Philippines
an introduction to Doing Business with the
Philippines
THE PHILIPPINES
Land Area: 300,000 sq.km.
The climate is hot and dry from March to May; rainy from June
to October; and cool and dry from November to February.
Foreigners may engage in all kinds of business subject to the limitations under the Philippine Constitution and special laws
1. Constitutional Restrictions
a. 60% ownership by Filipino citizens or nationals is required for the exploration, development and utilization of natural resources; ownership
and management of public utilities; and ownership, establishment and administration of educational institutions.
b. No foreign equity is allowed in mass media except recording and practice of all professions such engineering; medicine and allied professions;
law; accountancy, architecture and others save in cases prescribed by law.
2. Statutory Limitations
a. Foreign Negative Lists (FNL) under Foreign Investment Act of 1991―prescribes the maximum level of foreign equity allowed for
specific businesses enumerated therein which could be 20%; 25%; 30%; 40%; and 60%.
b. Mining Act of 1995―100% foreign-owned companies maybe involved in the exploration, development and utilization of minerals,
petroleum and other mineral products through a Financial andTechnical Assistance Agreement (FTAA).
c. Banking Law of 2000―limits foreign ownership in Philippine banks to 60% although a framework for 100% ownership maybe allowed in
the future.
SPECIAL ECONOMIC ZONES FOR
REGIONAL DEVELOPMENT
Special Economic Zones Act of 1995
Other smaller zones under said Act: John Hay & Poro Point
• Mandatory List
• Export Activities
• ARMM List
• Renewable Energy;
• Investment Tourism;
• Mining
• Export of Electronics
FISCAL AND NON-FISCAL
INCENTIVES
BOI Registered Enterprises
General Rule: Only Filipino citizens and companies organized under Philippines laws and registered with the BOI
are eligible for BOI incentives under the Omnibus Investments Code of 1987.
Exception: Companies which are 100% foreign-owned shall be eligible for BOI incentives if they are
• (a) engaged in pioneer projects (introduce new products or processes in the Philippines or conduct certain
approved businesses);
However, the foreign companies are obliged to attain 60% Filipino ownership with 30 years from registration or
longer period as determined by the BOI. Exception when 100% of production is for export or the foreign ownership is
limited under the Constitution or the Foreign Investment Negative List (FINL) of the Foreign Investments Law of
1991.
FISCAL AND NON-FISCAL
INCENTIVES
BOI Registered Enterprises
Tax Incentives
1. Pioneer Projects
• 6 years tax holiday for first 6 years of operations extendable to 2 years subject to certain conditions.
• 6 years exemption from local business tax (Local Government Code).
2. Non-pioneer Projects
• 4 years tax holiday from date of operations
extendable to 3 years subject to certain conditions.
Non-tax Incentives for all BOI-registered companies
• Access to manufacturing/trading warehouse system for export-oriented companies resulting to deferral or
elimination of taxes and customs duties.
• Simplified customs procedures for imports and exports.
• Unrestricted use of consigned equipment.
• Employment of foreign nationals in supervisory, technical or advisory positions for 5 years from registration.
FISCAL AND NON-FISCAL
INCENTIVES
PEZA Registered Enterprises
Tax Incentives
• 3 to 8 years tax holiday from income tax and local taxes. Thereafter, 5% tax on gross income (sales less direct costs)
in lieu of all local and income taxes.
• Duty-free and tax-free importation of imported capital equipment and production supplies,
• Exemption from branch profits remittance tax by PEZA-registered branch of foreign corporation.
PEZA- registered companies are entitled to all fiscal incentives avaible to BOI-registered companies.
Non-tax Incentives
• Permanent residency status for foreign investor with initial investment of US$100,000 or more. The permanent
residency status is extended to the investor’s spouse and dependent children under 21 years of age for investments of
US$150,OOO or more.
• Employment of foreign nationals to top managerial positions indefinitely of the foreign investor owns majority of the
capital of the registered enterprise.
Fiscal incentives for companies located at Subic Bay Freeport Zone and Clark Special Economic Zone are provided by the
laws creating them and generally takes the form of income tax holiday and duty-free importation of raw materials
and capital equipment.
FOREIGN LAND OWNERSHIP
General Rule: Philippine Constitution provides that only Filipino citizens and corporations and partnerships which
are at least 60%-owned Filipino-owned may acquire lands in the Philippines.
Exceptions:
• Philippine Condominium Act, R.A. 4726, allows foreigners to acquire condominium units and shares in
condominium corporations up to not more than 40% of the total and outstanding capital stock of a Filipino owned or
controlled condominium corporation.
There have been proposals in the Philippine Congress to amend this provision of the Philippine Constitution.
Foreigners can lease lands for industrial and agricultural projects for a maximum period of 50 years renewable for
another 25 years, or a total lease period of 75 years.
PROTECTION OF FOREIGN
INVESTMENTS
1. Bilateral Mutual Promotion and Protection of Foreign Investment Agreements
2. Regional Operating Headquarters (ROHQ)---branch office can derive income in the Philippines by
doing services to its affiliates, subsidiaries or branches in the Asia Pacific region including the
Philippines and other foreign markets such as administration, business planning procurement of
raw materials, marketing and sales promotion but it cannot directly or indirectly engage in the sale
and distribution of goods and services.
INVESTMENT RELATED VISAS