Fully Foreign Owned Company in the Philippines

Republic Act 7042, better known as the Foreign Investments Act of the Philippines, has liberalized foreign business ownership in the country, and opened doors of opportunity for many foreign investors to engage in business activities that not only improve the livelihood and employment opportunities of everyday Filipinos, but also promote consumer welfare, expand the scope, quality and volume of numerous business exports, as well as their access to foreign markets, and even share relevant agricultural and industrial technologies to everyday users. The act promotes equal treatment for both foreign and local investors alike, and requires that foreign investors register with the following government agencies:

• Philippines Securities and Exchange Commission (SEC) [for corporations, branch offices and partnerships]
• Philippines Department of Trade and Industry's (DTI) Bureau of Trade Regulation and Consumer Protection [for sole proprietorships]

For export enterprises, there are no restrictions on the extent of foreign ownership in the Philippines. With regards to domestic market enterprises in the Philippines, where foreign ownership exceeds 40%, foreign investors can have as much as 100% in equity investments, with a paid-in capital of USD 200,000. This is not inclusive of areas listed in the Foreign Investments Negative List.

What is the Foreign Investments Negative List?
Under the 1991 Foreign Investments Act (FIA) of the Philippines are two lists that define the limitations and restrictions of foreign investments, as stated in the constitution. These are collectively known as the "Foreign Investments Negative List", and are divided accordingly:

• List A deals with activities and industries reserved for Philippine nationals
• List B deals with activities and industries regulated by the Philippine court of law:
  • Defense-related activities which require prior permission from the Philippines Department of National Defense (DND), including the manufacture, repair, storage, and distribution of:
    • firearms
    • ammunition
    • lethal weapons
    • military ordnance
    • explosives
    • pyrotechnics
    • other similar materials
  • Activities with serious implications on public health and morals, including:
    • the manufacture and distribution of dangerous drugs
    • any form of gambling
    • the establishment of:
      • dance halls
      • nightclubs
      • bars
      • beerhouses
      • sauna and steam bathhouses
      • massage clinics

Setting up a Foreign-owned Business Operation in the Philippines

In setting up a business corporation in the Philippines, an investor may choose from any of the following options:

• branch office
• corporation
• representative office
• regional headquarters

Legal liability is an important consideration in setting up a business operation in the Philippines. Corporations limit the legal liability of their parent companies, because they require a juridical personality separate from their shareholders. Branch Offices, on the other hand, are mere extensions of their parent companies and under purposes of investment law, can be considered fully foreign-owned.

Setting up a Foreign-owned Export Enterprise in the Philippines

An export enterprise is a business that exports at least 60% of its total output. Subsidiaries and branch offices that export goods and services that amount to at least 60% of their total gross sales are considered export enterprises under the Foreign Investments Act, and may be 100% foreign-owned. Branch operations can be registered for as little as Php 5,000 in paid-up capital. However, most banks require at least Php 25,000-50,000 in initial deposits to open a corporate bank account.

Some industries that may be classified as export enterprises, and are eligible for 100% foreign-ownership, include:

• Call Centers
• Contact Centers
• BPOs
• Web development
• Web Design
• Software develoment
• Animation
• Export of physical product
• Export of services