Consisting of 7,107 islands, Philippines is a sovereign island country in Southeast Asia situated in the western Pacific Ocean. The Philippines is also a tropical country with fascinating landscapes. By law, foreigners do not have the right to acquire land in the Philippines. The simplest way for a foreigner to acquire real estate properties is to have a Filipino spouse purchase a property in his/her name.
Reasons to Invest In Philippine Real Estate:
1. Philippines economy is poised to rise
Philippines GDP rose 7.2 percent in 2013, after gaining 6.8 percent in the previous year. A recovery in developed economies may help the Philippines reach its GDP growth target of 8.5% in 2014 as it aspires to transform into a manufacturing hub. The World Bank forecasts growth will exceed 6 percent every year until 2015. With tame inflation, higher foreign exchange reserves, and a $16 billion infrastructure program, the Philippines economy is poised to rise.
2. More capital inflows expected
In 2013, Philippines credit ratings were upgraded to investment grade by all 3 credit rating agencies. Securing a better credit rating would allow Philippines to attract more capital as it is deemed to be less risky. Foreign direct investment in the Philippines has increased by 20 percent year on year in 2013. Overall business conditions would improve and flourish as more foreign capital is invested. This would have positive spillover effects on the real estate market.
3. Developing tourism industry
The Philippines recorded 4,681,307 visitor arrivals in 2013 compared to 4,272,811 in 2012, representing a 9.6% year on year increase. South Korea remained the biggest source of tourists accounting for 25% of the country’s visitor arrivals in 2013. Visitors from America, and China made up about 15% and 9% respectively of the total tourist arrivals in 2013. Chinese visitors are set to increase due the opening of new regular and chartered air services and increase in cruise itineraries. The booming tourism industry correlates positively for properties in the Philippines.
Property Type
Freehold
In the Philippines, only Filipino citizens or corporations with more than 60% equity held by Filipinos are allowed to own freehold private land. Foreigners and foreign establishments may own up to 40% of condominium development. 100% ownership of the unit can be under their names with individual condominium titles or Condominium Certificate of Title.
Leasehold
Only Philippine nationals are allowed to own public lands on leasehold tenure. Foreign corporations seeking to lease private land are subject to certain restrictions.
In the Philippines, only Filipino citizens or corporations with more than 60% equity held by Filipinos are allowed to own freehold private land. Foreigners and foreign establishments may own up to 40% of condominium development. 100% ownership of the unit can be under their names with individual condominium titles or Condominium Certificate of Title.
Leasehold
Only Philippine nationals are allowed to own public lands on leasehold tenure. Foreign corporations seeking to lease private land are subject to certain restrictions.
Resale
Purchasers can re-sell the property to either local, foreign, or corporation buyers. Same taxes apply to local or foreign buyers.
Title
Transfer Certificate of Title (TCT) – title for land
Condominium Certificate of Title (CCT) – for condominiums and townhouses
Condominium Certificate of Title (CCT) – for condominiums and townhouses
Notable Locations
Metro Manila, is an urban area that composes different cities and the surrounding urban fringe. With a land area of 636 square kilometres, Metro Manila has a population of more than 10 million. Quezon, the biggest city in Manila, holds more than 2 million inhabitants.
Financial Regulations for Foreigners
Loans for foreigners are possible with a loan quantum of up to 60%. The maximum loan tenure is 5 years and interest rates ranges between 6.88% and 9%.
Costs involved when buying a unit
| • | Documentary Stamp Tax: 1.5% of zonal value or price whichever is higher | |
| Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. The DST should be paid within 5 days after the close of the month when the taxable document was made, signed, issued or transferred. | ||
| • | Transfer Tax (for Makati City): 0.6% of zonal value or price whichever is higher | |
| A transfer tax is imposed on tax on the sale, donation, barter, or any other mode of transferring ownership or title of real property. The transfer tax provides evidence of its payment is required by the Register of Deeds of the province concerned before registering any deed. | ||
| • | Registration Fee = 0.45 to 0.50% of price (Payable upon TOP) | |
Other Taxes
| Capital Gains Tax | |||
| Capital Gains Tax is a tax imposed on the gains presumed to have been realised by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale. | |||
| Value Added Tax | |||
| Transactions involving sale, lease or sub-lease of real property by persons engaged in the business of selling, developing, leasing or sub-leasing of real property are subject to VAT .VAT rates are as below: | |||
| 12% of the gross receipts for lessors; | |||
| 10% of the gross selling price or zone value, whichever is higher, for cash sale or deferred plan sales; | |||
| 10% of instalments received or constructively received for instalment plan sales. | |||
| Creditable Withholding Tax | |||
| Transactions involving sale, transfer or exchange of real property classified as ordinary assets, shall be subject to creditable withholding tax. CWT is charged on: | |||
| 1. | Any person with respect to payment made in connection with his trade or business (to be registered as withholding agent of the BIR). | ||
| 2. | Individual buyers not engaged in trade or businesses are also constituted as withholding agents but they need to register as such with the BIR. | ||
| If seller or transferor is habitually engaged in real estate business with proof of registration with HLURB or HUDCC: | |||
| 1.5% of Purchase price - selling price < P500, 000 | |||
| 3% of Purchase price - Selling price is > P500, 000 but < P2 Million | |||
| 5% of Purchase price - Selling price is > P2 Million | |||
Individual Taxation
Individual resident citizens are taxed on their worldwide income, while non-resident citizens as well as resident and non-resident foreigners are taxed on income derived in the Philippines only. Foreigners who are permanent residents of the country but do not have citizenship, are subject to a flat tax rate of 25 % on gross income that is derived from within Philippines if their stay in the country does not exceed 180 days. (exchange rate 1 Philippine Peso = 0.029 Singapore Dollar)
Source: OrangeTee.com retrieved 22 Aug 2014
