Frequently Asked Questions
- Who may invest?
- 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).
- How much is the minimum investment?
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 capita 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.
- How is a foreign corporation defined in the Philippines?
- Foreign corporations has been defined as one, which owes its existence to the laws of another state, and generally, has no legal existence within another state. Section 123 of the Corporation Code defines a foreign corporation as one formed, organized, and existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in the Philippines.
- Can a foreign company invest in the Philippines?
- Yes. The Foreign Investment Act (R.A. 7042, 1991, amended by R.A. 8179, 1996) liberalized the entry of foreign investment into the Philippines. Under the FIA, foreign investors are generally treated like their domestic counterparts and must register with the Securities and Exchange Commission (SEC) (in the case of a corporation or partnership) or with the Department of Trade and Industry’s Bureau of Trade Regulation and Consumer Protection (in the case of a sole proprietorship).
- What requirements must be complied with before a foreign corporation can do business in the Philippines?
- If the foreign corporation itself intends to do business in the Philippines under its foreign charter, the foreign corporation must first secure a “License to do Business in the Philippines” from the Philippine Securities & Exchange Commission (SEC). If the foreign corporation intends to do business in the Philippines by incorporating a Philippine company, the foreign corporation must first secure the approval of the SEC by filing its incorporation papers, together with authenticated copies of its foreign charter and by-laws.
- Can a foreign company/investor be allowed to own a 100% of a business entity?
- 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%.
- 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?
- 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.
- 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?
- 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)?
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
- When can foreigners do business or invest in a domestic enterprise up to 100% of its capital?
- 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.
- What are the kinds of investments?
- 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
- In what form can foreign investments be made?
- 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.
- What are the basic rights and guarantees given to the safety of foreign investments?
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.
- What is the Foreign Investments Act (FIA) of 1991?
- 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.
- Where to file investment applications without incentives?
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
- What requirements must be complied with before a foreign corporation can engage in business in the Philippines?
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.
- Are investment incentives transferable?
- 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.
- Does our proposed project qualify for registration with the BOI/PEZA?
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.
- How does one file an application with the BOI/PEZA?
- 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.
- What possible obstacles would our application meet?
- 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.
- How long will it take to obtain BOI/PEZA approval once all requirements are complied with?
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.
- Assuming approval is obtained, what restrictions are ordinarily attached?
- 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.
- How much time is an investor allowed to start his project?
- 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.
- I am a foreigner and I would like to invest in the Philippines, what is the first thing I should do?
If you are producing goods for the domestic market and there will be no export activity, you may register your business as a sole proprietorship under the Foreign Investments Act of 1991:
- Make sure that your business activity does not fall under the Foreign Investment Negative List which has two components: List A enumerates the areas of activities reserved to Philippine nationals mandate of the Constitution and specific laws, and List B contains areas of activities which are defense-related and which have implications on public health and morals;
- Your initial paid-in capital under the amended Foreign Investments Act (R.A. 8179) must not be less than Two Hundred Thousand US dollars (US$200,000); if your business would involve advanced technology as determined by the Department of Science and Technology (DOST) or it would employ at least fifty (50) direct employees, a minimum paid-in capital of One Hundred Thousand US dollars(US$100,000) is allowed;
- Apply with the Department of Trade and Industry Provincial Office where your business will be located and register your Business Name (BN);
- With a BN Certificate of Registration, you proceed to get a Barangay Permit, Mayor’s Permit & go to the BIR.
If you will be joining a corporation or forming one:
- your corporation can be 100% foreign-owned if this is located in an Export Processing Zone or Special Economic Zone and qualify for incentives under the Philippine Economic Zone Authority (PEZA); click for more PEZA information
- based on the type of business activity, your foreign equity participation will depend on what is stipulated in the Foreign Investment Negative List.
- register with the Securities and Exchange Commission; get a Barangay Permit, Mayor’s Permit & go to the BIR.
If your product is at least 70% for export or if the activity is among those listed in the Investment Priorities Plan then your company may be registered and qualify for incentives with the Board of Investments (BOI):
- Apply with the BOI-Cebu Extension Office click for more information.
- Your initial paid-in capital under the amended Foreign Investments Act (R.A. 8179) must not be less than Two Hundred Thousand US dollars (US$200,000); if your business would involve advanced technology as determined by the Department of Science and Technology (DOST) or it would employ at least fifty (50) direct employees, a minimum paid-in capital of One Hundred Thousand US dollars (US$100,000) is allowed;
- Apply with the Department of Trade and Industry Provincial Office where your business will be located and register your Business Name (BN);
- With a BN Certificate of Registration, you proceed to get a Barangay Permit, Mayor’s Permit & go to the BIR.
- What are my rights and privileges as a foreign investor?
As a foreign investor, the following are your rights and privileges:
- 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 at the time of repatriation.
- Right to remit earnings from the investments in the currency in which the investment was originally made at the exchange rate at the time of remittance.
- Rights to payments of interests and principal on foreign loans and contracts.
- Properties represented by the investments or of the enterprises shall be exempted from expropriation by the government except for public use or in the interest of national welfare and defense.
- The government except for public use or in the interest of national welfare and defense shall not demand properties represented by the investments or of the enterprises.
- Can I, a foreigner, own land in the Philippines? What options do I have?
- No. As mandated by the Constitution, only Philippine nationals or 60% Filipino-40% foreign-owned companies may acquire land in the country.
- Foreigners, however, can lease land for a period of 50 years with the option of extension for another 25 years.
- Foreigners may, however, own buildings.
- What advantages do I get in locating in an industrial estate?
In an industrial park, the basic infrastructures are already in place. Water, electricity, telephone and other facilities are already available for immediate connections. The road network inside and outside the industrial estate is already pre-developed. Proper zoning (industrial, residential, commercial and recreational areas) inside the park is also predetermined, with the industrial lots simply waiting for the construction of the factory needed by the locator firm. Moreover, the Locator Company is given the assistance in securing local licenses and permits necessary for the construction and operation of the business.
Industrial estates are normally divided into two areas: a Customs Bonded and a Non- Customs Bonded Area. If the locator company is highly import dependent, it is advised to locate within the Customs Bonded Area. Doing so, its imported goods (raw materials, supplies and equipment) will not be subject to Customs inspection at the port but rather at the company’s premises inside the industrial park.
- Other than the wage/salary, what other costs or benefits do I have to give my employees?
Based on the 1997 Labor Code of the Philippines, the other costs / benefits that have to be given to employees are the following: .
- SSS Premium Contribution
- Service Incentive Leave
- State Insurance Fund/Employees
- Compensation Program Benefits
- Maternity Leave
- Paternity Leave
- 13th Month Pay
- Pag-ibig Contribution
- How will I import capital equipment? Are there restrictions in importation?
A company qualified for tax exemptions on the importation of its equipment must secure prior approval from its governing agency before actual importation can be made.
Regular importation is made through Authorized Agent Bank (AAB).
- How will I import raw materials/supplies? Are there restrictions in importation?
The importation of raw materials has already been liberalized. Therefore the importer simply has to proceed to an AAB to open the necessary letter of credit or other modes through which payment will be made.
There are, however, regulated items that require clearance from the concerned agency prior to importation, and items whose importation is prohibited.
- Application for Barangay Clearance / Permit?
- The Barangay Permit is given by the Barangay where your business will be located.
- How does one go about applying for a Mayor’s Permit/Municipal License to Operate?
To get this permit/license to operate, present the following documents at the Licensing Section of the Mayor’s Office where your business is located:
- Lease Contract of Building
- Barangay Clearance/Permit
- Application Form with the Sketch of Location of building at the back
The following fees are collected:
- Permit Fee - .002% of capital declared if new or based on gross sales if operating
- Business Tax - .0005% of declared capital
- Zoning Fee – per schedule Office of Building Officer (OBO) Fee – per schedule - Garbage Fee – per schedule
- Cebu Fire Dept. Fee – 10% of all fees paid excluding the business tax The processing time is one (1) week.
- What is done at the Bureau of Internal Revenue (BIR)?
With the Mayor’s Permit, the following are done at the BIR:
- Business Registration/Application for Value Added Tax (VAT) Number. - - Registration of Books of Accounts. No filing fee; one day processing time
- Application for Taxpayers Identification No. (TIN) No filing fee and processing time is one (1) week.
- Authority to Print Official Receipts. The printer applies directly with the BIR in behalf of the customer. No filing fee and processing time is one (1) day.
- What are the requirements of the Dept. of Labor and Employment (DOLE)?
- Any foreigner who will work in the Philippines is required to secure an Alien Employment Permit (AEP) from the DOLE in the specific Region.
- What is Annulment of Marriage?
Annulment of Marriage is a Court process in order to annul the marital union between a husband and wife. Annulment of marriage presupposes that the marriage was valid from the beginning and remains valid until annulled by the Court.
- What are the grounds for annulment? Is there a time limit for this?
Marriages can be annulled by the court on the following grounds:
- 1. Either party was eighteen (18) years of age but below twenty-one (21), and the marriage was solemnized without the consent of the parents, guardian or person having substitute parental authority over the party. You can only file the Petition within five (5) years after reaching the age of twenty-one. But you cannot anymore file the Petition if you have freely cohabited with each other as husband and wife after you reach the age of twenty-one. Your parent/s or guardian can also file the Petition anytime before you reach the age of twenty-one.
- 2. Either party was of unsound mind at the time of marriage. You may file the Petition anytime before the death of your husband or wife. But for instance, you freely cohabited with each after he/she came to reason,under this circumstance, you are already precluded by law from filing the Petition.
- 3. The consent of either party was obtained by fraud. You can file the Petition within five years after the discovery of the fraud, provided that you did not freely cohabit with your husband or wife after your full knowledge of the facts constituting the fraud. Sounds tricky?
- 4. The consent of either party was obtained by force, intimidation or undue influence or otherwise known as "shotgun marriage". You can file the Petition within five years from the time the force, intimidation, or undue influence disappeared or ceased. However, you are already barred from filing the Petition if you have freely cohabited with your husband or wife knowing that the force or intimidation had already ceased.
- 5. Either party was a sexual impotent or physically incapable of engaging in sexual intercourse and such incapacity continues and appears to be incurable. You can file the Petition within five (5) years after marriage.
- 6. Either party was afflicted with a sexually-transmissible disease found to be serious and appears to be incurable. You can also file the Petition within five (5) years after marriage.
- What are the kinds of fraud which constitute the ground for annulment?
The kinds of fraud that will give ground for annulment are as follows:
- Non-disclosure of a previous conviction by final judgment of the other party of a crime involving moral turpitude;
- Concealment by the wife of the fact that at the time of the marriage, she was pregnant by a man other than her husband;
- Concealment of sexually transmissible disease, regardless of its nature, existing at the time of the marriage; or
- Concealment of drug addiction, habitual alcoholism or homosexuality or lesbianism existing at the time of the marriage.
- Where can I file the Petition for Annulment?
You can only file the Petition for Annulment in the place of your residence or the place of residence of your husband or wife.
- What are the grounds to declare the marriage void?
The grounds to declare the marriage void are as follows:
- Those contracted by any party below eighteen years of age even with the consent of parents or guardians;
- Those solemnized by any person not legally authorized to perform marriages unless such marriages were contracted with either or both parties believing in good faith that the solemnizing officer had the legal authority to do so;
- Those solemnized without license unless exempted by law.
- Those bigamous or polygamous marriages.
- Those contracted through mistake of one contracting party as to the identity of the other;
- Assuming that you caused the annulment of your first marriage. However, you get married immediately without waiting for issuance of the Final Decree of Annulment. Your second marriage can also be voided by the Court.
- Psychological Incapacity of the husband or wife, existing at the time of marriage, which prevents him or her from complying with the essential marital obligations of marriage, even if such incapacity becomes manifest only after the solemnization of the marriage.
- Incestuous Marriages (between ascendants and descendants; between brothers and sisters whether full or half blood).
- Marriages between relatives:
- a. between collateral blood relatives, whether legitimate or illegitimate, up to the fourth civil degree;
- b. between step-parents and step-children;
- c. between parents-in-law and children-in-law;
- d. between the adopting parent and the adopted child;
- e. between the surviving spouse of the adopting parent and the adopted child;
- f. between the surviving spouse of the adopted child and the adopter;
- g. between an adopted child and and a legitimate child of the adopter;
- h. between adopted children of the same adopter;
- i. between parties where one, with the intention to marry the other, killed the other person's spouse, or his or her own spouse.
- What happens if I will get married without having my first marriage declared void?
Your second marriage will be invalid for being bigamous. The sad thing is, you will be facing another criminal case for bigamy in so far as your second marriage is concerned.
- Is there a time limit for me to file a Petition to declare the marriage void?
- The action to declare the marriage void shall not prescribe. Meaning, you can file the petition anytime during your lifetime.