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Doing Business

Doing Business

Investing in the Philippines

The Philippine Government welcomes foreign and domestic investments and is proactively promoting investments to accelerate the country’s economic growth and sustain its robust economic outlook. It is inviting investors to explore opportunities for investments in key areas of the Philippine economy.

Areas of Opportunities

Privatization and liberalization incentives in the electricity, water and waste water sectors are in place. Infrastructure projects are being opened for private sector funding in the following areas:

  • Agro-industry
  • BPO/IT services
  • Electronics / Semiconductors
  • Energy
  • Logistics (Hub)
  • Mining
  • Shipbuilding
  • Tourism

Doing Business in the Philippines

Basic information for doing business in the Philippines are shown below:

1.    Who are qualified to invest in the Philippines?

Anyone, regardless of nationality, is welcome to do business and invest in the country, in almost all areas of economic activities provided these are not listed in the Foreign Investments Negative Lists (FINL) of the Foreign Investment Act of 1991.

2.    What are these areas of investments covered by the Foreign Investments Act (FIA)?

Under the Foreign Investments Act of 1991 (Republic Act [RA] 7042 as amended by RA 8179, foreign investors are allowed to invest 100% equity in companies engaged in almost all types of business activities subject to certain restrictions as prescribed in the FINL. FINL is a short of investment in areas of activities, which may be opened to foreign investors and/or reserved to Filipino nationals.

3.    Is it possible for foreigners to invest up to 100% capital in domestic entity?

Yes, it is possible to do so if it meets the following conditions: a) If the proposed activity is not among those listed in the FINL; b) if the paid-up capital for domestic market enterprise is at least USD200,000.00, which may be lowered to USD100,000 if the following conditions are met: introduction of advanced technology; or employment of at least 50 direct employees; and c) if the product/service is for export.

What are the requirements for establishing a business in the Philippines?

Doing business in the Philippines (with or without incentives) requires prior registration with the following agencies: a) Securities and Exchange Commission (SEC) for corporation or partnership; and b) Department of Trade and Industry (DTI) for sole or single proprietorship.

There are other types of business enterprises that maybe set up under laws other than those of the Philippines which require SEC registration, namely: Branch office, Representative or liaison office, Regional Headquarters (RHQ) and Regional Operating Headquarters (ROHQ).

5.    What are possible incentive schemes available for an investor?

The government has come up with a liberal program of fiscal or non-fiscal incentives to attract foreign capital and technology that complements local resources.

In terms of investment incentives, the Philippines offers incentives such as income tax holiday or exemption from corporate income tax for four (4) or six (6) years; duty-free importation of capital equipment; employment of foreign nationals in supervisory, technical or advisory positions; tax credit for taxes and duties paid on raw materials, supplies and semi-manufactured products used in the manufacture of export products and forming part thereof; and access to bonded manufacturing warehouse system, among others.

6.     What protection is available to investors?

All investors are entitled to the basic rights and guarantees provided in the Philippine Constitution. Among other rights recognized by the government of the Philippines are the repatriation of Investments; remittance of Earnings; foreign Loans and Contracts; and freedom from expropriation.

Moreover, the Philippines is undertaking continuous reforms to improve the ease of doing business in the country through streamlining of government procedures.

For more information, prospective investors are advised to visit www.boi.gov.ph.

Public-Private Partnership (PPP) Program

By the Public-Private Partnership Center of the National Economic Development Authority (NEDA)

As of 29 May 2012, NEDA has rolled out the following projects for PPP:

Automatic Fare Collection System

  1. Balara Water Hub
  2. CALA Expressway (Cavite and Laguna Side)
  3. Cebu Bus Rapid Transit Demonstration Project
  4. Establishment of Cold Chain System and Covering Strategic Areas in the Philippines
  5. Grains Central Project
  6. Integrated Transport System (ITS) Project
  7. LRT Line 1 South Extension and Operation and Maintenance (O & M)
  8. LRT Line 2 East Extension and O & M
  9. Mactan-Cebu International Airport Passenger Terminal Building
  10. Modernization of the Philippine Orthopedic Center
  11. NAIA Expressway Project (Phase II)
  12. New Bohol (Panglao) Airport
  13. New Centennial Water Supply Source Project
  14. NLEX-SLEX Connector Road
  15. Operation and Maintenance of Angat Hydro Electric Power Plant (AHEPP)
  16. Auxiliary Turbines 4 & 5
  17. O & M of the Laguindingan Airport
  18. O & M of the Puerto Princesa Airport
  19. PPP for School Infrastructure Project
  20. Quirino Highway Improvement and Rehabilitation
  21. Vaccine Self-Sufficiency Project Phase II

 More information on the abovementioned PPP projects may be obtained from http://ppp.gov.ph/wp-content/uploads/2012/05/PPP-Brochure_May2012.pdf.

To know more about the investment priorities of the PHL Government, please visit: http://www.gov.ph/2012/06/13/investment-priorities-plan-2012/.

Why you should invest in the Philippines?

People Power

The Filipino workforce is one of the most compelling advantages the Philippines has over any other Asian country. With higher education priority, the literacy rate in the country is 94.6% – among the highest. English is taught in all schools, making the Philippines the world’s third largest English-speaking country. Every year, there are some 350,000 graduates enriching the professional pool.

Strategic Business Location

The Philippines is located right in the heart of Asia – today the fastest growing region. It is located within four hours flying time from major capitals of the region. Sited at the crossroads of the eastern and western business, it is a critical entry point to over 500 million people in the ASEAN market and a gateway of international shipping and air lanes suited for European and American businesses.

First-class lifestyle

Discover the best of sun, sea, sand and style in the tropical setting teeming with the best of western amenities. The Philippines is second home to expatriates who enjoy the company of the warmest people in the region, the country’s openness to varied cultures and a decidedly global outlook. Expats enjoy accessible and affordable luxuries – business centers, housing, schools, hospitals, shopping malls, hotels and restaurants, beach resorts, and recreation centers.

Abundant resources

An archipelago like the Philippines offers diverse natural resources, from land to marine to mineral resources. It is also the biggest copper producer in Southeast Asia and among the top ten producer of gold in the world. It is also home to 2,145 fish species, four times more than those found in the Bahamas. The 7,100 islands boast of beautiful beaches and breathtaking sceneries that offer soothing leisure and relaxation spots for vacationers and tourists.

Low cost of doing business

Wages are typically less than a fifth of that in the U.S. Local communication, electricity and housing costs are also 50% lower compared to the U.S. rates. Foreign companies that are now outsourcing programming and business processes to the Philippines estimate 30 to 40% business cost savings, 15 to 30% call center services and application systems and 35 to 50% software development.

Liberalized and Business-Friendly Economy

An open economy allows 100% foreign ownership in almost all sectors and supports a Build-Operate-Transfer (BOT) investment scheme that other Asian countries emulate. Government corporations are being privatized and the banking, insurance, shipping telecommunications and power industries have been deregulated. Incentive packages include the corporate income tax, reduced to a current 32%, with companies in the Special Economic Zones are subject to only 5% overall tax rates. Multinationals looking for regional headquarters are entitled to incentives such as tax exemptions and tax and duty-free importation of specific equipment and materials.

Unlimited business opportunities

As Asian economies integrate within the vast framework of the ASEAN Free Trade Agreement (AFTA), the Philippines is the natural and most strategic location for firms that want access to the large ASEAN market and its vast trade opportunities. The Philippines has enhanced and primed up various areas for investors and offers a dynamic consumer market accustomed to an array of product choices created by a competitive domestic economy.

Developing Infrastructure for Global Growth

A well-developed communication, transportation, business and economic infrastructure links the three major islands and distinguishes the Philippine economy. Highly accessible by air, water and cyberspace, liberalization of inter-island shipping and domestic aviation further sparked improved facilities and services. The container terminals are suited to handle cargo traffic at the highest levels of efficiency. Communication provides redundant international connectivity 24/7 with fiber optic cable as primary backbone network and satellite as backup. Economic reforms emphasize regional growth, converting remote areas into business centers. The landmark BOT legislation allows private investors to build and operate infrastructure, then turn it over to the Philippine government after a set period of time.

All you need and more

The Philippines offer state-of-the-art telecommunications facilities, adequate and uninterrupted power supply. There are ready-to-occupy offices and production facilities, computer security and building monitoring systems, as well as complete office services in specialized IT zones. With the government’s focus on building up an IT-enabled economy, the Philippines is on its way to becoming the E-services Hub of Asia.

An archipelago like the Philippines offers diverse natural resources, from land to marine to mineral resources. It is also the biggest copper producer in Southeast Asia and among the top ten producer of gold in the world. It is also home to 2,145 fish species, four times more than those found in the Bahamas. The 7,100 islands boast of beautiful beaches and breathtaking sceneries that offer soothing leisure and relaxation spots for vacationers and tourists.

Guides for investing  or doing business in the Philippines may be accessed at www.pwc.com/ph/en/business-guides/index.jhtml.

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INCENTIVES 

In line with efforts to further promote and develop the Philippines as an alternative eco-tourism and investment destination in the Southeast Asian region, the Philippine Government is offering the following incentives to those who will invest in eco-tourism related business in the country:

  • Four (4) years of Income Tax Holiday (ITH) as qualified under the National Investment Priorities Plan;
  • Upon expiration of the ITH, a 5% Special Tax on Gross Income and exemption from all national and local taxes.  (Gross income refers to gross sales or gross revenues derived from the registered activity, net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction made for administrative expenses or incidental losses during a taxable period);
  • Tax and duty-free importation of capital requirement;
  • VAT Zero Rating on local purchases of goods and services, including land-based telecommunications, electric power; and water bills; and
  • Exemption from expanded withholding tax.

*Source: Primer on Doing Business in the Philippines, DTI-Board of Investments

For more information on incentives on doing business in the Philippines, interested parties may wish to contact the Philippine Board of Investments at telephone numbers: +63-2-897-6682, +  63-2-890-9308, and + 63-2-895-3640 or visit www.boi.gov.ph. Inquiries may also be sent to Philippine Investment and Trade Center in Bangkok through email, pticbangkok@gmail.com , or +66-2258-5382 / +662-259-0139/40 ext. 119.

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