Foreign Investment Act Amendment: USD100,000 for EXPORT ENTERPRISE

Foreign Investment Act Amendment: USD100,000 for EXPORT ENTERPRISE

President Rodrigo Duterte signed into law Republic Act (RA) No. 11647, “An Act Promoting Foreign Investments”, thereby amending Republic Act No. 7042, otherwise known as the “Foreign Investment Act of 1991”.
RA No. 11647 is a consolidation of Senate Bill No. 1156 and House Bill No. 300 that was passed by Congress in December 2021.
The amended law seeks to help facilitate more foreign investments in the country by allowing more equity for foreign investors. The law also establishes the Inter-Agency Investment Promotion Coordination Committee, led by the Department of Trade and Industry (DTI), which will craft plans for the following: to promote the Philippines as a foreign investment destination; maintain an online database of foreign investments and local enterprises that can be partnered up; help local governments attract foreign investments; and address concerns of foreign investors.
Foreign investments are also encouraged in enterprises “that significantly expand livelihood and employment opportunities for Filipinos; enhance economic value of agricultural products; promote the welfare of Filipino consumers; expand the scope, quality and volume of exports and their access to foreign markets; and/or transfer relevant technologies in agriculture, industry and support services.”
Here are the salient features of the amended FIA:

  • 100% capital in domestic enterprise

Non-Philippine nationals are allowed to do business or invest in a domestic enterprise with up to 100 percent of its capital, except if their participation is prohibited or limited to a smaller percentage in the foreign investments negative list (FINL).
It also liberalizes the practice of professions not governed by existing special laws.

  • Reduction of list of investment areas reserved for Filipinos

There is the reduction of the number of direct hires for foreign companies from 50 to 15 to help attract smaller foreign investors.
This applies to 1) defense-related businesses like the manufacture, repair, storage, and distribution of firearms, ammunition, and lethal weapons; and 2) small and micro domestic market enterprises with paid-up equity capital of less than $200,000.

  • Startup enablers

Foreigners are now allowed 100% ownership of startups or startup enablers, enterprises involving advanced technology, enterprises where a majority of direct employees are Filipinos and there must be at least 15 such employees.

  • Development Program

Registered foreign enterprises employing foreign nationals and enjoying fiscal incentives should implement a skills and understudy development program to ensure transfer of technology or skills to Filipinos.

  • Less reduction cost

Export enterprises involving foreign investors that fail to meet export ratio requirements will be ordered to reduce its domestic market sales to at most 40% of its total production, compared to at most 60% in the old law.
The law also mandates export businesses to register under the National Internal Revenue Code so that they can avail themselves of any tax perks.
Thinking of putting up a business in the Philippines? Let the Filepino experts guide you with the process. Call us today at +63.917.8922337 (Philippines) or send your inquiries here.