What is The Foreign Investments Act (FIA) and Its Role in Foreign Ownership

October 13, 2025

The Foreign Investments Act (FIA), formally known as Republic Act No. 7042, is a pivotal piece of legislation in the Philippines, designed to regulate foreign investment while fostering economic growth through foreign direct investment. Enacted in 1991 and amended over time, the FIA strikes a balance between promoting foreign ownership and safeguarding national interests, primarily through the Foreign Investment Negative List. The Foreign Investment Law Philippines outlines permissible levels of foreign equity across various sectors, providing clear pathways for foreign investors in industries such as manufacturing, technology, and renewable energy. With foreign investment incentives in the Philippines, such as tax breaks and streamlined foreign business registration, the act supports investors in navigating the process of investing in the Philippines. This article provides a detailed examination of the FIA’s framework, compliance requirements, and its evolving role in positioning the Philippines as a competitive destination for global capital, offering insights for businesses seeking to leverage opportunities under Republic Act 7042.

Historical Evolution of the Foreign Investments Act

The Foreign Investments Act emerged to modernize the Philippines’ approach to foreign capital, transitioning from restrictive policies to a more open economic framework. Understanding its historical context clarifies how the FIA has shaped the nation’s investment landscape.

Pre-1991 Context: Before the FIA, the 1972 Investment Incentives Code and the 1987 Constitution capped foreign equity at 40 percent in most sectors, thereby limiting foreign direct investment in the Philippines to protect domestic industries. This approach deterred capital inflows, with only $228 million recorded in 1988, according to the Bangko Sentral ng Pilipinas.
1991 Enactment: Republic Act No. 7042, signed on June 13, 1991, liberalized foreign investment rules in the Philippines, allowing up to 100 percent foreign ownership in export-oriented enterprises and select domestic sectors, which boosted inflows to $730 million by 1992.
1995 Amendment (RA 8179): Reduced minimum capital requirements for foreign investors from $200,000 to $5,000 for domestic market firms, encouraging smaller enterprises and increasing approvals by 30 percent within two years.
Post-2000 Reforms: The 2015 launch of the ASEAN Economic Community prompted further liberalization, with Executive Order No. 65 (2018) opening sectors such as telecommunications to full foreign ownership, aligning with regional standards.
2022 Overhaul (RA 11647): Responded to post-pandemic recovery needs, expanding 100 percent foreign ownership to railways, airports, and expressways, resulting in $9.2 billion in foreign direct investment in the Philippines in 2024, a 15 percent rise.
Ongoing Adaptations: The FIA’s biennial review ensures responsiveness, with 2025 reforms under RA 12066 (CREATE MORE Act) enhancing incentives for sustainable investments.

This evolution reflects a strategic shift, positioning the Foreign Investments Act of the Philippines as a dynamic tool that balances liberalization with economic nationalism, fostering investor confidence while safeguarding critical sectors.

Core Provisions and Definitions under the FIA

The FIA establishes a clear regulatory framework for foreign investment in the Philippines, defining key terms and setting ownership guidelines to ensure compliance and transparency.

Policy Declaration (Section 2): The act promotes investments that enhance employment, technology transfer, and productivity, welcoming foreign capital in non-restricted sectors.
Key Definitions (Section 3): A “Philippine national” includes entities with at least 60 percent Filipino ownership; “foreign investment” requires an actual asset or foreign exchange transfer, registered with the Bangko Sentral ng Pilipinas.
Ownership Rules (Sections 5-7): Permits 100 percent foreign ownership in export enterprises (60 percent export threshold) and non-restricted domestic market firms, subject to SEC or DTI registration.
Special Provisions (Section 9): Grants former natural-born Filipinos investment parity in cooperatives and rural banks, excluding professions like law or defense activities.
Land Ownership (Section 10): Allows former citizens to acquire up to 5,000 square meters of urban land or up to three hectares of rural land for business purposes, supporting real estate ventures.
Environmental Compliance (Section 11): Mandates adherence to ecological standards, aligning with global accords like the Paris Agreement.

These provisions create a structured environment for foreign investors in the Philippines, ensuring parity with local firms while enforcing compliance with Philippine investment laws. For instance, a Singaporean tech firm can fully own a software development hub if it is export-focused, but must navigate joint ventures in restricted sectors, such as utilities.

The Foreign Investment Negative List: Restrictions and Exceptions

The Foreign Investment Negative List (FINL), detailed in Section 8, outlines sectors with restrictions on foreign investment, protecting national security and public welfare while allowing flexibility through exceptions.

List A (Constitutional Limits): Reserves mass media (except printing), natural resource exploitation, and public utilities like water supply to 40 percent or less foreign equity. Broadcasting is capped at 20 percent.
List B (Regulated Sectors): Prohibits foreign ownership in defense-related manufacturing (e.g., firearms) and dangerous drug production, requiring special clearances.
Recent Liberalizations: RA 11647 (2022) opened railways, airports, and contract growing to 100 percent foreign ownership, boosting agribusiness and infrastructure investments.
Exceptions: Export enterprises with a 60 percent output abroad are exempt from many restrictions; former natural-born Filipinos are granted waivers in retail and mining cooperatives.
Review Cycle: The FINL’s biennial updates, mandated by the National Economic and Development Authority, ensure relevance, with 2025 changes liberalizing retail trade above PHP 25 million.

The FINL’s transparency, published in the Official Gazette, aids compliance, with 2024 data showing $2.3 billion in approved projects. Missteps risk SEC penalties, underscoring the need for thorough due diligence.

Incentives for Foreign Direct Investment in the Philippines

The FIA is bolstered by foreign investment incentives in the Philippines, administered by the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA), to attract capital to priority sectors.

Income Tax Holidays (ITH): Four to seven years, extendable via the CREATE MORE Act (2024), with a 5 percent gross income tax post-ITH, reducing effective rates.
Duty-Free Imports: PEZA-registered firms enjoy exemptions on capital equipment and raw materials, with 2025 approvals reaching PHP 52.9 billion.
Non-Fiscal Benefits: Fast-tracked permits, 75-year land leases (RA 12252, 2025), and unrestricted foreign currency remittance for eco-zone enterprises.
Sector-Specific Perks: Renewable energy investors benefit from net metering and grid priority, while AI and genomics ventures receive R&D grants under the Innovative Startup Act.

These incentives led to an 18 percent increase in FDI in 2024, according to Bangko Sentral. However, eligibility requires meeting FIA thresholds, such as minimum capital and export ratios, emphasizing the need for precise applications.

Registration and Compliance: Navigating the Process

Navigating foreign business registration in the Philippines under the FIA involves intricate steps, where professional guidance from Triple i Consulting, a trusted provider, is critical due to the process’s complexity.

Entity Formation: Sole proprietorships register with DTI; corporations file Articles of Incorporation with SEC, verifying FINL compliance.
FIA Registration: Foreign equity above 40 percent requires Bangko Sentral registration of inward remittances within 18 months, securing repatriation rights.
Ongoing Compliance: Annual SEC reports, BIR tax filings, and DOLE work permits for expatriates; export firms must verify 60 percent output thresholds for incentives.
Penalties for Non-Compliance: Fines up to PHP 1 million or dissolution for errors like undervalued remittances or FINL violations.

The process, which averages 20 days for SEC approval, requires precision in equity calculations and inter-agency filings. Triple i Consulting’s expertise ensures seamless navigation, mitigating risks, and maximizing FIA benefits for foreign investors in the Philippines.

Recent Amendments and Future Prospects

Recent updates to the Foreign Investments Act of the Philippines enhance its appeal, with RA 11647 (2022) and RA 12066 (2024) expanding ownership and incentives.

2022 Amendments: Liberalized 26 sectors, including railways and airports, and established a single Negative List updated biennially.
2025 Reforms: Extended land leases to 99 years in strategic zones and introduced R&D deductions for green investments.
Future Outlook: ASEAN chairmanship in 2026 and projected 7 percent FDI growth through 2030 signal robust opportunities, though infrastructure gaps persist.
Challenges: Geopolitical risks, like South China Sea tensions, require investor vigilance, balanced by digital FINL portals for transparency.

These developments position the Philippines as a dynamic FDI hub, with the FIA fostering sustainable partnerships.

Final Insights

The Foreign Investments Act remains a cornerstone of the Philippines’ economic strategy, enabling foreign ownership while safeguarding national priorities through a transparent, adaptive framework. Its provisions, incentives, and recent reforms make it a vital tool for investors seeking to capitalize on the nation’s growth.

Is Assistance Available?

Yes, Triple i Consulting offers expert guidance to streamline compliance and unlock the full potential of the Philippines’ Foreign Investments Act. Contact us today to schedule an initial consultation with one of our experts: