Republic Act (R.A.) No. 11595, signed into law in December 2021, introduced amendments to R.A. No. 8762, otherwise known as the “Retail Trade Liberalization Act of 2000”.
What is the new paid-up capital requirement for foreign retailers?
The new minimum paid-up capital is Twenty-five million pesos (P25,000,000.00) for foreign-owned partnerships, associations, and corporations that wish to engage or invest in the retail trade business in the Philippines.[1]
Note must be taken that the foreign retailer shall be required to maintain in the Philippines at all times the paid-up capital, unless of course it intends to repatriate its capital and cease operations in the Philippines, in which case, it must notify the Securities and Exchange Commission (SEC), for partnerships, associations, or corporations; or the Department of Trade and Industry (DTI), for single proprietorships.
What must be done by the foreign retailer?
The foreign-owned entity must register with the SEC or the DTI, whichever is applicable. The law provides that, for purposes of registration with the SEC or the DTI, the foreign retailer shall submit a certification from the Bangko Sentral ng Pilipinas (BSP) [the central bank of the Philippines] of the inward remittance of its capital investment, or in lieu thereof, such other proof certifying that its capital investment is deposited and maintained in a bank in the Philippines.
What other conditions must be fulfilled?
The following are the other conditions:
The foreign retailer’s country of origin must not prohibit the entry of Filipino retailers [reciprocity requirement]; and
In the case of foreign retailers engaged in retail trade through more than one (1) physical store, the minimum investment per store must be at least Ten million pesos (P10,000,000.00).
What other amendments/changes were introduced by the new law?
R.A. No. 11595 removed the specific allowable foreign equity participation of foreign enterprises based on their paid-up capital. The following no longer applies:
Category A - Enterprises with paid-up capital of the equivalent in Philippine Pesos of less than Two million five hundred thousand US dollars (US$2,500,000.00) shall be reserved exclusively for Filipino citizens and corporations wholly owned by Filipino citizens
Category B - Enterprises with a minimum paid-up capital of the equivalent in Philippine Pesos of Two million five hundred thousand US dollars (US$2,500,000.00) but less than Seven million five hundred thousand US dollars (US$7,500,000.00) may be wholly owned by foreigners except for the first two (2) years after the effectivity of this Act wherein foreign participation shall be limited to not more than sixty percent (60%) of total equity.
Category C - Enterprises with a paid-up capital of the equivalent in Philippine Pesos of Seven million five hundred thousand US dollars (US$ 7,500,000.00) or more may be wholly owned by foreigners Provided, however, That in no case shall the investments for establishing a store in Categories B and C be less than the equivalent in Philippine Pesos of Eight hundred thirty thousand US dollars (US$830,000.00).
Category D - Enterprises specializing in high-end or luxury products with a paid -up capital of the equivalent in Philippine Pesos of Two hundred fifty thousand US dollars (US$250,000.00) per store may be wholly owned by foreigners. [2]
The other qualifications of foreign retailers were also removed, such as:
Five (5) retailing branches or franchises in operation anywhere around the world unless such retailer has at least one (1) store capitalized at a minimum of Twenty-five million US dollars (US$25,000,000.00); and
Five (5)-year track record in retailing;
[1] Section 5, R.A. No. 11595.
[2] See the old Section 5 which is found in R.A. No. 8762.