Updated: August 11, 2022
Not everyone has the capacity to buy land in the Philippines. Furthermore, not everyone is familiar with the process that goes with land acquisition. If you’re interested in buying land, here’s an article that will walk you through the steps that will help ensure a successful undertaking.
The Essential Steps to Buying Land in the Philippines
1. Ownership verification
Ever heard of stories when multiple people claim ownership of a single land? This is one situation that you’d want to avoid. Before buying land, verify who the real owner of a property is. Once verified, make it a point to transact only with the rightful owner or a person authorized to do transactions on behalf of the owner.
To verify, ask for a photocopy of the title. You can then check the “Certified True Copy” of the property’s title from the Register of Deeds. It should show the owner’s name and other pertinent information.
2. Document check
The land title bears important information. It may also reveal possible issues. Make sure that the title description will match the actual land being sold. The help of a surveyor may be needed to verify technical descriptions.
While a property title is a vital piece of document, there are other documents you need to pay attention to:
- Right of way. Another aspect that you shouldn’t overlook is the right of way. Some owners even have to pay for the property’s right of way especially if a street or road bounds the land they own.
- Tax declaration. Ask for a copy of the latest tax declaration. The receipts and documents that it will provide will confirm the payment of taxes. Take note that unpaid taxes will lead to penalties.
- Special Power of Attorney (SPA). In cases when the actual property owner isn’t the one dealing with the buyer, check if they have a Special Power of Attorney (SPA) from the owner. Verify if they are the rightful seller and ensure the validity of the authorized signatures.
3. Deed of Sale processing
Once you have validated documents and are already convinced that you found the right property for you, the actual sale follows. Here, you have to secure a notarized and signed deed of sale. If it’s not yet finalized, this document who between the buyer or seller will shoulder the gains and documentary stamp tax so you have to check the sections it contains.
4. BIR payment
Upon signing the Deed of Sale, BIR fees must be settled within 30 days. During this stage, some documents must be submitted such as the Deed of Absolute Sale (Original and photocopy), transfer Certificate of Title (Original and photocopy), Tax Declaration for Land and Improvement (as needed), buyer and seller’s Tax ID numbers.
5. Transfer taxes assessment and documentation
Transfer taxes must also be assessed and documented. This will include the Documentary Stamp Tax and your Capital Gains Tax to be calculated by the BIR representative. You will also be required to provide signed copies of your BIR Form 1706 and BIR Form 2000.
6. Processing of Certificate Authorizing Registration
The Certificate Authorizing Registration is another document you’ll need. To secure this, CGT and DST documents must be filed at the BIR. The claim slip that will be issued to you will be used for the following:
- Certificate Authorizing Registration (CAR)
- BIR-stamped Absolute Deed of Sale (original copy)
- Owner’s copy of Transfer of Certificate Title
- Tax Clearance (original copy)
- Official receipts of the transfer fee, tax clearance certificate, DST, CGT (original copy)
- Latest Tax Declaration for land and improvement (original copy)
7. Acquisition of new Tax Declaration copy
You have to get a copy of the new Tax Declaration document from the Municipal or Provincial’s Assessor’s office. Releasing will usually take 5 days after the following documents are presented.
- Deed of Absolute Sale
- Certificate Authorizing Registration
- Transfer Certificate Title
- Transfer Tax Receipt
8. Issuance of new land title
Cancellation of the old land title will be done by the Registry of Deeds after settling all payments and signing of documents. The issuance of the new title under the name of the new owner will be provided once the land title is officially transferred. You can get a copy of the updated title from the City Assessor’s office.
Guide to Processing Fees
- The transfer tax is paid by the land buyer and amounts to 0.5% of the actual sale price.
- The Capital Gains is equivalent to 6% of the actual sale price.
- The Documentary Stamp is computed as 1.5% of the actual sale price.
- The registration fee for the new land title amounts to 0.25% of the actual sale price.
NOTE: Land bought from developers or corporations has different percentages.
Buying Land in the Philippines: A Profitable Venture
Buying land in the Philippines opens opportunities to use your hard-earned money in a profitable undertaking. The property you’ll acquire is a tangible asset that may be used as a continuous source of passive income. Land value also increases over time so there is a huge chance that the investment you’ll make now will increase its value in the long run.
Listed below are some of the undertakings that you can venture into when you buy land in the Philippines:
Convert as a passive source of income.
The land you’ll buy can be used even without spending money on its development. Use it as a parking space or rent out lots to tenants who may use it as a storage or warehouse.
Use as an income-generating property.
You can invest to make your land useful for those in search of residential or commercial properties for rent. The money that you’ll put into it could generate continuous profit in the future.
Land value increases over time. You can keep it and wait a few years so you can resell it at a higher price even without spending on its development. The option to resell it within a short period is also a good way to generate a quick profit.
Try land partnership.
With the help of real estate developers, you can enter joint ventures so that you can make the most of the piece of land you own. Through a land partnership, you can earn money from a property without the need to sell it.
Vast opportunities come with buying land in the Philippines. Find the right property to buy or better yet, work with a trusted real estate development company that can present you with a wide range of options and help you find the right property that can earn you profitable gains in the long run.
Disclosure: This article is written in collaboration with CitiGlobal Realty and Development, Inc.
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