Can a foreign investor establish a business in the Philippines with 100% foreign equity capital?
Yes, provided, the following conditions are met.
The business is not included in the Negative List as provided herein;
The country or state of the foreign investor does not prohibit Filipinos and Filipino-owned corporations to do business therein; and
The business is a domestic enterprise* having a minimum paid-in capital of USD 200,000 in Philippine Peso equivalent.
Please note that if the domestic enterprise involves the use of advanced technology, as determined by the Department of Science & Technology, or employs at least 50 direct employees, the minimum paid-in capital required is reduced to USD 100,000 in Philippine Peso equivalent.
*What is a domestic enterprise?
It means an enterprise that produces goods for sale or renders services to the domestic market entirely or if exporting a portion of its output, fails to consistently export at least sixty percent (60%) thereof. (Section 3 (e) R.A. No. 7042)
What if the foreign investment is below USD 200,000?
The foreign equity will be limited to a maximum of 40% of the total equity capital of the enterprise, unless a lower percentage is provided in the Negative List depending on the type of the enterprise.
What are the enterprises included in the Negative List?
1. Enterprises wherein no Foreign Equity is allowed:
Mass media except recording.
Practice of professions with certain exceptions provided herein.**
Retail trade enterprises with paid-up capital of less than US$2,500,000.
Private detective, watchmen or security guards agencies.
Utilization of marine resources in archipelago waters, territorial sea, and exclusive economic zone as well as small-scale utilization of natural resources in rivers, lakes, bays, and lagoons.
Ownership, operation and management of cockpits.
Manufacture, repair, stockpiling and/or distribution of nuclear weapons.
Manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personnel mines.
Manufacture of firecrackers and other pyrotechnic devices.
2. Enterprises wherein up to 25% of Foreign Equity is allowed:
Private recruitment, whether for local or overseas employment.
Contracts for the construction of defense-related structures.
3. Enterprise wherein up to 30% of Foreign Equity is allowed:
4. Enterprises wherein up to 40% of Foreign Equity is allowed:
Subject to applicable regulatory frameworks, contracts for the construction and repair of locally-funded public works, except, infrastructure/development covered in RA 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 Section 20 of Batas Pambansa No. 232.
Culture, production, milling, processing, trading except retailing, of rice and corn and acquiring, by barter, purchase or otherwise, rice and corn and the by-products thereof.
Contracts for the supply of materials, goods and commodities to 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.
Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police (PNP) clearance.
Manufacture, repair, storage and/or distribution of products requiring Department of National Defense (DND) clearance.
Manufacture and distribution of dangerous drugs.
Sauna and steam bathhouses, massage clinics and other like activities regulated by law because of risks posed to public health and morals, except wellness centers.
All forms of gambling, except those covered by investment agreements with PAGCOR.
Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200, OOO.
Domestic market enterprises that involve advanced technology or employ at least fifty (50) direct employees with paid-in equity capital of less than the equivalent of US$IOO, OOO.
**List of foreign professionals allowed to practice their professions in the Philippines provided that their home country allows Filipinos to be admitted to the practice of these professions:
Agricultural and biosystems engineering
Guidance and Counselling
Nutrition and Dietetics
Physical and Occupational Therapy
Real Estate Service
Teaching at the elementary and secondary level
Other professions as may be provided by law or by treaty where the Philippines is a party.