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Q. Who may invest?
GTALAW. 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
Foreign Investment Negative List
(FINL).
Q. How much is the minimum investment?
GTALAW. 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
(Foreign
Investment Act) 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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)?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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.
• 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.
• 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.
• 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.
Q. What is the Foreign Investments Act (FIA) of 1991?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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?
GTALAW. 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.
Contact Us
_______________________________________
You're invited to call us to discuss
your company's legal matters. We shall be glad to talk with you over
the telephone, or in our office or yours, whichever is easiest for
you. You can also e-mail us at
gtalaw@gtalawphil.com and we shall get back to you
immediately.
GUZMAN TAÑEDO & ACAIN
Mile Long Building 316
Legaspi Village
Amorsolo Street
Makati City
Telephone: 8941441
TeleFax: 8124296
e-mail:
gtalaw@gtalawphil.com
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