Philippines Tax Authority

World Bank Philippines page

The Philippines rental market provides investors with good average yields, with the small to medium sized units attracting the highest yields. Consideration should be also given to the cost of buying property and the tax rate placed on rental income in the Philippines. Below are details related to the Philippines rental market along with the services provided by Healy Consultants:

According to the Global Property Guide, rental yields in the Philippines rental market (based on resale apartments and houses) are on the strongest in Asia at close to 11% for medium sized units. An inverse relationship exists for the costs of apartments, where the Philippines is one of the cheapest markets in Asia, on a per square metre basis.

There are differences in the upper and lower ends of the Philippines rental processes. Investors in the luxury property sector generally receive the rent for the entire period of the contract at the start of the tenancy agreement, usually one year. The luxury segment is also characterized by formal contracts whereby the landlord and tenant are free to negotiate the terms.

The Rental Reform Act of 2002 was enacted to regulate rental costs for residential units. This legislation set a limit to the maximum rent for units in the city and in rural areas, and a maximum allowable annual increase of 10%. Although the legislation expired at the end of 2004, it is still followed to an extent, especially in the lower end of the Philippines rental market.

Investors are advised to use the services of a local lawyer to avoid any contractual issues related to the Philippines rental market. Healy Consultants will appoint and supervise a local lawyer on behalf of clients to help protect their assets and maintain peace of mind.

Healy Consultants assists clients to manage the process of finding tenants for their residential or commercial property. Our firm will project manage the entire process including i) appointing a reliable agent, ii) determining appropriate rental for the property, iii) assisting with interviews of potential tenants and negotiation of contracts iv) organizing banks for collection of rent v) efficient problem solving, if the need arises.

Apart from the cost of buying the property in the Philippines, taxes in the Philippines are a significant expense for investors. For non-residents, income tax, including income from rental payments is taxed at 25%. Healy Consultants provides comprehensive tax and accounting services to investors to ensure all tax obligations are met most efficiently.

On the commercial side of the Philippines rental market, anticipation for the completion of new office stock and dampened demand due to the economic environment has put downward pressure on the rents. According to the October 2008 Market Overview from Colliers International Philippines, the premium office segment experienced a reduction of 7.2% during the third quarter of 2008 and is expected to decline by 10% over the full year. Apart from the economic environment, tenants have more options outside of the traditional locations within Makati CBD area.

Healy Consultants provides comprehensive property management services for investors who purchase property in the Philippines. Having our firm project manage activities such as organizing property maintenance and refurbishments, property security, property valuations, arranging appropriate property insurance and ad hoc problem solving requirements, can be an efficient way for clients to save time and money.

For more information on the Philippines rental market, call our Singapore office at (+65) 67350120 or contact us at email@healyconsultants.com

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