Navigating Foreign Investments: Equity Limits and Business Structures in the Philippines
Anyone, regardless of nationality, can invest in the Philippines with up to 100% equity. A business with 60% Filipino equity is considered a Philippine company, while one with more than 40% foreign equity is considered a foreign-owned domestic company.
Foreign-owned companies may be formed as a corporation, branch, regional headquarters, or representative office. The type of formation defines the foreign owners’ liability.
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Restrictions to 100% foreign ownership
Any business may be 100% foreign-owned except for those covered in the FIA Foreign Investment Negative List A & B. These restrictions are determined by:
The nature of the business
Amount of paid-up capital
For additional information, feel free to visit: Businesses Foreigners May Be Restricted to Invest In: the Foreign Investment Negative List
FIA Negative List A
Negative List A includes economic activities where foreign equity is restricted in compliance with the Philippine Constitution and Special Laws provisions. The restrictions range from zero to only 60% foreign equity allowed.
Activities where zero foreign ownership is allowed include:
mass media
the practice of professions
the use of Philippine marine resources
small-scale mining
the manufacture, repair, stockpiling, and/or distribution of nuclear, biological, chemical, and radiological weapons
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others as found in FIA Foreign Investment Negative List A
Negative List A also details economic activities where foreign ownership is restricted up to 20%, 25%, 30%, 40% and 60%.
FIA Negative List B
Negative List B includes activities where foreign ownership is restricted only up to 40% due to security, defense, health and moral reasons, as well as to protect small and medium-scale industries.
Minimum investments
Foreign ownership of businesses is also restricted by the amount of paid-up capital, depending on the nature of the business. Executive Order No. 98 has lowered the minimum paid-up capital needed for up to 100% foreign ownership, as follows:
Domestic enterprises
Unless otherwise stated in the FIA Negative List A&B, domestic enterprises, or companies catering to the domestic market, may have up to 100% foreign ownership if the paid-up capital is at least US$200,000. For domestic enterprises employing at least 50 persons and/or using advanced technology, the required minimum paid-up capital is only US$100,000.
Retail trade enterprises
Retail trade companies may have 100% foreign ownership if the paid-up capital is at least US$2,500,000, with a minimum investment of US$830,000 for establishing a store.
Retail companies specializing in luxury or high-end products are allowed 100% foreign ownership with a minimum paid-up capital of US$250,000 per store.
Export enterprises
A business qualifies as an export company if it exports at least 60% of its output. KPO, BPO, web development, and similar businesses serving foreign clients are considered export companies. Export companies may have 100% foreign ownership with a minimum paid-up capital of only P5,000, but have to submit an additional document that said companies are export entities to the Securities and Exchange Commission.
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