Foreign Investments Act of 1991

Republic Act 7042, also known as the Foreign Investments Act of 1991, was enacted to spell out the procedures and conditions under which non-Philippine nationals, including former Filipino citizens, may invest and do business in the Philippines with a required paid-in capital of at least US$200,000. The law was amended by Republic Act 8179 to further liberalize the entry of foreign investments into the country.

Foreign investments refer to equity investments made in the form of foreign exchange or other assets actually transferred to the Philippines. These non-cash assets may be in the form of capital goods and patents, formulae, or other technological rights or processes.

Specific Areas of Equal Investment Rights for Former Filipino Nationals:

Former natural born Filipinos can also engage in activities under List B of the Foreign Investments Negative
List. This means that their investments shall be treated as Filipino or will be considered as forming part of Filipino investments in activities closed or limited to foreign participation.

The equal investment rights of former Filipino nationals do not extend to activities reserved by the Constitution for Filipino citizens, including the following:

      1. exercise of profession
      2. defense-related activities
      3. security agency
      4. small-scale mining
      5. rice and corn industry
      6. cockpit operation

Former natural born Filipinos have also been given the right to be transferees of private land up to a maximum of 5,000 square meters in the case of urban land or three (3) hectares in the case of rural land to be used for business or other purposes. Please refer to the section on land ownership for details.

General List of Businesses Exclusive to Filipino Nationals:

Negative Lists (FINL) are classified as follows:

1. List A - consists of areas of activities reserved to Philippine nationals where foreign equity participation in any domestic or export enterprise engaged in any activity listed therein shall be limited to a maximum of forty percent (40%) as prescribed by the Constitution and other specific laws.

2. List B - consists of areas of activities where foreign ownership is limited to pursuant to law such as defense or law enforcement-related activities, which have negative implications on public health and morals, and small and medium-scale enterprises.

The revised Foreign Investments Act also deleted List C of the Foreign Investments Negative List. List C contains investment areas already adequately served by existing enterprises and in which foreign investments need not be encouraged further. Deletion of this list is expected to open further the market to foreign investments and keep existing firms efficient and responsive to the needs of consumers. Consumers will also benefit through wider choices of products in terms of quality and prices.

Application for Registration of Business of Non-Philippine Nationals:

The following are the requirements for application for registration and the agencies responsible for processing such applications:

Agency
Type of Business
Requirements
Securities and Exchange Commission
  • Foreign corporations
  • Domestic corporations or partnerships which are non-Philippine nationals

A. For New Domestic Corporation or Partnership:

  1. Articles of Incorporation/partnership
  2. Name verification slip
  3. Bank certificate of deposit
  4. ICR (Immigrant Certificate of Registration), SIRV (Special Investors Resident Visa)
  5. Proof of inward remittance (for non-resident aliens)

B. For Foreign Corporation

  1. Name verification slip
  2. Certified Copy of Board Resolution authorizing the establishment of an office in the Philippines and designating the resident agent to whom summons and other legal processes may be served on behalf of the foreign corporation;
  3. Financial statements for the immediately preceding year at the time of filing of the application, certified by an independent Certified Public Accountant of the home country;
  4. Certified copies of the Articles of Incorporation/Partnership with an English translation if in a foreign language;
  5. Proof of inward remittance such as bank certificate of inward remittance or credit advices.
For representative offices, the amount initially remitted should be at least US $30,000.00.
Bureau of Trade Regulations and Consumer Protection (BTRCP) - Dept. of Trade and Industry, National Capital Region
  • Single Proprietorships
  • Applications for Metro Manila
For enterprise engaged in defense-related activities

Small and medium-sized domestic market enterprises with paid-in equity capital less than US $100,000

Enterprise with at least 50 direct employees

1. Duly accomplished BTRCP Form No. 17 and accompanying documents

2. Additional Requirements:

a) Clearance from the DND or PNP
b) Certificate from the DOST that the investment involves advance technology
c) Certification from the appropriate Department of Labor and Employment (DOLE) Regional Office

Provincial Offices of the DTISole proprietorships* same requirements
Provincial Extension Offices of the SEC
Corporations/partnerships

* same requirements

All documents executed abroad must be authenticated by the Philippine Embassy/Consulate.

Pre-Processing of Documents:

All applications are considered officially accepted only upon submission of completed documents to appropriate government agency.

Former natural born Filipinos who wish to do business in the Philippines must also submit a copy of birth certificate, certified by the local civil registrar or the National Statistics Office. For those born abroad, a certificate of birth from appropriate government agency of the county where the birth is recorded will be required. It must show the father or mother to be a Filipino at the time of birth or if the citizenship of the parents is not indicated, additional proof that the parent is a Filipino citizen or has not lost his/her Filipino citizenship at the time of the applicant investor's birth.

Those born before January 17, 1973 of Filipino mothers must also submit all of the following:

1. Certified true copies of his/her sworn statement of election of Filipino citizenship
2. Oath of allegiance from civil registrar where documents were filed and/ or forwarded
3. Identification certificate issued by the Bureau of Immigration

In case of loss and/ or destruction of record of birth or non-registration of birth, the following must be submitted:

1. Certificate of non-availability of birth certificate on account of loss and/ or destruction of birth record from the local civil registrar and/ or appropriate government agency if birth was registered abroad
2. Copy of birth certificate of mother or father by the local civil registrar or the NSO
3. Affidavit of two (2) disinterested persons attesting to their personal knowledge that at the time of the applicant's birth, the child was born of a Filipino mother or father

Documents executed or issued abroad must be authenticated by the Philippine Embassy or Consulate having jurisdiction over the place of execution or issuance of document.

Additional Requirements:

Former natural born Filipinos who wish to do business in the Philippines must also submit a copy of birth certificate, certified by the local civil registrar or the National Statistics Office. For those born abroad, a certificate of birth from appropriate government agency of the county where the birth is recorded will be required. It must show the father or mother to be a Filipino at the time of birth or if the citizenship of the parents is not indicated, additional proof that the parent is a Filipino citizen or has not lost his/her Filipino citizenship at the time of the applicant investor's birth.

Those born before January 17, 1973 of Filipino mothers must also submit all of the following:

1. Certified true copies of his/her sworn statement of election of Filipino citizenship
2. Oath of allegiance from civil registrar where documents were filed and/ or forwarded
3. Identification certificate issued by the Bureau of Immigration

In case of loss and/ or destruction of record of birth or non-registration of birth, the following must be submitted:

1. Certificate of non-availability of birth certificate on account of loss and/ or destruction of birth record from the local civil registrar and/ or appropriate government agency if birth was registered abroad
2. Copy of birth certificate of mother or father by the local civil registrar or the NSO
3. Affidavit of two (2) disinterested persons attesting to their personal knowledge that at the time of the applicant's birth, the child was born of a Filipino mother or father

Documents executed or issued abroad must be authenticated by the Philippine Embassy or Consulate having jurisdiction over the place of execution or issuance of document.


Approval:

Decision or approval of the application should be made within fifteen (15) working days from official acceptance of said document/s. Otherwise, the application shall be considered as automatically approved if not acted upon within the said period for a cause not attributable to the applicant.

One-Stop Action Center (OSAC):

The One-Stop Action Center for Investment or OSAC expedites the setting up of business in the Philippines by providing frontline services and assistance to walk-in investors. Competent personnel form several government agencies are available to answer business queries, arrange meetings and factory visits, promote joint ventures, and facilitate the acquisition of permits, licenses and registration. OSAC also processes certain incentives for BOI registered companies and Regional Headquarters (RHQs).

The OSAC is located at the :

Ground Floor
Board of Investments
Industry and Investments Building
385 Sen. Gil Puyat Avenue, Makati City


Investment Priorities Plan (IPP):

The IPP is a list of various areas of economic activities for investment eligible for government incentives as provided of in the Omnibus Investments Code of 1987, as amended. This is drawn up and revised every year in consultation with concerned government agencies and the private sector. Generally, the IPP seeks to attain the following goals:

1. To uplift the material well-being of the poor and the marginalized
2. To enhance global competitiveness of the Philippine industries
3. To ensure sustainable development
4. To take advantage of the global and international developments


Incentives to Registered Firms:

Incentives/privileges may be enjoyed only upon registration. In general, registered enterprises are entitled to the following incentives:

Tax Exemptions:

1. Income Tax Holiday (ITH)

  1. BOI registered enterprises shall be exempt from the payment of income taxes reckoned from the scheduled start of commercial operations as follows:
    • New projects with a pioneer status for six (6) years
    • New projects with a non-pioneer status for four (4) years
    • Expansion projects for three (3) years. As a general rule, exemption is limited to incremental sales revenue/volume.
    • New or expansion projects in less developed areas for six (6) years, regardless of status
    • Modernization projects for three (3) years. As a general rule, exemption is limited to incremental sales revenue/volume.
  2. The income tax holiday is limited in the following cases:
    • Export traders may be entitled to the ITH only on their income derived from the following:
      • Export new products, i.e., those which have not been exported in excess of US$100,000 in
        any of the two (2) years preceding the filing of application for registration, or
      • Export to new markets, i.e., to a country where there has been no recorded import of a specific export product in any of the two (2) years preceding the application for registration.
    • Mining Activities
      • The exploration and development of mineral resources are not entitled to ITH
      • Mining and/ or quarrying without mineral processing is not entitled to ITH
      • Mining and processing of aggregates is not entitled to ITH
  3. New registered pioneer and non-pioneer enterprises and those located in the Less Developed Ares (LDAs) may avail themselves of a bonus year in each of the following cases:
    • The indigenous raw materials used in the manufacturer of the registered product must at least be fifty percent (50%) of the total cost of raw materials for the preceding years prior to the extension unless the Board prescribes a higher percentage.
    • The ratio of the total imported and domestic capital equipment to the number of workers for the project does not exceed US$10,000 to one (1) worker.

In no case shall the registered pioneer firm avail of his incentive for a period exceeding eight (8) years.

2. Exemption from taxes and duties on imported spare parts

A registered enterprise with a boded manufacturing warehouse shall be exempt from customs duties and national internal revenue taxes on its importation of required supplies/ spare parts for consigned equipment or those imported with incentives.

3. Exemption from wharfage dues and export tax, duty, impost and fees

All enterprises registered under the 1999 IPP will be given a ten (10)-year period from date of registration to avail of the exemption from wharfage dues and any export tax, impost and fees on its non-traditional export products.

4. Tax exemption on breeding stocks and genetic materials

Agricultural procedures will be exempted from the payment of all taxes and duties on their importation of breeding stocks and genetic materials within ten (10) years form the date of registration or commercial operation.

Tax Credits:

1. Tax credit on tax and duty portion of domestic breeding stocks and genetic materials

A tax credit equivalent to one hundred percent (100%) of the value of national internal revenue taxes and customs duties on local breeding stocks within ten (10%) years from date of registration or commercial operation for agricultural procedures.

2. Tax credit on raw materials and supplies

A tax credit equivalent to the national internal revenue taxes and duties paid on raw materials, supplies and semi-manufacture of export products and forming part thereof shall be granted to a registered enterprise.

Additional Deductions from Taxable Income:

1. Additional Deduction for Labor Expense (ADLE)

For the first five (5) years from registration, a registered enterprise shall be allowed an additional deduction form taxable income equivalent to fifty percent (50%) of wages of additional skilled and unskilled workers in the direct labor force. This incentive shall be granted only if the enterprise meets a prescribed capital to labor ratio and shall not be availed simultaneously with ITH.

This additional deduction shall be doubled if the activity is located in an LDA.

2. Additional deduction necessary and major infrastructure works

Registered enterprises located in LDAs or in areas deficient in infrastructure, public utilities and other facilities may deduct form taxable income an amount equivalent to the expenses incurred in the development of necessary and major infrastructure works.

This privilege, however, is not granted to mining and forestry-related projects as they would naturally be located in certain areas to be near their sources of raw materials.


Non-Fiscal Incentives:

1. Employment of foreign nationals

A registered enterprise may be allowed to employ foreign nationals in supervisory, technical or advisory positions for five (5) years from date or registration. The positions of president, general manager, and treasurer of foreign-owned registered enterprises or their equivalent shall, however, not be subject to the foregoing limitations.

2. Simplification of customs procedures for the importation of equipment, spare parts, raw materials, and supplies and exports of processed products.

3. Importation of consigned equipment for a period of ten (10) years from date of registration, subject to posting of a re-export bond.

4. The privilege to operate a bonded manufacturing / trading warehouse subject to Customs rules and regulations.

Entrepreneurial Development Services:

Considering the multitude of OFWs, and the magnitude of foreign exchange that they continue to contribute to the economy, the Bureau of Investments (BOI) believes that the OFWs are excellent sources of investment into the Philippines, hence, the inclusion of overseas Filipinos among BOI's target investors.

To make its investment promotions effort for this sector effective and gain more impact, the BOI has integrated its overseas promotions program with Overseas Workers Welfare Administration's (OWWA) Reintegration Preparedness Program. Among the activities and services of the BOI for OFWs are:

1. Conduct of Business/Investment Counseling Seminar

2. Conduct of Entrepreneurial Training Workshop

Depending on the preference or need of a particular job site, the BOI may conduct either a general investment briefing or a more advanced seminar workshop dealing with entrepreneurship and business/investment counseling.

3. Assistance in the preparation of project report/project feasibility for BOI registration

4. Participation in investment fairs or exhibitions overseas as venue for BOI to undertake information awareness among the OFWs or Filipino overseas

5. Assistance in joint venture partnership

6. Referrals to financing programs for additional capital

7. Provision of guidance in setting up the business

An investor who would like to engage in businesses and avail of incentives can simultaneously file his application for registration with the SEC/ BTRCP and application for incentives with the Board of Investments (BOI). The addresses and telephone numbers are as follows:

Board of Investments (BOI)
Industry and Investments Bldg.
385 Sen. Gil Puyat Ave., Makati City
Tel. Nos. 890-1332/ 897-6682/ 895-3640

Security and Exchange Commission (SEC)
SEC Bldg., EDSA cor. Ortigas Ave., Greenhills, Mandaluyong

Tel. No. 726-0931

Bureau of Trade Regulation and Consumer Protection (BTRCP)
Department of Trade and Industry
Trade and Industry Bldg.
361 Gil Puyat Ave., Makati City

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