Foreign company ownership, is it forbidden in the Philippines?

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3 years ago

If you are a foreigner and you plan to start a business in Asia, build it in the Philippines! The Philippines is one of the fastest growing countries. The Philippines has become attractive to foreigners because of its location and the ability of Filipinos to speak English. The former "sick man of Asia" seems to be well and its neighbors in Southeast Asia are well on their way.

Doing business in the Philippines is not easy. Registration with the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) is laborious and the law governing the business of foreigners in the country is complex. Add to this the rumored red tape of the said agencies.

In recent weeks, the issue of "foreign ownership" in the country has become a hot topic. Foreign ownership is the right of a foreigner to do business in the Philippines. It will be recalled that this was the focus when the SEC revoked the certification of digital news online Rappler.

It is accused of having a foreigner owning a website that is prohibited by our Constitution. Meanwhile, Rappler CEO Maria Ressa asserted that all stakeholders of the website are Filipinos. But the SEC insists that Rappler has granted special provision to one of its foreign stockholders to decide for business. Many are confused, if foreigners are not allowed to own in the country, why are we attracting foreign investors?

Foreign Investment in the Philippines

The Philippines encourages foreigners to invest in the country under R.A. 7042 or the Foreign Investments Act of 1991. In total, under it a foreigner can own up to 40% of a business. But a foreigner is allowed to own 100% of a business in the Philippines if:

This is not on the Negative List.

The country from which foreign investors come is also allowed to invest in Filipinos.

The business has a paid in capital equivalent to 200,00USD.

Has a capital of 100,000USD and has 50 employees and uses Advanced Technology according to the Department of Science and Technology.

Export business is one of the very easy enterprises for foreigners to enter the Philippines. It only requires P5,000 capital, but most banks need P25,000 to P50,000 capital to open a corporate account.

Mass Media and other sectors just for the Filipinos

There are industries that prohibit foreign ownership and are reserved only for Filipinos. These are the industries that are prohibited under the Philippine Constitution. These sectors include:

Mass media except recording

Practice of all professions including but not limited to engineering, medicine and all allied professions, accountancy, architecture, criminology, chemistry, customs brokerage, environmental planning, forestry, geology, interior design, landscape and architecture, law, librarianship, marine desk officers, marine engine officers, master plumbing, sugar technology, social work, teaching, agriculture, fisheries, guidance counseling, real estate service, respiratory therapy, psychology

Retail trade services

Cooperatives

Private security agencies

Small-scale mining

Utilization of marine resources in archipelagic waters, territorial sea, and exclusive economic zones as well as small-scale utilization of natural resources in rivers, lakes, bays, and lagoons

Ownership, operation, and management of cockpits

Manufacture, repair, stockpiling, and / or distribution of nuclear weapons, biological, chemical, and radiological weapons and anti-personnel mines

Manufacture of firecrackers and other pyrotechnic devices

Anti-Dummy Law and government business projects

Inevitably, some Filipinos are taking advantage of the said industries to enter the said industries and use a "dummy" or Filipino representative who will stand as the business owner, but in the end it is still the foreigners who will decide. To prevent the use of Filipinos, Commonwealth Act No. was enacted. 108 or Anti-Dummy Law. Foreigners and Filipinos found guilty of violating this law can face up to 5-15 years in prison and pay enormous fines.

Filipinos are often forced to hold on to the knife and use it for foreigners due to lack of funds or capital. Starting a business sometimes requires a lot of money to succeed.

The government is trying to address this through various projects that will help Filipinos get into business. The Department of Trade and Industry (DTI) administers the Transformation and Advancement Fund or P3 program which is a lending program for micro entrepreneurs. Under this program, an entrepreneur can borrow from P5,000 to P100,000 to small businesses with 2.5% interest per month or 30% interest per year. The loan can also be approved in just one day.

NEDA also studies the sectors that foreigners can enter 100% every two years. It expands the businesses that foreigners can enter to encourage them to invest in the country.

Investing in the Philippines seems to be a big test for foreigners who want to do business. But doing business in the Philippines has many benefits, including the Filipino tradition of being hardworking and diligent in their work. All you have to do is follow the rules to register your business.

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