23 June 2017
Establishing a Presence in the Philippines
Foreign companies are only permitted to invest in certain sectors, as other sectors are either closed to foreign investment, or subject to certain investment restrictions. Examples of restricted investment are provided below, but it is advisable to refer to Foreign Investment Negative List (FINL) for full details – the 10th list was amended in May 2015, with amendments limited to once every two years.
|No foreign ownership||Ownership of between 20-40%|
|Retail trade enterprises with less than US$2.5 million invested||Exploration, development and utilisation of natural resources|
|Practising certain professions (e.g. pharmacy, law, radiology)||Operation of public utilities and private lands|
|Manufacture, repair, stockpiling and/or distributing of nuclear weapons, biological, chemical and radiological weapons and anti-personal mines||Contracts for the supply of materials, goods and commodities to government owned or controlled corporation, company, agency or municipal corporation|
|Manufacture, repair, storage and/or distribution of products and/or ingredients requiring Philippine National Police or Department of National Defence clearance|
In the Philippines, there is the Anti-Dummy Law which penalises those who violate foreign equity restrictions and evade nationalisation requirements. It prohibits dummy or proxy arrangement to accomplish a transaction not allowed under Philippine law.
How to Establish a Presence
Numerous agencies regulate business registration and the indicates that it takes on average 28 days to start a business in the Philippines, ranking the country 171st out of 190 economies in that category.
The Securities and Exchange Commission (SEC) is the primary agency for administering the registration and operation of domestic corporations under the Corporation Code. The table below provides an overview of the different methods that a Hong Kong company can adopt and establish itself in the Philippines. However, it is also recommended that the following guides are also read for further information:
- Steps in securing business permits (Board of Investment)
- Guide on Investment Laws (Board of Investment)
|Corporation (stock or non-stock)|
|Sole Proprietor||Registration with: |
|Regional Operating Headquarters|
Upon registration, all companies must comply with the Philippines’ accounting standards (Philippine Financial Reporting Standards, which are IFRS with limited modifications) and must present Audited Annual Financial Statements and an Annual Return. These must be filed with the BIR and SEC.
The Philippines offers a number of incentives to encourage investment in specific areas, and Hong Kong companies may be able to take advantage of these incentives. The Investment Priority Plan (IPP) details the investments in which incentives are available [latest IPP 2017]. To benefit from these incentives, a Hong Kong company is required to register with the relevant organisations, and a full list of these organisations can be found on the Government’s Invest in Philippines website. The key organisations to be aware of however, are:
- Board of Investments (BOI) – provides incentives to companies independent of their locations within the Philippines.
- Philippine Economic Zone Authority (PEZA) – provides incentives to companies located in special economic zones to promote investments in export-oriented manufacturing and service facilities.
The incentives offered are similar under the BOI or PEZA with fiscal and non-fiscal benefits available as follows:
The BOI offers incentives to companies in the following projects:
- Business Process Outsourcing (BPO)
- Electronics Industry
- Renewable Energy
A Hong Kong company can register for BOI incentives through the BOI website, with the turnaround time of around 5-21 days. However, certain conditions must be met, which vary depending on whether the company established is export orientated or focused on the domestic market.
|Company is export orientated||Domestic market|
Economic activities eligible for investment are detailed on the PEZA website and include export manufacturing, IT service export, tourism and logistics and warehouse services. Registration for PEZA incentives is submitted through a PEZA application form, which is evaluated and reviewed by the PEZA board. The turnaround time varies and is dependent on the availability of the PEZA board. Before making registration, companies should ensure they are eligible and the following conditions must be met:
- 100% export regardless of ownership
- If selling to the domestic market, the company must obtain approval from PEZA, with sales to the domestic market pay mostly limited to 30% to 50%
- Located in the special economic zones
- Regulatory Environment
- Establishing a Presence
- Intellectual Property Protection
- Staff Recruitment
- Tax Considerations
- Import/Export Procedures
- Further information