Restrictions on retail trade business in the Philippines.

What is the definition of retail trade?

"Retail trade" shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption.[1]

What are the activities not considered as “retail trade”? [2]

1. Sales by manufacturer, processor, laborer, or worker, to the general public the products manufactured, processed or products by whose capital does not exceed One hundred thousand pesos (100,000.00);

2. Sales by a farmer or agriculturist selling the products of his farm, regardless of capital;

3. Sales arising from restaurant operations by a hotel owner or inn-keeper irrespective of the amount capital, provided, that the restaurant is incidental to the hotel business;

4. Sales to the general public, through single outlet owned by a manufacturer of products manufactured, processed or assembled in the Philippines, irrespective of capitalization;

5. Sales to industrial and commercial users or consumers who use the products bought by them to render service to the general public and/or produce or manufacture goods which are in turn sold by them; or

6. Sales to the government and/or its agencies and government-owned and controlled corporations.

What is the capital requirement for a non-Filipino to engage in “retail trade”?

1. For Category B – Enterprises with a minimum paid-up capital USD 2,500,000.00. [3]

Opening of branches by a registered foreign retailer is allowed, provided that the investments for each branch must not be less than USD 830,000.00. [4]

2. For Category D - Enterprises specializing in high-end or luxury products with a paid-up capital of USD 250,000.00 per store may be wholly owned by foreigners. [5]

"High-end or luxury goods" shall refer to goods which are not necessary for life maintenance and whose demand is generated in large part by the higher income groups. Luxury goods shall include, but are not limited to products such as; jewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods, electronics and other personal effects. [6]

What are the pre-qualification requirements for foreign retailers?

1. Latest audited annual financial statements, incorporating an income statement and a balance sheet or their equivalents: [7]

a. For Category B – minimum of USD 200M net worth is required. [8]

b. For Category D – minimum of USD 50M net worth is required. [9]

2. Certification by a responsible officer of the applicant-foreign retailer stating that:

a. it has been engaged in retailing for the past five years; and

b. has at least five (5) retailing branches anywhere in the world, or at least one branch is capitalized at a minimum of USD 25,000,000.00;

3. Certification from the responsible officer of the applicant of the existence of franchise or licensing agreements if the applicant fails to meet the preceding requirement of at least 5 retailing branches; and

4. Certification by the proper official of the home state of the applicant-foreign retailer of the local embassy/consulate of the home country of the said applicant-foreign retailer to the effect that the laws of such state allows or permits reciprocal rights to the Philippine citizens and enterprises together with the extent of participation allowed.

[1] Sec. 3 (1), R.A. 8762, Retail Trade Liberalization Act of 2000.

[2] Sec 2, Rule I, IRR R.A. 8762

[3] Sec. 1, Rule III, IRR R.A. 8762

[4] Sec. 2, Rule III, IRR R.A. 8762

[5] Supra note 8.

[6] Sec. 3 (2), R.A. 8762

[7] Sec. 2, Rule IV, IRR R.A. 8763

[8] Sec 1 (a), Rule IV, IRR R.A. 8763

[9] Id.

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