Real estate, whether a house and lot, a townhouse, or a condominium, is the best investment for Overseas Filipino Workers (OFW). Not only does it provide a safe haven for your far-away loved ones in the Philippines, but it also provides security for your retirement because real estate always appreciates. Investing the money you worked hard for, purchasing a property in the Philippines entails a lot of things to be prepared for and considered before entering any transactions. The opportunity to purchase an affordable property arises unexpectedly, so it is best to be prepared for it. Furthermore, it is best to plan for the purchase of a property; this article will serve as a guide for OFW on what documents are needed when buying a lot in the Philippines.
The Philippines, as an archipelago country consists of 7,107 islands which is a total of roughly 30 million hectares or 300,000 square kilometers. The distribution of land is slanted. There are an estimated 4.2 million small farms with less than 1.5 hectares and 8,475 large private landholdings with up to 25,000 hectares in the rural sector. The majority of farm holdings are less than 3 hectares in size. There are 10.2 million marginal farmers and farm workers in the United States, with 70% of them being landless (Elauria, 2015).
The number of rural informal settlements is unknown. The State has implemented various land reforms since the 1930s, the most recent being the 1988 Comprehensive Agrarian Reform Law. While large swaths of land have been redistributed, the most contentious private agricultural lands, which are also the most productive and fertile, have remained in the hands of wealthy private landowners (Philippines Statistics Authority) 2015; FAO 1997; Borras and Franco 2007; Quizon and Pagsanghan 2014).
Provided by the data above, opportunity to own your property in the Philippines is rampant. As an OFW it is the best investment to secure your loved ones back at home.
Documents Needed When Buying a Lot in the Philippines
The basic documents needed when purchasing a lot in the Philippines are the same whether it is a residential, commercial, or agricultural lot. Here is a list of documents and information on how to obtain them:
1. The Consularized Special Power of Attorney (SPA)
A Consularized SPA is simply a Special Power of Attorney executed and signed abroad, at the Philippine Embassy of the country where the requesting OFW resides, to authorize an immediate family member (children, spouse, parents, or grandparents) to act as his or her representative in the Philippines in order to obtain or sign documents on his or her behalf. Its special power does not include authorization to sell the OFW’s properties but to only prepare, process, and sign documents.
In processing this document, the OFW must prepare the following:
- Photocopy of the first and last page of the Philippine passport
- Valid Philippine-issued government ID (if passport is not available, though some requires both ID and passport)
- Personal appearance
- Two witnesses (both should be of legal age and available for personal appearance at the Embassy during the execution of the SPA)
- Valid IDs of witnesses
- Notarial fee (amount varies per country)
2. Proof of Income (commonly for the last 3 months)
From the website of PAG-IBIG, these are the list of sources of proof of income for OFWs:
- Employment Contract:
- Employment Contract between employee and employer; or
- POEA Standard Contract
- Certificate of Employment and Compensation
- CEC written on the Employer/Company’s official letterhead; or
- CEC signed by employer (for household staff and similarly situated employees) supported by a photocopy of the employer’s ID or passport
- Income Tax Return filed with Host Country/Government
3. Proof of Billing (here in the Philippines)
Proof of billing should be under the name of the OFW. It may be from electricity, water, or internet provider.
4. TIN (for verification. If you don’t have a TIN # in the Philippines, the property specialist may do this for you)
The OFW’s income from abroad is not taxed due to the reciprocity rule, but the OFW’s business activities in the Philippines should be taxed, so the OFW can still apply for a TIN for tax purposes.
In processing this document, the OFW must prepare the following:
- Birth certificate or any valid identification showing the applicant’s name, address, and birth date; or
- Passport with visa; or
- Employment contract
- For OFWs and seamen earning purely foreign-sourced income: BIR Form 1904 – Application for Registration for One-Time Taxpayer and Person Registering under E.O. 98
5. Certificate of Employment and Compensation (CEC)
This is a formal document that confirms the individual’s employment experience, current position, and salary. Employers of both locally employed Filipinos and overseas Filipino workers can prepare this certificate (in English only as well as signed by authorized personnel such as HR manager) to confirm their employment- usually when the employment contract cannot be retrieved for some reason, or as an addition to it.
6. Post-dated checks (PDCs) for the down payment
Some developers’ requirements may vary. If you don’t already have a checking account, your attorney-in-fact may open one in your name. If you have a local savings account, you can ask your representative for a checking account.
7. Photocopy or scanned copy of your passport and IDs
Lastly, it is important to have a copy of your identification for validation purposes.
Fees to Look Out for When Buying a Lot in the Philippines
In line with this, there are fees to be prepared for during the process of purchasing the property
- Notary Fee – This will be required to validate some documents for the process. It usually costs between 1% and 2% of the property’s value.
- Registration Fee – It is calculated using the Register of Deeds’ Registration Fee Table and is based on the property’s actual price.
- Local Transfer Tax – Depending on your residence, when you’re in the province, you’ll pay.5%, and in Metro Manila, you’ll pay.75%. This is the tax you pay when you transfer ownership of a property from the seller to your name.
- Documentary Stamp Tax (DST) – This, like notary fees, is a type of tax that legitimizes documents and papers in order to prove their credibility. This is an excise tax of 1.5 percent of the selling price.
- Capital Gains Tax – It is exactly what it sounds like – it is the tax paid on the capital invested since this is considered as income it should to be taxed by the government.
- Real Property Tax – This is a monthly expense that you will incur once you have purchased your property. It is also known as the “real estate tax.” The money is used by the government to fund community improvements in the areas where your house or condominium unit is built upon.
- Maintenance Fees and Association Fees – This is a common appropriation of funds for the maintenance of your property. This is common in subdivision, condominums or any residence with a community. The price for this fee varies from the association heads of the community.