How can foreigners buy property in the Philippines is a question many foreign investors have. With over 7,100 islands to choose from, the Philippines remains one of the best options for foreigners who want to invest in Southeast Asian real estate. Whether you want to live in bustling cities, a smoother rural experience, or even near the beaches, the Philippines has it all. So, how can foreigners buy property in the Philippines? This article will answer all you need to know about buying property in the Philippines.
Can foreigners buy property in the Philippines?
Foreigners can buy property in the Philippines, but only the building or a condominium unit. Under Philippine laws, foreigners are not allowed to own land. Hence, as a foreigner, buying land in the Philippines is generally prohibited, subject to certain exceptions, as you can read below.
How can foreigners buy property in the Philippines?
Buying property in the Philippines can be done in three different ways, and these are through:
- Purchasing through a corporation
- Buying a condominium unit
- Purchasing a building and renting the land
For a more detailed explanation of these ways, take a look at these different methods:
1. Setting up a corporation
The safest but most exhausting method for a foreigner to buy property in the Philippines is setting up a corporation, officially called ‘100% Foreign-Owned Domestic Corporation’. Through this method, foreigners, through their corporations, are allowed to purchase land in the Philippines.
However, it is essential to note that a minimum investment must be made to establish the ‘100% Foreign-Owned Domestic Corporation’. It’s possible to reduce the investment amount by partnering with a Filipino and complying with the 60% locally owned shares. In that case, you have to make sure that you have Filipino co-owners.
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 $200,000 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. You only need a minimum initial capital of ₱ 5,000 ($90) when doing so. In addition, there is also the payment of registration fees which you can easily calculate using the SEC Registration Calculator.
When incorporating, make sure that you also have a bank account which you can do in a span of two weeks. Once all your documents are ready, it is fairly quick to 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.
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2. Opt for a condominium unit
Instead of buying land in the Philippines, most foreigners in the Philippines opt to reside in condominiums because they are allowed to own a unit in their name. The only requirement is that Filipino citizens or Filipino-owned corporations must possess at least 60% of the branches of the condominium.
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 period of 25 to 50 years.
3. Purchase the building only
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.
Leases to foreigners are only for a duration of 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.
Where should I buy a house in the Philippines?
Now that you already know the answer to how can foreigners buy property in the Philippines, the next question is knowing the best places to buy a house. When buying a house in the Philippines, it is equally important to align the location with your specific intentions for the purchase. You must consider your lifestyle, available amenities near the area, and whether you intend to reside for a long time or simply a rest house.
To assist you in identifying the most suitable areas, here are a few prime destinations for purchasing a property in the Philippines.
Metro Manila is the primary economy of the Philippines, particularly in Makati and Taguig. It hosts numerous multinational companies, business districts, high-end condominium units, and housing subdivisions, making it an excellent choice if you plan to work or invest in the country.
However, it is also essential to consider the high cost of living associated with Metro Manila and traffic and pollution. Nonetheless, investment in real estate in the metro is very lucrative due to the increasing demand for residential spaces.
The Province of Cebu is friendlier for those who want the perfect city and island lifestyle blend. When living in Cebu, foreigners can easily access stunning beaches, refreshing mountains, and outdoor activities. Further, a few minutes of travel can easily transport you to Cebu City, where many economic activities and international businesses operate.
For a more laid-back lifestyle, Bohol is the perfect option. The province is renowned for its crystal blue beaches and the world-famous Chocolate Hills. An increasing number of foreigners are visiting Bohol, accounting for almost 45% of tourist arrivals. Given Bohol’s understated appeal and increasing foreign interest, this indicates potential growth in future housing demand.
Transaction fees and property taxes in the Philippines
In addition to the purchase price of the property and the payment for the lease of land, it is crucial to take note of the various fees and taxes you might incur. Here is a detailed breakdown of these financial obligations:
After paying the seller the property’s purchase price, you would naturally want to have the property title in your name. To do so, payment of a transfer tax is necessary. The transfer tax rate varies between 0.5% and 0.75% of the property’s sales price, zonal value, or fair market value, depending on the property’s location. Different municipalities or cities impose slightly different rates, so it is vital to consult local authorities to determine the specific percentage applicable in your area.
Title Registration Fee
The final step is 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 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.
Capital Gains Tax
In the Philippines, Capital Gains Tax is similar to income tax, but it is on profits from selling an asset such as a property. It has a rate of 6% of the selling price, zonal value, or fair market value, whichever is higher. However, it is the seller who usually pays the CGT.
Buy property in the Philippines with Own Property Abroad
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Frequently Asked Questions (FAQs)
Can foreigners own land in the Philippines?
Generally, foreigners cannot own land in the Philippines. However, exceptions exist, such as by setting up a corporation or when you acquire the property through inheritance.
How can foreigners invest in the Philippines?
Foreigners can invest in the Philippines through various avenues, including investing in Philippine Stock Exchange-listed companies, establishing corporations, or joint ventures with Filipino partners where you can invest in real estate. It’s crucial to adhere to each investment option’s specific regulations and requirements.
How to buy a house in the Philippines?
When buying a house in the Philippines, start by identifying a suitable property and negotiating terms with the seller. Conduct thorough due diligence, including property inspections and title checks. Pay the required taxes and fees, and have the property registered under your name.