Foreign investors usually have the same rights as Filipino citizens and must register their businesses with the Securities and Exchange Commission (SEC) (corporation, partnership, branch office or representative office) or with the Department of Trade and Industry’s Bureau of Trade Regulation and Consumer Protection (sole proprietorship). Foreign ownership of corporations is defined in the Corporation Code of the Philippines. The Foreign Investment Act (R.A. 7042, 1991, amended by R.A. 8179, 1996) liberalized the entry of foreign investment into the Philippines.
Businesses with Foreign Investment Restrictions
Within the 1991 Foreign Investment Act (FIA) there are two negative lists also know as the “Foreign Investment Negative List” which defines the foreign investments which are limited or restricted by the constitution and specific laws. Negative List A & Foreign ownership is limited for reasons of security, defense, risk to health and morals and protection of small and medium scale enterprises. Negative List B
Domestic Corporations (subsidiary)
A registered company with at least 60% Filipino ownership is considered as having Philippine nationality; if more than 40% foreign-owned, it is considered a foreign owned domestic corporation.
More than 40% and up to 100% foreign ownership of a Domestic Market Enterprise is allowed as long as the paid-in capital is a minimum of USD 200,000.00. Employing a minimum of 50 direct employees or using advanced technology may allow a paid-in capital of less than USD 100,000.00 (R.A. 7042 as amended by R.A. 8179).**
Retail Trade Enterprises
100% foreign ownership is allowed for Philippine retail trade enterprises: (a) with paid-up capital of USD 2,500,000.00 or more provided that investments for establishing a store is not less than USD 830,000.00; or (b) specializing in high end or luxury products, provided that the paid-up capital per store is not less than USD 250,000.00 (Sec. 5 of R.A. 9762). No foreign equity is allowed in Retail Trade Enterprises with less than the above mentioned capital.
An export enterprise is defined as a business who exports at least 60% of its output.
Export Business Enterprises may be 100% fully foreign owned and may file with the SEC for an exemption of the paid-up capital requirement of USD 200,000.00.
KPO, BPO, Back Office IT, Web Development and call centers are all considered Philippines Export Enterprises.
** Unless otherwise indicated in the Philippine Foreign Investment Negative List