Академический Документы
Профессиональный Документы
Культура Документы
Business in
the
Philippines
1
2009 edition
Foreword
The Philippines has long opened its doors to embrace global
economic interconnectedness. As the world economy shrinks, that
is to say cross border transactions and investments have indeed
resulted in close trade relationship among countries, the need for a
global network which will provide consistent advice has never been
more apparent. RSM International makes a difference worldwide as
it is a global network composed of independently owned and
managed professional service firms, united by a common desire to
provide the highest quality service to their clients.
2
Contents
General 4
Taxation
18
Employment 58
Accounting 68
Asset Valuation 73
Relevant Websites
89
3
General
The Philippines is one of the countries in Southeast Asia which is
located in the “Pacific Rim of Fire.” It is an archipelago composed of
7,100 islands and islets. The country has a total land area of 30
million hectares or 300,000 square kilometers and the three biggest
islands commonly inhabited by people are Luzon. Visayas, and
Mindanao. Its archipelagic nature makes the world’s 5th longest
coastline; it has a coastline of about 36, 300 kilometers. Three
prominent bodies of water surrounded the archipelago: the Pacific
Ocean on the east, the South China Sea on the west, and the
Celebes Sea on the south.
Filipinos use the two official languages, Filipino and English. Filipino
is the native language used nationally as a language of
4
communication among ethnic groups while English is also widely
used as a medium of instruction in higher education and in business
trades. There are eight major dialects spoken by majority of the
Filipinos: Tagalog, Cebuano, Ilocano, Hiligaynon or Ilonggo,
Bicolano, Waray, Pampango, and Pangasinense. Eighty-five percent
of the Filipino is predominantly Catholic while the Muslims
constitute of about 5 percent of the population. The remaining 10
percent belongs to other religious groups.
5
message to the rest of the world through world-class transmission
facilities. The country’s communication infrastructure is well-
developed and expanding, a high quality, low cost bandwidth
domestic network, with six available platforms: fixed line, cellular,
cable TV, over the air TV and radio, and the VSAT system.
Economy
The Philippine economy is considered a mixed economic system,
which means it may feature both capitalism and socialism. The
country is considered by International Monetary Fund (IMF) as a
fastest growing economy is Southeast Asia as the country posted a
real GDP growth of 7.3% in 2007. For 2008, the country’s real GDP
increased by 4.5 percent. Based on the NSO Labor Force Survey in
2008, the full year economic growth increased labor employment by
530,000. The employment created was based on services which
served as the country’s primary growth driver. In response to the
global economic crisis, the government is partnering with private
sector for infrastructure projects. Ownership of dwellings and real
estate, business process outsourcing, agriculture,
healthcare/medical tourism, and tourism are the positive prospects
that could help the economy to remain resilient and prepare for
eventual economic rebound.
6
investments approved during the quarter were coursed through BOI
and PEZA.
Administration
The 1987 Constitution provides a presidential system of
government with bicameral parliament and three equal branches:
(1) the Executive, (2) the Legislative, and (3) the Judiciary. As
defined, the Legislature makes the law, the Judiciary interprets the
law (if consistent with the Constitution), and the Executive
implements the law.
7
Local Customs
The regular working day is consisted of eight (8) hours. Banking
institutions can be flexible with their own business hours; however,
the time should not be lesser than six (6) hours a day, anytime
between 8 a.m. to 5 p.m. Generally, commercial banks transact
from 9 a.m. to 3 p.m. and savings bank from 9 a.m. to 5p.m.
There are eleven (11) regular holidays and (3) special non-working
holidays. These holidays are shown further on this reading.
8
Types of Business Entities
Generally, there are three forms of business organization in the
Philippines.
Sole Proprietorship
Type of business entity which there is only one owner and he has
the final word taking all decisions by himself. All debts of the
business are debts of the owner and must pay from his personal
possessions. This means that the owner has unlimited liability.
Partnership
Type of business organization in which two or more individuals pool
money, skills, and other resources, and share profit and loss in
accordance with terms of the partnership agreement.
Corporation
A corporation is an artificial being created by operation of law,
having the right of succession and the powers, attributes and
properties expressly authorized by law or incident to its existence.
9
These are equity investments made by non- Philippine nationals in
the form of foreign exchange and/ or other assets actually
transferred to the Philippines and duly registered with the Central
Bank which shall assess and appraise the value of such assets other
than foreign exchange.
The enterprise whose products and services do not fall within List A
and B of Foreign Investment Negative List is allowed up to one
hundred percent (100%) ownership.
The same shall register with the Board of Investment (BOI) and
submit the reports that may be required to ensure continuing
compliance of the export enterprise. In case when the export
enterprises fail to meet the export ratio requirement, the BOI shall
advise the Security and Exchange Commission (SEC) and Bureau of
Trade Regulation and Consumer Protection (BTRCP). Thus, both
agencies shall order the non-complying export enterprises to
reduce its sales to the domestic market to not more than forty
percent (40%) of its total production. Failure to comply with such
order without justifiable reason may subject the enterprise in
cancellation of SEC or BTRCP registration and other appropriate
penalties.
Audit Requirements
A statutory audit is required for all corporations with authorized
capital stock or paid-up capital exceeding P50, 000, including
branches of foreign corporations. It is also required for any
corporation whose gross sales or earnings exceed P150, 000 in any
quarter.
Formation procedures
Registration Requirements
11
To establish a corporation, between five to 15 individuals must act
as incorporators. They must each own or subscribe to at least one
share, and a majority of them must be residents of the Philippines.
At least 25% of the authorized capital stock must be subscribed at
the time of incorporation, and at least 25% of that subscribed stock
must be paid. However, when the capital stock consists of no-par
value shares, the subscriptions must be paid in full.
Formation Costs
12
stockholders and capital composition, investments, treasury shares,
retained earnings, and dividends.
Partnership
A partnership with more than P3, 000 in capital must register with
the SEC. Registration follows the pattern outlined above for
corporations. The filing fee for the articles of partnership is the
greater of P1, 000 or 0.2% of the partnership capital.
13
Partnerships are subject to the same record keeping and statutory
audit requirements as corporations.
Sole Proprietorship
Liquidation/Receivership
Corporations may be dissolved for any of the following causes:
14
shareholders to the distribution of corporate assets is subordinated
to the rights of the creditors.
15
Foreign Exchange Controls
(ForEx)
The Philippines’ official currency is Philippine Peso (Php), and the
Bangko Sentral ng Pilipinas (BSP) has the sole power and authority
to issue the currency within the territory of the Philippines. The BSP
issues notes and coins for circulation in the Philippines. It also
issues legal tender commemorative notes and coins.
16
One’s county’s banking system plays a major role on foreign
investment. The Philippines have different banks: there are
universal and commercial banks (including international banks with
officers in the country), rural banks, and credit unions covering a
wide range of banking needs. Banking in the Philippines varies
greatly between urban and rural environments. Many rural banks of
the Philippines function on the basis of mobile phone technology.
Meanwhile, urban Philippine banks function similarly to major banks
all over the world, offering personal, business, and corporate
banking services through a wide variety of means. It is also
important to keep in mind that foreigners involved in Philippine
banking are subject to government restrictions on foreign
investment. As such, foreign investors and business people need to
research banking practices thoroughly before they begin.
17
documentation requirements will make it possible for residents that
chose not to seek BSP approval and/or registration of the
loans/investments to source their foreign exchange requirements
without necessarily compromising compliance with anti-money
laundering regulations.
Registration of Foreign
Investments with BSP
Registration with the central monetary authority - Bangko Sentral
ng Pilipinas [BSP] - of loans and investments accounts was lifted
except in cases where funding will be made through the banking
system of transactions like repatriation of capital and remittances of
dividends and profits, as well as foreign exchange requirement for
future debt.
19
Confirmation of Sales (for government securities); Certificate of
Time Deposit (for peso time deposits with tenor of 90 days or
longer); and contract/certificate of investment (for money market
instruments).
Repatriation of Profit
There are no existing restrictive regulations on the repatriation of
funds related to BSP-registered foreign investments such as sales or
divestment proceeds, profits, dividends, royalties, loan payments
and liquidation. BSP registration of foreign investments is necessary
only in cases where the foreign exchange required to service the
repatriation of capital and remittance of profits, dividends, royalties,
loan payments or liquidation proceeds will be sourced from the
banking system.
20
TAXATION
Overview of Philippine Taxation
and Philippine Tax Regulation
The National Internal Revenue Code (NIRC) of 1997 contains the
laws governing taxation in the Philippines. The Bureau of Internal
Revenue (BIR), which is under the Department of Finance (DOF),
administers taxation. Its main functions consist of assessment,
collection, processing, and taxpayer assistance. The BIR is headed
by a Commissioner who has exclusive and original jurisdiction to
interpret the provisions of the Code and other tax laws.
TYPES OF TAXES
Individual Income Tax
21
Personal exemption of Php 50,000 is allowed as a deduction to
taxable income of individual taxpayer regardless if he/she is single
or married. Individual, whether single or married, shall be allowed a
personal exemption of Php 25,000 for each qualified dependent
child, provided that the total number of dependent for which
additional exemptions may be claimed shall not exceed four (4)
dependents. In case of married individuals, only one spouse may
claim additional exemptions for qualified dependent child. A non-
resident alien engaged in trade or business shall be allowed
personal exemption subject to reciprocity rule.
Over P10,000 but not over P500 + 10% of the excess over
P30,000 P10,000
Over P30,000 but not over P2,500 + 15% of the excess over
P70,000 P30,000
Over P70,000 but not over P P8,500 + 20% of the excess over
140,000 P 70,000
22
• Non-resident aliens are taxed at a rate of 25% of gross
income from sources within the Philippines if their stay
within the country does not exceed 180 days in a calendar
year. Otherwise, they are taxed on the basis of graduated
rates.
• Foreign nationals who are employed by regional area or
regional operating headquarters of multinational
corporations, representative offices, offshore banking
units, petroleum service contractors and subcontractors,
are subject to income tax at 15% of their gross income
from such employers (e.g. salaries, annuities, honoraria,
and allowances).
1. Interest from any peso bank deposit, and yield or any other
monetary benefit from deposit substitutes and from trust
funds and similar arrangements; royalties, prizes, and
other winnings derived from sources within the Philippines
shall be tax at a rate of 20%;
2. Royalties on books, as well as other literary works and
musical compositions is taxed at a rate of 10%;
3. Interest income received by a resident individual taxpayer
from a depository bank under Foreign Currency Deposit
System is taxed at a rate of 7.5%;
4. Interest income from long term deposit which was pre-
terminated by the holder before the fifth (5th) year shall be
taxed at a rates herein to be deducted and withheld from
the proceeds based on the length of time the instrument
was held by the taxpayer:
23
consortium of which he is a member or a co-venturer shall
be taxed at a rate of 10% except for non-resident alien
engaged in trade or business which is taxed at a rate of
20%;
6. Capital gains on sale of real property are taxed at 6% of
gross selling price or fair market value, whichever is
higher; and
7. Capital gains in sale of stocks.
Corporate Taxes
24
3. Offshore Banking Units shall be subject to final tax at a rate of
ten percent (10%).
25
Preferential Tax Rates for Non-Resident Corporations
Tax Rates
26
Improperly Accumulated Earnings Tax
Tax Incentives
Deductibility of Expenses
28
a. Citizen and Domestic Corporation.
b. Partnerships and Estates.
Abandonment Losses.
31
i. Depreciation. A taxpayer shall be allowed
depreciation as a deduction for reasonable allowance
for the exhaustion, wear and tear (including
reasonable allowance for obsolescence) of property
used in the trade or business.
32
l. Research and Development – A taxpayer may treat research
or development expenditures which are paid or incurred by him
during the taxable year in connection with his trade, business or
profession as ordinary and necessary expenses which are not
chargeable to capital account. The expenditures so treated shall be
allowed as deduction during the taxable year when paid or
incurred.
33
a. Individual Taxpayer
1. Resident Citizen
2. Non-resident Citizen
3. Resident Alien
4. Taxable Estate or Trust
b. Corporate Taxpayer
1. Domestic Corporation
2. Resident Foreign Corporation
34
4. Medical Tourism – medical health services, endorsed
by the Department of Health, with foreign as primary
clientele
35
capable of providing infrastructures and other support
facilities required by IT Enterprises, as well as amenities
required by professionals and workers involved in IT
Enterprise, or easy access to such amenities.
36
9. Facilities Providers:
ITH Extension years may be granted if the project complies with the
following criteria, (one criterion is equivalent to one ITH extension
year), provided that the total ITH entitlement period shall not
exceed eight (8) years:
a. The average net foreign exchange earnings of the project for the
first three (3) years of operations is at least US$500,000.00 and,
37
b. The capital equipment to labor ratio of the project does not
exceed US$10,000.00 to 1 for the year immediately preceding the
ITH extension year being applied for.
> The average net foreign exchange earnings of the project for the
first three (3) years of operations is at least US$500,000.00 and,
> The capital equipment to labor ratio of the project does not
exceed US$10,000.00 to 1 for the year immediately preceding the
ITH extension year being applied for.
39
• Upon expiry of the Income Tax Holiday - 5% Special Tax on
Gross Income and exemption from all national and local
taxes
• Tax and duty-free importation of capital equipment
• VAT Zero Rating on local purchases of goods and services,
including land-based telecommunications, electric power,
and water bills
• Exemption from expanded withholding tax
40
• Exemption from payment of local government fees such as
Mayor’s Permit, Business Permit, permit on the Exercise of
profession/Occupation/Calling, Health Certificate Fee,
Sanitary Inspection Fee, and Garbage Fee
41
• Exemption from expanded withholding tax
8. Facilities Enterprises
42
b. IT Park Facilities Enterprise
WITHHOLDING TAXES
Compensation
43
Employees receiving purely compensation income of Minimum
Wage Earners (MWE) who work in private sector and being paid the
Statutory Minimum Wage (SMW) as fixed by the Regional Wage
Tripartite and Productivity Board (RWTPB) and National Wages and
Productivity Commission (NWPC) applicable to the place where they
are assigned shall be exempted from income tax. Holiday pay,
overtime pay, night shift differential pay and hazard pay received
by MWE is also exempted from income tax.
44
employee, such as retrenchment, redundancy, or
cessation of business.
c. Social security benefits, retirement gratuities,
pensions and other similar benefits received by
resident or non-resident citizens of the Philippines
or aliens who come to reside permanently in the
Philippines from foreign government agencies and
other institutions private or public.
d. Payments of benefits due or to become due to
any person residing in the Philippines under the
law of United States administered by the United
States Veterans Administrations.
e. Payments of benefits made under the social
Security Systems Act of 1954 as amended.
f. Benefits received from GSIS Act of 1937 as
amended, and the retirement gratuity received by
government officials and employees.
De Minimis Benefits
45
1. Monetized unused vacation leave credits of employees not
exceeding ten (10) days during the year and the
monetized value of leave credits paid to government
officials and employees;
2. Medical cash allowance to dependents of employees not
exceeding P 750.00 per employee per semester or P
125.00 per month;
3. Rice subsidy of P 1,500.00 or one (1) sack of 50kg. rice per
month amounting to not more than P 1,500.00;
4. Uniform and clothing allowance not exceeding P 4,000.00
per annum;
5. Actual yearly medical benefits not exceeding P 10,000.00
per annum;
6. Laundry allowance not exceeding P 300.00 per month;
7. Employee achievement awards which must be in form of
tangible personal property other than cash or gift
certificate, with annual monetary value not exceeding P
10,000.00 received by the employee under an established
plan which does not discriminate in favor of highly paid
employees;
8. Gifts given during Christmas and major anniversary
celebrations not exceeding P 5,000.00 per employee per
annum;
9. Flower, fruits, books, or similar items given to employees
under special circumstances; and
10. Daily meal allowance for overtime work not exceeding
twenty five percent (25%) of his basic minimum wage.
The amount of “de minimis” benefits within the limit shall not
be considered in determining the P 30,000.00 ceiling of other
benefits excluded from gross income. Any excess of the de
minimis benefits over their respective ceilings shall be
considered part of the other benefits and the employee
receiving it will be subject to tax only on the excess amount
over P 30.000.00
46
computing the taxable income of the taxpayers. The taxpayer is
required to withhold these taxes and remit the same with the BIR at
the time it was paid or becomes payable, whichever comes first.
Rentals 5%
Prime contractors/sub-contractors 2%
Supplier of services
2%
Supplier of services
2%
47
Commission, rebates, discounts and 10%
other similar considerations paid and
granted to independent and
exclusive distributors,
medical/technical and sales
representative and marketing agents
and sub-agents of multi-level
marketing companies
a. Housing
b. Expense Account
c. Vehicle of any kind
d. Household Personnel
e. Interest on loan at less than market rate to the extent of
the difference between the market rate and actual rate
granted
f. Membership fees, dues and other expense borne by the
employer for the employee in social and athletic clubs or
other similar organizations
g. Expense for foreign travel
h. Holiday and vacation expenses
i. Education assistance to the employee of his dependents
48
j. Life or health insurance and other non-life insurance
premium or similar amounts in excess of what the law
allows
The Fringe Benefit Tax shall be thirty two percent (32%) of the
gross-up monetary of the benefits received. The gross-up monetary
value shall be computed by dividing the monetary value of the
fringe benefit by sixty eight percent (68%).
BUSINESS TAX
Value Added Tax (VAT). The VAT is an indirect tax and the amount
of tax may be shifted or passed on to the buyer, transferee or
lessee of the goods, properties, or services. Twelve percent (12%)
49
of the gross selling price or gross value in money is usually levied to
the goods or properties sold, bartered or exchanged.
a. Export sales
50
shipping or international air transport
operations.
53
devoted principally to the publication of paid
advertisements;
7. Sale, importation or lease of passenger or cargo
vessels and aircraft, including engine equipment
and spare parts thereof for domestic and
international transport operation;
8. Importation of fuel, goods and supplies by person
engaged in international shipping or air transport
operations;
9. Services of banks, non-bank financial
intermediaries performing quasi-banking functions
and other non-bank financial intermediaries
subject to percentage tax, such as money
changers and pawnshops; and
10. Sale or lese of goods or properties or the
performance of services other than the
transactions mentioned in the preceding
paragraphs, the gross annual sales or receipts do
not exceed the amount of one million five
hundred thousand (P1,500,000.00).
Invoicing Requirements
54
Sale of goods and properties - output tax is computed by
multiplying the gross selling price by the rate of twelve percent
(12%).
a. Discounts
b. Sales returns and allowances
PERCENTAGE TAX
b. International Carriers
1. International air carriers doing business in the
Philippines shall pay a tax of three percent (3%) of
their quarterly gross receipts.
2. International shipping carriers doing business in
the Philippines shall pay a tax equivalent to three
percent (3%) of their quarterly gross receipts.
c. Tax on Franchises - there shall be levied, assessed and
collected in respect to all franchises on radio and/or
television broadcasting companies whose annual gross
receipts of the preceding year does not exceed Ten million
pesos (P10,000,000). Radio and television broadcasting
companies referred to in this Section shall have an option
to be registered as a value-added taxpayer and pay the
tax due thereon, once the option is exercised, it shall not
be revoked.
1. Government
2. Diplomatic Services
56
3. International Organizations
4. News Services
On dividends 0%
On royalties, rentals of 5%
property, real or personal,
profits, from exchange and
all other items treated as
gross income
Long-term maturity -
(1) Over four (4) years but not 1%
exceeding seven (7) years 0
(2) Over seven (7) years %
58
the amounts necessary to insure the lives of the variable
contract workers.
59
race horses, the tax shall be ten percent (10%) of the
prizes.
Percentage Rate
Up to twenty-five percent 4%
(25%)
Tax Treaties
The Philippines has entered into a tax treaty to avoid of double
taxation and prevention of fiscal evasion with the following
countries:
61
Australia Hungary Russia
France Poland
Germany Romania
TRANSFER PRICING
Currently, the Philippines does not have any rules or regulations
pertaining to transfer pricing. In the previous rulings of the BIR,
particularly in conducting examination which involves related party
transactions, the BIR advice its revenue officer to refer to
Organization for Economic Co-operation and Development (OECD)-
transfer pricing model in determining if the transactions clearly
reflect the proper income of the company. They are yet to release
62
their own rules and regulations in determining the arms length
transaction of related companies.
Percentage Tax
Monthly /Quarterly On or before the twentieth (20) day
following the close of the month.
Withholding tax
Compensation/Expanded On or before the tenth (10) day
following the close of the month.
(except for the month of December
Final Tax which is due on or before January 15)
On or before the tenth (10) day
following the close of the month
63
EMPLOYMENT
FOREIGN VISA
Foreign nationals may come and visit to the Philippines for
business and tourism purposes with a temporary visitor’s visa that
allows stays for period of 59 days extendable to six months. To
extend their stay, visitors need to register, secure an extension of
stay and pay corresponding immigration fees to the Bureau of
Immigration or with the office of the municipal or city treasurer in
areas outside Metro Manila. Executive Order No. 408 allows
foreign nationals, except some specifically restricted nationalities,
to stay in the Philippines for up to 21 days without a visa.
WORK PERMIT
Foreign nationals seeking employment in the Philippines, whether
residents or nonresidents, must secure alien employment permits
(AEP) from the Department of Labor and Employment (DOLE).
64
1. The AEP shall be valid for one (1) year or co-terminus
with the duration of employment, consultancy services or other
modes of employment or term of office. Said AEP is valid for the
position/s and company for which it was issued.
2. In case of assignment in the company's subsidiaries,
branch offices and joint ventures and those assigned in the
headquarters with oversight function in any of the branch offices,
operation or projects in the country, one (1) AEP shall be required
and valid for all the said assignments irrespective of their place/s.
3. An application for AEP shall be filed personally or through
their respective employer with the DOLE Regional Office having
jurisdiction over the intended place of work.
4. In case of foreign nationals to be assigned in subsidiaries,
branch offices and joint ventures, and those assigned in the
headquarters with oversight functions in any of the branch offices,
operations or projects in the country, they may file their
application in any of the DOLE Regional Offices nearest their place
of work.
66
P1000.00 a month, regardless of the nature of their
employment, a 13th month pay not later than December 24
of every year. It refers to the one-twelfth of the total basic
salary earned by an employee within the calendar year. It
is computed pro-rata for employees who worked for only a
portion of the year.
67
Right to service incentive leave. In the absence of
collective bargaining agreement or any related
company policy. Every employee who has rendered at
least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.
68
Paternity Benefit. It refers to the benefit granted to a
married male employee allowing him not to report for work
for seven (7) days (for each delivery for the first 4
deliveries) but continues to earn the compensation
therefore, on the condition that his spouse has delivered a
child or suffered miscarriage for purposes of enabling him
to effectively lend support to his wife in her period of
recovery and/or in the nursing of the newly-born child.
70
o Commission of a crime or offense by the employer
or his representative against the person of the
employee or any of the immediate members of
his family; and
o Other causes analogous to any of the foregoing.
OTHER PRIVILEGE/S
71
Solo parent leave – under the SOLO PARENT WELFARE ACT of
2000 (RA 8972) a solo parent employee who has rendered service
of at least one year is entitled to not more than seven working
days of parental leave in addition to the leave privileges under
existing laws.
REGULATING BODY
Department of Labor & Employment (DOLE). The
government agency that works to promote gainful employment
opportunities, develop human resources, protect workers and
promote their welfare, and maintain industrial peace. Among its
strategies are:
WELFARE BENEFITS
Upon the start of employment, employees including resident
foreign employees are mandated to be reported/registered to the
following government agencies:
72
Employees Compensation Commission (ECC). ECC is
mandated by Philippine law to provide meaningful and
appropriate compensation to workers. The commission
implements the Employee's Compensation Program (ECP)
which provides a package of benefits for public and private
sector employees and their dependents in the event of
work-connected contingencies such as:
1. Sickness
2. Injury
3. Disability
4. Death
73
Salary Credit
Employees Php10 or
Compensation None 0.20% of
Commission (ECC) employees MSC
Home Development
Php100 Php100
Mutual Fund
74
Accounting
Philippine Financial Reporting
Standards (PFRS) in the
Philippines
75
The Philippines is in full compliant with IFRS effective January 2005,
a process which started back in 1997 in moving from the US based
GAAP to IFRS. The Philippines has introduced the Accountancy Act
of 2004 and the Philippine Institute of Certified Public Accountants
(PICPA) has been designated as the accredited professional
association.
76
been amended to conform to the IAS. The amendments resulted in
additional disclosure requirements including the presentation of
segment reporting, statement of changes in equity, and cash flow
statement.
77
It is the policy of the State to streamline administrative procedures
of registering patents, trademarks and copyright, to liberalize the
registration on the transfer of technology, and to enhance the
enforcement of intellectual property rights in the Philippines.
Law on Patents
A patent is an exclusive right granted to any technical solution to a
problem in any field of human activity which is new, involves an
inventive step, and is industrially applicable. It may be, or may
relate to, a product, or process, or an improvement of any. The right
to patent belongs to the inventor, his heirs, or assigns. When two
(2) or more persons have jointly made an invention, the right to a
patent shall belong to them jointly.
Under the Republic Act 8293, a shift was made from “first-to-invent
system” to “first-to-file system.” The period of grant was 20 years
from the date of filing. In patent infringement, the court may award
damages not exceeding three (3) times the amount of actual
damages sustained. If the damages cannot be readily ascertained,
the court may award damages equivalent to a reasonable royalty.
78
prescribe in three (3) years from the date of the commission of the
crime.
Law on Trademarks
“Marks” are visible signs capable of distinguishing the goods
(trademarks) or services (service marks) of an enterprise. Marked or
stamped containers are also considered “marks.” The registration is
for a period of ten (10) years; renewable for the subsequent ten
(10) periods as long a mark is being used in trade and commerce.
Law on Copyrights
There is no registration requirement for copyrights; however, a
deposit is required in order to complete the collection of the
National Library and the Library of the Supreme Court. Deposit with
either library is sufficient under the law. Further, the deposit is not
required for the existence on one’s copyright because the copyright
exists from the moment of creation.
The legal remedies available are: judicial (filing of case with the
Regional Trial Court), administrative (filing at the Bureau of Legal
Affairs of IP office), request for mediation involving author’s rights,
complaint from violation of laws involving IP, or filing a case at the
Department of Trade and Industry (DTI) regardless of the amount of
damages or if no damages are claimed.
ASSET VALUATION
Companies and individuals seek valuations for a variety of reasons,
including merger and acquisition activities, value-based estate and
gift planning, and litigation support. A valuation can often produce
significant benefits in crucial negotiations or help a company realize
the true value of an asset, a transaction, or an entire business.
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responsibilities from Department of Trade and Industry (DTI)
through the Bureau of Trade Regulation and Consumer Protection
(BTRCP) to Professional Regulation Commission (PRC) to be
exercised by the Professional Real Estate Service Board (PRESB) is
now on going.
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Valuations of real properties are used for different purposes -
acquisition and disposal, mortgages, taxation, land and property
management, among others.
Pro-business Environment
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The Philippines is the third-largest English speaking country in the
world, enabling its manpower to have a unique edge over
neighboring countries in terms of labor quality. Flanked by the
Pacific Ocean and the South China Sea, its strategic location makes
it a critical entry point to some 500 million people in the ASEAN
market - offering vast trade opportunities - and an ideal base for
business. It is also the best Asian country in terms of overall quality
of expatriate life, considering its cultural compatibility with
expatriates, housing, sporting and recreational facilities, quality
healthcare, and first-rate educational institutions.
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being promoted as agricultural, industrial, commercial and
recreational hubs.
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• Redefined “export enterprise” to mean at least 60% for
export
• Allowed 100% foreign ownership of business activities
outside FINL but without incentives
Under this law, 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, which is a
shortlist of investment areas or activities that may be opened to
foreign investors/reserved to Filipino nationals.
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While most areas of businesses have limits for foreign investors, the
amended FIA of 1991 lists the following types of businesses where
natural-born Filipinos can enjoy the same investment rights as a
Philippine citizen.
• Cooperatives
• Thrift banks and private development bank
• Rural banks
• Financing companies
Former natural born Filipinos can also engage in activities under List
B of the FINL. 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.
Incentives
The government has come up with a liberal program of fiscal and
non-fiscal incentives to attract foreign capital and technology that
complement local resources. Different incentives schemes are
available relative to the location and registration of the proposed
business activity.
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• Preferred Activities. These cover (1)
agriculture/agribusiness and fishery, (2) infrastructure, (3)
tourism, (4) research and development, (5) engineered
products, and (6) strategic activities.
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Companies registered with the BOI are eligible for income tax
holidays which range form 3 to 8 years. 4 years for new projects
without pioneer status and 6 years for projects with pioneer status.
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Listing Rules in the
Philippines
The Philippine Stock Exchange, Inc. (PSE or The Exchange) is a
private organization that provides and ensures a fair, efficient,
transparent, and orderly market for the buying and selling of
securities. The Exchange was formed in December 23, 1992
through the union of the country’s two former bourses: Manila Stock
Exchange (MSE) and Makati Stock Exchange (MkSE).
At present, the PSE maintains two trading floors: one in Makati City
and another in its head office in Pasay City. Even with two trading
floors, the PSE maintains a ‘one price-one market’ exchange
through the MakTrade System. This is a single-order-book book
system that tallies all orders into one computer and ensures that
these orders match with the best bid/best offer regardless of which
floor the order were placed. MakTrade, likewise, allows PSE to
facilitate the trading of securities in a broker-to-broker market
through automatic order and trade routing and confirmation. It also
keeps and eye on any irregularity in the transactions with its market
regulation and surveillance databases.
Companies are listed in the PSE on the First Board, Second Board,
or the Small and Medium Enterprises Board. To help the investing
public keep track faster of industry performance, listed companies
are classified into the following sectors: Financial, Industrial, Holding
Firms, Property, Services, and Mining and Oil. More importantly, PSE
has adopted an online daily disclosure system to prove the
transparency of listed companies and ensure full, fair, timely, and
accurate disclosure of material information from all listed
companies.
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GENERAL CRITERIA
BASIC GUIDELINES
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TRACK RECORD REQUIREMENT
A company must have a cumulative None, but must demonstrate a The applicant company
consolidated pre-tax profit of at potential for superior growth,
least at least P50 Million and a through the submission of should have been
minimum pre-tax profit of P10 Statement of Active Business operational for at least
Million for each of the three (3) full Pursuits and Objectives.
fiscal years immediately preceding
one (1) year with positive
the application for listing. For net operating income
purposes of this rule, pre-tax profit (income before interest,
shall not include non-recurring and
extraordinary income, nor shall it
taxes, depreciation and
be reduced by non-recurring and amortization-EBITDA)
extraordinary loss. The applicant during the last financial
must further be engaged in
materially the same businesses year.
and must have a proven track
record of management throughout
the last three (3) years prior to the
filing of the application.
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has been operating for at
least Ten (10) years prior
to the filing of the
application. The applicant
company shall have a
cumulative pre-tax profit
of at least P50 Million,
excluding non-recurring
and extraordinary income
and/or loss, for the last
Three (3) fiscal years
immediately preceding the
application for listing. No
net operating loss must
have been registered in
the fiscal year
immediately preceding the
filing of the application;
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prohibited from divesting
its shareholdings in the
said subsidiary(ies) for a
period of three (3) years
from the listing of its
securities. The prohibition
shall not apply if a
divestment plan is
approved by majority of
the applicant company’s
stockholders.
NUMERICAL CRITERIA
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FIRST BOARD SECOND BOARD SME BOARD
Authorized Capital Stock: Minimum- Authorized Capital Stock: Minimum- Authorized Capital Stock: Minimum-
P 20,000,000.00
P400,000,000.00 P 100,000,000.00 Maximum - P 100,000,000.00
Subscription & Paid-up: Minimum- Subscription & Paid-up: Minimum- Subscription & Paid-up: Minimum-
P100,000,000.00 P 25,000,000.00 25% of the ACS
Condition on Paid-up: at least 75%
of the paid-up must have already * The applicant company
been disbursed to the project, should have net tangible
venture or business referred to in
the business plan assets of at least Five
Million Pesos (P
5,000,000.00). The net
tangible assets
requirement is not
applicable to information
technology companies.
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OPERATING HISTORY
For a track record of profitable At least one (1) year prior to listing. At least one
operations- At least three (3) full
fiscal years prior to the filing of the
listing application if with track
record
For a market capitalization or net
tangible assets of P500M - at least
five (5) years.
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REQUIREMENTS
MINIMUM OFFERING
Unless otherwise provided by law or government regulation, the The minimum offering to
minimum offering to the public for initial listing shall be based on the
following schedule: the public for initial listing
shall be twenty percent
MARKET CAPITALIZATION PUBLIC OFFER (20%) of the authorized
Not exceeding P400 M 33% or P50M whichever is higher
capital stock. Provided,
Over P400M to P1B 25% or P100M whichever is higher that the existing
Over P1B to P5B 20% of P250M whichever is higher shareholders prior to
Over P5B to P10B 15% or P750M whichever is higher
Over P10B 10% or P1B whichever is higher listing of securities shall
maintain fifty-one percent
(51%) ownership within
the next three years
following listing date.
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OFFER PRICE
Upon filing of the application, the The applicant company shall at all After listing, the company
applicant company shall have and times have a minimum 7 directors.
maintain a minimum of 7 directors. The company shall likewise shall, at all times,
The applicant company shall, at all maintain at least 500 stockholders. maintain a minimum 7
times, maintain, at least 1,000 Each of these stockholders must directors and at least 50
stockholders or security holders hold at least one board lot of the
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each owning shares or securities shares of the company. stockholders owning
equivalent to at least one board lot
upon listing in the Exchange. shares equivalent to at
least one board lot. The
company shall be held
responsible for
maintaining the
designated number of
stockholders owning
shares of stock in the
company.
LOCK-UP
The applicant company shall cause The applicant company shall cause The company shall cause
its existing stockholders or security its existing security holders who
holders who own an equivalent of own an equivalent of at least 10% all its existing
at least 10% of the issued and of the issued and outstanding stockholders to enter into
outstanding shares not to sell, securities of the company to enter an agreement with the
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assign or in any manner dispose of into an agreement with the Exchange not to sell,
their shares for a minimum period Exchange not to sell, assign,
of 180 days after the listing of the encumber or in any manner assign, encumber or in
said shares. dispose of their securities for a any manner dispose of
period of three hundred sixty-five their securities for a
If there is any issuance of shares or (365) calendar days after the
securities or instruments which listing of such securities. period of two (2) years
lead to issuance of shares or after the listing of such
securities done and fully paid for If there is any issuance of shares
within 180 days prior to the start of or securities (i.e., private
securities.
the offering period, and the placements, asset for shares swap
transaction price is lower than that or a similar transaction) or If there is any issuance of
of the offer price in the IPO, all instruments which lead to issuance
shares or securities availed of shall of shares or securities (i.e., shares (i.e., private
be subject to a lock-up period of at convertible bonds, warrants or a placements, asset for
least 365 days from full payment similar instrument) done and fully
of the aforesaid shares or paid for within One-hundred-eighty
shares swap or a similar
securities. (180) days prior to the start of the transaction) or
offering period, and the instruments which leads
transaction price is lower than that
of the offer price in the Initial
to the issuance of shares
Public Offering, all shares or (i.e. convertible bonds,
securities availed of shall be warrants or a similar
subject to a lock-up period of at
least three-hundred-sixty-five instrument) done and
(365) days from full payment of fully paid for within One-
the aforesaid shares or securities.
hundred-eighty (180)
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days prior to the start of
the offering period, and
the transaction price is
lower than that of the
offer price in the Initial
Public Offering, all
persons who availed of
the securities shall be
subject to a lock-up
period of Three-hundred-
sixty-five (365)
consecutive calendar
days from full payment of
such securities.
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All issued and outstanding All issued and outstanding All issued and outstanding shares
securities of including treasury securities of the type and class shall be applied for listing in the
shares shall be applied for listing. applied for, including treasury Exchange.
shares shall be applied for listing.
LISTING DOCUMENTS
FINANCIAL STATEMENTS
Audited FS for the last three (3) full Audited FS for the last three (3) full When applicable, audited
fiscal years of the company and its fiscal years of the company and its
subsidiaries prepared by an subsidiaries prepared by an FS for the last three (3)
independent auditor together with independent auditor. full fiscal years of the
a schedule of the aging of its applicant company and its
accounts receivable
subsidiaries
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STATEMENT OF ACTIVE BUSINESS PURSUITS & OBJECTIVES
103
should there be references made in should there be references made in
the Statement to future profits or the Statement to future profits or
losses, or any other item that losses, or any other item that would
would be construed to indicate be construed to indicate forecasts,
forecasts, then the applicant then the applicant company is
company is required to include required to include financial
financial projections in the projections in the Statement duly
Statement duly reviewed by an reviewed by an independent
independent accounting firm. accounting firm.
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Relevant Websites for
Further Reading
The following are relevant reference websites of several
government offices and other related organizations that could guide
investors who want to do business in the Philippines:
Organization Website
General Reference
Macroeconomics
Finance
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About RSM International
RSM international is the 7th largest network of independent
accounting and consulting firms worldwide, with over 730 offices in
over 70 countries, and more than 30, 000 people on hand to serve
its clients’ needs.
Contact Details
Contact Details
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Alas, Oplas & Co., CPAs
Makati Head Office
25th Floor, Philippine AXA Life Centre
1286 Sen. Gil Puyat Avenue
Makati City, Philippines 1200
Telephone: (632) 759-5090
Fax: (632) 887-6180
Email: aocheadoffice@rsm-alasoplascpas.com
Contact Partners:
Disclaimer Text
The aim of this publication is to provide general information about
doing business in the Philippines and every effort has been made to
ensure that the contents are accurate and current. However, tax
rates, legislation, and economic conditions referred to in this
publication are only accurate at the time of writing. Information in
this publication is in no way intended to replace or supersede
independent or other professional advice. Copies of this booklet can
be obtained from RSM International Executive Office or at Alas,
Oplas & Co., CPAs.
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International Limited, a company registered in England and Wales
(company number 4040598) whose registered office is at 11 Old
Jewry, London EC2R 8DU. Intellectual property rights used by
members of the network including the trademark RSM International
are owned by RSM International Association, an association
governed by articles 60 et seq of the Civil Code of Switzerland
whose set is in Geneva.
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