Disclaimer: This article is for informational purposes only and does not constitute legal advice. Laws, regulations, and procedures may change over time, and individual circumstances vary. For specific, personalized guidance, it is recommended to consult a qualified attorney in the Philippines.

Real Estate Purchase, LLC Formation, and NGO Establishment in the Philippines

The Philippines presents a dynamic environment for investors, entrepreneurs, and socially driven individuals. Whether you plan to purchase real estate, establish a limited liability company–type structure, or set up a non-profit organization, it is important to understand the legal framework. Below is an overview of each process, relevant laws, and practical considerations.

I. Real Estate Purchase in the Philippines

1. Legal Framework and Key Agencies

Constitutional Limitations
- The 1987 Philippine Constitution provides that only Filipino citizens and Philippine-registered corporations (with at least 60% Filipino ownership) can acquire and own land in the Philippines.
- Foreign individuals and foreign-owned corporations generally cannot own land but may own condominium units (subject to a 40% foreign ownership cap in a condominium corporation) or long-term lease certain properties.
Relevant Laws
- Commonwealth Act No. 141 (The Public Land Act) – Governs lands of the public domain and sets rules on who may acquire these lands.
- Republic Act No. 4726 (The Condominium Act) – Allows foreign nationals to own condominium units provided foreign ownership does not exceed 40% of the total project.
- The Civil Code of the Philippines – Governs contracts, sales, and obligations that are fundamental to real estate transactions.
Key Government Agencies
- Land Registration Authority (LRA) – Responsible for issuing and maintaining land titles.
- Registry of Deeds (RD) – Maintains the registry of property titles at the local level.
- Housing and Land Use Regulatory Board (now the Department of Human Settlements and Urban Development, DHSUD) – Issues licenses to sell, regulates real estate developments, and oversees subdivisions and condominiums.

2. Modes of Acquisition

Direct Purchase by a Qualified Buyer
- Filipino individuals or corporations with at least 60% Filipino ownership can directly purchase and register land.
- Foreign nationals may purchase condominium units if the 40% cap is not exceeded.
Long-Term Lease
- Foreign individuals or corporations often resort to long-term leases of up to 50 years, renewable for another 25 years, under the Investor’s Lease Act (R.A. No. 7652).
Residential Condominium Units
- Foreigners can own full title to a condominium unit, provided the total foreign stake in the condominium project does not exceed 40%.

3. Steps to Purchase Real Estate

Title Verification
- Obtain a certified true copy of the title from the Registry of Deeds to ensure it is free from encumbrances or liens.
Due Diligence
- Confirm authenticity of the title.
- Check tax declarations and ensure real property taxes are up to date.
- Review any restrictions (e.g., subdivision, zoning, or homeowner association rules).
Drafting the Contract
- Usually in the form of a Deed of Sale.
- Must be notarized to be binding and for purposes of registration.
Payment of Taxes
- Capital Gains Tax (6% of the property’s selling price or zonal value, whichever is higher) – Typically shouldered by the seller, though parties may arrange otherwise.
- Documentary Stamp Tax (DST) (1.5% of the selling price or zonal value) – Typically shouldered by the buyer, though negotiable.
- Transfer Tax – Varies by local government unit (LGU). Usually around 0.5% to 0.75% of the selling price or zonal value.
Registration
- Submit notarized Deed of Sale and proof of tax payments to the Registry of Deeds.
- A new Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) will be issued in the buyer’s name.

II. LLC Formation in the Philippines

The term “LLC” (Limited Liability Company) does not exist as a separate juridical structure under Philippine law, which is largely based on the Revised Corporation Code (R.A. No. 11232). However, there are similar structures that offer limited liability to its members or shareholders:

Stock Corporation – The typical vehicle for business formation in the Philippines.
One Person Corporation (OPC) – A new structure under the Revised Corporation Code, allowing single-person ownership with limited liability.
Partnerships – Governed by the Civil Code, but general partnerships do not offer limited liability except for limited partnerships, where some partners can have limited liability.

1. Closest Equivalent to an LLC: Stock Corporation

In practical terms, the most common business vehicle is the stock corporation. A stock corporation under Philippine law provides limited liability to its shareholders (i.e., liability is generally limited to the extent of their capital contributions).

Minimum Capital Requirements
- In most sectors, there is no specific minimum paid-up capital unless you engage in foreign ownership–restricted industries or require special licenses (e.g., for financing, investment houses).
- For foreign equity, the Foreign Investments Act of 1991 (R.A. No. 7042) and subsequent amendments (R.A. No. 11647) govern. If a corporation has more than 40% foreign equity and is engaging in activities not in the Philippine negative list, the typical capital requirement is US$200,000 (which may be reduced in certain circumstances, e.g., if your business involves advanced technology or employs a large number of locals).
Incorporators
- Under the Revised Corporation Code, you need 2 to 15 incorporators for a regular stock corporation.
- These incorporators serve as the first stockholders.
Process for Incorporation
1. Name Verification – Reserve a unique name through the Securities and Exchange Commission (SEC) online platform.
2. Draft and Notarize Documents – Prepare the Articles of Incorporation and Bylaws (though the Revised Corporation Code allows for a more flexible approach to bylaws).
3. Deposit Capital – Deposit paid-up capital in a Philippine bank if required.
4. Submit Application to the SEC – Includes the Articles of Incorporation, Treasurer’s Affidavit, and other supporting documents.
5. Issuance of SEC Certificate of Incorporation – Once approved, the SEC issues the Certificate of Incorporation, signifying the existence of the corporation.
6. Post-Incorporation Registrations – Register with the Bureau of Internal Revenue (BIR), obtain local business permits, and secure other licenses as needed.

2. One Person Corporation (OPC)

Structure – Allows a single stockholder to form a corporation with limited liability.
Requirements – No minimum capital unless required by law or special regulation.
Corporate Officers – The single stockholder is the sole director and president, but an OPC still needs to appoint a treasurer and corporate secretary (the treasurer can be the same person if bonded, but the corporate secretary must be different if the single stockholder is not a resident).
Registration – Same process as a regular corporation but simplified (Articles of Incorporation specifically for an OPC).

3. Foreign Ownership Restrictions

Negative List (FINL) – Certain industries are fully or partially reserved for Filipinos (e.g., mass media, retail trade under certain thresholds, small-scale mining, etc.).
60-40 Rule – If an industry is partially open to foreign investment, the maximum foreign equity is 40%. Exceeding 40% triggers higher capital requirements unless an industry-specific regulation allows 100% foreign ownership.

III. NGO Establishment in the Philippines

Establishing a non-governmental organization (NGO) or non-profit entity in the Philippines is commonly done through a non-stock, non-profit corporation under the Revised Corporation Code.

1. Legal Framework

Revised Corporation Code (R.A. No. 11232) – Governs both stock and non-stock corporations.
Securities and Exchange Commission (SEC) – Oversees the registration of non-stock, non-profit corporations.
Bureau of Internal Revenue (BIR) – Issues tax exemption rulings for qualified non-stock, non-profit corporations.

2. Requirements and Process

Name Reservation
- Verify and reserve the proposed NGO name through the SEC online system.
Articles of Incorporation and Bylaws
- For non-stock corporations, the Articles must indicate that no part of its income shall inure to the benefit of any member, trustee, or officer.
- Must include provisions detailing the organization’s purpose, which should be primarily charitable, religious, educational, scientific, social welfare, or similar objectives.
Incorporators/Directors/Trustees
- A non-stock corporation needs at least five (5) but not more than fifteen (15) incorporators. Each incorporator automatically becomes a member and a trustee.
- The board of trustees governs the NGO.
Submission to the SEC
- Submit the notarized Articles of Incorporation, Bylaws, Treasurer’s Affidavit, and other documents (e.g., an endorsement if required by a relevant government agency, depending on the NGO’s purpose).
Issuance of Certificate of Incorporation
- The SEC will issue the Certificate of Incorporation, signifying legal personality.
Tax-Exempt Status
- To secure tax exemption, apply with the BIR for a Certificate of Tax Exemption.
- Generally, income from activities in line with the organization’s non-profit mission is tax-exempt. However, any profit from unrelated trade or business is taxable.

3. Post-Registration Requirements

BIR Registration – Secure the NGO’s Tax Identification Number (TIN), register official books of accounts, and obtain authority to print official receipts.
LGU Permits – Depending on operational activities, secure the local government unit permits (e.g., mayor’s permit).
Reporting and Compliance –
- Submit general information sheet (GIS) and audited financial statements (AFS) annually to the SEC.
- Maintain proper governance and financial records.

Practical Considerations

Legal Counsel
- Engaging a Philippine-based law firm or legal consultant is advisable. Real estate and corporate regulations can be complex, especially for foreign nationals.
Documentation and Translation
- If your documents are in a foreign language, the SEC or other government agencies typically require official English translations and may require authentication (apostille or consularized).
Restrictions and Special Permits
- Check if your desired business activity or NGO mission requires special endorsements from relevant government agencies (e.g., Department of Social Welfare and Development if your NGO works with marginalized sectors).
Compliance and Ongoing Obligations
- Staying up-to-date with regulatory filings, renewals, and tax requirements is crucial to avoid penalties and maintain good standing.
Foreign Exchange Regulations
- The Philippine central bank, Bangko Sentral ng Pilipinas (BSP), regulates the inflow and outflow of foreign currency. If you will fund your corporation or NGO from abroad, or repatriate funds later, you may need to comply with BSP guidelines.

Conclusion

Navigating real estate purchases, forming a business entity akin to an LLC, or establishing a non-government organization in the Philippines requires a solid understanding of the country’s legal framework. Philippine law restricts foreign ownership of land, mandates the structure of corporations (stock or non-stock), and regulates NGOs under specific guidelines. Proper research, thorough due diligence, and professional legal and accounting advice are indispensable to ensure compliance, protect your interests, and achieve your objectives within the Philippine legal system.

Disclaimer: The information in this article is presented in a summary form. Always consult a qualified attorney or licensed professional in the Philippines to address specific legal concerns.