Start your Foreign Investment in the Philippines today — and let FilePino guide you every step of the way!
As the trusted leader in company formation services in the Philippines, we offer a comprehensive suite of foreign investment – related services to foreign nationals, international business entities, and expats.
Why Invest in the Philippines?
The Philippines is an attractive foreign investment destination for a number of compelling reasons, from the sustained economic growth over the decades to the welcoming business climate. Here are the top reasons:
Robust Economic Growth
The country boasts one of the fastest-growing economies in Southeast Asia, driven by several factors, such as rapid consumer market growth, a strong service sector, investment in infrastructure, government policies and reforms, and technological advancements.
Strategic Location
While the country’s geography as an archipelago poses some challenges for interisland mobility, it is strategically positioned close to major markets like China, Japan, Singapore, and Malaysia. Thus, it offers a valuable gateway to the expansive Asian market.
Highly Skilled Workforce
The country continuously nurtures a large, well-educated, highly skilled, and English-speaking workforce particularly drawn to thriving sectors, such as technology, business process outsourcing, and healthcare.
Cost-Effective Operations
Investing in the country allows foreign investors to benefit from lower operational costs, such as employee wages, office space rentals, and overhead expenses, compared to many other neighboring countries.
Favorable Foreign Investment Climate
In recent years, the Philippine government has liberalized policies and regulations on foreign investments, eased business registration and compliance processes, and incentivized foreign enterprises, particularly those in the special economic zones.
Foreign Investments Act (FIA)
The Republic Act 7042, also known as the “Foreign Investments Act of 1991 (FIA)” and amended by RA 8179, is the primary legislation that governs foreign investments in the Philippines.
As landmark legislation, it promotes the entry of foreign investments to expand livelihood and employment opportunities for Filipinos, enhance the economic value of farm products, increase the volume of exports, improve access to foreign markets, and supplement Filipino capital and technology.
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
As defined by the law, a foreign investment is “an equity investment made by a non-Philippine national in the form of foreign exchange and/or other assets actually transferred to the Philippines and duly registered with the Central Bank which shall assess and appraise the value of such assets other than foreign exchange (Sec, 3(c)).”
Under the FIA, foreigners are allowed to make foreign investments in the Philippines with up to one hundred percent (100%) ownership, provided that the business line or sector is not among those restricted in the FINL.
Foreign Investment Negative List (FINL)
The Foreign Investment Negative List (FINL) or Negative List, is a government-issued document that lists economic sectors or investment areas where foreign ownership and participation in the Philippines are regulated based on the set percentages.
This FINL is updated every two (2) years, and the latest is the Twelfth (12) Regular Foreign Investment Negative List (FINL). This consists of two (2) lists. List A contains areas of investments where foreign ownership is limited by mandate of the constitution and specific laws. List B, on the other hand, lists those limited for reasons of security, defense, risk to health and morals, and protection of small and medium scale enterprises.
Foreign Investment Opportunities in the Philippines
Foreign nationals and entities can tap into a wealth of opportunities in the Philippines through foreign investments, which may include:
Businesses
In the Philippines, various sectors offer diverse business opportunities to foreign investors. These include, but are not limited to, business process outsourcing (BPO), information technology and software development, manufacturing, real estate and property development, renewable energy, tourism and hospitality, and financial services.
[a] Business Structures. Foreign nationals and entities can consider forming a company or establishing extension offices. There are various business structures available as entry points, including sole proprietorships, partnerships (or joint ventures), domestic corporations, domestic subsidiaries, representative offices, branch offices, regional headquarters (RHQs), and regional operating headquarters (ROHQs).
[b] Business Registration. Foreign sole proprietors must register their business names with the Department of Trade and Industry (DTI). Corporations, partnerships, branch and representative offices need to submit applications with the Securities and Exchange Commission (SEC). Regional headquarters (RHQ) and regional operating headquarters (ROHQ) must register with the Board of Investments (BOI). Additionally, the businesses must secure registrations with the local government units (LGUs), the Bureau of Internal Revenue (BIR), and other statutory agencies.
[c] Maximum Foreign Ownership. Foreigners may own and operate a business in the Philippines with up to one hundred percent (100%) foreign ownership, however, with exceptions in the sectors identified in the FINL.
[d] Export Enterprise Incentives. Interestingly, a business qualifies as an export company if it exports at least sixty percent (60%) of its output. Export companies can have one hundred percent (100%) foreign ownership with a minimum paid-up capital of only PHP 5,000, but have to submit additional documentation to the Board of Investments (BOI) and Securities and Exchange Commission (SEC).
[e] Business Capitalization. Additionally, if the paid-up capital for a domestic market enterprise as mandated by law is at least US$ 200,000, this may even be reduced to US$ 100,000, provided that the business introduces advanced technology or employs at least fifty (50) direct employees.
[f] Tax and Other Incentives. Enterprises operating in economic zones and holding special accreditations (e.g., with PEZA, BOI, CEZA, SBMA, etc.) can also have access to various fiscal and non-fiscal incentives. These include, but are not limited to, income tax holidays, duty-free importation, net operating loss carry-over (NOLCO), VAT-zero on selected sales, tax exemption of tax credits, and accelerated depreciation, among others. However, these incentives may vary across industries under special laws.
Equity Investments and Joint Ventures
Foreign investors can also engage in foreign direct investments (FDI) or form joint ventures with existing Filipino companies, however only in sectors allowed in the FINL.
[a] One Hundred Percent (100%) Foreign Equity. As already mentioned, under Foreign Investments Act of 1991 (as amended), foreign investors can invest in as much as one hundred percent (100%) equity, except in areas specified in the FINL. There are also no restrictions on the extent of foreign ownership of export enterprises.
[b] Up to Forty Percent (40%) Foreign Equity. Foreign investors may hold up to forty percent (40%) foreign equity in certain sectors, such as procurement of infrastructure projects, exploration and utilization of natural resources, operation of public utilities, educational institutions (with special conditions), rice and corn milling and processing (except retailing), contracts for supplying materials to GOCCs, ownership of condominium units, private radio telecommunication networks, and manufacture, repair, and storage of firearms, gunpowder, etc. (requiring PNP clearance), among others.
[c] Up to Thirty Percent (30%) Foreign Equity. Foreign nationals may also invest in the advertising sector, however, up to thirty percent (30%) equity only.
[d] Up to Twenty-Five Percent (25%) Foreign Equity. Foreign investments in private recruitment for local or overseas employment and contracts for the construction of defense-related structures are allowed up to twenty-five percent (25%) foreign equity.
[e] Zero Percent (O%) Foreign Equity. There are sectors and industries, however, where foreign investments are not allowed. These include, but are not limited to, mass media, practice of professions (with exceptions), retail trade with paid-up capital less than PHP 25,000,000, cooperatives, private detective and security agencies, small-scale mining, utilization of marine resources, operation of cockpits, and manufacturing of nuclear, biological, chemical, and radiological weapons.
Real Estate Investments
Although direct land ownership in the Philippines is restricted to Filipino nationals, there are legal avenues for acquisitions by foreign nationals, such as through long-term leases, inheritance, corporate ownership, and condominium ownership.
[a] Long-Term Leases. Foreign nationals can enter into long-term lease agreements with Filipino landowners for a maximum of fifty (50) years (with a possibility of extending it for another twenty-five (25) years).
[b] Inheritance and Marital Factors. Foreign nationals may also inherit land if they are legal heirs of Filipino citizens. Purchase of properties in the Philippines by foreigners through marriage is also possible. However, the Filipino spouse will receive the title to the assets. The foreigner’s name may appear in the legal document of acquisition or contract but not in the Transfer Certificate of Title (TCT).
[c] Corporate Ownership. Foreigners can establish or invest in corporations or partnerships with at least sixty percent (60%) Filipino ownership, and such entities can acquire or hold land in the Philippines.
[d] Condominium Ownership. Foreign nationals can also invest in condominium units and own a maximum of forty percent (40%) of the total units in a condominium corporation. The majority of the units or sixty percent (60%) must still be under Filipino ownership.
Foreign Portfolio Investments
Foreign Portfolio Investments (FPI), also referred to as Foreign Indirect Investments, allow foreigners to purchase stocks and bonds of publicly listed companies on the Philippine Stock Exchange (PSE), allowing them to make foreign investments without direct management involvement. However, investors must first obtain an Alien Certificate of Registration Identity Card (ACR I-Card) and be eligible to open a brokerage account.
Investment Visas
For foreign nationals looking to engage in foreign investments while enjoying a permanent or indefinite residency and other exclusive privileges in the Philippines, there are also investment visas available (check the official websites of the visa issuers for updates or possible changes):
[a] Special Investor’s Resident Visa (SIRV). Foreign nationals, along with their spouses and dependent unmarried children below 21 years, can enjoy indefinite residency and multiple-entry privileges by remitting a foreign investment of at least US 75,000. Such investment must be made in publicly-listed companies, companies in the Investment Priorities Plan (IPP) of the Board of Investments (BOI), and entities engaged in the manufacturing and services sectors.
[b] CEZA Investor’s Resident Visa. The Cagayan Economic Zone Authority (CEZA) can also grant a permanent residency status and visa to foreign investors (with their spouses and dependent unmarried children below 21 years) who establish a business within the Cagayan Special Economic Zone and Freeport (CSEZFP) with a capital investment of at least US$ 150,000.
[c] Treaty Investor’s Visa (9d Visa). This 9(d) Visa is available for aliens coming to carry out substantial trade between the Philippines, Germany, Japan, or the United States, to develop and direct the operations of enterprises in the Philippines with substantial foreign investments. It also covers the spouse and dependent unmarried minor children under 21 years of age.
[d] Subic-Clark Investor’s Visa (SCIV). Issued by the Subic Bay Metropolitan Authority (SBMA) to foreign nationals in the Subic Bay Freeport (SBF), this visa requires an investment of at least US$ 250,000 and entitles the holder a permanent or indefinite resident status inside the SBF.
Foreign Investment Protections in the Philippines
According to Section 4 of Republic Act No. 5186, all investors are entitled to the basic rights and guarantees provided in the Constitution. The government of the Philippines recognizes the following rights:
Repatriation of Investments
Foreign investors have the right to repatriate the full proceeds of the liquidation of the investment in the original currency, using the exchange rate prevailing at the time of repatriation as long as it is registered with Bangko Sentral ng Pilipinas (BSP).
Remittance of Earnings
Foreign investors have the right to remit earnings from the investments in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.
Foreign Loans and Contracts
Foreign investors have the right to remit funds required to pay the interest and principal on foreign loans and obligations from technological assistance contracts, at the prevailing exchange rate at the time of remittance.
Freedom from Expropriation
The government will not expropriate property related to investments or enterprises, except for public use or in the interest of national welfare and defense, and only with just compensation. In such cases, foreign investors or registered enterprises have the right to remit compensation received in the original currency of the investment and the prevailing exchange rate at the time of remittance.
Right to Requisition of Investment
Property related to the investment or belonging to the enterprise cannot be requisitioned, except during war or a national emergency, and only for the duration of the event. Just compensation for any requisitioned property will be paid in the original currency of the investment and the prevailing exchange rate at the time of remittance.
Ready to Start Your Foreign Investment in the Philippines?
FilePino is a leading and trusted company formation service provider in the Philippines. We assist foreign nationals, international business entities, and expats in transforming their foreign business ventures into thriving local ventures. Our comprehensive suite of services supports businesses throughout their entire lifecycle.
Arrange an initial consultation with our business consultants today! Call us at (02) 8478-5826 (landline) or 0917 892 2337 (mobile) or send an email to info@filepino.com.
