F.A.Q.’s

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Below Are Some FAQ’s That Our Clients Sometimes Have, Please Email Additional Questions

Can a foreigner or foreign corporation own a 100% of a Philippines business entity?

Yes, one hundred percent (100%) foreign equity is allowed in all areas of investments under the Foreign Investments Act (FIA) except certain financial institutions and those included in the Regular Foreign Investment Negative List (FINL).

What areas of investment and industries are covered by Foreign Investments Act (FIA)?

The FIA covers all investment areas, except banking and financial institutions, which are regulated and governed by the rules of the Bangko Sentral ng Pilipinas (BSP).

Foreign Investment Negative List – lists companies that have at least some maximum foreign ownership requirements, some industries it is limited to 20% others 40%. The Foreign Investment Negative List also covers professions that foreigners are barred from working.

What types of business structures can investors choose from when setting up a business in the Philippines?

Organizations may set up under a variety of organizational structures known as single proprietorship, partnership, corporation, branch office, representative office, regional headquarters and regional operating headquarters.

How do these business structures differ from one another?

Single/Sole Proprietorship is a business structure owned by an individual who has full control/authority of his own and owns all the assets, personally owes and answers all liabilities or suffers all losses and enjoys all the profits to the exclusion of others. Must apply for a Business Name with the Department of Trade and Industry

Partnership is treated as a juridical person having a separate legal personality from that of its members. It may either be general or limited, depending on the liability of the partners. It consists of two (2) or more partners. A partnership must register with the Securities Exchange Commission (SEC) with a minimum capitalization of three thousand pesos (Php 3,000.00).

Corporation is a juridical person established under the Corporation Code and is regulated by the SEC with a personality separate and distinct from that of its stockholders. It consists of at least five (5) to fifteen (15) incorporators each of whom must hold at least one share. It must be registered with the Securities Exchange Commission (SEC). The minimum paid-up capital is five thousand pesos (Php 5,000.00).

Branch Office is an extension of a foreign enterprise and has no separate and independent legal personality. It can carry out the business activities of its head office and may derive income from the Philippines. It is required to inwardly remit $200,000.00 to the Philippines as its assigned capital.

Representative Office is one which deals directly with the clients of its parent company in the Philippines, but may not derive income from the Philippines. It undertakes activities such as information dissemination, communication center, promotion of the company’s products, as well as quality control. It is required to have an initial remittance of at least $30,000.00 working capital into the Philippines.

When are foreigners allowed to do business or invest in a domestic Philippines enterprise up to 100% of its capital?

As long as the proposed activity he intends to venture in is not among those listed in the FINL. Then the paid-up capital for domestic market enterprise must be at least $200,000.00, which may be lowered to $100,000 if the following conditions are met:

  • Introduction of advanced technology;
  • or Employment of at least 50 direct employees.

How and Where can I apply for registration of my investments?

For Single/Sole Proprietorship – Submit an application, together with the required documents, to the Bureau of Trade Regulation and Consumer Protection (DTI-BTRCP), an office under the Department of Trade & Industry.

For Corporations/Partnerships, Branch and Representative Offices – Submit application forms together with required documents at the Securities and Exchange Commission (SEC).

For Regional Headquarters and Regional Operating Headquarters – Submit application form together with required documents at the Board of Investments.

For all proposed activity of a domestically incorporated enterprise to qualify for incentives, the firm must file its application with the appropriate the investment promotion agencies depending on the project’s location, as follows:

Location outside of Economic or Freeport Zones

  • Board of Investments (BOI)

Located in Economic or Freeport Zones

  • Cagayan Economic Zone Authority (CEZA)
  • Clark Development Authority (CDC)
  • Phividec Industrial Authority (PIA)
  • Philippine Economic Zone Authority (PEZA)
  • Subic Bay Metropolitan Authority (SBMA)
  • Zamboanga Economic Zone Authority (ZEZA)

 

Investments (BOI) and Philippine Economic Zone Authority (PEZA) Registrations?

Board of Investments (BOI)
To be eligible for registration with the board of investments, an entity must register its activity with the BOI, if the proposed activity is listed in the current Investments Priorities Plan (IPP). If not listed, the enterprise may still be entitled to BOI incentives, if the following conditions are met:

  • At least 50% of the production is for export (for enterprises with 60% Filipino/40% foreign ownership); or
  • At least 70% of production is for export (for enterprises more than 40% of which is foreign-owned)

Foreign-owned firms, whose ownership is more than 40% of the outstanding capital stock and which proposes to engage in domestic activities, may be entitled to incentives, if the proposed activity is listed in the current Investment Priorities Plan and is qualified as a Pioneer Project.

What is classified as a Pioneer Project?

A preferred area of investments may be declared pioneer if the activity:

A project that involves the manufacturing or processing (not merely the assembly or packaging) of goods or raw materials that have not yet been/currently produced in the Philippines on a commercial scale;

A project that uses a design, scheme, formula, process, method or system of production and/or transformation of an element, raw material, or finished good which is new and untried;

A project that engages in agricultural activities and services which are essential to the achievement of the country’s self-sufficiency program;

A project which produces non-conventional fuels or manufactures equipment which utilize non-conventional sources of energy;

Other project specific criteria is provided in the current IPP.

What are the incentives available to registered enterprises?

Under the Board of Investments (BOI)

Any enterprise registered with the Board of Investments (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):

a. Income Tax Holiday (ITH)

BOI-registered enterprise shall be exempt from the payment of income taxes reckoned from the scheduled start of commercial operations, as follows:

  • – New projects with a pioneer status for six (6) years;
  • – New projects with a non-pioneer status for four (4) years;
  • – Expansion projects for three (3) years. As a general rule, exemption is limited to incremental sales revenue/volume;
  • – New or expansion projects in less developed areas (LDAs) for six (6) years, regardless of status;
  • – Modernization projects for three (3) years, as a general rule, exemption is limited to incremental sales revenue/volume.
  • – Tax credit on raw materials, supplies and semi-manufactured products;
  • – Additional deduction from taxable income for labor expense (cannot be simultaneously enjoyed with theITH incentive);
  • – Additional deduction from taxable income for necessary and major infrastructure works (cannot be simultaneously enjoyed with the ITH incentive);
  • – Exemption from wharf dues and export tax, duty, impost and fees.
  • – Modified Duty Rate for Capital Equipment by virtue of E.O. No. 313.

Effective June 06, 2004 BOI registered enterprises in good standing with project registered as new or expanding, with the power of Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, may import machinery, equipment, spare parts and accessories subject to zero percent (0%) duty for export-oriented enterprises and one percent (1%) duty for domestic-oriented enterprises, classified under AHTN Chapters 40, 59, 68, 69, 70, 73, 76, 82, 83, 84, 85, 87, 89, 90, 91 and 96 of the Tariff and Customs code of the Philippines

The capital equipment incentive provided under the E.O. No. 313 shall be availed of by the registered enterprise for a period of two (2) years from its start or until 06 June 2006.

Certain non-fiscal incentives are also available to the registered enterprises, among which are:
– employment of foreign nationals;
– guaranteed repatriation of foreign investments and earnings thereon;
– and importation of consigned equipment for an unlimited period subject to the posting of re-export bond.

Philippine Economic Zone Authority (PEZA)

Investment Incentives for Ecozone Developers / Operators

Income Tax Holiday

– 4 years for IT Parks/Buildings located outside of Metro Manila;
– 6 years for manufacturing located in less developed area;

Incentives under the Build-Operate-Transfer Law, which includes government support for accessing Official Development Assistance and other sources of financing;

Provision of vital off-site infrastructure facilities;
Option to pay a special 5% Gross Income Tax, 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;

What activities can a RHQ/ROHQ engage in?

Regional Headquarters (RHQ)

The activities of the RHQ are limited to acting in a supervisory role, communications and coordinating center for its subsidiaries, affiliates, and branches in the Asia Pacific region.

It is neither allowed to derive any income from the Philippines and/or to participate in any manner in the management of a branch office it might have in the Philippines, or to solicit, market goods and services either on behalf of its parent company or its branches.

Regional Headquarters (RHQ) Incentives

– Exemption from 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.

Regional Operating Headquarters (ROHQ)

The Regional Operating Headquarters may engage in any of the following qualifying services:

– General administration and planning
– Business planning and coordination
– Sourcing/procurement of raw materials components
– 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
– Data processing and communications
-Business development

Regional Operating Headquarters (ROHQ) Incentives

– 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 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 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.

An 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 or indirectly solicit or market goods and services.

What incentives given to expats working for RHQ/ROHQ?

– Multiple Entry Visa
– Expats, including spouses and unmarried children below 21 years old will be issued multiple entry visa;
– Non-immigrant visa will be processed within 72 hours from submission of documents to the Bureau of Immigration;
– Validity period of 3 years extend-able for another 3 years;
– Exemption from fees except reasonable administrative costs;
– Exemption from securing an 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
– Personnel and their dependents.

How can a company remit its profits and repatriate capital abroad? 

Any enterprise seeking to remit its profits and dividends or repatriate its capital abroad must register their inward remittances 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.

What investment rights does a former natural born Filipino have? The Foreign Investments Act (FIA) recognizes the rights of former natural born Filipinos. They are granted same the investment rights as Filipino citizens in activities such as cooperatives, thrifts 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.”

What are the basic rights and guarantees given to foreign investments? 

All investors and enterprises are entitled to the basic rights and guarantees provided in the Philippine Constitution, such as:

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.

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.

FOREIGN LOANS AND CONTRACTS

The right to remit, at the exchange rate prevailing at the time of remittance, which may be necessary to meet the payment of interest and the principal on foreign loans and foreign obligations arising from technological assistance contracts.

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.

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 a war or a 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.

What visa can be issued to me as an investor? 

Special Investor Resident Visa (SIRV) entitles the holder to reside in the Philippines for an indefinite period of time. As long as his investment subsists in the Philippines. Any alien, except restricted nationals under the Foreign Service Code, may apply for an SIRV provided he meets the following requirements:

He has never been convicted of a crime involving moral turpitude.
He is not afflicted with any dangerous or contagious disease.
He has never been institutionalized for a mental disorder or a disability.
He is able to invest at least US $75,000.00 in the Philippines.

ALLOWABLE FORMS OF INVESTMENT – For the purposes of securing an SIRV, only ownership of shares of stocks in the following shall be accepted as eligible forms of investment, to with:

IN EXISTING CORPORATIONS

PUBLICLY-LISTED COMPANIES,
COMPANIES ENGAGED IN INVESTMENT PRIORITIES PLAN (IPP) PROJECTS, OR
COMPANIES ENGAGED IN THE MANUFACTURING AND SERVICE SECTORS.

 

IN NEW CORPORATIONS:

COMPANIES TO BE ENGAGED IN THE MANUFACTURING AND SERVICE SECTORS, OR
COMPANIES TO BE ENGAGED IN IPP PROJECTS

 

The government has liberalized visa requirements for foreigners to encourage foreign participation in the economic development of the Philippines. Among the liberalized rules are the following provisions:

– Foreign stockholders, investors, representatives of investment houses, land developers and tourism developers are among the categories entitled to the special visa incentive, which grants privileges to certain foreign nationals.
– Aliens entitled to enter the country under the provision 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.
– Foreign technicians may be admitted to the Philippines with a 9g pre-arranged employment visa if their employers can prove that the skills they possess are not available in the country

Entry Visa

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, extend-able for a maximum of one year. To extend their stay, visitors 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.

Work Permits

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 Program (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.

Metro Manila Head Office

Address: 12F Sagittarius Building,
111, H.V. Dela Costa Street Salcedo Village, Makati City 1227
Tel: +63 (02) 5519012
+63 905 313 0064
Fax: +63 2 551 8052
Email: info@tripleiconsulting.com