Foreigner’s Guide
By law, foreigners don’t have the right to acquire land in the Philippines. Only Filipino citizens can own land (there have been many proposals to amend this law but of this writing, the law remains unchanged.) The simplest way for a foreigner to acquire real estate properties is to have a Filipino spouse purchase a property in his/her name. Exceptions: Corporations or partnerships that is at least 60% Filipino owned are entitled to acquire land in the Philippines. An exception to this rule, is foreign acquisition of a Philippine real estate in the following cases: * Acquisition before the 1935 constitution. * Acquisition thru hereditary succession if the foreign acquire is a legal or natural heir. This means that when you are married to a Filipino citizen and your husband/wife dies, you as the natural heir will become the legal owner of his/her property. The same is true for the children. Every natural child (legitimate or illegitimate) can inherit the property of his/her Filipino father/mother even if he/she is not a Filipino citizen. * Purchase of not more than 40% interest in a condominium project. * Purchase by a former natural-born Filipino citizen subject to the limitations prescribed by law. (natural born Filipinos who acquired foreign citizenship is entitled to own up to 1,000 square meter of residential land, and 1 hectare of agricultural or farm land) * Filipinos who are married to aliens who retain their Filipino citizenship, unless by their act or omission they have renounced their Filipino citizenship. Owning of houses or buildings is legal as long as the foreigner does not own the land on which the house is build. Setting up a corporation with 40% of the stocks in the foreigner’s name and 60% to Filipinos is a good alternative. There must be a minimum of 5 stockholders, and foreigner can have the Filipino stockholders sign blank transfer of the stocks for security. Rent The land can be leased by the foreigner or a foreign corporation on a long term contract for an initial 50 year period and renewable every 25 years. A foreigner can rent a lot and at the same time legally own the house on the rented land. Condominiums The Condominium Act of the Philippines, R.A. 4726, expressly allows foreigners to acquire condominium units and shares in condominium corporations up to 40 % of the total and outstanding capital stock of a Filipino owned or controlled condominium corporation. Those who claim that foreigners can own a house & lot in the Philippines have a condominium title to their property. There are a very few single-detached homes or Townhouses in the Philippines with condominium titles. Most condominiums are mid to high rise buildings. Please see our condominiums for sale in the Philippines. If you wish to stay permanently in the Philippines or if you frequent the Philippines and stay for long periods. Avail of the government’s Special Resident Retirement Visa (SRRV). Foreign Nationals Protect Your Investment Assets in the Philippines
Currently foreign nationals are not allowed the specific right to hold Philippine land in their individual name. They are however allowed full and complete ownership in their individual name of a Philippine condominium. The easiest and securest way for a foreigner to hold title of Philippine land, is to create a Philippine corporation to hold title. Either a stock or LLC type corporation. LLC is the simplest form to create, and just as secure as a stock corporation. Many foreign individuals and companies form an LLC type of Philippine corporation. Incorporating allows the foreign national through their Philippine corporation the best way to own Philippine land with the lowest risk and the most control over of their Philippine investment assets. Along with a Power of Attorney, and Declaration of Trust agreements, from the Filipino co-incorporator, foreign nationals are now assured that their Philippine investment assets are secure, and under their control. The best and easiest form of Philippine corporation for a foreign national to form is a Limited Liability company. A limited liability company ("LLC") is a legal form of business company that is an amalgam between a partnership and a corporation. The members have the same tax benefits as a partnership (unless the members of the LLC elect to be taxed as a corporation) at the same time being able to take advantage of the limited liability for the actions, obligations and debts characteristics of a corporation Advantages of an LLC Limited Liability. Like the shareholders of a corporation, the owners (called 'members') of an LLC have limited liability for business debts. Pass-Through Taxation. An LLC with multiple owners will, by default, be taxed as a partnership. Owners report their share of the profits and losses of the LLC on their personal tax returns, and no separate tax is assessed on the company itself. Management Flexibility. LLCs have much more management flexibility than corporations. An LLC may be managed either directly by its owners or by a manager who may be one of the members or may be hired to run the business. An LLC may have an unlimited number of owners. Simple Record Keeping. Unlike corporations, LLCs are not required to hold an annual meeting and draft meeting minutes. Deductible Expenses. Similar to a corporation, normal business expenses like an owner's salary may be deducted from the profits of an LLC before the LLC's income is allocated to its owners for tax purposes. Flexible Profit & Loss Allocations. Unlike a corporation, an LLC is not required to allocate profits and losses in proportion to ownership interest ("member interest'). This means that the owners of an LLC can agree to allocate the company's profits and losses among themselves however they see fit and not necessarily based on the percentage of the company each owner controls. Disadvantages of Limited Liability Company Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy. Initial Public Offering: Business owners with plans to sell shares of their company to the public, or issuing employee shares in the future, may be best served by choosing a corporate business structure. Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. As a foreign national, your LLC will have no choice but to be classified as a corporation for tax purposes. Good day, and good Cebu real estate investing! |