Can Foreigners Own Business In Philippines Business in the Philippines?
The Philippines is a popular destination for foreigners seeking to start or expand their businesses. With its strategic location, highly skilled workforce, and rapidly growing economy, it offers many opportunities for entrepreneurs. However, many foreigners often need clarification about the rules and regulations governing business ownership in the Philippines. In this article, we will explore the laws governing foreign ownership of businesses in the Philippines and what you need to know before starting a business there.
The 60-40 Rule
The Philippines follows the 60-40 rule regarding foreign ownership of businesses. Foreign investors can own up to 40% of a domestic corporation, while Filipino citizens or corporations must own the remaining 60%. The 60-40 rule is enshrined in the Philippine Constitution and aims to protect Filipino businesses from foreign competition while still allowing for foreign investment.
Types of Business Structures
Foreigners looking to invest in the Philippines have several options regarding business structures. The most common options include:
- Sole Proprietorship: This is the simplest form of a business structure owned and operated by a single individual. However, it is important to note that foreigners cannot own a sole proprietorship in the Philippines.
- Partnership: This is a business structure owned by two or more individuals who share the profits and losses of the business. Foreigners can own up to 40% of a partnership in the Philippines.
- Corporation: Can Foreigners Own Business In Philippines A corporation is a separate legal entity from its owners and offers limited liability protection. Foreigners can own up to 40% of a corporation in the Philippines.
- Branch Office: A branch office is an extension of a foreign corporation and can engage in business activities in the Philippines. However, it is important to note that a branch office does not have a separate legal entity from its parent company.
Requirements for Foreign-Owned Businesses
Foreign-owned businesses in the Philippines must comply with certain requirements and restrictions. These include:
- Investment Capital: Foreign-owned businesses must have a minimum investment capital of at least US$200,000 for retail and trading businesses and at least US$100,000 for all other businesses.
- Board of Directors: Foreign-owned corporations must have a minimum of five directors, three of whom must be Filipino citizens.
- Employment of Filipino Workers: Foreign-owned businesses must employ at least 10 Filipino workers.
- Registration with Appropriate Agencies: Foreign-owned businesses must register with the appropriate government agencies, including the Securities and Exchange Commission (SEC), the Bureau of Internal Revenue (BIR), and the Department of Trade and Industry (DTI).
- Compliance with Local Laws: Foreign-owned businesses must comply with all local laws, regulations, and taxes.
Foreigners can own businesses in the Philippines but must comply with the 60-40 rule and other requirements and restrictions. It is important to seek legal and professional advice before starting a business in the Philippines to ensure compliance with all laws and regulations. With the right research and preparation, foreign entrepreneurs can take advantage of the many opportunities the Philippines offers and contribute to its growing economy.
