The Filipino Congress has just approved a new law on foreign investments in the Philippines (Republic Act No. 11647), amending partially the previous law (Republic Act No. 7042). The new law includes a general statement in its Article 1 about the principles guiding these investments, such as transparency, reciprocity, fairness, and economic cooperation. It introduces regulations that are of great interest to foreign investors, including Spanish investors, as it is more open, liberal, and flexible compared to the previous law.
Regarding the concept of “foreign investments in the Philippines,” the law defines it as capital investments made by non-Filipino nationals in the form of currencies or assets transferred to the Philippines and registered with the Central Bank. However, not all sectors are open to foreign investments, and some sectors, like defense-related industries, require prior authorization from the Ministry.
One notable feature of this new law is that non-Filipino nationals can now invest up to 100% of their capital in a Filipino company after registering with the Securities and Exchange Commission (SEC) or the Department of Trade and Industry (DTI). There are few restrictions on foreign ownership unless exceptional circumstances specified in the law arise. Non-Filipino nationals can also access legal incentives by registering with the Board of Investments (BOI) and meeting the criteria outlined in the Omnibus Investment Code (Executive Order No. 226).
The Foreign Investments in the Philippines law also addresses micro and small businesses with capital below USD 200,000. While these are typically reserved for Filipino nationals, exceptions are made if they meet certain criteria such as advanced technology development, being recognized as startups under specific laws, or employing a majority of Filipino workers. In such cases, non-Filipino nationals can hold a percentage of the capital but are required to transfer technology to Filipino employees if they employ foreign workers and benefit from tax incentives.
Furthermore, the law emphasizes the protection of foreign investments, including repatriation of dividends and safeguarding against expropriation. It also outlines various incentives, both fiscal (such as tax exemptions and credits) and non-fiscal (like employing foreign workers or simplifying customs procedures). Special incentives are provided for investments in priority areas outlined in the Investment Priorities Plan or for establishing Regional Offices by multinational companies. Learn more about INVESTMENTS IN SOUTHEAST ASIA in our PRACTICAL GUIDE.
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
