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Ninety-nine (99-year) land lease to foreigners

land lease

AN ACT LIBERALIZING THE LEASE OF PRIVATE LANDS BY FOREIGN INVESTORS, ESTABLISHING THE STABILITY OF LONG-TERM LEASE CONTRACTS, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7652, OTHERWISE KNOWN AS THE “INVESTORS’ LEASE ACT”

Here is the good news for foreign investors in the Philippines. A Bill that addresses the concern of foreign investors regarding the shorter rental period for land lease agreements. Under the Philippine Constitution, the transfer of ownership of land to foreign nationals is prohibited. However, they are allowed to lease lands but only for 50 years renewable by another 25 years. In order to welcome more foreign investors, Senate Bill No. 2898 and House Bill No. 10755 were introduced, which seeks to amend Republic Act No. 7652, or the Investors’ Lease Act of 1993, extending the lease period for private land to foreign investors from 50 to 99 years.

According to one of the authors of this new bill, it seeks to attract new foreign investments and encourage existing investors to expand their businesses, thereby creating more job and income opportunities for and sustaining our economic growth,” the author in the house of representatives declared “We want to be competitive regionally and globally in terms of enticing foreign investments.”[1]

The pertinent provision in the Senate bill is as follows:
SECTION 1. Section 2 of Republic Act No. 7652, otherwise known as the “Investors’ Lease Act”, is hereby amended to read as follows:

“SEC. 2. Declaration of Policy. – It is hereby declared the policy of the State to encourage foreign investments consistent with the constitutional mandate to conserve and develop our own patrimony. Towards this end, the State hereby adopts a flexible and dynamic policy on the granting of long-term lease on private lands to foreign investors for the establishment of industrial estates, factories, assembly or processing plants, agro-industrial enterprises, land development for industrial or commercial use, tourism, AGRICULTURE, AGRO-FORESTRY, ECOLOGICAL CONSERVATION and other similar priority productive endeavors. IT IS THE POLICY OF THE STATE TO ENSURE THE RELIABILITY OF INVESTORS’ LEASE CONTRACTS TO PROVIDE A STABLE ENVIRONMENT FOR FOREIGN INVESTMENTS.”[2]

In Senate version, it included the lease on private land to foreign investor for the establishment of AGRO-FORESTRY and ecological conservation. This is a welcome to tree farms corporations. This will benefit corporations investing on trees farms and in agricultural landscapes, farming in forests and tree-crop production, including cocoa, coffee, rubber and oil palm.

Under both bills, the foreign investor must have an APPROVED AND REGISTERED INVESTMENT under Republic Act 7041 or FOREIGN INVESTMENTS ACT OF 1991 as amended by RA 11534 otherwise known as corporate recovery and Tax incentive for enterprises act (CREATE) as amended by RA 12066 (CREATE MOTE ACT) and other applicable laws or has complied with the investment requirements prescribed by the appropriate investment promotion agency pursuant to existing laws[3].

In the Senate version[4], The leasehold right acquired under long-term lease contracts entered into pursuant to this Act may be sold, transferred, assigned, OR MAY SERVE AS SECURITY FOR A LOAN: Provided, that when the buyer, transferee, [of] assignee, OR CREDITOR is a foreigner or foreign owned enterprise, the conditions and limitations in respect to the use of the leased property as provided for under this Act shall continue to apply.

This allows liberalization in trade as the leased land may be sold, transferred, assigned, or may serve as security for a loan. Giving foreign investors more freedom in dealing with the leased land, creating more opportunities for both the landowners and investors.

At ABO law firm we assist foreign companies in completing all their legal requirements to set up offices and to facilitate their investment in the country. We assist clients in contracts with Filipino investors/landowners and in its registration for investment incentives with the Board of Investments, Philippine Economic Zone Authority and other Special Economic Zones. Our law firm helps foreign investors in export- oriented enterprises avail incentives such as special taxes and income tax holidays and we specialize in registration of companies with the relevant government agencies such as the Securities and Exchange Commission (SEC), the Department of Trade and Industry (DTI), the Bureau of Internal Revenue (BIR) and all other relevant government agencies.

Written by: Atty. Rexford C. Resurreccion

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