​Rental Yields
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Renting out a Condominium unit in The Philippines represents a very good investment mainly because of the Rental Yield. If this yield is compared to other capital cities around the world, the Rental Yield in the Philippines is significantly higher and range from 5% to 10%, sometimes even more depending on the quality and location of the investment.
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Below is a survey that show the Rental Yield per annum of condominium units in general.
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Area Purchase price Monthly Rent Yield/P.A
30sqm $ 73,410 $ 539 8.82%
50sqm $ 116,150 $ 810 8.36%
70sqm $ 159,880 $ 1,308 9.81%
120sqm $ 288,840 $ 1,836 7.63%
250sqm $ 500,000 $ 3,820 9.17%
Districts researched:
Eastwood City , Makati (Commercial Business District), Ortigas (Commercial Business District), Rockwell, Global City-The Fort
Source: Global Property Guide Definitions
Company Ownership
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Like with most countries if inheritance tax is a concern then an investor looking to build a significant portfolio of properties may want to consider owning the property in a corporate structure. This would be more sensible if the property is to be held for the long term with a view of using the property to generate a retirement income and then eventually pass it on to beneficiaries without the need for inheritance tax.
General Information​
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The Philippines is a great emerging market for an International Property Investor:
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- value for money when compared with other capital cities around the world
- good build quality with experienced developers and a proven track record
- excellent rental yields compared to property the price which offers the investor a very good return on their capital
- Manila is a vibrant city with great growth, and while the government continues to spend money on improving infrastructure and looks to make the Philippines an appealing tourist and retirement destination, there is tremendous opportunity for investors.
The Philippines is also situated in one of the most dynamic areas in the world where the economies of its neighbours like China are thriving. As a result people from China and South Korea view the Philippines as a country where property can be purchased at far better rates than their own respective countries, however the Philippines has a similar climate and better standard of living.
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Starwealth Consultancy and Services are fully committed to the Philippines as a market. SCS is convinced that this economy and environment offers tremendous potential for real growth. Key criteria when selecting suitable property are:
- location
- price per square meter
- rental yields
- knowledge of the local area
- future infrastructural developments
Other Taxes​​
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Value Added Tax (VAT) $540 $1,728 $3,456
Annual Taxes Due $923 $5,232 $11,568
Tax Due as % of Gross Income 5.13% 7.27% 8.03%
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[figures and numbers are for illustration purposes only. Contact Starwealth Consultancy & Services for inquiries.]
Income Tax Rates​
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Up to PHP10,000 5% 11 11 11
PHP10,000 PHP30,000 10% 43 43 43
PHP30,000 PHP70,000 15% 128 128 128
PHP70,000 PHP140,000 20% 201 302 302
PHP140,000 PHP250,000 25% - 595 595
PHP250,000 PHP500,000 30% - 1,621 1,621
Over PHP500,000 32% - 804 5,412
_______ _______ _______
Annual Income Tax Due $383 $3,504 $8,112
Taxes​
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Not only is the cost of living in The Philippines very affordable, but the taxes are often much lower than those in other developing or even well established countries.
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For example when a foreign national decides to purchase a condominium unit for the purpose of rental, the yearly taxes involved are between 5% to 8% of the Annual Rental Income. This tax range already includes rental income taxes and value added taxes. Please refer below.
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Non-resident
Monthly rental income 1,500 6,000 12,000
Annual Rental Income 18,000 72,000 144,000
Less: Business Expenses (14,400) (57,600) (115,200)
Less: Personal Deduction (1,080) (1,080) (1,080)
_______ _______ _______
= Taxable Income $2,520 $13,320 $27,720
Inheritance Tax​
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Nonresident foreigners pay estate tax on only property located in the Philippines. The taxable inheritance sum is arrived at after deducting all expenses, losses, debts, and any taxes related to the property (all proportionate to the ratio of the Philippine gross estate to his total estate) as well as the surviving spouses net share. Estate tax is levied at progressive rates.
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TAX BASE, PHP (US$) Citizens and Resident Foreigners
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Up to 200,000 ($4,621) TAX RATE NIL
200,000 - 500,000 ($11,551) 05% on band over $4,621
500,000 - 2 million ($46,205) 08% on band over $11,551
2 million - 5 million ($115,513) 11% on band over $46,205
5 million - P10 million ($231,027) 15% on band over $115,513
Over 10 million ($231,027) 20% on band over $231,027
​​Summary
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Inheritance tax is always something that needs to be thought about by foreigners living in the Philippines and for International investors purchasing real estate or shares. Like most countries the Philippines places an inheritance tax charge on an estate when an individual dies who owns assets in the Philippines.
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The law is however relatively easy and this makes planning for inheritance tax more straightforward. The rates of tax are mentioned above and are not excessive compared with other jurisdictions. There are also generous allowances which can be deducted before any inheritance tax is charged and loans or mortgages can also be offset against assets.
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The Philippines also recognises Wills of other countries. This means that for most foreigners who invest in the Philippines if they have a Will in their country of domicile this ensures that their assets in the Philippines are passed on in accordance with their wishes. Clearly if no Will is made in the country where the individual was born or in the Philippines then this could cause problems for beneficiaries and severely delay any proceeds in the deceaseds estate.