DOING BUSINESS IN THE PHILIPPINES

Can a  foreigner  do business in the Philippines?

The answer is definitely a yes. However, there are certain requirements  provided by Philippine laws. 

Subject to certain requirements under Philippine laws, A foreigner can engage in business by organizing under Philippine laws a (1) sole proprietorship; (2) partnership or  a (3) corporation (stock or non-stock) or if it is organized under foreign laws it can engaged in  business through its branch office, representative office and  Regional  Headquarters or Regional Operating Headquarters.

It is  the Foreign Investment Act (FIA) of 1991  that governs foreign investments in the Philippines. FIA opened  domestic market to 100% foreign investment except those in  the Foreign Investment Negative List (FINL).

This FINL are shortlist of investment areas or activities which may be opened to foreign investors and/or reserved to Filipino nationals.    

If an activity to be engaged in (if not included in FINL) has more than 40% foreign equity the paid in capital required is US$200,000.00. It may be lowered to US$S100,000.00 if the business involves advance technology or the  company employs at least 50 direct employees. Thus, if the equity are as follow: 60% Filipino and 40% foreign then the paid in capital can be less than US$200,000.00.

In engaging in business in the Philippines please be guided by  the  FINL shortlist providing as follows:

LIST A: FOREIGN OWNERSHIP IS LIMITED BY MANDATE OF THE CONSTITUTION AND SPECIFIC LAWS
No Foreign Equity

1. Mass Media except recording (Art. XVI, Sec. 11 of the Constitution; Presidential Memorandum dated 04 May 1994)

2. Practice of professions  (Art. XII, Sec. 14 of the Constitution; Sec. 1 of R.A. 5181)
3. Retail trade enterprises with paid-up capital of not less than US$ 2,500,000.00 (Sec. 5 of R.A. 8762)
4. Cooperatives (Ch. III, Art. 26 of R.A. 6938)
5. Private Security Agencies (Sec. 4 of R.A. 5487)
6. Small-scale Mining (Sec. 3 of R.A. 7076)
7. Utilization of Marine Resources in archipelagic waters, territorial sea, and exclusive economic zone (Art. XII, Sec. 2 of the Constitution)
8. Ownership, operation and management of cockpits (Sec. 5 of P.D. 449)
9. Manufacture, repair, stockpiling and/or distribution of nuclear weapons (Art. II Sec. 8 of the Constitution)
10. Manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personal mines (Various treaties to which the Philippines is a signatory and conventions supported by the Philippines)
11. Manufacture of firecrackers and other pyrotechnic devices (Sec. 5 of R.A. 7183)

Up to Twenty Percent (20%) Foreign Equity
12. Private radio communication network (R.A. 3846)
Up to Twenty-Five Percent (25%) Foreign Equity
13. Private recruitment, whether for local or overseas employment (Art. 27 of P.D. 442)
14. Contracts for the construction and repair of locally-funded public works (Sec. 1 of CA 541, LOI 630) except:
a. infrastructure/development projects covered in R.A. 7718; and
b. projects which are foreign funded or assisted and required to undergo international competitive bidding(Sec. 2(a) of R.A. 7718)
15. Contracts for construction of defense-related structure (Sec. 1 of CA 541)
Up to Thirty Percent (30%) Foreign Equity
16. Advertising (Art. XVI, Sec. 11 of the Constitution)
Up to Forty Percent (40%) Foreign Equity
17. Exploration, development and utilization of natural resources (Art. XII, Sec. 2 of the Constitution)
18. Ownership of Private Lands (Art. XII, Sec. 7 of the Constitution; Ch. 5, Sec. 22 of CA 141)
19. Operation and management of public utilities (Art. XII, Sec. 11 of the Constitution; Sec. 16 of CA 146)
20. Ownership/establishment and administration of educational institutions (Art. XIV, Sec. 4 of the Constitution)
21. Culture, production, milling, processing, trading excepting retailing, of rice and corn and acquiring, by barter, purchase or otherwise, rice and corn and the by-products thereof (Sec. 5 of PD 194; Sec. 15 of R.A. 5762)
22. Contracts for the supply of materials, goods and commodities to government-owned or controlled corporation, company, agency or municipal corporation (Sec. 1 of R.A. 5183)
23. Project Proponent and facility Operator of a BOT project requiring a public utilities franchise (Art. XII, Sec. 11 of the Constitution; Sec. 2a of R.A. 7718)
24. Operation of deep sea commercial fishing vessels (Sec. 27 of R.A. 8550)
25. Adjustment Companies (Sec. 323 of P.D. 612 as amended by P.D. 1814)
26. Ownership of condominium units where the common areas in the condominium projects are co-owned by the owners of the separate units or owned by a corporation (Sec. 5 pf R.A. 4726)
Up to Sixty Percent (60%) Foreign Equity

27. Financing companies regulated by the Securities and Exchange Commission (Sec. 6 of R.A. 5980 as amended by R.A. 8556)

28. Investment housed regulated by the SEC (Sec. 5 of P.D. 129 as amended by R.A. 8366)

LIST B: FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY, DEFENSE, RISK TO HEALTH AND MORALS AND PROTECTION OF SMALL AND MEDIUM-SCALE ENTERPRISES

Up to Forty Percent (40%) Foreign Equity

1.  Manufacture, repair, storage, and/or distribution of products and ingredients used in the manufacture thereof requiring Philippine National Police [PNP] clearance:

a.  Firearms [handguns to shotguns], parts of firearms and ammunition therefor, instruments or implements used or intended to be used in the manufacture of firearms
b.  Gunpowder
c.  Dynamite
d.  Blasting supplies
e.  Ingredients used in making explosives:

i.    Chlorate of potassium and sodium
ii.    Nitrates of ammonium 4vxc & barium, copper [11], lead [11] calcium and cuprite
iii.    Nitric acid
iv.   Nitrocellulose
v.    Perchlorates of ammonium, potassium and sodium
vi.   Dinitrocellulose
vii.  Glycerol
viii.  Amorphous Phosphorus
ix.   Hydrogen Peroxide
x.    Strontium Nitrate Powder
xi.   Toluene

f.  Telescopic sights, sniperscope and other similar devices [Republic Act No. 7042]

2.  Manufacture, repair, storage and/or distribution of products requiring Department of National Defense [DND] clearance:

a.  Guns and ammunition for warfare
b.  Nuclear weapons and ordnance
c.  Military ordnance and parts thereof [e.g., torpedoes, mines, depthcharger, bombs, grenades, missiles]
d.  Gunnery, bombing and fire control systems and components
e.  Guided missiles/missile systems and components
f.   Tactical aircraft (fixed and rotary-winged), components and parts thereof
g.  Space vehicles and component system
h.  Combat vessels (air, land, naval) and auxiliaries
i.   Weapons repair and maintenance equipment
j.   Military communications equipment
k.  Night vision equipment
l.   Stimulated coherent radiation devices, components and accessories
m. Biological warfare components
n.  Armament training devices
[Republic Act No. 7042, as amended by R. A. No. 8179]

3.  Manufacture and distribution of dangerous drugs [Republic Act No. 7042, as amended by R. A. No. 8179]

4.  Sauna and steam bathhouses, massage clinics and other like activities regulated by law because of risks they may impose to public health and morals [Republic Act No. 7042, as amended by R. A. No. 8179]

5.  Other forms of gambling, e.g., race track operation; racehorse ownership/importation [Republic Act No. 7042, as amended by R. A. No. 8179]

6.  Domestic market enterprises with paid-in equity of less than the equivalent of US$200,000.00 unless they involve advance technology or they employ at least fifty [50] direct employees, the minimum paid-in capital will be reduced to US $ 100,000.00. [R. A. 7042, as amended by R.A. 8179]