How to Buy Property in the Philippines

The Philippines presents an attractive landscape for foreign individuals considering property acquisition. Navigating the country’s real estate market requires understanding its unique legal framework and adherence to established procedures. This guide provides essential information to help potential buyers acquire property, outlining steps from ownership limitations to tax obligations.

Foreign Ownership Guidelines

The Philippine Constitution generally restricts land ownership to Filipino citizens and corporations where at least 60% of the capital is Filipino-owned. Foreign individuals are prohibited from directly owning land. This principle outlines various pathways for foreign acquisition of real property interests.

Foreigners can fully own condominium units, provided foreign ownership in the project does not exceed 40% of total units. This is a common avenue for foreign property acquisition, evidenced by a Condominium Certificate of Title (CCT). The unit is owned, but not the land, which is typically owned by the condominium corporation.

Long-term land lease agreements offer another viable option. Leases can extend for an initial 50 years, renewable for an additional 25 years. For industrial or commercial purposes, under the Investor’s Lease Act, leases can be for 50 years, renewable once for 25 years, totaling 75 years. Legislative changes may extend the maximum leasehold period for foreign investors to 99 years.

Foreigners can also acquire property interests indirectly through corporate ownership structures. A Philippine corporation can own land if at least 60% of its capital is Filipino-owned, with foreign ownership capped at 40%. This mechanism requires genuine Filipino majority ownership and control to avoid violating anti-dummy laws.

Specific provisions exist for former natural-born Filipinos who have reacquired their citizenship or lost it. These individuals can own land, often with area limitations. Those who reacquire citizenship under the Dual Citizenship Law generally enjoy the same land ownership rights as native-born Filipinos without area restrictions.

Marriage to a Filipino citizen does not automatically grant the foreign spouse direct land ownership rights. While the land can be registered under the Filipino spouse’s name, the foreign spouse’s name cannot appear on the Transfer Certificate of Title (TCT). However, the foreign spouse can legally own improvements on the land, even if the land itself is titled solely in the Filipino spouse’s name.

Essential Due Diligence

Thorough due diligence is paramount before any property purchase in the Philippines. This investigative phase ensures the property is legitimate, free from disputes, and suitable for its intended use, helping prevent future legal or financial complications.

Obtain certified true copies of the Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) from the Register of Deeds. This document provides proof of ownership and details any annotations, encumbrances, or liens, confirming its cleanliness and authenticity.

Verify tax declarations with the local Assessor’s Office. This ensures real property taxes are current and the property description aligns with the title. Settling any outstanding tax obligations before transfer is necessary.

For land purchases, obtain and review a survey plan to confirm precise boundaries and area, preventing boundary disputes. Check with the local planning office or Local Government Unit (LGU) for zoning regulations and approved land use, as this dictates what can be built or operated on the property.

If the property is part of a condominium or subdivision, inquire about homeowners’ association dues and community rules. Confirm the seller’s identity and legal authority to sell, especially if a Special Power of Attorney is involved or if the seller is a corporation requiring specific resolutions.

Investigate any existing easements or rights of way that might affect property use, as these can impact access or development plans. For certain property types, verify environmental compliance certificates to ensure adherence to environmental regulations.

The Property Purchase Process

Once foreign ownership guidelines are understood and due diligence completed, the property purchase process begins. This sequence involves legal documentation, payment procedures, and government registrations to legally transfer ownership, ensuring a smooth and valid transaction.

The process starts with finding a suitable property and making an offer. Following an agreed price, a Letter of Intent (LOI) or Reservation Agreement is executed with a reservation fee. This initial commitment secures the property and is usually deductible from the total purchase price.

Drafting the Deed of Absolute Sale (DOAS) formally documents the transaction. This legal instrument contains essential details: full legal names of buyer and seller, a comprehensive property description, the agreed purchase price, and a statement confirming full payment. Engaging a legal professional to draft or review the DOAS is advisable to ensure all terms are clear and legally sound.

Payment for the property is structured with an initial down payment, followed by the balance upon signing the DOAS or through a staggered payment schedule. Once signed, the DOAS must be notarized to achieve legal validity and be accepted for registration with government agencies.

After notarization, taxes and fees must be paid to the Bureau of Internal Revenue (BIR) and the local government. This is a prerequisite for transferring the title. The BIR then issues a Certificate Authorizing Registration (CAR), a mandatory tax clearance confirming all applicable taxes have been paid. Without the CAR, the property title cannot be transferred.

The notarized DOAS and CAR, along with other required documents, are submitted to the Register of Deeds. The Register of Deeds cancels the old title and issues a new Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) in the buyer’s name, legally transferring ownership. The new owner must update the tax declaration with the local Assessor’s Office to reflect the change in ownership and ensure proper assessment for annual real property taxes.

Taxes and Fees in Property Transactions

Property transactions in the Philippines involve several taxes and fees that buyers and sellers must account for. Understanding these financial obligations is essential for accurate budgeting and ensuring a legally compliant transfer of ownership. Rates depend on the transaction and property type.

Capital Gains Tax (CGT) is imposed on the seller at 6% of the selling price, fair market value, or zonal value, whichever is highest. This tax applies to the sale of real property considered a capital asset. While generally the seller’s responsibility, parties may agree to alternative arrangements in the Deed of Absolute Sale.

Documentary Stamp Tax (DST) is usually borne by the buyer, calculated at 1.5% of the selling price, fair market value, or zonal value, whichever is highest. This tax is levied on the document itself, signifying the transfer of property. Both CGT and DST are paid to the Bureau of Internal Revenue (BIR).

A Transfer Tax is collected by the local government unit (LGU) where the property is located. This tax ranges from 0.5% to 0.75% of the selling price, fair market value, or zonal value, whichever is higher, and is usually paid by the buyer. The exact rate can vary slightly depending on the specific city or municipality.

Beyond these primary taxes, buyers incur various registration fees paid to the Register of Deeds for title transfer. These fees are generally a small percentage of the property value or a fixed amount. Miscellaneous fees include notarial fees for the Deed of Absolute Sale, attorney’s fees for legal assistance, and potentially broker’s commissions.

Property owners are subject to an annual Real Property Tax, known as “amilyar.” This tax is assessed by the local government based on the property’s assessed value and varies by location, typically 1% of the assessed value in provinces and 2% in Metro Manila. It is an ongoing obligation for property owners.