Investing in the Philippines: Frequently Asked Questions Part 1
1. What are the various structural options that I could choose from when setting up a business in the Philippines?
You may set up your business under one of the following organizational structures: (1) single proprietorship, (2) partnership, (3) corporation, (4) branch office, (5) representative office, (6) regional headquarters, or (7) regional operating headquarters.
2. Can a foreign investor fully own a business entity?
Yes, a one hundred percent (100%) foreign equity may be allowed in all areas of investments under the Foreign Investments Act (FIA) R.A. 7042 except those included in the Regular Foreign Investment Negative List (FINL).
3. What are the areas of investments covered by the FIA?
The FIA covers all investment areas, except banking and other financial institutions, which are governed and regulated by the Bangko Sentral ng Pilipinas (BSP).
The FINL covers areas of economic activity whose foreign ownership is limited to a maximum of forty percent (40%) of the outstanding capital stock in the case of a corporation or capital in case of partnership.
Below are further descriptions on the Negative Lists A & B:
List A: refers to areas reserved to Filipinos by mandate of the Constitution and Special Laws such as but not limited to:
Mass Media except recording, practice of licensed profession, retail trade, cooperative, and small-scale mining etc. where foreign ownership is prohibited; and
Advertising, ownership of land, operation and management of public utilities, etc., where only minority foreign ownership is prohibited.
List B: refers to areas that are defense-related, those with adverse effects on public health and morals and domestic market enterprises with paid-up capital of less than US$200,000, provided they involve advanced technology as determined by the Department of Science and Technology (DOST) or directly employ at least fifty (50) employees, in which case, the paid-up capital shall be lowered to US$100,000 only to non-Philippine nationals.
4. When can foreigners do business or invest in a domestic enterprise up to 100% of its capital?
Full entry of non-Filipinos is feasible if the proposed activity is not among those listed in the FINL; and
For domestic market enterprises (i.e., enterprises that derive income primarily from sources within the Philippines), when the paid-up capital is at least US$200,000 which may be lowered to US$100,000 and if the following conditions are met: (a) introduction of advanced technology; or (b) employment of at least 50 direct employees.
5. Where does one apply for registration of business?
1. For Single/Sole Proprietorship (Filipino or foreign national) – you may go online at http://www.bnrs.dti.gov.ph to register your business name. Note that a foreign national should secure first an ACR-Icard with the Bureau of Immigration before securing a DTI permit and/or opening an account in any commercial bank.
2. For Corporations/Partnerships, Branch and Representative Offices – Submit the application and the required documents to the Securities and Exchange Commission.
3. For Regional Headquarters and Regional Operating Headquarters – Submit the application and the required documents to the Board of Investments.
Source: Board of Investments Frequently Asked Questions Booklet
This article does not constitute and is not intended to be legal advice. If you have any question or need any assistance in setting up a business in the Philippines, please feel free to send us an email at roselle.jean@nonatolaw.com.
