Q. Dear Atty.Wong, I need your help. I have always read your column with interest and now I have some issues which I hope you can answer.
I am a natural-born Filipino who came to Canada in 1970, now a Canadian Citizen, have dual citizenships (Filipino/Canadian), married to natural-born Canadian citizen, have two adult children, born in Canada.
A while back, I inherited my parent’s house and lot in Cebu City, Philippines, size of lot is 191.5 sq meters, house is of no value, is uninsurable, title of land is registered in my name. I am the only child.
Questions:
1) Can I transfer the title of the property to my children NOW?
Can they own properties there since they are foreigners? Are there certain
restrictions? What are the tax implications if any, like capital gains and how
much? How do I go about doing this?
2) Another option – should I wait until my death in which case, they will inherit
the property (willed to them only and not to spouse) and only inheritance and
and estate tax is payable? How much is the inheritance tax? At my death, will
my children have to go to the Philippines and have the transfer of title done?
Will there be probate, probate fees and how much? Thank you. BL
Hi BL, hereunder are the answers to your queries :
Ans:
1) Can I transfer the title of the property to my children NOW?
Can they own properties there since they are foreigners? Are there certain restrictions? What are the tax implications if any, like capital gains and how much? How do I go about doing this?
Ans: It depends. If at the time of the birth of your children in Canada, you were still Filipino citizen, then your children is deemed a Filipino citizen otherwise they are not. Thus, your children are Filipino citizen they are allowed to own real estate properties in the Philippines.
If your children are not as Filipino citizen at the time of birth under Philippine law ,then as foreigners , they can only owned real estate by means of hereditary succession, meaning the real estate property is transferred to them only by reason of the death of the parents and without leaving a WILL. Transfer of real property to a foreigner by WILL OR TESTAMENTARY succession is not allowed.
On the other hand, if your children are Filipino citizens at the time of their birth, there is no restriction as to the area of real estate that they can own.
The restriction of ownership of real property is applicable only to a former natural born Filipino citizen who has acquired foreign citizenship. In your case, since you have a dual citizenship (Filipino) the said limitation/restriction on landownership in terms of area does not apply to you anymore.
As regards to former natural-born Filipino citizens who have acquired other Citizenship, the privilege of owning real estate properties in the Philippines is subject to the certain restrictions pursuant to Batas Pambansa Blg. 185(for residential purposes only) and other laws such as under RA 7042 as amended by RA 8179, to wit:
A maximum of 5,000 sq. meters for urban land and maximum of three (3) hectares for rural land. Either of the spouses may avail of the privilege in case both spouses wish to acquire lands for this purpose, the total area acquired should not exceed the maximum allowed .
In case he/she already owns urban or rural lands for residential purposes, he/she may acquire additional urban or rural lands, which when added to those he/she presently owns, shall not exceed the authorized maximum area .
A person may acquire not more than two (2) lots which should be situated in different municipalities or cities anywhere in the Philippines provided that the total area of these lots do not exceed 5,000 sq. meters for urban land or three (3) hectares for rural land for business purposes.
An individual who has already acquired urban land shall be disqualified from acquiring rural land and vice versa.
Under Section 4 of Rule XII of the Implementing Rules and Regulations of RA 7042 as amended by RA 8179, a transferee who has already acquired urban land shall be disqualified from acquiring rural land and vice versa. However, if the transferee has disposed of his/her urban land, he/she may still acquire rural land vice versa, provided that this will be used for business. A transferee of residential land acquired under Batas Pambansa Blg. 185(for residential purposes only) may still avail of the privilege granted under this law.
If you sell or transfer your real estate property you have to pay capital gains tax of 6% of the Selling Price/Market Price/or Zonal Valuation of the property whichever is higher.
The payment shall be made to the Bureau of Internal Revenue(BIR), in addition to Documentary Stamp Tax of 1.5% of the gross selling price. The buyer or transferee of the real property will also pay the corresponding registration and transfer fees to office of the Register of Deeds which is in the range of 1 to 1.5% depending of the location of the property and its gross selling price.
2) Another option – should I wait until my death in which case, they will inherit the property (willed to them only and not to spouse) and only inheritance and estate tax is payable? How much is the inheritance tax? At my death, will my children have to go to the Philippines and have the transfer of title done? Will there be probate, probate fees and how much?
Ans : If your estate/real property is transferred by reason of death, your estate will be liable to pay the so called Estate tax( or used to be called Inheritance tax) . It is payable to the Bureau of Internal Revenue(BIR) .
The Estate tax is based on the net estate after deducting the allowable deductions from the gross estate. The amount would depend on the value of the net estate based on the table set forth by the tax code. It is suggested you confer with tax practitioner(s) in the Philippines.
In case of death, where there is no WILL there will be no probate. Probate will only ensued of you have a will. But as mentioned earlier, testamentary succession of transferring real property to an alien in the Philippines is not allowed. Only intestate succession(transfer of property without a will ) is allowed to foreigners by way of inheritance.
Looking forward you’ll the above in order and thank you for writing .