Real Estate Ownership: Philippines vs. United States – What Ex-pats Need to Know
What You Need To Know
For ex-pats considering property investment or relocation, understanding the differences between real estate ownership in the Philippines and the United States is crucial. This blog post will explore the key distinctions, focusing on legal frameworks, ownership rights, and important considerations for foreign investors.
Land Ownership
Philippines
The most significant difference lies in land ownership. In the Philippines, foreign ownership of land is strictly prohibited by the 1987 Constitution[1][3]. This restriction aims to protect the country’s resources for Filipino citizens. The only exceptions are cases of hereditary succession, where a foreigner can inherit land from a Filipino spouse[6].
United States
In contrast, the United States generally allows foreign nationals to purchase and own land without restrictions. There are some exceptions related to agricultural land in certain states, but overall, the U.S. has a more open policy towards foreign land ownership.
Condominium Ownership
Philippines
While land ownership is restricted, foreigners can own condominium units in the Philippines. The Condominium Act (Republic Act No. 4726) allows foreign ownership of condo units, provided that foreign ownership in the condominium corporation does not exceed 40%[1][3]. This provision offers a popular avenue for foreign investment in Philippine real estate.
United States
In the U.S., there are typically no restrictions on foreign ownership of condominiums. The rules that apply to American citizens generally apply to foreign buyers as well.
Corporate Ownership
Philippines
Foreigners can indirectly own land through a corporation, but with limitations. Philippine law allows corporations with up to 40% foreign equity to own land[1][4]. However, at least 60% of the corporation’s shareholders must be Filipino. This method is often used by foreign investors looking to acquire land for business purposes.
United States
In the U.S., foreign-owned corporations can generally purchase real estate without restrictions, although some states may have specific reporting requirements.
Leasing Options
Philippines
For those unable to purchase land, leasing is a viable alternative. Foreigners can lease land in the Philippines for up to 50 years, with a possible renewal for an additional 25 years[1][3]. This option is particularly useful for long-term business or residential purposes.
United States
Leasing in the U.S. is also an option but is typically chosen based on personal preference rather than legal necessity. There are no specific restrictions on foreigners leasing property in the U.S.
Special Considerations for Retirees
Philippines
The Philippines offers a Special Resident Retiree’s Visa (SRRV) program, which provides certain benefits to foreign retirees. SRRV holders can lease property long-term and even purchase condominium units[5]. This program makes the Philippines an attractive destination for foreign retirees.
United States
The U.S. doesn’t have a specific visa program for retirees comparable to the SRRV. However, various visa options (such as the EB-5 investor visa) can provide pathways to residency and property ownership for retirees.
Property Taxes and Fees
Philippines
When purchasing property in the Philippines, buyers should be prepared for various taxes and fees, including:
- Documentary Stamp Tax: 1.5% of the property’s selling price
- Transfer Tax: 0.5% to 0.75% of the selling price
- Registration Fee: Typically around 0.25% of the selling price
- Annual Real Estate Tax: Based on the property’s assessed value[7]
United States
In the U.S., property taxes vary significantly by state and locality. Additionally, foreign buyers may be subject to FIRPTA (Foreign Investment in Real Property Tax Act) withholding when selling property.
Financing Options
Philippines
Financing options for foreigners in the Philippines are limited. While some Philippine banks offer mortgage loans to foreigners, especially those with long-term visas or Filipino spouses, cash purchases are more common[7]. Some developers also offer in-house financing options.
United States
Foreign buyers in the U.S. generally have access to a wider range of financing options, including conventional mortgages from U.S. banks, although they may face stricter requirements or higher down payments.
Legal Protections and Enforcement
Philippines
The Philippines has laws protecting property rights, but enforcement can sometimes be challenging. The Anti-Dummy Law (Commonwealth Act No. 108) is designed to prevent circumvention of restrictions on foreign ownership[4]. Ex-pats should be cautious of schemes that claim to bypass ownership restrictions, as these are often illegal and unenforceable.
United States
The U.S. generally has strong legal protections for property rights and a well-established system for enforcing these rights. However, foreign buyers should still be aware of local laws and regulations that may affect their property ownership.
Conclusion
While both the Philippines and the United States offer opportunities for real estate investment, the legal frameworks and restrictions differ significantly. The Philippines has more restrictions on foreign ownership, particularly regarding land, but offers alternatives like condominium ownership and long-term leases. The U.S. generally has fewer restrictions but may have more complex tax implications for foreign investors.
Ex-pats considering property investment in either country should thoroughly research local laws, consult with legal professionals, and consider their long-term goals before making a decision. Understanding these key differences will help ensure a smoother and more successful real estate investment experience, whether in the tropical paradise of the Philippines or the diverse landscapes of the United States.
Sources
[1] How to buy and own real estate in the Philippines as a US citizen https://bambooroutes.com/blogs/news/philippines-us-citizen-property-ownership
[2] You Lease or Own a Condo, THAT’S it! : r/Philippines_Expats – Reddit https://www.reddit.com/r/Philippines_Expats/comments/1bf8ju2/you_lease_or_own_a_condo_thats_it/
[3] Foreigner Property Ownership Philippines — Respicio & Co. https://www.lawyer-philippines.com/articles/foreigner-property-ownership-philippines
[4] Foreign Ownership of Land in the Philippines https://www.dayananconsulting.com/foreign-ownership-land-philippines/
[5] 9 Best Property Ownership Laws for Expatriates in Philippines https://www.expatbuddy.com/9-best-property-ownership-laws-for-expatriates-in-philippines/
[6] How Can a Foreigner own a House or a Building in the Philippines? https://ndvlaw.com/how-can-a-foreigner-own-a-house-or-a-building-in-the-philippines/
[7] Buying Property in the Philippines as a Foreigner https://www.internationalsurfproperties.com/2024/08/buying_property_in_the_philippines_as_a_foreigner/
