessitates the formation of a corporation and its registration with the Securities and Exchange Commission (SEC).

The sole criterion, like owning a condominium property, is that the corporation remains to adhere to the 40 percent foreign ownership regulation, which implies that natural born Filipino citizen must still have majority ownership of at least 60 percent share in that business.

However, upon the closure of the corporation, the foreigner is entitled to collect his proportionate part of the company’s residual assets, but not the land or real estate properties. In these cases, the land or real estate property could be sold and the earnings will be divided among the owners of the corporation, including the foreigner.

Acquire land by foreigner married to a Filipino

If a foreigner marries a Filipino citizen, the foreigner may purchase land, but the title of the land or Transfer Certificate of Title will be under the name of the Filipino spouse. The name of the foreigner may appear in the Contract or Deed of Sale, but it cannot appear in the property title.

Even though the foreigner purchased the property, he must obtain the consent of the Filipino citizen spouse, who is the owner of the land according to the land title, when he wants to sell the property as he is not permitted to dispose of the land.

If the Filipino spouse dies, the foreigner cannot acquire ownership of the property. Instead, the foreigner can either sell the property and collect the proceeds, give the land ownership to their children or legal heirs, or in the case of a childless couple, transfer the land ownership to the Filipino spouse’s family.

Bought by a natural-born Filipino foreigner

Under the 1987 Constitution, natural-born Filipinos who renounced their Filipino citizenship and obtained foreign citizenship are permitted to possess the land in the Philippines.

Natural-born Filipinos, as defined by the Philippine Constitution, are citizens of the Philippines from birth and do not need to execute any act to earn or perfect their Philippine citizenship. Natural-born Filipinos can also be naturalized citizens under the Philippines’ Naturalization Law, Filipino citizens who married a foreigner but have not relinquished their Filipino citizenship, or those who have dual and derivative citizenship.

However, there are limitations prescribed on property ownership for non-Filipino nationals who were former natural-born in the Philippines, such as the following:

Lot size restrictions for acquiring land to be used as a residence:

1,000 square meters (sqm) of urban land

1 hectares of agricultural or farm land

Lot size restrictions for acquiring land to be utilized for business or commerce:

Urban land of 5,000 square meters (sqm).

3 hectares of farm land

According to the same property ownership standards, a natural-born Filipino may buy no more than two  lots or residential land located in separate towns, rural land or cities across the Philippines, provided that the total area of such lots does not exceed 1,000 sq. m. for urban land or one hectare for rural land used as a dwelling, but not more than 5,000 sq. m. for urban land or three hectares for rural land for business usage.

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