The Philippines has always been a great business location for foreign investors, with its strategic position in Southeast Asia, abundance of natural resources, and highly skilled workforce. But without a clear understanding of the laws and processes involved in setting up a foreign-owned business, you could end up with more costs than returns on your investment. Here are the mistakes you need to avoid as a foreign investor in the Philippines:
First, you must clarify what field of industry or type of business operations you are planning to invest in. This will help you not only in processing your business registration requirements more efficiently but also in navigating the restrictions or incentives in your chosen industry. The Eleventh Regular Foreign Investment Negative List opened up more opportunities for foreign participation in key investment areas and activities, allowing 100% foreign ownership for export businesses, such as those in the retail trade, IT or BPO services, and financing and investing. Industries such as manufacturing, construction, private land ownership, exploration of natural resources, and informal education and training centers now allow up to 40% foreign equity. However, some activities and enterprises are completely off-limits for foreign investors, such as:
Foreign companies can also take advantage of fiscal and non-fiscal incentives if they are registered with the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA), ranging from tax exemptions and cost deductions to special protection and benefits. Knowing which incentives your company is eligible for can help increase the returns on your investment. According to the Omnibus Investments Code of 1987 and the Special Economic Zone Act of 1995, these incentives can include:
There are many requirements and legal procedures involved in setting up a business in the Philippines. To secure your investment, your company needs to undergo several registration processes at various government agencies, where you need to acquire the following:
Some of these processes can be complicated, so work with business professionals and experts in Philippine corporate law to ensure a smooth registration process.
Nominee agreements are documents in which one person agrees to act on behalf of another person in legal matters. While this might seem like a more convenient and cost-effective route to establishing your business, it is also extremely risky if not properly structured or handled by a reputable business consultancy. Vague nominee agreements can lead to hefty costs, investment scams, and even undesirable legal situations, especially if it categorizes as an act of evasion under the Philippine Anti-Dummy Law.
In line with the Investment Incentives Act, foreign investors are entitled to the basic rights and guarantees provided in the Philippine Constitution, as well as the rights to: