Foreign companies or nationals who want to invest in the Philippines will be happy to know that the requirements for doing so have been considerably eased.
Executive Order No. 98, which took effect in 2012, has broadened the scope of activities where up to 100% foreign equity is allowed. The Executive Order amends the Foreign Investment Act (FIA), which contains the guidelines for foreign investments in the Philippines.
Foreign investments in the Philippines
Anyone, regardless of nationality, can invest in the Philippines with up to 100% equity. A business with 60% Filipino equity is considered a Philippine company, while one with more than 40% foreign equity is considered a foreign-owned domestic company.
Foreign-owned companies may be formed as a corporation, branch, regional headquarters, or representative office. The type of formation defines the foreign owners’ liability.
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Restrictions to 100% foreign ownership
Any business may be 100% foreign-owned except for those covered in the FIA Foreign Investment Negative List A & B. These restrictions are determined by:
The nature of the business
Amount of paid-up capital
For additional information, feel free to visit: Businesses Foreigners May Be Restricted to Invest In: the Foreign Investment Negative List
FIA Negative List A
Negative List A includes economic activities where foreign equity is restricted in compliance with the Philippine Constitution and Special Laws provisions. The restrictions range from zero to only 60% foreign equity allowed.
Activities where zero foreign ownership is allowed include:
mass media
the practice of professions
the use of Philippine marine resources
small-scale mining
the manufacture, repair, stockpiling, and/or distribution of nuclear, biological, chemical, and radiological weapons
Retail
others as found in FIA Foreign Investment Negative List A
Negative List A also details economic activities where foreign ownership is restricted up to 20%, 25%, 30%, 40% and 60%.
FIA Negative List B
Negative List B includes activities where foreign ownership is restricted only up to 40% due to security, defense, health and moral reasons, as well as to protect small and medium-scale industries.
Minimum investments
Foreign ownership of businesses is also restricted by the amount of paid-up capital, depending on the nature of the business. Executive Order No. 98 has lowered the minimum paid-up capital needed for up to 100% foreign ownership, as follows:
Domestic enterprises
Unless otherwise stated in the FIA Negative List A&B, domestic enterprises, or companies catering to the domestic market, may have up to 100% foreign ownership if the paid-up capital is at least US$200,000. For domestic enterprises employing at least 50 persons and/or using advanced technology, the required minimum paid-up capital is only US$100,000.
Retail trade enterprises
Retail trade companies may have 100% foreign ownership if the paid-up capital is at least US$2,500,000, with a minimum investment of US$830,000 for establishing a store.
Retail companies specializing in luxury or high-end products are allowed 100% foreign ownership with a minimum paid-up capital of US$250,000 per store.
Export enterprises
A business qualifies as an export company if it exports at least 60% of its output. KPO, BPO, web development, and similar businesses serving foreign clients are considered export companies. Export companies may have 100% foreign ownership with a minimum paid-up capital of only P5,000, but have to submit an additional document that said companies are export entities to the Securities and Exchange Commission.
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