You may set up your business under several organizational structures known as single proprietorship, partnership, corporation, branch office, representative office, regional headquarters, or regional operating headquarters.
Yes, one hundred percent (100%) foreign equity may be allowed in all areas of investments under the Foreign Investments Act (FIA) R.A. 7042 except those included in the Regular Foreign Investment Negative List (FINL).
The FIA covers all investment areas except banking and other financial institutions, which are governed and regulated by the Bangko Sentral ng Pilipinas (BSP).
The Foreign Investment Negative List covers 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 further descriptions on the Negative Lists A & B:
List A: refers to areas reserved to Filipinos by mandate of the Constitution and Special Laws such as but not limited to:
a. Mass Media, except recording, practice of licensed profession, retail trade,cooperative and small –scale mining, etc. where foreign ownership is prohibited; and
b. 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 advance 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.
4. When can foreigners do business do business or invest in a domestic enterprise up to 100% of its capital?
A. Full entry of non-Filipinos is feasible if the proposed activity is not among those listed in the FINL;
B. When the paid-up capital for domestic market enterprise is at least US$200,000 which may be lowered to US$100,000 and if the following conditions are met:
· Introduction of advanced technology; or
· Employment of at least 50 direct employees.
A. For Single/Sole Proprietorship (Filipino or foreign national) – You may go online at http://www.bnrs.dti.gov.ph to register your business name.
For other inquiries on Business Name (BN) Registration, consider the following:
· For concern regarding Business name policies, clarification on requirements, call (632) 751-3330;
· For technical concern such as page cannot be displayed, problem in viewing look up table, etc. please call (632) 729-8681;
· For inquiries and checking of application status, the contact points in Metro Manila are:
Atrium Building : (632) 864-0847 or (632) 501-5135
Trafalgar Building : (632) 811-8367 or (632) 811-8231
Hi-way 54 : (632) 706-1767
Park and Ride : (632) 536-7153
(near Manila City Hall)
Caloocan City : (632) 332-0829
· Send emails to [email protected];
· Visit the DTI- National Capital region, Makati City if within Metro Manila, located at the 12F Trafalgar Plaza, 105 H.V. Dela Costa St., Salcedo Village, Makati City;
· Approach any DTI Provincial office (if outside Metro Manila) with contact information supplied at http:www.businesslcedo Village.gov.ph.
A. A foreign national secure first ACR-Icard with the Bureau of Immigration before securing DTI permit and/or opening an account in any commercial banks.
B. For Corporation/Partnerships, Branch and Representative Offices – Submit application forms together with the required documents at the Securities and Exchange Commission (SEC). The SEC is located at the SEC Building, EDSA corner Ortigas Avenue, Greenhills, Mandaluyong City. Its contact number is (632) 584-0923; 584-9225. For concerns outside Metro Manila, SEC has Extension Offices. Online information could be generated from http://www.sec.gov.ph.
C. For Regional Headquarters and Regional Operating Headquarters – Submit application together with required documents at the Board of Investments via the Project Evaluation and Registration Dept., Industry and Investments Building, 385 Sen. Gil Puyat Avenue, Makati City, Metro Manila. Said office could be reached through telephone number (632)895-3997 or through emails sent to [email protected].
For a proposed activity of a domestically incorporated enterprise to qualify for incentives, the firm must be registered with the appropriate investment promotion agency/ies depending on the project’s location, to wit:
A. Location outside of Economic or Freeport Zones
· Board of Investments (BOI)
· Regional BOI in ARMM
B. Located in Economic or Freeport Zones
· Aurora Special Economic Zone Authority (ASEZA)
· Cagayan Economic Zone Authority (CEZA)
· Clark Development Corporation (CDC)
· Phividec Industrial Authority (PIA)
· Philippine Economic Zone Authority (PEZA)
· Subic Bay Metropolitan Authority (SBMA)
· Zamboanga Economic Zone Authority (ZEZA)
7. What other relevant information that should be noted about registering with the Board of Investments (BOI) and Philippine Economic Zone Authority (PEZA)?
A. Board of Investment (BOI)
To qualify for registration with the BOI, a company should be organized under Philippine laws as a domestic entity. An enterprise may register its activity if the same is listed in the current Investments Priorities Plan (IPP). If not listed the enterprise may also be entitled to BOI incentives for as long as the following conditions are met:
· At least 50% of the production is for export (for enterprise with more than 60% Filipino/40% foreign ownership); or
· At least 70% of production is for export (for enterprise with more than 40% of foreign ownership).
Foreign-owned firms, whose ownership exceeds 40% of the outstanding capital stock and which proposes to engage in domestic-oriented activities, may be entitled to incentives if the proposed activity is listed in the current IPP and qualities under Pioneer status (refer to ensuing description).
B. Philippine Economic Zone Authority (PEZA)
The Special Economic Zone Act of 1995 as amended, mandates the PEZA to operate, administer, manage and develop Special Economic Zones or Ecozones.
Enterprises that may qualify for registration with PEZA are domestic company, subsidiary and branch office that will manufacture and export 100% of their production and/or services.
Permission has to be sought if the enterprise located within the zone will export below 100% and in most cases PEZA has allowed up to 30% of production for the domestic market.
So far, there are 225 proclaimed Special Economic Zones that are operating in the country. Details could be drawn from http://www.peza.gov.ph.
A. A preferred area of investments may be declared Pioneer if the activity:
· 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; or
· Uses a design, formula, scheme, method, process or system of production or transformation of any element or raw material or finished good which is new and untried; or
· Engages in agricultural activities/services essential to the achievement of the country’s self-sufficiency program; or
· Produces non-conventional fuels or manufactures equipment which utilize non conventional sources of energy; or
· Conforms to other specific criteria as provided for in the annually drawn investments Priorities Plan.
A. Board of Investments (BOI)
An enterprise registered with the BOI, pursuant to the 1987 Omnibus Investments Code (Executive Order No. 226) is entitled to, among others, the following incentives subject to certain terms and conditions:
· Income Tax Holiday (ITH)
BOI-registered enterprise shall be exempt from the payment of income tax reckoned from the scheduled start of commercial operations, as follows:
¾ New projects with a pioneer status for six (6) years;
¾ New projects with a non-pioneer status for four (4) years;
¾ Expansion projects for three (3) years, the exemption of which, as a general, is limited to incremental sales revenue/volume;
¾ New or expansion projects in less developed areas (LDAs) for six (6) years, regardless of status;
¾ Modernization projects for three (3) years, the exemption of which, as a general rule, is limited to incremental sales revenue/volume.
· Tax credit on raw materials, supplies and semi-manufactured products (for export producers only);
· Additional deduction from taxable income for labor expense (cannot be simultaneously enjoyed with the ITH incentive);
· Additional deduction from taxable income for necessary and major infrastructure works (cannot be simultaneously enjoyed with the ITH incentive);
· Exemption from wharfage dues and export tax, duty, import and fees.
· Modified Duty Rate for Capital Equipment by virtue of E.O. No. 528
Since June 17, 2006, BOI registered enterprises of good standing with project registered as new or expanding under the Omnibus Investments Code of 1987 may import machinery, equipment, spare parts and accessories that are subject to zero percent (0%) duty for export-oriented enterprises and one (1%) duty for domestic-oriented enterprises. The products fall under Chapters 40, 59, 68, 69, 70, 73,76, 82, 83, 84, 85, 87, 89, 90, 91 and 96 of the Tariff and Custom Code of the Philippines.
The capital equipment incentive provided under E.O. No. 313 (Modifying the Nomenclature and the Rates of Imported Duty on Certain Imported Articles under Section 104 of the Tariff and Customs Code of 1978, as amended) shall be availed of by a registered enterprise for a period of five (5) years from its effectivity, or until June 16, 2011.
Certain non-fiscal incentives are also available to the registered enterprise, among which are: (a) employment of foreign nationals; (b) guaranteed repatriation of foreign investments and earnings thereon; and (c) importation of consigned equipment for an unlimited period subject to the posting of re-export bond.
B. Philippine Economic Zone Authority (PEZA)
PEZA offers the following Investment Incentives for Ecozone Developers/Operators:
· Income Tax Holiday
¾ 4 years for IT Parks/ Buildings located outside of Metro Manila;
¾ 6 years for manufacturing located in less developed area;
· Provision of vital off-site infrastructure facilities;
· Option to pay a special 5% tax on Gross Income earned, in lieu of all national and local taxes;
· Permanent resident status for foreign investors and immediate family members;
· Employment of foreign nationals;
· Assistance in the promotion of economic zones to local and foreign locator enterprises;
For Ecozone and IT Locators, the following incentives could be extended:
· Income Tax Holiday (ITH)
¾ New registered pioneer firms
– Six (6) years from commercial operation;
¾ New registered non-pioneer firms
– Four (4) years from commercial operation;
¾ Expanding Firms
– Three (3) years from commercial operation of the expansion;
¾ After the ITH period, the option to pay a special 5% tax on Gross Income, in lieu of all national and local taxes;
· Exemption from duties and taxes on imported capital equipment, spare parts, supplies, raw materials;
· Tax Credit on Domestic Breeding Stock and Genetic Materials – an ecozone export enterprise which purchases breeding stocks and genetic materials form a domestic producer shall be entitled to a tax credit evaluation to 100% of the value of national internal revenue taxes and customs duties that would have been waived on the breeding stocks and genetic materials had these items been imported;
· Domestic sales allowance equivalent to 30% of total sales;
· Exemption from wharfage dues and export taxes, imposts and fees;
· Employment of foreign nationals;
· Simplified import and export procedures;
· Other incentives under Executive Order No. 226 (Omnibus Investment Code of 1987), as may be determined by the PEZA Board.
Enterprises allowed to operate within the Subic Bay Freeport (SBF) shall, in lieu of paying all other taxes, pay a final tax of 5% of gross income provided their income form local (non-export) sales shall not exceed 30% of their income from all sources.
Enterprises locating within the Clark Special Economic Zone (former American Airbase at Clark Field) and Poro Point Special Economic and Freeport Zone (formerly Wallace Air Station and its adjoining areas) are granted incentives similar to those given to the SBF enterprises.
Five other special economic zones are were created under separate special laws. These are the Cagayan Special Economic Zone Authority (CESA), Zambaonga Economic Zone Authority (ZEZA), Authority of the Freeport Area of Bataan (AFAB), and Tourism Infrastructure and Enterprise Zone Authority (TIEZA) and Aurora Special Economic Zone. The incentives granted to those that will locate in these ecozones are similar to the incentives granted to PEZA ecozone.
A. Regional Headquarters (RHQ)
The activities of the RHQ are limited to acting as a supervisory, communications and coordinating center for its subsidiaries affiliates and branches in the region.
It is neither allowed to derive any income from sources in the Philippines and to participate in any manner in the management of any subsidiary or branch office it might have in the Philippines nor to solicit or market goods and services whether on behalf of its mother company or its branches, affiliates, subsidiaries or any other company.
Incentives for RHQ
· Exemption from corporate income tax;
· Exemption from branch profits remittance tax;
· Exemption from value-added tax;
· Sale or lease of goods and property, and services to the RHQ are zero-rated;
· Exemption from all kinds of local taxes, fees or charges imposed by a local government unit, except real property tax on land improvements and equipment;
· Tax and duty free importation of equipment and materials for training and conferences needed and solely used for the RHQ functions, and which are not locally available, subject to prior BOI approval;
· Importation of brand new motor vehicle but subject to payment of taxes and duties.
B. The Regional Operating Headquarters (ROHQ) may engage in any of the following qualifying services:
· General administration and planning
· Business planning and coordination
· Sourcing/procurement of raw materials component
· Corporate finance advisory services
· Marketing control and sales promotion
· Training and personnel management
· Logistics services
· Research and development services and product development
· Technical support and maintenance
· Dataprocessing and communications
· Business development
Incentives for ROHQ
· Subject to preferential income tax rate of 10% on taxable income;
· Exemption from all kinds of local taxes, fees or charges imposed by a local government unit, except real property on land improvements and equipment;
· Tax and duty free importation of equipment and materials for training and conferences needed and solely used for the ROHQ functions, and which are not locally available, subject to prior Board of Investments (BOI) approval;
· Importation of brand new motor vehicle but subject to payment of taxes and duties.
ROHQ is allowed to offer qualifying services only to its affiliates, branches or subsidiaries as declared in its registration with the Securities and Exchange Commission (SEC). It is not allowed to directly and indirectly solicit or market goods and services whether on behalf of their mother company, branches, affiliates, subsidiaries or any other company.
Incentives for Expatriates
· Multiple Entry Visa:
¾ Expatriates, including spouse and unmarried children below 21 years old will be issued this type of visa;
¾ Non-immigrant visa will be processed within 72 hours from submission of documents to the Bureau of Immigration;
¾ Validity period of 3 years extendible for another 3 years;
¾ Exemption from payment of fees except reasonable administrative costs;
¾ Exemption from securing Alien Certificate of Registration;
· Withholding tax of 15% on compensation income applicable to both alien and Filipino executives holding managerial and technical positions;
· Tax and duty free importation of used household goods and personal effects;
· Travel tax exemption
¾ Personnel and their dependents.
Enterprises seeking to remit its profits and dividends or repatriate its capital abroad may register their inward remittance with the Bangko Sentral ng Pilipinas (BSP) after registration with the SEC or BTRCP. For this purpose, BSP rules and regulations covering procedures for registration of foreign investments are observed.
The Foreign Investment Act (FIA) recognizes the rights of former natural born Filipinos. They are granted same investment rights as Filipino citizen in activities such as cooperatives, thrift banks and private development banks, rural banks and financing companies. In addition, under Section 1 of the FIA as amended by RA 8179, “Any natural born citizen who has lost his citizenship, and who has legal capacity to enter into a contract under Philippine laws may be a transferee of a private land to be used by him for business or other purposes up to a maximum area of five thousand (5,000) square meters in the case of urban land or three (3) hectares in the case of rural land.”
All investors and enterprises are entitled to the basic rights and guarantees provided in the Philippine Constitution, such as:
A. Right to REPATRIATION OF INVESTMENTS
In the case of foreign investments, the right to repatriate the entire proceeds of the liquidation of the investment in the currency in which the investment was originally made at the exchange rate prevailing at the time of repatriation.
B. Right to REMITTANCE OF EARNINGS
In the case of foreign investments, 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.
C. Right to FOREIGN LOAN AND CONTRACTS
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.
D. 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 of 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.
E. Right to NON-REQUISITION OF INVESTMENT
There shall be no requisition of 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 of such. 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.
A. The Special Investor Resident Visa (SIRV) entitles the holder to reside in the Philippines for an indefinite period as long as his investment subsists. Any alien, except restricted nationals under the Foreign Services Code, may apply for an SIRV provided he meets the following requirements:
A. He has not been convicted of a crime involving moral turpitude.
B. He is not afflicted with any loathsome, dangerous or contagious disease.
C. He has not been institutionalized for mental disorder or disability.
D. He is willing and able to invest the amount of at least US$75,000.00 in the Philippines.
B. SVEG – Special Visa for Employment Generation (E.O. 758)- The SVEG is a special visa issued to a qualified non-immigrant foreigner who shall actually employ and maintain at least ten (10) Filipinos in a lawful and sustainable enterprise, trade or industry. Qualified foreigners who are granted the SVEG shall be considered special non-immigrants with multiply entry privileges and conditional extended stay, without need of prior departure from the Philippines.
The privileges of this Executive Order may extend to the qualified foreigner’s spouse and dependent unmarried child/children below eighteen (18) years of age whether legitimate, illegitimate or adopted.
For purposes of securing an SIRV, only ownership of shares of stocks in the following shall be accepted as eligible forms of investment, to wit:
A. In existing corporations:
· Publicly-listed companies
· Companies engaged in Investment Priorities Plan (IPP) Projects, or
· Companies engaged in the manufacturing and services sectors.
B. In new corporations:
· Companies engaged to be engaged in the manufacturing and services sectors, or
· Companies engaged to be engaged in IPP Projects
The government has liberalized visa requirements for foreign entrants to encourage foreign participation in the economic development of the Philippines. Among the liberalized rules are the following provisions:
A. Foreign stockholders, investors, representatives of investment houses, land developers and tourism developers are among the categories entitled to the special visa incentive, which grant privileges to certain foreign nationals.
B. Aliens entitled to enter the country under the provisions of a treaty of amity, commerce and navigation may be admitted as non-immigrants. They are given treaty-trader visas for the sole purpose of carrying on substantial trade between the Philippines and the state of which they are nationals.
C. Foreign technicians may be admitted to the Philippines with a pre-arranged employment visa if their employees can prove that the skills they possess are not available in the country.
Foreign nationals may come to the Philippines for reasons of business, pleasure or health with a temporary visitor’s visa. This visa allows stays for periods of 59 days, extendible for a maximum of one year. To extend their stay, visitor’s must register with the Bureau of Immigration or with the office of the municipal or city treasurer in areas outside Manila. Executive Order No. 408 allows foreign nationals, except those of specifically restricted nationalities, to stay in the Philippines for up to 21 days without a visa.
In general, a foreign national seeking employment in the Philippines, whether resident or non-resident, must secure an Alien Employment Permit (AEP) from the Department of Labor and Employment (DOLE). An AEP is valid for one year from the date of issue and may be renewed subject to the approval of the DOLE. Executives of area or regional headquarters and OBUs, as well as treaty trader visa holders, are exempt from the requirement to obtain alien employment certificates.
A local employer who wishes to employ a foreign national must apply on the foreign national’s behalf with the DOLE for the permit. The petitioning company must prove that the foreign national possesses the required skills for the position and that no Filipino is available who is competent, able and willing to do the specific job for which the foreign national is desired.
To ensure a proper transfer of technology, the DOLE requires the employers of foreign nationals to provide an Understudy Training Programme (UTP) and to designate at least two Filipino understudies. The functions of these employers must be deemed permanent, and they must require skills or expertise that are scarce in the Philippines.
The SRRV is managed by the Philippine Retirement Authority (PRA). Its primary role is to promote and grant the SRRV’s to would-be retirees, and to offer a range of services, benefits, and comfort that would make their stay worthwhile.
Once you are SRRV Visa holder, it opens the door to vast opportunities and benefits. These include:
· Option to Retire Permanently
· You may live, work and study in the Philippines
· Multiple Entry Privileges
· You may travel outside the Philippines and re-enter anytime.
· Exemptions from:
· Income tax from your pension and annuities;
· Exit and re0entry permits of the Bureau of Immigration;
· Annual registration requirement of the Bureau of Immigration;
· Customs Duties and Taxes with regard to the importation of household goods and personal effects up to US$7,000.00
· Travel tax, if you stay in the Philippines is less than one year from the last entry date; and
For more tails, you may log on to www.pra.gov.ph
Treaty Traders Visa (applicable only to Japanese, Germans and Americans)
This visa is issued to a foreigner who:
A. seeks to develop and direct the operation of the company in the Philippines.
B. is not applying for a non-immigrant visa in order to avoid the requirements or limitations applicable to an immigrant.
C. intends to leave the country upon the completion of his contract
D. is employed by an actual company and not by a bogus organization
If an applicant is from the United Sates of America (USA), he must prove that
A. he is engaged in a trade according to the trade and commerce agreements of the Philippines and the United States
B. he intends to leave the country upon the completion or termination of his contract
C. his employer is a foreign national or the company he intends to work with is foreign –owned; and he must hold a supervisory or an executive position
D. he holds special qualification as a supervisor or executive officer of a foreign company (if underage)
Note: The Treaty Trader’s Visa is valid for one year.
Initially, DTI-NERBAC can assist you in conceptualizing your project. The Domestic Investments Promotion Service (DIPS) of BOI can provide the additional requirements for you to be included in the database of investments for promotion. In addition, BOI-DIPS will help you find a probable joint venture partner.
The Board of Investments is an investment promotion agency and does not offer financial assistance to prospective investors. However, you can apply for financial assistance from Philippine banks e.g. Land Bank of the Philippines and Development Bank of the Philippines. You may contact the abovementioned banks to get the necessary information in applying for financial assistance.
LandBank of the Philippines – Buendia, Makati Branch
G/F Tara Building, 389 Sen Gil Puyat Avenue
Makati City Philippines
Tel No: (632) 836-9734/903-9971
Email Add: [email protected]
Development Bank of the Philippines
Sen Gil J. Puyat Avenue corner Makati Avenue,
Makati City, Philippines
Tel No: (632) 815-1479
Email Add: [email protected]