How Foreigners Can Own Land & Buy Real Estate in the Philippines
Exceptions allowing foreigners to acquire land in the Philippines
- Property was acquired prior to the 1935 Constitution;
- Property was acquired through hereditary succession, with the foreigner being a legal or natural heir;
- Purchase of a unit or units in a condominium project, subject to 40% foreign ownership limit in the condominium corporation;
- Purchase of land by a domestic corporation, subject to 40% foreign ownership rule;
- Purchase by a foreigner married to a Filipino;
- Purchase by a foreigner who was originally natural-born Filipino, subject to limitations set by the law.
Purchase of a condo unit
This third scenario is perhaps the easiest to understand since this has been typically cited as the most common way for a foreigner to own property in the Philippines.
Under the Condominium Act of the Philippines or Republic Act (RA) 4726, foreign citizens are allowed to buy condo units in any condominium project, as long as foreign ownership of that project does not exceed 40%.
For example, let’s say Condominium Project X is currently offering 100 units for sale. Under the law, all 100 unit owners become owners of Project X Condominium Corporation, the residual owner of the condo building. The condo developer may market and sell condo units to foreigners as long as the percentage of foreign ownership in that project will not exceed 40%.
Purchase of land by a corporation
A valid and legal loophole used by foreigners looking to own land in the Philippines is through the creation of a domestic corporation. This simply requires the establishment of a company to be registered with the Securities and Exchange Commission (SEC).
The only requirement is that the corporation must still abide by the 40% foreign ownership rule, which means Filipinos must still have majority ownership — at least 60% stake in that corporation.
Once approved by the SEC, the corporation may now purchase any real estate property, including land, house and lot, condominium units, or commercial buildings. As part-owner of this corporation, the foreigner can enjoy the use and benefits of the acquired property. However, the foreigners’ combined stake in the ownership is limited to just 40%.
Upon dissolution of the corporation, the foreigner is entitled to receive his proportionate share in the remaining assets of the company, but this doesn’t mean he can get to own the land owned by the corporation. The land may be sold and the cash proceeds distributed to the owners, including the foreigner.
Purchase by a foreigner married to a Filipino
If a foreigner is married to a Filipino citizen, the foreigner is allowed to buy land but the title of the land (called the TCT or Transfer Certificate of Title) will be in the name of the Filipino spouse. The foreigner’s name may be included in the Contract or Deed of Sale, but it cannot be in the TCT or land title.
Yes, the foreigner may have purchased and acquired the land but in reality, he does not “own” it. For one, he is not allowed to dispose of the land unilaterally, that is, without the explicit permission of the Filipino spouse who is the actual “owner” as per the land title.
In the event of the death of the Filipino spouse, the foreigner becomes the natural heir of the property. Since the foreigner is not allowed to own land, the available options include:
- Disposing the property within a reasonable amount of time and collecting the proceeds of the sale;
- Passing ownership to the children or legal heirs; or
- Passing ownership to the Filipino spouse’s relatives, in case the couple is childless.
Opko Finance, an accounting and outsourcing services company based in Asia and managed by a French expatriate, helps Start up, SME, Entrepreneurs, subsidiaries of big companies to set up and develop their business in the best hubs in Asia and Middle East, faster and with fewer resources through outsourcing solutions in the Philippines.
For any information on investing in properties in the Philippines, please contact our team to info@opkofinance.com.
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