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Foreign Business Ownership in the Philippines

100% foreign business ownership in the Philippines is certainly possible. Popular fully foreign-owned businesses are some of the following:

  • Business Process Outsourcing

  • Export-oriented businesses

  • Retail and Restaurants (with a capital requirement of USD 500,000 as per the Retail Trade Liberalization Act)

  • SME businesses (with a minimum investment of USD 200,000 or USD 100,000 with conditions)

There are some industries that are reserved for Filipinos and some – such as public utilities – allow only limited foreign equity.

We’ll discuss foreign ownership restrictions in the Philippines in more detail below.


Contents


Full Foreign Ownership: Quick Summary of Important Points


100% foreign business ownership in the Philippines with barely any minimum capital and no requirements on the number of Filipinos employed for export companies is absolutely possible.

Our incorporation experts have done incorporation in the Philippines for these kinds of businesses all the time.

However, foreigners who want to sell to the local market and do not want to set up export companies find that 100% foreign business ownership in the Philippines is only possible upon the fulfillment of certain conditions. For example:

  • Retail and restaurants – 100% foreign ownership in the Philippines is only possible with USD 500,000 capitalization and per-store investments should be USD 200,000

  • Small and Medium Businesses must have USD 200,000

  • Small and Medium Businesses can have a lower capitalization of USD 100,000 with advanced technology as defined by the DOST or if a startup as stated by DICT, DTI, DOST and must employ 15 Filipinos.

  • Land cannot be owned by a foreigner but a condominium unit can

These are some of the common hurdles to foreign business ownership in the Philippines, and why foreigners often struggle with getting a business off the ground. In broad strokes, selling to the local market requires significant funding.

In contrast, export market enterprises require limited funding and may even be eligible for Tax Incentives, depending on the circumstances.

Now, there are some industries that have limits on foreign ownership ranging from 25% to 40%. These industries are limited due to special laws, the constitution, or because there are national security concerns.

We’ll go through them in special sections below but before we skip to that, we’d like to add a special note on foreign ownership of land.

Foreigners cannot buy land unless they are former Filipinos – and former Filipinos are subject to constraints in the quantity of land they can purchase. Foreigners can inherit land but not through a Will.

We would also caution against putting the land in the name of a partner or a Filipino friend – there are too many risks that occur.


Foreign Ownership Restrictions Philippines: No foreign ownership at all


There are some industries that cannot be owned by foreigners. These are usually industries restricted by special laws or the constitution. These industries are:

  • Mass media except for recording and internet businesses

  • Practice of professions

  • Cooperatives

  • Security companies

  • Small scale mining

  • Utilization of marine and river resources

  • Cockpits

  • Nuclear, biological, chemical, and radiological weapons

  • Firecrackers and other pyrotechnics


Foreign Ownership Restrictions Philippines: Limited Foreign Ownership


Some industries are subject to foreign ownership restrictions in the Philippines. These are:

  • Recruitment agencies for local and overseas employment (25% foreign ownership)

  • Construction of defense related structures (25% foreign ownership)

  • Advertising (30% foreign ownership)

Those that allow 40% foreign business ownership in the Philippines are:

  • Development of natural resources

  • Infrastructure projects (Section 23.4.2.1 of RA 9184)

  • Ownership of land

  • Operation of public utilities (RA 11659)

  • Educational institutions other than those of religious groups, for foreign diplomats and personnel, foreign temporary residents, or for short term high skill development that is not part of the formal educational system

  • Rice and corn production except retailing

  • Contracts to government owned agencies or corporations

  • Ownership of condominium units

  • Private radio communications networks

  • Manufacture of arms and munitions and other items that require Philippine National Police clearance

  • Manufacture of dangerous drugs

  • Micro and small domestic enterprises with less than USD 200,000 of capital

  • Micro and small domestic enterprises with less than USD 100,000 of capital must have advanced technology as defined by the DOST or are endorsed as a startup by the DTI, DOST, DICT which must have 15 employees

Source: Lawyer Philippines


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