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Foreign Investments Act

RA 7042
Policy of the Law
• attract, promote and welcome productive investments
from foreign individuals, partnerships, corporations, and
governments, including their political subdivisions, in
activities which significantly contribute to national
industrialization and socioeconomic development to the
extent that foreign investment is allowed in such activity by
the Constitution and relevant laws
• encourage foreign investment on enterprises that
significantly expand livelihood and employment
opportunities
• welcome foreign investments as a supplement to Filipino
capital and technology in enterprises serving mainly the
domestic market
Policy of the Law
• GR: no restrictions on extent of foreign
ownership of export enterprises. In domestic
market enterprises, foreigners can invest as
much as 100% equity. Except: Areas included
in the negative list.
• Foreign owned firm catering mainly to the
domestic marker shall be encouraged to
undertake measures that will gradually
increase Filipino participation in their
businesses.
Definition of Terms
• Foreign Investment
– shall mean as equity investment made by a
non-Philippine national 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.
• Foreign corporations are considered “doing or transacting
business” in the Philippines if they are:
1. Soliciting orders, service contracts, and opening offices
whether called liaison offices of branches.
2. Appointing representatives, distributors domiciled in the
Philippines or who stay for a period or periods totaling 180
days or more.
3. Participating in the management, supervision or control of
any domestic business, firm, entity, or corporation in the
Philippines.
4. Doing any act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to some extent
the performance of acts or works or the exercise of some
functions normally incident to and in progressive prosecution
of, the purpose and object of its organization.
• Export Enterprise
– is a manufacturing, processing or service
enterprise, which exports 60% or more of its
output, or a trader which purchases products
manufactured domestically or exports 60% or
more of such purchases.
• Domestic Market Enterprise
– one that produces goods for sale and renders
services to the domestic market entirely, or, if
exporting a portion of its output fails to
consistently export at lease 60% thereof.
• Foreign Investments in Export Enterprises
– allowed up to one hundred percent (100%)
ownership unless foreign ownership therein is
prohibited or limited by existing law or the Foreign
Investment Negative List.
– Compliance with registration requirements.
• Foreign Investments in Domestic Market Enterprises
– up to one hundred percent (100%) of domestic
market enterprises unless foreign ownership
therein is prohibited or limited by existing law or
the Foreign Investment Negative List (generally
limited to a maximum of 40% unless a lower limit
is provided.)
Registration of Investments of
Non-Philippine Nationals
• Registration with the Securities and Exchange
Commission (SEC), or with the Bureau of
Trade Regulation and Consumer Protection
(BTRCP) of the Department of Trade and
Industry in the case of single proprietorships.
• Participation of non-Philippine national must
not be prohibited or limited to a smaller
percentage by existing law and/or under
Foreign Investment Negative List.
Philippine Nationals
1. Citizen of the Philippines;
2. Domestic partnership or association wholly owned by
citizens of the Philippines;
3. Corporations organized under Phil. Laws of which at least
60% of the capital stock outstanding and entitled to vote
is owned and held by Filipino citizens;
4. Corporations organized abroad and registered as doing
business in the Philippines under the Corporation Code of
which 100% of the capital stock entitled to vote belong
to Filipinos; and
5. Trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a
Philippine national and at least 60% of the fund will
accrue to the benefit of the Philippine nationals.
Foreign Investment Negative List
• List A
– Enumerates the areas of economic activities reserved
for Philippine nationals by constitutional mandate and
specific laws, including exploitation of natural resources,
operation of public utilities, educational institutions,
mass media, labor recruitment and retail trade.
• List B
– Lists down activities where foreign investment is limited
for reasons of security, defense, risk to health and
morals and protection of small an medium scale
enterprise, including defense-related activities and
those which have implications on public health and
morals.
• List C
– Contain the areas of investment in which
existing enterprises already serve
adequately the needs of the economy and
the consumer and do not require further
foreign investments, as determined by
NEDA and approved by the President and
promulgated in a Presidential Proclamation