Disclaimer: The following article is provided for general informational purposes only and does not constitute legal advice. Laws and regulations may change, and individual circumstances vary. For specific legal concerns or the most current information, consult a qualified attorney or appropriate government agency.

1. Introduction

In the Philippines, legal structures and regulations surrounding land acquisition, corporate formation (both domestic and international), and non-profit registration can be complex. This article provides an overview of:

The legal framework for purchasing land in the Philippines.
The general process of forming a U.S. Limited Liability Company (LLC) when you are based in or connected to the Philippines.
The key steps and regulatory requirements in setting up a Non-Governmental Organization (NGO) (or non-profit corporation) in the Philippines.

2. Purchasing Land in the Philippines

2.1 Constitutional Restrictions on Foreign Ownership

The 1987 Philippine Constitution places strict limits on land ownership by non-Filipinos:

Foreign nationals generally cannot own land in the Philippines.
100% Filipino-owned entities, or Filipino citizens, can own land.
Corporations or partnerships with foreign equity can own land only if at least 60% of the shares are Filipino-owned.
Exceptions include hereditary succession (by operation of law), acquisition through a Filipino spouse (though the title is generally in the Filipino spouse’s name), and certain special laws that allow foreigners to own condominium units (subject to a 40% foreign equity cap in the condominium project).

2.2 Alternative Options for Foreigners

Since direct ownership is restricted, foreigners looking to use real property in the Philippines often consider these legal alternatives:

Long-Term Lease
- Foreign nationals can lease private lands for up to 50 years, renewable once for up to an additional 25 years (under the Investors’ Lease Act).
Condominium Units
- Foreigners may own condominium units provided that foreign ownership in the entire condominium project does not exceed 40%.
Corporate Ownership
- A corporation with up to 40% foreign equity and at least 60% Filipino ownership may hold title to private land.
- This structure must comply with the Philippine Corporation Code and foreign investment laws.
Marital Arrangement
- If married to a Filipino citizen, the land can be registered in the name of the Filipino spouse. The foreign spouse cannot be listed as an owner on the title. However, a foreign spouse can be a co-borrower in financing arrangements, subject to lender policies.

2.3 Additional Requirements and Procedures

Transfer of Certificate of Title: Upon acquisition, you must register with the Register of Deeds, pay documentary stamp tax, transfer tax, and registration fees.
Tax Obligations: Potential capital gains tax, withholding tax, documentary stamp tax, and local transfer taxes typically apply.
Due Diligence: Verify that the property has a clean title, free from liens and encumbrances.
Legal Assistance: Engagement of a Philippine-licensed attorney is strongly advised to navigate property laws and ensure compliance.

3. U.S. LLC Formation for Philippine-Based Individuals or Businesses

3.1 Overview of a U.S. LLC

A Limited Liability Company (LLC) is a popular business entity in the United States because it offers pass-through taxation (by default) and limited liability protection to its owners (called members). For Philippine-based entrepreneurs or foreign nationals, forming a U.S. LLC can open doors to the U.S. market and simplify global operations.

3.2 State-Level Incorporation

In the U.S., business entities are formed at the state level, not federal. The common choices for foreign entrepreneurs include:

Delaware: Known for its flexible corporate statutes and well-established business law precedents.
Wyoming: Often praised for low fees and strong privacy features.
Nevada: Popular for relatively favorable taxation and privacy laws.

3.3 Formation Steps

While the exact steps vary by state, the general process is:

Choose a State of Registration
- Decide based on business needs, tax implications, and privacy considerations.
Select a Name
- Must comply with state naming rules (e.g., including “LLC” or “Limited Liability Company”).
Appoint a Registered Agent
- A registered agent with a physical address in the chosen state is required to receive legal documents.
File Articles of Organization
- Submit the formation document (sometimes called a Certificate of Formation) to the state filing office and pay the required filing fee.
Draft an Operating Agreement
- Though not always legally required, it is highly recommended to outline membership, management, and financial rules.
Obtain an Employer Identification Number (EIN) from the IRS
- An EIN (Tax ID) is necessary to open a U.S. bank account, file taxes, and hire employees.
Consider Tax and Reporting Obligations
- LLCs default to pass-through taxation, but you can elect corporate taxation if needed.
- Check if there are annual fees and reporting requirements in your chosen state.

3.4 Philippine Considerations

Foreign Ownership: Generally, there are no U.S. citizenship or residency requirements for owning or managing an LLC.
Banking and International Transactions: You may need to coordinate with Philippine banks or U.S.-based financial institutions for cross-border transactions.
Philippine Tax Implications: Revenue earned via the U.S. LLC might also be subject to Philippine tax, depending on the residency status of the owner(s). Consult a tax professional familiar with both Philippine and U.S. tax laws.
Double Taxation Avoidance: The Philippines and the U.S. have a tax treaty that may help reduce or eliminate double taxation. Understanding treaty benefits is critical if you will remit profits to the Philippines.

4. Setting Up an NGO (Non-Governmental Organization) in the Philippines

4.1 Legal Structures for NGOs

In the Philippines, NGOs typically register as:

Non-Stock, Non-Profit Corporations under the Revised Corporation Code of the Philippines.
Alternatively, organizations sometimes register as Foundations, which also fall under non-stock corporation rules but often have specific capitalization or asset requirements.

4.2 Registration Steps with the Securities and Exchange Commission (SEC)

Name Verification
- Propose at least three potential names. Perform a name search to ensure availability.
Drafting Articles of Incorporation & By-Laws
- Must comply with the Revised Corporation Code and indicate the non-profit nature of the organization.
- Include the organization’s purpose, principal office, term of existence, trustees, membership rules, and distribution of assets upon dissolution (assets should ideally go to another non-profit).
Securing Endorsements (If Applicable)
- Depending on the NGO’s purpose, the SEC may require endorsements from relevant government agencies (e.g., Department of Social Welfare and Development for social services, Department of Health for health-related services, etc.).
Filing with the SEC
- Submit the verified name, drafted Articles of Incorporation and By-Laws, and other supporting documents (e.g., Treasurer’s Affidavit, Proof of Minimum Contribution).
- Pay the required filing and registration fees.

4.3 Post-Registration Compliance

Obtain a Bureau of Internal Revenue (BIR) Tax Identification Number (TIN)
- Even non-stock, non-profit entities must register with the BIR.
- You may apply for tax-exempt status if the organization meets specific requirements under Philippine law.
Local Government Unit (LGU) Registration
- Register with the city or municipality where the principal office is located to obtain a Mayor’s Permit (if needed). NGOs sometimes have special arrangements, but local ordinances still require them to register their presence.
Other Permits and Licenses
- NGOs engaged in certain activities (e.g., fundraising or social services) may need additional permits from agencies like the Department of Social Welfare and Development (DSWD).
Annual Reporting
- Non-stock, non-profit corporations must submit a General Information Sheet (GIS) and Audited Financial Statements to the SEC every year.

4.4 Additional Considerations

Foreign Funding and Grants: If you expect foreign grants, ensure compliance with the Anti-Money Laundering Act (AMLA) and other regulations on financial transparency.
Tax-Exempt Status: Being registered as a non-stock, non-profit corporation does not automatically grant tax exemptions. The organization must apply for and secure a Certificate of Tax Exemption with the BIR, provided it meets the conditions laid out in the Tax Code and relevant revenue regulations.
Philippine Council for NGO Certification (PCNC): Accreditation by PCNC may help the NGO secure tax-deductible donations and improved credibility.

5. Practical Tips and Best Practices

Engage Professional Help Early
- Retain a Philippine-licensed attorney for land transactions.
- For U.S. LLC formation, consult with a U.S.-licensed attorney or a formation service with cross-border experience.
- For NGO setup, consider consulting professionals who specialize in non-profit law to streamline regulatory compliance.
Conduct Thorough Due Diligence
- Verify land titles and corporate documents.
- Research state laws in the U.S. if forming an LLC.
- Check relevant Philippine laws and SEC memoranda for the NGO’s operations.
Stay Updated on Regulatory Changes
- Philippine laws and SEC rules can change.
- Tax treaties and international finance regulations may also evolve.
- Periodically review the official websites of relevant agencies such as the Philippine SEC, the BIR, the DSWD, the U.S. IRS, and the Department of State (for U.S. LLC matters).
Plan for Tax Efficiency
- A cross-border business strategy should account for both Philippine and U.S. tax obligations.
- Consider how your NGO’s funding, revenue (if any), and expenditures might be taxed or exempted.
Maintain Good Corporate Governance
- Uphold transparency and accountability, particularly for NGOs that rely on public trust and donations.
- LLC owners should have a clear operating agreement that outlines members’ responsibilities.

6. Conclusion

Navigating land purchase, U.S. LLC formation, and NGO establishment from a Philippine context involves understanding complex legal frameworks and regulatory requirements. While foreign nationals face significant restrictions in owning Philippine land, viable legal structures—leases, condominiums, or Filipino-majority corporations—may offer solutions. Meanwhile, forming a U.S. LLC can be straightforward but requires careful consideration of state-specific rules and cross-border tax implications. Finally, establishing a non-profit or NGO in the Philippines necessitates a thorough understanding of the Revised Corporation Code, SEC guidelines, and relevant endorsements or permits.

Seek professional advice and stay informed of the latest changes in law to ensure compliance and protect your interests, whether you are investing in property, expanding business operations, or undertaking philanthropic endeavors in the Philippines.

References and Resources

1987 Philippine Constitution – Article XII on National Economy and Patrimony.
Revised Corporation Code of the Philippines (Republic Act No. 11232).
SEC Website: https://www.sec.gov.ph
Bureau of Internal Revenue (BIR): https://www.bir.gov.ph
Philippine Council for NGO Certification (PCNC): https://www.pcnc.com.ph
U.S. Internal Revenue Service (IRS): https://www.irs.gov
Delaware Division of Corporations: https://corp.delaware.gov (for Delaware LLC formation)

Disclaimer Reiterated: This article is not intended as legal advice. Always consult qualified legal, tax, or financial professionals to address your specific situation.