Guide for Investment in Philippines

The Republic Act of No. 7042 also known as the Foreign Investment act of 1991 (FIA) is law that governs the establishment of foreign investments and businesses in the Philippines. The FIA also tackles the attraction and promotion of foreign investors in the country. The Republic Act of No. 7042 or the FIA has provided a Negative list, this Negative List composes of List A and List B. Wherein the Lists A is the lists of foreign ownerships that are limited by mandate of the constitution and specific law. The Lists B is the list of foreign ownerships that are for reasons of security, defense, risk to health and morals and protection of small and medium-scale enterprises. Amendments for the Negative List can be done. However, in Lists B, amendments may not be made more often than once every two years.

 

LIST A

No Foreign Equity
  1. Mass Media except recording [Article XVI, Section 11 of the Constitution; Presidential Memorandum Order dated 04 May 1994].chanrobles virtual law library
  2. Services involving the practice of licensed professions save in cases prescribed by law.chanrobles virtual law library

a. Engineering

 i.     Aeronautical Engineering
ii.    Agricultural Engineering
iii.   Chemical Engineering
iv.    Civil Engineering
v.     Electrical Engineering
vi.    Electronics and Communication Engineering
vii.   Geodetic Engineering
viii.  Mechanical Engineering
ix.    Metallurgical Engineering
x.     Mining Engineering
xi.    Naval Architecture and Marine Engineering
xii.   Sanitary Engineering

b. Medical and Allied Professions

i.    Dentistry
ii.   Medical Technology
iii.  Midwifery
iv.  Nursing
v.   Nutrition and Dietetics
vi.  Optometry
vii.  Pharmacy
viii. Physical and Occupational Therapy
ix.   Radiologic and X-ray Technology
x.   Veterinary Medicine

c.    Accountancy
d.   Architecture
e.  Criminology
f.   Chemistry
g.  Customs Broker
h.  Environmental Planning
i.   Forestry
j.   Geology
k.  Interior Design
l.   Landscape Architecture
m. Law
n.  Librarianship
o.  Marine Deck Officer
p.  Marine Engine Officer
q.  Master Plumbing
r.   Sugar Technology
s.  Social Work
t.  Teaching
[Article XIV, Section 14 of the Constitution; Section 1 of R. A. No. 5181]

3. Retail Trade [Republic Act No. 1180]

4. Cooperatives [Chapter III, Article 26 of R. A. No. 6938]

5. Private Security Agencies [Section 4 of R. A. No. 5487]

6. Small-scale Mining [Section 3 of R. A. No. 7076]

7. Utilization of marine resources in archipelagic waters, territorial sea, and exclusive economic zone [Article XII, Section 2 of the Constitution]

8. Ownership, operation and management of cockpits [Section 5 of Presidential Decree No. 449]

9. Manufacture, repair, stockpiling and/or distribution of nuclear weapons [Article II, Section 8 of the Constitution]

10. Manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons [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 RA 7183)

UP to Twenty Percent (20%) Foreign Equity
  1. Private radio communications network (RA 3846)
Up to Twenty-Five Percent (25%) Foreign Equity
  1. Private recruitment, whether for local or overseas employment [Articles 27 of Presidential Decree No. 442]
  2. Contracts for the construction and repair of locally-funded works except:
  3. Infrastructure/development projects covered in Republic Act No. 7718, also known as the Expanded BOT Law; and
  4. Projects which are foreign-funded or assisted and required to undergo international competitive bidding [Commonwealth Act 541 as amended by Presidential Decree No. 1594; Letter of Instructions No. 630; Republic Act No. 7718]
  5. Contracts for the construction of defense related structures (Sec. 1 of CA 541)
Up to Thirty Percent (30%) Foreign Equity
  1. Advertising [Article XVI, Section 11 of the Constitution]
Up to Forty Percent (40%) Foreign Equity
  1. Exploration, development and utilization of natural resources (Article XII, Section 2 of the Constitution)
  2. Ownership of private lands (Art. XII, Sec. 7of the Constitution; Ch. 5, Sec. 22 of CA141; Sec. 4 of RA 9182)
  3. Operation and management of public utilities (Art. XII, Sec. 11 of the Constitution;Sec. 16 of CA 146)
  4. Ownership/establishment and administration of educational institutions (Art. XIV, Sec. 4 of the Constitution)
  5. 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) 5
  6. Contracts for the supply of materials, goods and commodities to government-owned or controlled corporation, company, agency or municipal corporation (Sec. 1 of RA 5183)
  7. Project Proponent and Facility Operator of BOT project requiring a public utilities franchise (Art. XII, Sec. 11 of the Constitution; Sec. 2a of RA 7718)
  8. Operation of deep sea commercial fishing vessels (Sec. 27 of RA 8550)
  9. Adjustment Companies (Sec. 323 of PD612 as amended by PD 1814)
  10. Ownership of condominium units where the common areas in the condominium project are co-owned by the owners of the separate units or owned by a corporation
Up to Sixty Percent (60%) Foreign Equity

27. Financing companies regulated by the Securities and Exchange Commission

 

LIST B

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]

Regulatory Procedures on establishing Business and Investments in the Philippines

Business Permit/License from Local Government Units

A typical Local Government Unit (LGU) like Makati City Hall will need the following requirements:

  • Locational clearance (for new applicants and change of business address only)
  • Lease contract between the lessor and the lessee; if leased, attach Mayor’s Permit registration of the building owner/landlord as a real estate lessor. If not, Lease Contract between the lessee and the sub-­‐ lessee with conformity of the owner of the building administration. If owned, Transfer Certificate of Title (TCT) or Tax Declaration (photocopy) must be submitted.
  • Business Name Registration with the Department of Trade and Industry (for sole proprietorship/new applicants)
  • Articles of Incorporation/Partnership (approved by the SEC) (for new applicants only)
  • Barangay Clearance
  • Public Liability Insurance

Other requirements, depending on the type of business, may also be submitted:

  • Resident Certificate A and B for sold proprietorship, C and C1 for corporation
  • Contractor’s License issued by the Philippine Contractors Accreditation Board (PCAB), in case of general/specialty and engineering contractor
  • National Grains Authority (NGA), in case of dealer of rice/corn and wheat
  • Bureau of Food and Drug Administration in case of drugstores/bakery
  • Accreditation Certificate issued by the Department of Trade in case of auto repair shop, electronics, radio, and other electrical equipment
  • Customer Broker’s License issued by the Customer Broker’s Commission in case of Custom Brokerage Business
  • Real Estate Broker’s License issued by the Department of Trade and Industry (DTI) in case of real estate broker
  • Clearance from the Department of Labor and Employment (DOLE) in case of recruitment agency
  • Clearance from the Philippine Overseas Employment Agency (POEA) in case of manning and crewing services
  • Central Bank Authority in case of banking institution
  • Pest Control License issued by Fertilizer and Pesticide Authority in case of pest control services
  • Videogram Permit issued by the Videogram Regulatory Board in case of video rental services
  • Occupancy Permit and Ownership in case of real estate lessor
  • Future Commodity Merchant/Broker’s License issued by the Securities & Exchange Commission for those engaged in the sale of commodities for future transactions as merchant/broker
  • PCSUCIA (National License) for those operating security agencies
  • Department of Environmental and  Natural Resources (DENR) clearance in case of mining
  • Permit from LTO Franchising and Regulatory Board in case of car rentals and transport services
  • License to operate firearms and explosive units, to be obtained in Camp Crame
  • Department  of  Transportation  &  Communication (DOTC) in case of courier services
  • Energy Regulatory Board (ERB) in case of dealer of LPG
  • National Telecommunication Commission (NTC) in case of business in the telecommunications industry
  • Permit from Philippine Shipper’s Bureau in case of forwarders
  • TESDA Certification

 

Alien Employment Permit (Department of Labor and Employment)

This permit is a document issued by the Department of Labor and Employment authorizing a foreign national to work in the Philippines.

Foreign Nationals Required Applying for an AEP

  • Foreign nationals seeking employment in the Philippines whether  they  are  non-residents  or refugees
  • Foreign professionals who are allowed to practice their profession in the Philippines under reciprocity and          other international agreements and in consultancy services
  • Holders of Special Investors Resident Visa (SIRV), Special Retirees Resident Visa (SRRV), Treaty Traders Visa or Special Non-­‐Immigrant Visa for as long as they occupy any executive, advisory, supervisory, or technical position in any establishment

Exempted from Securing an AEP

  • Resident foreign nationals employed or seeking employment in the Philippines
  • Members of the diplomatic services and foreign government officials accredited by the Philippine government
  • Officers and staff of international organizations of which the Philippine government is a cooperating member, and their legitimate spouses desiring to work in the Philippines
  • Foreign nationals elected as members of the Governing Board who do not occupy any other position, but have only voting rights in the corporation
  • All foreign nationals granted exemption by special laws and all other laws that may be promulgated by the Congress
  • Foreign nationals who come  to  the  Philippines  to teach, present and/or conduct research studies in universities and colleges as visiting, exchange or adjunct professors under formal agreements between universities or colleges in the Philippines and foreign universities or colleges; or between the Philippine government and foreign government; provided that the exemption is on a reciprocal basis
  • Owners and representatives of foreign principals, whose companies are accredited by the Philippine Overseas Administration (POEA), who come to the Philippines for a limited period solely for the purpose of interviewing Filipino applicants for employment abroad

Land and Property ownership by the Foreigners

On one hand, Foreigner can buy or own buildings and houses in the country. However, they cannot own the land itself. Foreign corporations, associations, or individual may rent a land for a period of 25 years and renewable for another 25 years. On the other hand, companies that are investing in the Philippines may lease a land for 50 years and renewable for another 25 years.

Investment procedures and guidelines

Before investing in the Philippines, investors must follow the regulatory process on how to apply for investment in the country.

Investors must:

  1. Register with Securities and Exchange Commission (SEC).
  2. Register with the Board of Investment (BOI).
  3. Registration with the Philippine Economic Zone of Authority.
  4. Registration with the Bangko Sentral ng Pilipinas
  5. Compliance with the Department of Environment and Natural Resources.
  6. Compliance with the Department of Labor and Employment
  7. Compliance with other Tourism Investment Guidelines
  8. Projects of the Investors must be approved by the government agencies

 

References:

Australia-Philippines Bilateral Trade and Economic Relationship. (2013). Retrieved January 20, 2015, from tp://www.philippines.embassy.gov.au/files/mnla/FACT_SHEET_2013-Bilateral_Trade_and_Economic.pdf

Philippines. (n.d.). Retrieved January 20, 2015, from http://data.worldbank.org/country/philippines

New Zealand Embassy Manila, The Philippines. (n.d.). Retrieved January 20, 2015, from http://www.nzembassy.com/philippines/relationship-between-new-zealand-and-the-philippines/new-zealand-and-the-philippines

ASEAN, Australia and New Zealand Free Trade Agreement. (2014, August 13). Retrieved January 14, 2015, from http://www.mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/Asean/index.php

(n.d.). Retrieved January 13, 2015, from https://www.cia.gov/library/publications/the-world-factbook/geos/rp.html

Economy Watch – Follow The Money. (n.d.). Retrieved January 13, 2015, from http://www.economywatch.com/world_economy/philippines/export-import.htm

Bano, Sayeeda, & Tabbada, Jose. (2012). Economic Relations between ne w Zealand and the Philippines: an Empirical Analysis

Board of Investments. Primer on Doing Business in the Philippines 2012. Retrieved October 2012, from The Official Website of Board of Investments: http:// www.boi.gov.ph/boiweb/pdf/primer.pdf

Doing Business in Ph Guidebook