Notes: In general, foreigners can own a corporation up to 100% provided thtat:
a) these enterprises are not on the Negative List;
b) the country or state of the foreign investor also allows Filipinos and their corporations to do business therein;
c) if the foreign investor is investing in a domestic enterprise, the domestic enterprise must have a paid-in capital equivalent to USD 200,000.
What do you think? Yes, it's not an easy task. Besides, there are lots of steps to go through when set up a company.
Businesses with Foreign Investment Restrictions
Foreign Investment Negative List (FINL) defines the foreign investments which are limited or restricted by the constitution and specific laws. Current List. List A consists of areas of activities reserved to Philippine nationals where foreign equity participation in any domestic or export enterprise engaged in any activity listed therein shall be limited to a maximum of forty percent (40%) as prescribed by the Constitution and other specific laws. List B consists of areas of activities where foreign ownership is limited pursuant to law such as defense or law enforcement-related activities, which have negative implications on public health and morals, and small and medium-scale enterprises.
Notes: Some business is clearly listed but some could be quite vague. To be exact, you'd better ask SEC before start anything else. They will check the "nature" of your business.
Notes: Any amendment to List A may be made at any time to reflect changes instituted in specific laws while amendments to List B shall not be made more often than once every two years, pursuant to Section 8 of RA 7042 (as amended) and its revised Implementing Rules and Regulations.
Domestic Market Corporations
The general rule of ownership for a Philippine Domestic Market Enterprise is 60% Filipino ownership and 40% foreign ownership of a business.
The FIA states that if the activity to be engaged in: is not included in the FINL, is more than 40% foreign-owned, and will cater to the domestic market, the capital required is at least two hundred thousand dollars (US$200,000). The capital may be lowered to one hundred thousand dollars (US$100,000), if activity involves advance technology, or the company employs at least 50 direct employees. (R.A. 7042 as amended by R.A. 8179).
If the foreign company will export at least 60% of its output, or a trader that purchases products domestically will export at least 60% of its purchases, the required capital is only Php5,000.
Notes: Domestic Corporation can hold land. If you are a foreigner thinking of acquiring a land using 60-40 corporation, I think you'd better not because you can't hold the control of the company. Not only you cannot hold a position like president but also there are a lot more other issues.
Notes: Under the same concept, a foreigner can own a condo unit as long as the total share of foreigners of the condo projects (owned by a corporation or associates) doesn't exceed 40%.
Notes: The former natural born Filipino has equal investment rights with citizen when they invest in List B, Cooperatives, Rural Banks, Thrift Banks and private development banks and Financing companies. However, it's not applied to List A which are reserved for Filipino citizens under the constitution. They are also allowed to be transferees of private land up to a maximum of 5,000 square meters in the case of urban land or three (3) hectares in the case of rural land to be used for business or other purposes.
Retail Trade Enterprises
"Retail trade" shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or good for consumption. 100% foreign ownership is allowed for Philippine retail trade enterprises: (a) with paid-up capital of USD 2,500,000 or more provided that investments for establishing a store is not less than USD 830,000; or (b) specializing in high end or luxury products, provided that the paid-up capital per store is not less than USD 250,000 (Sec. 5 of R.A. 9762). No foreign equity is allowed in Retail Trade Enterprises with less than the above mentioned capital.
Notes: Excluded sales from retail trade
Sales in restaurant operations by a hotel owner or inn-keeper irrespective of the amount capital: provided, that the restaurant is incidental to the hotel business; and Sales which are limited only to products manufactured, processed or assembled by a manufactured, processed or assembled by a manufacturer though a single outlet, irrespective of capitalization.
Notes: "High-end or luxury goods" shall refer to goods which are not necessary for life maintenance and whose demand is generated in large part by the higher income groups. Luxury goods shall include, but are not limited to products such as; jewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods, electronics and other personal effects.
Notes: Which one will not belong to "retail trade"? Yes, wholesale trade.
Export Businesses
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.
KPO, BPO, Back Office and call centers are considered Export Enterprises, unless otherwise indicated in the Philippine Foreign Investment Negative List.