Dear Attorney,

I hope this letter finds you well. I am reaching out to seek legal guidance regarding a matter involving a possible deed of sale in the Philippines. As a non-Filipino citizen, I am curious to know if I am allowed to execute a deed of sale in the country, whether as the seller or buyer of a property or any other form of asset. I am particularly interested in the legal requirements, restrictions, and implications under Philippine law.

Your expertise in this area would be greatly appreciated. Please provide me with an in-depth understanding of how this process works, and whether any special considerations or permits are required to complete such a transaction.

Thank you in advance for your assistance.

Sincerely,
A Foreign National Seeking Legal Guidance

Legal Overview on Non-Filipino Citizens Executing a Deed of Sale in the Philippines

In the Philippines, the execution of a deed of sale, whether for real or personal property, is governed by a combination of civil law principles, statutory provisions, and constitutional restrictions. Foreign nationals are permitted to enter into contracts under certain conditions, but specific rules apply when it comes to property transactions. Below is a comprehensive discussion of the legal framework governing the capacity of a non-Filipino citizen to execute a deed of sale in the Philippines.

I. General Legal Framework for Deeds of Sale

A deed of sale is a legal document that formalizes the transfer of ownership of a property or asset from the seller to the buyer. It requires the following essential elements for validity:

Consent of the Parties – Both the seller and buyer must agree to the terms of the sale.
Object of the Contract – The property or asset being sold must be identifiable and legally transferrable.
Cause or Consideration – The price or value of the sale must be clearly stated.

While these principles apply equally to Filipino and foreign nationals, specific laws and constitutional restrictions impose limitations on certain transactions involving foreign nationals.

II. Can Foreign Nationals Execute a Deed of Sale as Buyers?

Under Section 7, Article XII of the 1987 Philippine Constitution, non-Filipino citizens are generally prohibited from owning land in the Philippines. This provision reflects the state’s policy of reserving land ownership for Filipinos and corporations that are at least 60% Filipino-owned. However, exceptions and nuances exist:

Ownership of Condominium Units
- Non-Filipinos are allowed to purchase condominium units, provided that the foreign ownership in the condominium project does not exceed 40% of the total ownership. This is governed by the Condominium Act (Republic Act No. 4726).
Ownership Through Marriage to a Filipino Citizen
- A foreign national married to a Filipino citizen may acquire land in the name of the Filipino spouse. The property must remain under the Filipino spouse's ownership, and the foreign spouse cannot have exclusive ownership.
Inheritance by Foreign Nationals
- Foreigners may acquire land through inheritance if the property is willed to them by a Filipino relative.
Acquisition of Land by Former Filipinos
- Under Batas Pambansa Blg. 185 and Republic Act No. 8179, natural-born Filipinos who have lost their Philippine citizenship may purchase land, subject to specific size limitations:
  - Up to 5,000 square meters for urban land.
  - Up to 3 hectares for rural land.
Ownership Through Judicial or Administrative Processes
- Foreigners may own land under exceptional circumstances, such as land acquisition through judicial foreclosure or settlement of debts, provided the transaction complies with existing laws.

III. Can Foreign Nationals Execute a Deed of Sale as Sellers?

Foreign nationals who lawfully own property in the Philippines—whether through any of the exceptions mentioned above or in the form of personal property—are permitted to sell such property. In this case, the execution of the deed of sale is fully valid, provided that:

The property being sold was acquired legally.
The deed complies with the requirements under the Civil Code of the Philippines.

When selling real property, foreign nationals must ensure that the transaction adheres to taxation laws, particularly the imposition of capital gains tax and other documentary stamp taxes under the National Internal Revenue Code (NIRC).

IV. Requirements and Procedure for Executing a Deed of Sale

For a deed of sale to be valid and enforceable, the following steps must be taken:

Preparation of the Deed
- The deed of sale must include all essential details, such as the identities of the buyer and seller, description of the property, purchase price, and terms of payment.
Notarization
- Under Philippine law, the deed of sale must be notarized to bind third parties and be admissible as evidence in court. Notarization transforms the document into a public instrument, which is required for real estate transactions.
Transfer of Title (For Real Property)
- After executing the deed of sale, the buyer must process the transfer of ownership with the Register of Deeds. This involves:
  - Payment of transfer taxes and registration fees.
  - Submission of the deed of sale and other required documents.

V. Legal Considerations and Restrictions for Non-Filipino Buyers

Leasehold Rights for Foreign Nationals
- While foreigners cannot own land, they are permitted to lease land for a maximum of 50 years, renewable for another 25 years, under the Investor’s Lease Act (Republic Act No. 7652).
Anti-Dummy Law (Commonwealth Act No. 108)
- Foreign nationals must not use Filipino citizens or corporations as dummies to circumvent restrictions on land ownership. Violations can lead to criminal prosecution and forfeiture of the property.
Tax Implications
- Both the buyer and seller must comply with applicable tax obligations. Buyers pay documentary stamp tax and transfer tax, while sellers pay capital gains tax on real estate sales.

VI. Can Foreigners Execute a Deed of Sale for Personal Property?

Foreigners face no legal restrictions in buying or selling personal property (e.g., vehicles, equipment, goods) in the Philippines. Such transactions are governed by the general provisions of the Civil Code and other relevant laws.

VII. Practical Tips for Non-Filipinos Executing a Deed of Sale

Consult a Lawyer
- Always seek legal advice to ensure compliance with Philippine laws and to avoid costly mistakes.
Conduct Due Diligence
- Verify the ownership and status of the property or asset being sold. For real estate, check the title with the Register of Deeds for any encumbrances.
Understand Tax Responsibilities
- Be aware of the tax implications and ensure timely payment of applicable taxes to avoid penalties.
Secure the Necessary Permits
- For real property transactions, ensure compliance with government regulations, particularly if the transaction involves land owned by a Filipino spouse or inherited property.

Conclusion

While non-Filipino citizens can execute deeds of sale in the Philippines under certain conditions, the process is governed by strict constitutional and statutory rules, especially concerning land ownership. Foreign nationals must carefully assess their eligibility to enter into such transactions and comply with legal requirements to ensure the validity of the deed of sale. Consulting a qualified attorney is indispensable for navigating the complexities of Philippine law.