Philippines - League of Lawyers

Capital: Manila
Largest city: Quezon City
Official Language: Filipina/ English
Government: Unitary presidential constitutional republic
Area: 300,000 km2
Population: 106,651,394
Currency: Philippine peso (PHP)
GDP total: PHP 47.744 trillion (USD1 trillion)
GDP per capita: PHP 432,613.01 (USD9,061)
Time zone: UTC+8
Calling code: +63
Internet TLD: .ph

[Source: Wikipedia]

Total Foreign Investment in Philippines
2018: USD83 billion (PHP3.988 trillion)
2019: USD88 billion (PHP4.229 trillion) with the top 3 foreign investors being Singapore, China and South Korea
[Source: santertrade.com/ UNCTAD’s World Investment Report]

3 largest trading partners: Japan, United States and China
Top 3 exports: Integrated circuits/microassemblies, Computers, Computer parts
[Source: worldstopexports.com]

Q&A on Foreign Investment

Are there any foreign investment laws in the Philippines?
Yes, the principal foreign investment laws in the Philippines are the Omnibus Investment Code or Republic Act (R.A.) No. 7042 and the Foreign Investment Act or R.A. 8179. Other relevant laws are the Revised Corporation Code (R.A. 11232), the Securities Regulation Code (R.A. 8799) and recently, the Philippine Competition Law (R.A. No. 10667). On top of these, there are special laws with respect to particular and specific industries that regulate foreign investments in one way or another.
Is there a governing or regulatory body responsible for overseeing foreign investment in the Philippines?
Foreign investments in the Philippines are regulated principally by the Philippine Board of Investments, Securities and Exchange Commission, Philippine Economic Zone Authority, and the different administrative bodies from which companies are required to secure permits and licenses in order to do business.
What restrictions exist in the Philippines on foreign investment?
The Philippines has generally eased its fiscal, monetary and other economic policies to attract foreign investments in the country. Except for nationalized industries, which are reserved for 100% ownership of Filipino citizens, many business industries are open to foreign investments. President Rodrigo Duterte also issued Executive Order No. 65, Series of 2018, pertaining to the 11th Regular Foreign Investment Negative List which defined and specified the various industries where foreign investment may come in.
Which industries do these restrictions apply to (if any)?
In accordance with R.A. 7042 and Executive Order No. 65, series of 2018, the “11th Regular Foreign Investment Negative List” sets the parameters and restrictions in foreign investments, to require:
- Up to 25% foreign equity – private recruitment agencies, whether local or overseas employment, and contracts for the construction of defense-related structures.
- Up to 30% foreign equity – advertising
- Up to 40% foreign equity –
  - Subject to applicable regulatory frameworks, contracts for the construction and repair of locally-funded public works, except:
    - Infrastructure/development projects covered in RA No. 7718; and
    - Projects which are foreign-funded or assisted and required to undergo international competitive bidding.
  - Exploration, development and utilization of natural resources.
  - Ownership of private lands.
  - Operation of public utilities, except power generation and the supply of electricity to the contestable market and such other like businesses or services not covered by the definition of public utilities.
  - Educational institutions other than those established by religious groups and mission boards, for foreign diplomatic personnel and their dependents, and other foreign temporary residents, or for short-term high-level skills development that do not form part of the formal education system as defined in Sec. 20 of Batas Pambansa No. 232 (1982).
  - Culture, production, milling, processing, trading except the retail of rice and corn and acquiring, by barter, purchase or otherwise, rice and com and the by-products thereof.
  - Contracts for the supply of materials, goods and commodities to a government-owned or controlled corporation, company, agency or municipal corporation.
  - Operation of deep-sea commercial fishing vessels.
  - Ownership of condominium units.
  - Private radio communications network.
- No foreign equity – Nationalized industries such as mass media, retail trade, practice of profession, small scale mining, cooperatives and the like are reserved 100% exclusively for domestic equity.
Can foreign investors acquire real estate/ property/ land in the Philippines?
Yes, a foreign investor may acquire real property in the Philippines by way of a corporate vehicle in an industry which allows 40% foreign equity.
A foreign investor who is married to a Filipino citizen, by virtue of his/her bonafide union, may also jointly acquire real property in the country.
Are there any sanctions or restrictions on foreign investors from certain countries?
Generally, the Philippines is a friendly nation that opens its doors to all foreign investors.
Are any governmental approvals required for foreign investment in the Philippines?
Except for projects and services in national public works, public defense and public order, foreign investors are liberally allowed to establish a business company or enter into a joint venture agreement in order to do business in the country.
What are the common types of foreign investment in the Philippines?
Foreign investors have come to the Philippines in many types across various economic sectors and industries. The main sectors for investments are information and communication, electricity, gas, steam and air conditioning supply, manufacturing, and administrative and support service activities. The 2018 Negative List has further paved the way for these foreign investments. In 2019, China and South Korea followed Singapore as the largest investors in the Philippines.
What are the common business entities open to foreign investors?
Foreign investment in the Philippines comes into two vehicles. One is through a private corporation. Another is through joint ventures with a local domestic corporation.
Are there any tax advantages for foreign investment in the Philippines?
Yes, the Philippines has 43 double taxation agreements which include Australia, Canada, China, Japan, France, Germany, the EU States, the United Kingdom and the United States of America.
The Philippines also provides several tax incentives and holidays to foreign investors that locate their businesses at the Free Trade and Economic Zones in the country.
Are there any incentives for foreign investors in the Philippines?
There are many incentives laid out for foreign investors depending on the types of industries they enter into and the location of their principal business in the country. Generally, a foreign investor may have a 5-year income tax holiday for pioneer business, a special percentage tax in lieu of national and local taxation, and tax-free and duty-free importation for capital equipment, supplies, raw materials, spare parts and other articles, including finished goods, among other. They are also allowed to employ foreign nationals. Furthermore, they can even be granted permanent resident status depending on the level of their investments.
Are there any free trade zones in the Philippines, which are attractive to foreign investors?
There are various free trade and economic zones in the Philippines that can be found in Cagayan, Subic-Zambales, Clark, Pampanga, Bataan, Cavite and Zamboanga. Aside from these, those that do business in sunshine industries like Business Process Outsourcing enjoy incentives and tax holidays almost similar to free trade and economic zones.
Can foreign investors obtain work visas in the Philippines?
A foreign investor is required to secure a work visa from the Philippine Bureau of Immigration and an Alien Employment Permit (AEP) from the Department of Labor and Employment to allow him to do business and perform his duties and functions for his business company. Technically, the law requires that the applicant must offer a special set of knowledge, expertise and experience that no local national can do to justify the issuance of AEP and work visa. The administrative bodies however have relaxed this interpretation such that even workers in offshore gaming operations have been given their respective visas and AEPs.
Are there any foreign currency or exchange controls regulations in the Philippines relating to foreign investment?
The Philippines is guided by R.A. 9160 or the Anti-Money Laundering Act which checks the inflow and outflow of foreign investment to ensure that the country will not be a place for dirty money, while the so-called “hot money” (which can enter and exit the economy though shares in the Philippines Stock Exchange and government securities) will be minimized in order not to adversely affect economic stability. A foreign national can only bring in less than USD10,000.00 to the country and beyond that, he must secure a clearance from the Anti-Money Laundering Council, which is led by the Philippine Central Bank.
Can foreign investors invest in government projects? If so, are there any restrictions or penalties imposed on the withdrawal of such investments?
Yes, foreign investors may enter into contracts for the construction and repair of locally-funded public works, subject to applicable regulatory frameworks, except:
- infrastructure/development projects covered in R.A. No. 7718; and
- Projects which are foreign-funded or assisted and required to undergo international competitive bidding.
Are there any safeguards or investor protection frameworks in place in the Philippines for foreign investors?
The Philippines gives ample protection to foreign investment pursuant to the 1987 Constitution, Omnibus Investment Code and the Foreign Investment Act, as amended.
Additionally, the Public-Private Partnership Act (R.A. 8975) proscribes regular trial courts, except the Supreme Court, to issue temporary restraining orders, preliminary injunction and preliminary mandatory injunctions against all infrastructure projects which involve the Philippine national government. This law allows smooth implementation of projects even if there are disputes or misunderstanding between the parties.
Is the Philippines a signatory to any investment protection treaties with any countries?
The Philippines has 40 bilateral and international investment agreements which provide protection measures and infrastructure for foreign investments.
Have there been any recent changes in law or developments for reform that may affect foreign investment in the Philippines?
Since 2018, the Philippine rules and policies for foreign investments have remained stable with the implementation of the Negative List. The key change by far is that, in response to COVID-19, the Philippine central bank has relaxed its documentary and reporting rules for foreign exchange operations.
An important piece of reform, the Ease of Doing Business and Efficient Government Service Delivery Act (EDB Act) or R.A. 11032 was enacted which introduced a series of facilitative and commercially practical reforms such as the:
- introduction of standardised deadlines for government transactions;
- creation of a single business application form;
- automation of business permits processing; and
- establishment of a central business databank.
The EDB Act also established the Anti-Red Tape Authority (ARTA), which is mandated to simplify, fast-track and do away with red tape in the process of doing business in the country. The ARTA, which is an agency attached to the Office of the President, has helped facilitate the timely approval of permits and licenses, even the visas of foreign nationals seeking to work or do business in the country.
The Philippines also adopted the Tax Incentives Management and Transparency Act of 2015 (R.A. 10708) to enable the government to monitor, review, and analyze the economic impact of tax incentives on economic growth. It aims to promote fiscal accountability and transparency in the grant and management of tax incentives by conducting cost-benefit analysis and developing the means to promptly measure the government’s fiscal exposure.
What tips are there for foreign investors to be aware of when dealing with foreign investment in the Philippines?
Foreign investors must consider a special product or service together with their capital and the industries that they have a competitive advantage in before seeking to come to the country. It is best that they pursue some exploratory mission(s) and engage a business consultant and legal team in order to map out the way for their business undertakings.
Foreign investors should consider the many comparative advantages of the Philippines such as an English-speaking and well-skilled workforce, strong cultural proximity to the United States of America, exposure to an emerging market and a geographical location in a dynamic Asia-Pacific region.

ABOUT THE AUTHORS

Solo V. Tibe
Lawyer, Tarriela Tagao Ona & Associates

Mr. Solo V. Tibe serves the Firm in a special role by handling commercial, civil, criminal, labor and administrative cases for its various local and foreign clients.
He has travelled abroad for business missions and as a delegate to international seminars and conferences. Occasionally, he would serve as a resource person in a local radio program, speaker in training event or writer of a legal article in a local newspaper. He sits as an officer and adviser to the board of directors of several business companies and non-profit organizations.
He is married to a medical doctor, has 3 children and is actively involved in development work and volunteer service to his religious organization.

ABOUT THE FIRM

Name: Tarriela Tagao Ona & Associates
Address: 8th Floor, Strata 2000 Building, Emerald Avenue, Ortigas Center, Pasig City, Philippines
Telephone: +632 86356092
Email: ttoalawfirm@gmail.com
Website address: www.ttoalaw.com
Key contact: Edgar E. Tarriela/ Managing Partner, www.ttoalaw.com
Established: March 18, 1997
Number of lawyers: 7
Languages: English, Filipino

Brief description:
The Tarriela Tagao Ona & Associates is a full service law firm which specializes in regulatory, tax, labor and corporate aspects of foreign investments. The Firm’s composition, with the partners’ extensive experience and expertise, provides a competitive advantage in meeting the requirements of local and foreign clients.

Since 1997, the Firm has continued to provide its clients creative and sound legal advice, comprehensive total solutions and value driven services to help them achieve their targets and objectives. It has served many start-ups and large multinational companies from their organization phase to their eventual growth and expansion.

The Firm engages its clients as true stakeholders and advances their rights and interests while upholding the rule of law, justice and social order, maintaining the honor of the legal profession and fulfilling its humble share in nation building.

Key practice areas:
The Firm handles all types of legal issues and matters but specializes in Business and Commercial laws, Civil law, Taxation, Labor Relations, Arbitration and representation in cases lodged among various administrative and quasi-judicial bodies. All lawyers are seasoned advocates from the regular trial courts up to the Supreme Court of the Philippines.