Concepts on Foreign Ownership of Corporations in the PH (2024)

The Philippines is home to a growing economy which brings along with it great business opportunities for both locals and foreign investors from abroad. That said, when it comes to establishing foreign ownership of corporations in the country, foreign investors are usually granted the same rights as citizens of the Philippines.

To enjoy these rights, they must register their companies with the Securities and Exchange Commission (SEC) for the business type whether corporation, partnership, branch office or representative office. And they can register with the Department of Trade and Industry’s (DTI) Bureau of Trade Regulation and Consumer Protection for sole proprietorships.

In the Corporation Code of the Philippines, the Foreign Investment Act, R.A. 7042, as amended by R.A. 8170 liberalized foreign investment in the country, and foreign ownership corporations are now well defined. If you need assistance in this aspect, you can reach out to accounting firms that offer business registration services. Learn more about the concept of foreign owned corporations below:

Under the 1991 Foreign Investment Act (FIA), there are two subsidiaries, negative, lists. This is alternatively called the “Foreign Investment Negative List” that defines the kind of foreign investments which are limited or restricted by the Philippine constitution and other specific laws.

Of the two Negative Lists, Negative List A contains clauses for the specific investment areas for foreign ownership as allowed by Philippine Laws. Negative List B is limited for the purpose of defense, security, and risk to the morals and well-being of medium and small-scale local enterprises.

Notably, these Negative Lists may be amended by the Philippine President, except in cases where the constitution imposes restrictions on foreign equity and the activities in question. It may also only be amended once every two years. Make sure to keep updated with the news for any new changes and amendments because ignorance of the law will not excuse you from penalties and other legal repercussions. It would help to work with an accounting firm to stay updated on revenue regulations and law updates.

A subsidiary is a registered company that comprises at least 60% Filipino ownership, whereby owners must be of Filipino nationality. If the foreign stake is 40%, it is considered as a foreign-owned domestic corporation.

Foreign ownership exceeding 40% and up to 100% of any domestic market enterprise is allowed so long as the paid-in capital is at least USD 200,00. The company must also employ a minimum of 50 direct employees, or if using advanced technology, may allow a paid-in capital lower than USD 100,000 according to R.A. 7042 and as amended by R.A. 8179.

Export businesses are defined as those that export at least 60% of their outputs, and these may be 100% foreign-owned. They may also file for an exemption of the paid-up capital requisite of USD 200,000 with the SEC. Some businesses considered as export companies in the Philippines include BPOs, KPOs, Back Offices, IT, Web Development, and call center

Note: Unless indicated as otherwise in the Negative Lists.

Are you’re a foreigner looking to establish a corporation in the Philippines? We can help you out. Our accounting firm is a one-stop shop, offering help with bookkeeping to business registration services. We have a long roster satisfied domestic and international clients. Get in touch with us today and enjoy our free 30-minute consultation.