Despite the economic setbacks caused by the global pandemic, the Philippines remains an attractive location for foreign investment, especially with its government pushing for more liberalized business practices and less restriction.
For example, the Philippine government has highlighted sectors that are ripe for foreign investment, such as aerospace, automotive, copper, information technology and business process management (IT-BPM), and electronics. The Department of Energy has also recently allowed foreign companies to fully own large-scale geothermal projects in the country. But as with most investments, it’s crucial to do a solid background check on the business structure in the Philippines. You should know your limits and restrictions as a foreign investor, which will help you avoid costly legal situations and invest in industries that can maximize your returns.
According to the Foreign Investments Act of 1991, which was recently amended in 2018, the following enterprises are allowed to be fully owned by any non-Philippine national or foreign corporation:
Export enterprises include any manufacturer, processor, or service enterprises that export at least 60% of its output, or traders that purchase products domestically and export at least 60% of its purchases. This includes businesses such as call centers, contact centers, IT-BPOs, web development, and web design.
Domestic corporations or subsidiaries are allowed 100% foreign equity if:
Moreover, retail trade enterprises with a paid-up capital of USD 2.5 Million and above are allowed 100% foreign ownership, including those that specialize in high-end or luxury products with a paid-up capital of USD 250,000 or more per store.
This includes the production and trading of rice, corn, and its by-products, as well as contracts for the supply of materials, goods, and commodities to government-owned or -controlled companies and agencies.
This refers to contracts for the construction and repair of locally-funded public works, such as infrastructure and foreign-funded projects. Operation of public utilities, except power generation and electricity supply, also falls under this category.
Foreigners can have 40% equity in the real estate industry, particularly in the ownership of private lands and condominiums.
Usually, with regards to the tourism industry, this involves the exploration, development, and utilization of natural resources, including the operation of deep-sea commercial fishing vessels.
This refers to educational institutions or curriculums that do not form part of the formal education system or those established by religious groups and mission boards. As such, this can include educational institutions for foreign diplomatic personnel or temporary residents and their dependents, or for short-term high-level skills development.
Foreign Investment Negative List A covers areas of investment that are reserved to Philippine nationals in accordance with the Philippine Constitution and specific laws.
Foreign ownership is strictly not allowed in industries such as:
Businesses dealing with human resources and construction labor – such as private recruitment for local or overseas employment and contracts for the construction of defense-related structures – can have only up to 25% foreign equity.
Foreign Negative List B, covers defense-related activities and businesses that have implications on public health and morals. Once authorized by the Department of National Defense (DND), these businesses can have up to 40% foreign ownership. These include:
Set up your business in the Philippines with the FilePino team today! You can call us at +1.806.553.6552 or send us an email at [email protected]. We’ll also be happy to answer any questions you may have here.
