1) The Core Rule: Land Ownership Is Generally Reserved to Filipinos

Philippine land ownership is constitutionally restricted. As a baseline:

Private land may generally be owned only by:
- Filipino citizens, and
- Corporations/associations at least 60% Filipino-owned (often called “Philippine nationals” for landholding purposes).

A foreign national who cannot qualify under the constitutional exceptions (e.g., certain hereditary successions) cannot directly acquire or hold title to private land. This is why many foreign investors explore domestic corporate structures.

But “buying land through a domestic corporation” is lawful only if the corporation is properly structured and the foreigner’s involvement is within what Philippine law allows.

2) What “Domestic Corporation” Means (and What It Doesn’t)

A domestic corporation is one organized under Philippine law, registered with the SEC. Being “domestic” does not automatically mean it can own land.

For land ownership, the critical test is nationality:

A domestic corporation that is at least 60% owned by Filipinos may generally acquire/hold land, subject to other statutory limits.
A domestic corporation that is more than 40% foreign-owned is treated as foreign for landholding purposes and cannot own private land.

Important practical consequence: If a foreigner wants “control,” pushing ownership beyond 40% foreign is the one thing that kills the land-owning ability.

3) Legitimate Objective vs. Illegal Objective

There are two very different situations:

A. Legitimate: Foreign investor participates in a Philippine corporation that is truly Filipino for landholding

Foreign ownership is capped at 40%.
Filipino ownership is real, paid, and beneficial.
Governance and financing arrangements do not secretly negate Filipino ownership.
Land is acquired by the corporation for legitimate business purposes.

B. Illegitimate: Using Filipinos as dummies to simulate 60% Filipino ownership

If the “Filipino” shares are only on paper (nominee/dummy), or the foreigner is the real beneficial owner of those shares, the arrangement risks violating the Anti-Dummy Law and can lead to voiding of the scheme, criminal exposure, and inability to enforce side agreements.

A major compliance theme is that you can lawfully invest and protect your economics, but you cannot lawfully fake Filipino ownership or use arrangements designed to evade the constitutional restriction.

4) The Basic Legal Pathway: A Landholding Corporation That Is 60/40

4.1 Common capital structure

A typical compliant structure uses:

60% Filipino equity and 40% foreign equity (or less).

Classes of shares can be used (common, preferred, voting/non-voting) but must stay within these guardrails:

In landholding corporations, Filipinos must hold at least 60% of outstanding capital that counts for nationality.
When foreign participation is allowed up to 40%, foreigners typically must be limited to that 40% on both:
- Ownership (economic rights), and
- Control (governance rights), in ways that don’t negate Filipino control where legally required.

4.2 Governance: Board composition and key officers

Even if foreign equity is capped at 40%, compliance issues arise if foreigners are placed in positions that amount to “management” of a partly nationalized activity in violation of nationality rules.

As a practical baseline:

Board seats and officer roles should be designed so that Filipino control remains meaningful.
Foreign directors may be allowed, but board composition must be consistent with nationality restrictions applicable to the corporation’s activities.
For landholding alone, the principal constitutional test is equity nationality; however, Anti-Dummy concerns arise if foreigners effectively control management in a manner inconsistent with a nationalized enterprise.

4.3 Corporate purpose

The corporation’s primary and secondary purposes should be consistent with:

Land acquisition and ownership for business use (e.g., real estate holding, leasing, development, or as site for operations), and
Any regulated activities (real estate development, brokerage, utilities, etc.) which may carry additional licensing or nationality constraints.

Purpose clauses are not just formalities. Banks, registries, auditors, and counterparties will examine whether landholding fits within the corporate purpose.

5) The “Control Problem”: Where Structures Usually Fail

Foreign investors often seek “control” through side agreements. The main legal risk is that a structure can be nominally 60/40 but functionally foreign-controlled, suggesting a dummy arrangement.

Common red-flag mechanisms:

5.1 Secret trust / nominee arrangements

Filipino shareholders holding shares “in trust” for the foreigner.
Deeds of assignment signed in blank.
Side letters compelling Filipinos to transfer shares upon demand. These are high-risk and may be unenforceable and/or criminal.

5.2 Voting control arrangements that erase Filipino discretion

Irrevocable proxies to vote Filipino shares in perpetuity.
Voting agreements that remove independent judgment. Some voting arrangements can be valid in corporate practice, but when used to bypass nationality restrictions, they can be treated as a prohibited circumvention.

5.3 Financing that turns Filipino equity into a sham

Examples:

The foreigner provides all capital; Filipino “owners” pay nothing.
The foreigner lends money to Filipinos specifically to subscribe, but the loan is non-recourse to the Filipino and repayable only from dividends; or the foreigner can seize the shares easily. This can be characterized as beneficial foreign ownership.

5.4 Options and “automatic takeovers”

Call options allowing the foreigner to acquire Filipino shares whenever legally possible may be structured, but if it effectively treats Filipino shares as placeholders until a later takeover, it becomes a circumvention signal—especially if paired with control rights today.

5.5 Negative control / veto rights over core corporate actions

Investors commonly negotiate protective veto rights (reserved matters). In a restricted area like landholding, overbroad vetoes that give the foreigner effective control can undermine Filipino control.

Key compliance principle: Protective rights aimed at preventing abuse can be acceptable; rights that effectively make foreigners the real decision-makers in a nationalized area are risky.

6) What a Foreigner Can Do Instead: Lawful Economic Protection Tools

Foreign investors still need practical protection. Lawful tools exist, but must be used carefully:

6.1 Preferred shares with economic preferences (within the 40% cap)

Foreign investors can hold preferred shares with:

Dividend preference,
Liquidation preference,
Anti-dilution protections,
Redemption features (subject to corporate law constraints and solvency),
Limited voting rights as provided by law and the articles/bylaws.

But “preferred” cannot be used to fake Filipino ownership.

6.2 Shareholders’ agreement with reasonable reserved matters

A shareholders’ agreement can define:

Information rights,
Audit rights,
Budgeting processes,
Reserved matters requiring supermajority consent.

To reduce nationality risk, reserved matters should be:

Narrow,
Investor-protective (not day-to-day management),
Not equivalent to full control.

6.3 Debt financing (secured lending), not disguised equity

A foreigner can lend to a Philippine corporation. Security can be taken over:

Corporate assets (subject to rules),
Shares (with care),
Contracts and receivables.

However:

Foreclosure outcomes matter. If enforcing security would result in the foreigner acquiring land or becoming beneficial owner of Filipino shares beyond allowed limits, the remedy may be restricted or restructured.
A share pledge over Filipino shares can be risky if enforcement would transfer beneficial ownership to a foreigner in a way that breaches nationality rules.

6.4 Land lease instead of purchase

If the foreigner’s true objective is use/possession rather than title:

Long-term leasing by a foreign individual or a foreign-owned company can often achieve business goals with fewer nationality issues, subject to statutory lease term limits and registration requirements.

6.5 Corporate acquisition of land with foreign investor as minority, plus operational contracts

Foreign investors can protect their returns through:

Management service agreements (careful with Anti-Dummy),
Profit-sharing arrangements aligned with lawful structures,
Development agreements,
Build-to-suit leases,
Joint ventures where the land is held by the qualified Philippine entity.

7) The “60/40” Test in Practice: How Nationality Is Evaluated

7.1 Beneficial ownership matters

Regulators and courts can look beyond paper titles. If Filipino shareholders are merely nominees, the arrangement is vulnerable.

7.2 Layering corporations and the “look-through” approach

If the landholding corporation is owned by other corporations, nationality may be analyzed through layers:

If a shareholder-corporation is itself partially foreign-owned, the Filipino ownership contribution may be counted only to the extent of its own Filipino ownership.
The structure must preserve at least 60% Filipino ownership in the landholding entity as ultimately measured.

This is where overly complex holding companies often fail: a top-level “60/40” may not translate to an effective “60/40” at the landholding layer.

7.3 Documentation and disclosures

A compliant structure typically has:

Clear capitalization records,
Proof of payment for subscriptions,
Updated General Information Sheets (GIS) and beneficial ownership disclosures where applicable,
Board and stockholder resolutions aligned with corporate acts,
Clean audit trail to show Filipino owners are real owners.

8) Due Diligence for the Land Itself (Corporate Buyer Perspective)

Even a perfectly structured corporation can get trapped by a defective title. Corporate land acquisition due diligence typically covers:

8.1 Title verification

Obtain and verify the owner’s duplicate certificate of title.
Check for liens, encumbrances, adverse claims, annotations, easements.
Confirm the property’s boundaries and technical description.

8.2 Tax and assessment status

Real property tax payments and delinquencies.
Zonal value/fair market value considerations affecting taxes.

8.3 Land classification and restrictions

Agricultural land issues and agrarian reform coverage.
Ancestral domain/Indigenous Peoples’ rights concerns where applicable.
Reservations, protected areas, or special zones.
Local zoning and land use plans.

8.4 Corporate authority of seller (if seller is a corporation)

Board and stockholder approvals (as required),
Authority of signatories,
Secretary’s certificate.

9) Transaction Mechanics: How the Corporation Buys the Land

A typical corporate acquisition workflow:

Term sheet / letter of intent (if used) with contingencies for due diligence and approvals.
Due diligence (title, tax, zoning, permits, corporate authority, environmental where relevant).
Corporate approvals:
- Board approval to buy,
- Possibly stockholder approval if the purchase is a major transaction depending on corporate thresholds and internal governance.
Signing:
- Deed of Absolute Sale (or conditional sale),
- Payment arrangements,
- Escrow (common to manage title transfer risks).
Tax compliance:
- Documentary stamp tax, capital gains/withholding tax depending on structure, transfer taxes, registration fees.
Registration:
- Submission to Register of Deeds; issuance of new title in the corporation’s name.
Post-closing:
- Update tax declaration, local assessor records, corporate asset registers, insurance.

10) Taxes and Fees: High-Level View (Non-Exhaustive)

Philippine real property transfers often involve:

Income tax regime on sale (often capital gains tax for certain sellers, or creditable withholding/regular income depending on classification),
Documentary stamp tax,
Local transfer tax,
Registration fees and incidental costs.

Because the tax consequences depend heavily on whether the seller is an individual or corporation, whether the property is capital asset or ordinary asset, and deal structuring (asset sale vs share sale), tax planning should be aligned early with the corporate structure.

11) Share Deal vs Asset Deal: A Common Workaround and Its Limits

Foreign investors sometimes try to avoid the “land transfer” by acquiring shares in a landholding company.

11.1 Share acquisition can be legitimate

A foreigner may acquire up to 40% of shares in a landholding domestic corporation (subject to other restrictions), and the land stays titled to the company.

11.2 Share acquisition does not legalize foreign control

If the share deal is used to gain control in a way that effectively makes the company foreign, it triggers the same restrictions and Anti-Dummy risks.

11.3 Due diligence is heavier

A share deal inherits:

All corporate liabilities (tax, labor, contracts, litigation),
Compliance issues with nationality, licenses, permits.

12) Ongoing Compliance: Keeping the Corporation Qualified

Even if the corporation is initially compliant, it can fall out of compliance later.

12.1 Monitoring ownership changes

Transfers of shares,
New share issuances,
Capital increases,
Conversions of instruments,
Mergers.

Any event that drives foreign ownership beyond 40% can create a constitutional problem for landholding.

12.2 Protecting the 60% Filipino requirement

Practical controls:

Right of first refusal for Filipino shareholders (to prevent unintended foreign creep),
Transfer restrictions in bylaws or shareholders’ agreement,
Clear cap table management and regular compliance reviews.

12.3 Beneficial ownership reporting and corporate housekeeping

SEC filings (GIS and other reportorial requirements),
Beneficial ownership disclosures where required,
Keeping minutes, stock and transfer book, subscription records, and proof of payment tidy.

13) Common Structures and When They Make Sense

13.1 Single landholding corporation (simple holdco)

Corporation owns land directly.
Foreign investor holds up to 40%. Best for: single property, long-term holding, straightforward leasing.

13.2 Two-tier structure (holdco + opco)

Holdco (landholding) owns the land.
Opco (operations) leases from holdco. Foreign investors may invest differently across entities, but must still respect nationality restrictions where relevant. Best for: operational businesses needing a clean separation of real estate and operating risks.

13.3 Joint venture project company (development)

JV company acquires land (must be 60% Filipino).
Foreign investor participates within cap.
Development and sales structured via contracts. Best for: real estate projects, industrial parks, mixed-use developments (subject to industry regulation and licensing).

14) High-Risk “Workarounds” to Avoid

These patterns often lead to unenforceable arrangements, criminal risk, or loss of investment protection:

Side agreements declaring the foreigner as “true owner” of land or of Filipino shares.
Undated/blank deeds of assignment for Filipino shares held as collateral in substance.
Irrevocable proxies over Filipino shares designed to hand control permanently to foreigners.
Simulated capitalization where Filipinos contribute nothing and do not enjoy real ownership benefits.
Mortgage/foreclosure designs intended to end with the foreigner taking title to land.
Back-to-back transfers intended to conceal a foreign purchase.

The recurring problem is intent and effect: if the arrangement is meant to do indirectly what is prohibited directly, it is vulnerable.

15) Practical Compliance Checklist (Transaction + Structure)

15.1 Corporate structuring

Foreign equity at ≤ 40%.
Filipino equity is real and paid.
Share classes and voting rights do not defeat Filipino control requirements.
Board/officer composition and management authority consistent with nationality constraints.
Purpose clause supports land acquisition.

15.2 Documentation hygiene

Articles/bylaws reflect share classes correctly.
Stock and transfer book updated.
Subscription agreements and proof of payment complete.
Shareholders’ agreement drafted to protect investor without creating dummy indicators.
SEC filings current.

15.3 Land acquisition diligence

Clean title verification and encumbrance checks.
Tax clearance/real property tax status.
Zoning and land classification.
Seller authority and approvals.

15.4 Post-closing controls

Ownership monitoring and transfer restrictions.
Compliance calendar for SEC reporting.
Clear policies on who can sign, buy, sell, mortgage, lease, and at what thresholds.

16) Key Takeaways

A foreigner cannot “buy land” in the Philippines by simply using a Philippine-registered company. The company must be a qualified Philippine national (generally ≥ 60% Filipino-owned).
The biggest legal risk is not the corporation’s registration—it’s beneficial ownership, control, and intent. Dummy arrangements are high-risk.
Foreign investors can protect economics through lawful mechanisms: carefully designed share rights, shareholder agreements, and financing—without converting Filipino ownership into a sham.
Compliance is not one-time. The corporation must remain qualified, and the transaction must be cleanly documented, tax-compliant, and properly registered.