Investor FAQs by GTALAW
Q. Who may invest?
Anyone, regardless of nationality is welcome to invest in the Philippines in almost all areas, and up to the extent of 100 percent ownership. There are however, some areas of economic activities, which according to law, are reserved for Philippine nationals. These activities are found in the (FINL).
Q. How much is the minimum investment?
For simple incorporation paid-capital requirements of the Securities and Exchange Commission, the minimum paid-up capital is P5,000.00. However, higher Paid-up Capital is required for specialized businesses like Banks, Lending companies, Investment Houses and Manning Agencies, business Engage in VOIP Services, and Recruitment Agencies.
Foreign Investors who wish to own more than 40% to 100% of the business may also comply Philippine investment laws. Republic Act 8179 amended Republic Act 7042 reduced the minimum paid-capital of foreign companies serving the domestic market from US$500,000 to US$200,000. The minimum maybe decreased further to US$150,000 if a company uses advanced technology as certified by the Department of Science and Technology or directly employs at least 50 employees.
Individual investors may also invest a minimum of US$50,000.00 to US$75,000.00 to qualify for certain visas like Special Investor's Resident Visa and Special Retirees Resident Visa.
Q. Can a foreign investor be allowed to own a 100% of a business entity? Yes, one hundred percent (100%) foreign equity may be allowed in all areas of investments under the Foreign Investments Act (FIA) except financial institutions and those included in the Regular Foreign Investment Negative List (FINL). However, for a company that will do business locally or for domestic market, it is mandatory that the minimum amount of investment should be US$200,000.00 if foreign ownership is more than 40% to 100%.
Q. Is there an exemption to the minimum capital investment of US$200,000.00 if the investor would like to own 100% of the company but only invests a minimal amount?
Yes, there is an exemption. You can apply for an exemption from the Foreign Investment Act at the Securities and Exchange Commission (SEC), preferably upon the filing of your application for Incorporation, whenever your business is considered an export market enterprise - an enterprise wherein a manufacturer, processor or service (including tourism) enterprise exports sixty percent (60%) or more of its output, or wherein a trader purchases products domestically or exports sixty percent (60%) or more of such purchases. But you have to submit a detailed business plan including the outline of your business targets and projections.
Q. We are planning to operate a call center business and/or back-office operation in the Philippines. We will be doing services for all our clients in the United States, Canada and the UK. Can we own 100% of the business without investing US$200,000.00?
Yes, but you have to apply for an exemption with the Securities and Exchange Commission and prove that your business is considered as an export market enterprise. Business Process Outsourcing, Call Centers and Back Office Operations are all considered export market enterprise because more than 60% of its service output is exported.
Q. What are the areas of investments covered by Foreign Investments Act (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).
Foreign Investment Negative List - means a list of 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 the case of partnership.
Below are Negative Lists A & B where:
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; 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 involved 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
Q. When can foreigners do business or invest in a domestic enterprise up to 100% of its capital?
If the proposed activity he intends to venture in is not among those listed in the Foreign Investment Negative List. If the paid-up capital for domestic market enterprise is at least US$200,000.00, which may be lowered to US$100,000 if the following conditions are met: (1)Introduction of advanced technology; or (2) Employment of at least 50 direct employees.
Q. What are the kinds of investments?
Depending on the type of incentives desired, the kind of investment under E.O. 226 are:
• Book I of E.O. 226 - Investment with Incentives
• Republic Act No. 8756 Amending Books III and IV of
E.O. 226 - Multinational Companies Establishing Regional or
Area Headquarters or Regional Operating Headquarters in the
Philippines
• Book V - Special Investor's Resident Visa
• Republic Act 7916 as amended by Republic Act 8748 - Special
Economic Zones Act of 1995
Book II (Foreign Investments Without Incentives) has been repealed by Republic Act No. 7042 or the Foreign Investments Act of 1991, as amended by Republic Act No. 8179. Foreign-owned companies not availing of incentives are covered by the provisions of this Act.
Q. In what form can foreign investments be made?
In general, "foreign investments" which means equity investments, can be made in the form of foreign exchange or other assets actually transferred to the Philippines. These non-case assets may be in the form of capital goods, patents, formulae, or other technological rights or processes.
Q. What are the basic rights and guarantees given to the safety of foreign investments?
All investors and enterprises are entitled to the basic rights and guarantees provided in the Philippine Constitution. Among other rights recognized by the government of the Philippines are the following:
• Right to REPATRIATION OF INVESTMENTS
In the case of foreign investments, the right to repatriate the entire proceeds of the liquidation of the investments in the currency in which the investment was originally made at the exchange rate prevailing at the time of repatriation.
In the case of foreign investments, the right to repatriate the entire proceeds of the liquidation of the investments in the currency in which the investment was originally made at the exchange rate prevailing at the time of repatriation.
• Right to REMITTANCE OF EARNINGS
The right to remit, at the exchange rate prevailing at the time of remittance, such as may be necessary to meet the payment of interest and the principal on foreign loans and foreign obligations arising from technological assistance contracts.
The right to remit, at the exchange rate prevailing at the time of remittance, such as may be necessary to meet the payment of interest and the principal on foreign loans and foreign obligations arising from technological assistance contracts.
• Right to FREEDOM FROM EXPROPRIATION
There shall be no expropriation by the government of the property represented by the investments or of the property of enterprises except for public use or in the interest of national welfare and defense and upon payment of just compensation. In such cases, foreign investors or enterprises shall have the right to remit sums received as compensation for the expropriated property in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.
There shall be no expropriation by the government of the property represented by the investments or of the property of enterprises except for public use or in the interest of national welfare and defense and upon payment of just compensation. In such cases, foreign investors or enterprises shall have the right to remit sums received as compensation for the expropriated property in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.
• Right to NON-REQUISITION OF INVESTMENT
There shall be no requisition of the property presented by the investment or of the property of enterprises, except in the event of war or national emergency and only for the duration. Just compensation for the requisitioned property may be remitted in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.
There shall be no requisition of the property presented by the investment or of the property of enterprises, except in the event of war or national emergency and only for the duration. Just compensation for the requisitioned property may be remitted in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.
Q. What is the Foreign Investments Act (FIA) of 1991?
Foreign Investments Act (FIA) of 1991 (or Republic Act 7042 and Republic 8179) allows foreign ownership of up to 100% in most industries, except those specified in the Foreign Investment Negative List (FINL).
Investors who do not seek incentives and/or whose chosen activities do not qualify for incentives, (i.e. the activity is not listed in the IPP, and they are not exporting at least 70% of their production) may go ahead and make the investments. They only have to be guided by the FINL.
The FINL clearly defines investment area requiring at least 60% Filipino ownership. All other areas outside this list are fully open to foreign investors.
Q. Where to file investment applications without incentives?
Investors who do not seek incentives and/or whose chosen activities do not qualify for incentives, (i.e. the activity is not listed in the IPP, and they are not exporting at least 70% of their production) may go ahead and make the investments. They only have to be guided by the FINL.
The FINL clearly defines investment area requiring at least 60% Filipino ownership. All other areas outside this list are fully open to foreign investors.
Q. Where to file investment applications without incentives?
Partnership or Corporation (whether stock or non-stock), not seeking incentives, can go directly to the Securities and Exchange Commission (SEC) to register its Articles of Partnership or Incorporation.
Single proprietorship need only to go to the Bureau of Trade Regulation and Consumer Protection (BTRCP) or to the DTI Regional offices in the region
Q. What requirements must be complied with before a foreign corporation can engage in business in the Philippines?
Single proprietorship need only to go to the Bureau of Trade Regulation and Consumer Protection (BTRCP) or to the DTI Regional offices in the region
Q. What requirements must be complied with before a foreign corporation can engage in business in the Philippines?
Before a foreign corporation can engage in business in the Philippines, it must first secure the necessary licenses or registration certificates from the appropriate government agencies. Generally, the registration process starts with the Securities and Exchange Commission (SEC).
If the proposed project or activity qualifies for incentives, the foreign investor may file its application with the appropriate government agency depending on the projects location.
Q. Are investment incentives transferable?
If the proposed project or activity qualifies for incentives, the foreign investor may file its application with the appropriate government agency depending on the projects location.
Q. Are investment incentives transferable?
In general, investment incentives are not transferable. Tax credit certificates may, however, be transferred subject to certain conditions. In the case of tax credit certificates issued pursuant to the Export Development Act of 1994, said documents are considered negotiable instruments and may be transferred to any person, natural or juridical, except to local government units.
Q. Does our proposed project qualify for registration with the BOI/PEZA?
Q. Does our proposed project qualify for registration with the BOI/PEZA?
To qualify for registration with the BOI for incentive purposes, the proposed foreign investment must be made in any of the following:
preferred areas of investment listed in the current Investment Priorities Plan(IPP). A preferred area may be declared pioneer if it: (1) involves the manufacturing or processing (not merely assembly or packaging) of goods or raw materials that have not been produced in the Philippines on a commercial scale; (2) uses a design, formula, scheme, method, process or system of production or transformation of any element or raw material into another raw material or finished good which is new and untried; (3) engages in agricultural activities/services essential to the achievement of the country's self-sufficiency program; and (4) produces non-conventional fuels or manufactures equipment which utilize non-conventional sources of energy; provided that the final product in any of the foregoing instances involves substantial use and processing of domestic raw materials;
Enterprises engaged in preferred non-pioneer areas and exporting at least 70% of their output; and
Projects in less-developed areas provided that the activities in all of the above cases are not reserved for Philippine nationals.
On the other hand, the projects that may qualify for registration with PEZA are those that involve manufacturing for export and the domestic market, free trade, tourism, information technology, utilities, facilities enterprises including those engaged in warehousing and trading operations in the ecozones and development and operation of ecozones.
Q. How does one file an application with the BOI/PEZA?
preferred areas of investment listed in the current Investment Priorities Plan(IPP). A preferred area may be declared pioneer if it: (1) involves the manufacturing or processing (not merely assembly or packaging) of goods or raw materials that have not been produced in the Philippines on a commercial scale; (2) uses a design, formula, scheme, method, process or system of production or transformation of any element or raw material into another raw material or finished good which is new and untried; (3) engages in agricultural activities/services essential to the achievement of the country's self-sufficiency program; and (4) produces non-conventional fuels or manufactures equipment which utilize non-conventional sources of energy; provided that the final product in any of the foregoing instances involves substantial use and processing of domestic raw materials;
Enterprises engaged in preferred non-pioneer areas and exporting at least 70% of their output; and
Projects in less-developed areas provided that the activities in all of the above cases are not reserved for Philippine nationals.
On the other hand, the projects that may qualify for registration with PEZA are those that involve manufacturing for export and the domestic market, free trade, tourism, information technology, utilities, facilities enterprises including those engaged in warehousing and trading operations in the ecozones and development and operation of ecozones.
Q. How does one file an application with the BOI/PEZA?
An application shall be made in the form prescribed by the BOI / PEZA in two (2) copies and properly sworn to before a notary public. A project feasibility study is required as one of the primary documents supporting the application for registration.
Q. What possible obstacles would our application meet?
Q. What possible obstacles would our application meet?
The obstacles normally encountered in the filing of applications include noncompliance with the criteria set by the BOI, misinterpretation of the coverage of activities listed in the IPP, failure to submit the required supporting documents and project feasibility study and possible opposition from sectors or enterprises which might be adversely affected by the proposed project. The BOI requires publication of the notice of application and conducts hearings if objections to the application are received. For PEZA applicants, the usual problem consists of non-compliance with some of the criteria set by PEZA and failure to submit required documents and information.
Q. How long will it take to obtain BOI/PEZA approval once all requirements are complied with?
Under the 1987 Omnibus Investments Code, applications filed with the BOI shall be considered automatically approved if not acted upon by the Board within twenty (20) working days from official acceptance thereof, subject to the usual terms and conditions.
In the case of PEZA, the processing and evaluation by the appropriate department usually takes about two weeks. The decision on the project is made during the bi-monthly meetings of the PEZA Board.
Q. Assuming approval is obtained, what restrictions are ordinarily attached?
Q. How long will it take to obtain BOI/PEZA approval once all requirements are complied with?
Under the 1987 Omnibus Investments Code, applications filed with the BOI shall be considered automatically approved if not acted upon by the Board within twenty (20) working days from official acceptance thereof, subject to the usual terms and conditions.
In the case of PEZA, the processing and evaluation by the appropriate department usually takes about two weeks. The decision on the project is made during the bi-monthly meetings of the PEZA Board.
Q. Assuming approval is obtained, what restrictions are ordinarily attached?
A list of general and specific terms and conditions is normally attached to the approval letter issued by the BOI/PEZA upon approval of the application for registration. The general conditions include certain management, financial, operational and marketing restrictions which must be properly complied with so as to avoid grounds for cancellation of registration. The specific terms and conditions which may include nationality, operational and reporting requirements vary depending upon the nature of the business enterprise.
Q. How much time is an investor allowed to start his project?
The amount of time allowed for starting a registered project depends on the type of the proposed project and the period set by the proponent in the feasibility study with the approval of the BOI/PEZA.
Q. How much time is an investor allowed to start his project?
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