Buying Land In The Philippines Part 8: Converting Land Use Type

Buying Land In The Philippines Part 8: Converting Land Use Type

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Reclassification can be done through the Municipal Assessor. It is important to be thoughtful about how reclassification, because different land use types are assessed at different tax rates. 

It may be cheaper to make only part of your land residential and the remainder some other type, like orchard etc.... 

Our lot was originally classified as coco land. The reclassification that we went with was 30% residential and 70% orchard. If we had classified our lot as 100% residential the taxes would have been much higher, so we only made the part where the house actually sits residential. 

Since most of the coconut trees had been cut down leaving only a few of them with other assorted fruit bearing trees we reclassified the remaining part as orchard, which is taxed at a lower rate than coco land and much lower than residential.

If we pay our taxes by December 31 we get a 20% discount. The discount is reduced each month until March 1. From March 1-31 the tax is just the regular rate. If you pay after March 31, the there is a 2% penalty. That monthly penalty will be added for up to 36 months an this goes on for every year the tax is not paid.

Davao provides a slightly different scheme on taxes. Davao City will give you the 20% discount if you pay the taxes in full by March 31.

Every municipality has its own unique tax scheme so check with your local assessor's office to find out the specific details for your municipality.

Points to keep in mind:
  • If you do not pay your taxes that you may be in danger of losing your land.
  • In some cases there is tax amnesty for delinquent accounts.
  • Be sure that all of the details on the tax declaration are complete and correct.


Falling Dollar Philippines 2020

Falling Dollar 2020

I have been seeing expats talking about why the Peso is strengthening lately against the Dollar.

The Philippines has been taking on a lot of debt recently and the stated reason is Coronavirus response. The proceeds from these foreign loans have been delivered to the Philippines in the form of US Dollars. This is driving the Philippines' Dollar reserves to record levels in June:
The Philippines’ dollar reserves inched up to another historic high in June thanks to inflows from the government’s overseas borrowings to fund its drive against the coronavirus pandemic, which outpaced its loan repayments.

“The month-on-month increase in the [dollar reserve] level reflected inflows mainly from the national government’s foreign currency deposits with the BSP,” it said. “These inflows were offset, however, by the foreign currency withdrawals made by the national government to pay its foreign currency debt obligations.”
And this continues in July:
Gross international reserves (GIR) rose by 15% from a year earlier to $98 billion as of last month, data from the Bangko Sentral ng Pilipinas (BSP) showed. It also rose by 4.8% from May....

...the continued increase in the dollar reserves would continue to support the peso, which had strengthened to the P48 a dollar level.

The rising dollar reserves bode well for the strength of the peso also market watchers said that the central bank is not intervening to set the value of the peso.

More Dollars in the Philippines means that each Dollar is worth less relative to the Peso.

But this is likely only temporary, though the second article states that dollar reserves will continue to increase.

The Philippines cannot take on new loans forever and the loans that it has must be repaid...in Dollars. This will gradually drive the Dollar up against the Peso.

Another reason for the dollar's drop is the Philippines' net positive current account:
The peso may not return to pre-pandemic levels in the near term as the Philippines' current account remains in surplus, explained ING Bank Manila senior economist Nicholas Mapa.
The current account is the balance of trade and income vs. expenditures on the international market. Philippines is not spending internationally, because demand for foreign goods has collapsed due to the pandemic. 

That along with remittances is helping to keep the current account well positive for now. But it will not last. A prime reason for the positive current account is the fact that the Philippines' economy is in recession due to the pandemic. The Philippines is not consuming foreign goods so there are no imports and this allows the Philippines to hold on to its dollars. As the Philippines emerges from the slump the consumption engine will roar to life as pent up demand explodes - driving the current account into the negative.

The near term may show more weakening of the Dollar, but soon (barring economic collapse of the US) the Dollar rebounds with vengeance.

The good news is that the FED has signaled that it will not be using negative interest rates, so with rates already as low as they can go that part of dollar weakness hopefully is stabilized and the rate can only go up, which will strengthen the dollar (but only after 2021?).

The US is debasing its currency, but every nation is in that boat to one degree or another, so maybe that part of the equation matters less. Then again this may be what drives the dollar much lower if the printing accelerates and the US economy takes a bigger hit than is expected.

The Bank of International Settlements seems to indicate that the US could print trillions more dollars and be in no danger of inflation as there is a gigantic dollar shortage right now globally that is expected to almost double by December.

September 10 article referencing weak imports/current account as cause of peso strength. Philippines is not buying stuff so peso goes up.

If you have an opinion or information please share.


Buying Land In The Philippines Part 7: Land With No Title

Buying Land In The Philippines Part 7: Land With No Title

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If you have land that is not titled, then you need to contact DENR. DENR may perform a subdivision survey. Understand that the information in this article is generic and some of the items herein may not apply to your specific case.
  • The land in question must be zoned residential. 
  • There can be no dispute or conflict as to who is the rightful owner.
  • Cost may vary for survey and titling process.
  • DENR in some locations may not have adequate personnel to perform the survey right away or at all.
  • The entire process can take anywhere from three months to one year (be proactive).
  • When the process is complete the owner shall receive an Original Certificate of Title (OCT).

Again, this is for land that has no title. If your land has an OCT or TCT already, then do not believe FaceBook posts telling you to contact DENR for a free or very cheap survey.