Philippines - United States Department of State (2024)

Policies Towards Foreign Direct Investment

The 2021 Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act standardized the incentives regime across 14 investment promotion agencies (IPAs). The Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA) are the country’s lead IPAs. The BOI approves incentives for projects with an investment capital of USD 20 million and below; the interagency Fiscal Incentives Review Board (FIRB) approves incentives for projects beyond the USD 20 million investment capital threshold. Noteworthy advantages of the Philippine investment landscape include free trade zones, including special economic zones, and a large, educated, English-speaking, and relatively low-cost workforce. Philippine law treats foreign investors the same as domestic counterparts, except in sectors reserved for Filipinos by the Philippine Constitution and enumerated in the Foreign Investment Negative List (FINL). Additional information regarding investment policies and incentives are available on the BOI (http://boi.gov.ph) and PEZA (http://www.peza.gov.ph) websites.

The Philippines’ regulatory environment can be unclear in many economic sectors and corruption remains a significant problem, although the country moved up the rankings (by one place compared to last year) in Transparency International’s 2022 Corruptions Perceptions Index. Large, family-owned conglomerates dominate the economic landscape, crowding out smaller businesses.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreigners are prohibited from fully owning land under the 1987 Constitution, although they can lease a contiguous parcel of up to 1,000 hectares (2,471 acres) for a maximum of 75 years. Dual citizens are permitted to own land.

The 2022 Foreign Investment Act (FIA) requires the publishing every two years of the FINL, which outlines sectors in which foreign investment is restricted. The 2022 FINL bans foreign ownership/participation in the following activities: mass media (except recording and internet businesses); small-scale mining; private security agencies; utilization of marine resources; ownership, operation, and management of co*ckpits (co*ckfight venues); manufacturing of firecrackers and pyrotechnic devices; manufacturing and distribution of nuclear, biological, chemical, and radiological weapons; and manufacturing and distribution of anti-personnel mines. Foreign professionals in the following fields are allowed to practice in the Philippines if their country permits reciprocity: medicine, pharmacy, nursing, dentistry, accountancy, architecture, engineering, criminology, teaching, chemistry, environmental planning, geology, forestry, interior design, landscape architecture, and customs brokerage.

The Philippines limits foreign ownership to 40 percent in the manufacturing of explosives, firearms, and military hardware; private radio communication networks; natural resource exploration, development, and utilization (with exceptions); educational institutions (with exceptions); operation and management of public utilities; operation of commercial deep sea fishing vessels; Philippine government procurement contracts (40 percent for supply of goods and commodities); contracts for the construction and repair of locally funded public works (with some exceptions); ownership of private land; and rice and corn production and processing (with some exceptions). The amended FIA includes 100 percent foreign ownership for enterprises with a minimum paid-in capital of USD 100,000 involved in advanced technology (as determined by the Department of Science and Technology), endorsed as start-ups or start-up enablers (pursuant to the Innovative Startup Act), and where a majority of direct hires (but not less than 15 workers) are local talent. The FINL cannot change prior laws related to foreign investments, such as Constitutional provisions which bar investment in mass media, “public utilities,” and natural resource extraction (but the government has implemented policies to permit 100 percent foreign ownership of investments in renewable energy sources like wind, solar, and geothermal).

In the telecommunications sector, services are classified as either “basic” or “enhanced” value added. Internet service providers as value-added service providers cannot build their own fiber network for commercial purpose and are required to connect to franchised telecommunication facilities. Only companies with a legislative franchise and public telecommunication entities are allowed to build transmission and switching facilities, offer a local exchange service, and operate inter-exchange service and an international gateway facility.

Radio spectrum management is based on the Radio Control Law of 1931, which requires that only “enfranchised entities” be given a permit to “construct, install, establish, or operate a radio station.” Telecommunications regulators possess the authority to issue permits for the use of frequencies and to sub-allocate spectrum bands allocated by the International Telecommunications Union (ITU). The National Telecommunications Commission (NTC) allocates radio spectrum to service providers.

The minimum investment requirement for foreign retailers is USD 500,000 and the per-store investment requirement is USD 200,000. In practice, retail trade enterprises with capital of less than USD 500,000 are still reserved for Filipinos. The Philippines allows up to full foreign ownership of insurance adjustment, lending, financing, or investment companies; however, foreign investors are prohibited from owning stock in such enterprises, unless the investor’s home country affords the same reciprocal rights to Filipino investors.

Foreign banks are allowed to establish branches (no more than six) and can own up to 100 percent of the voting stock of locally incorporated subsidiaries. Ownership caps apply to foreign non-bank investors, whose aggregate share should not exceed 40 percent of the total voting stock in a domestic commercial bank and 60 percent of the voting stock in a thrift/rural bank.

Other Investment Policy Reviews

The World Trade Organization (WTO) and the Organization for Economic Co-operation and Development (OECD) conducted a Trade Policy Review of the Philippines in March 2018 and an Investment Policy Review of the Philippines in 2016, respectively.

Business Facilitation

Business registration in the Philippines is cumbersome due to multiple agencies involved in the process. The Ease of Doing Business and Efficient Government Service Delivery Act of 2018 (aka the “Ease of Doing Business Act” or EODB) legislates standardized deadlines for government transactions, a single business application form, a one-stop-shop to issue or renew permits and licenses, automation of business registration and permits processing, a zero-contact policy, and a central business databank.

Outward Investment

There are no restrictions on outward portfolio investments for Philippine residents. However, outward investments funded by foreign exchange purchases above USD 60 million, or its equivalent per investor per year, require prior notification to the central bank.

Transparency of the Regulatory System

Proposed Philippine laws must undergo public comment and review. Government agencies are required to craft implementing rules and regulations (IRRs) through public consultation meetings within the government and with private sector representatives after laws are passed. New regulations must be published in newspapers or in the government’s online official gazette before taking effect (https://www.gov.ph/). The 2016 Executive Order on Freedom of Information (FOI) mandates full public disclosure and transparency of government operations, with certain exceptions. The public may request copies of official records through the FOI website ( https://www.foi.gov.ph/).

Stakeholders report generally inconsistent regulatory enforcement in the Philippines. Some U.S. investors describe business registration, customs, and immigration as burdensome. Customs processes, in particular, can present challenges and the Embassy has received multiple reports from U.S. businesses of overly invasive searches, inconsistent customs charges, and solicitations of “facilitation fees” (e.g., bribes) from some customs officials. Regulatory agencies are generally not statutorily independent but are attached to cabinet departments or the Office of the President. Inconsistencies in the judicial system affect regulatory enforcement.

International Regulatory Considerations

The Philippines is a member of the World Trade Organization (WTO) and provides notice of draft technical regulations to the WTO Committee on Technical Barriers to Trade ( https://eping.wto.org/).

The Philippines is part of the ASEAN Economic Community (AEC) and participates in the ASEAN Single Window (ASW). The country’s National Single Window (NSW) now issues an electronic Certificate of Origin via the tradenet.gov.ph platform, and the NSW is connected to the ASW, allowing for customs efficiencies and better transparency.

Legal System and Judicial Independence

While independent, the Philippine judicial system is not immune to external influence. The Supreme Court is the highest court and sole constitutional, judicial body. The lower courts consist of: (a) trial courts with limited jurisdictions (i.e., Municipal Trial Courts, Metropolitan Trial Courts, etc.); (b) Regional Trial Courts (RTCs); (c) Shari’ah District Courts (Muslim courts); and (d) Courts of Appeal (appellate courts). Special courts include the Sandiganbayan (anti-graft court for public officials) and the Court of Tax Appeals. A total of 147 RTCs have been designated as Special Commercial Courts (SCC) to hear intellectual property (IP) and other commercial cases, with four SCCs authorized to issue writs of search and seizure on IP violations, enforceable nationwide. In addition, nearly any case can be appealed to appellate courts, including the Supreme Court, increasing caseloads, and further clogging the judicial system.

Foreign investors describe the inefficiency and uncertainty of the judicial system as a significant barrier to investment. Investors often decline to file cases in court because of slow and complex litigation processes and corruption fears. Stakeholders report an inexperienced judiciary when confronted with cases involving complex issues such as technology or science.

Laws and Regulations on Foreign Direct Investment

The Board of Investments (http://boi.gov.ph/), an agency under the Department of Trade and Industry (DTI), is the lead investments promotion agency of the Philippines. The interagency Fiscal Incentives Review Board, chaired by the Philippine Secretary of Finance, oversees the administration and grant of tax incentives by investments promotions agencies and determines the target performance metrics used as conditions to avail of tax incentives for investments above USD 20 million. The Strategic Investment Priorities Plan (SIPP), administered by the BOI, identifies preferred economic activities approved by the President.

The 1995 Special Economic Zone Act allows the Philippine Economic Zone Authority ( http://www.peza.gov.ph) to regulate and promote investments in export-oriented manufacturing and service facilities inside special economic zones, including the granting of fiscal and non-fiscal incentives for investments worth USD 20 million and below.

Competition and Antitrust Laws

The Philippine Competition Commission (PCC) is an independent body mandated to resolve complaints on issues such as price fixing and bid rigging, and to stop mergers that would restrict competition. More information is available on PCC website ( http://phcc.gov.ph/#content). The Department of Justice ( https://www.doj.gov.ph/) prosecutes violations of competition laws.

Expropriation and Compensation

Philippine law allows expropriation of private property for public use or in the interest of national welfare or defense. Should expropriation occur, foreign investors have the right to receive compensation in the currency of their initial investment. No recent cases of expropriation involve U.S. companies in the Philippines.

Dispute Settlement

ICSID Convention and New York Convention

The Philippines is a member of the International Center for the Settlement of Investment Disputes (ICSID) and has adopted the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, or the New York Convention.

Investor-State Dispute Settlement

The Philippines is signatory to various treaties that recognize international arbitration of investment disputes. Since 2002, the Philippines has been respondent to five investment dispute cases filed before the ICSID ( https://icsid.worldbank.org/en/).

International Commercial Arbitration and Foreign Courts

Lack of resources, staffing, and corruption make investment dispute processes protracted and expensive. Public-Private Partnership (PPP) infrastructure contracts are required to include alternative dispute resolution (ADR) provisions.

A separate action must be filed for foreign judgments to be recognized or enforced under Philippine law, though Philippine law does not recognize foreign judgments that run counter to existing Philippine laws. Foreign arbitral awards are enforceable upon application in writing to the regional trial court with jurisdiction, and petitions may be filed at any time.

Bankruptcy Regulations

The 2010 Philippine bankruptcy and insolvency law provides a predictable framework for rehabilitation and liquidation of distressed companies, although an examination of some reported cases suggests uneven implementation. The law recognizes cross-border insolvency proceedings in accordance with the United Nations Conference on Trade and Development (UNCTAD) Model Law on Cross-Border Insolvency.

Investment Incentives

The Philippines’ Strategic Investment Priorities Plan (SIPP) enumerates investment activities entitled to incentives facilitated by the Board of Investments (BOI). Fiscal incentives for SIPP-listed industries include income tax holidays, enhanced tax deductions, and a five percent corporate tax rate. Non-fiscal incentives include: employment of foreign nationals, simplified customs procedures, duty exemption on imported capital equipment and spare parts, import of consigned equipment, and operation of a bonded manufacturing warehouse.

Industries included in the 2022 SIPP are: qualified manufacturing activities, including agro-processing; agricultural, fishery, and forestry products; integrated circuit (IC) design; creative industries and knowledge-based services; maintenance, repair, and overhaul of aircraft; charging/refueling stations for alternative energy vehicles; industrial waste treatment; telecommunications; mass housing; and infrastructure and logistics.

Foreign Trade Zones/Free Ports/Trade Facilitation

Export-oriented businesses enjoy preferential tax treatment when located in export processing zones, free trade zones, and certain industrial estates, collectively known as economic zones, or ecozones. Businesses located in ecozones are considered outside customs territory and are allowed to import capital equipment and raw material free of customs duties, taxes, and other import restrictions. Goods imported into ecozones may be stored, repacked, mixed, or otherwise manipulated without being subject to import duties and are exempt from the Bureau of Customs’ Selective Pre-shipment Advance Classification Scheme.

Philippine Economic Zone Authority (PEZA)

PEZA operates 415 ecozones, primarily in manufacturing, IT, tourism, medical tourism, logistics/warehousing, and agro-industrial sectors. PEZA manages four government-owned export-processing zones (Mactan, Baguio, Cavite, and Pampanga) and administers incentives to enterprises in other privately owned and operated ecozones. Any person, partnership, corporation, or business organization, regardless of nationality, control and/or ownership, may register as an exporter with PEZA, provided it physically locates inside an ecozones. PEZA administrators have earned a reputation for maintaining a clear and predictable investment environment within their zones ( http://www.peza.gov.ph/).

Bases Conversion Development Authority (BCDA) and Subic Bay Metropolitan Authority (SBMA)

These ecozones sit inside former U.S. military bases. The BCDA (http://www.bcda.gov.ph/ operates: Clark Freeport Zone (Angeles City, Pampanga), John Hay Special Economic Zone (Baguio), Poro Point Freeport Zone (La Union), and Bataan Technology Park (Morong, Bataan). The SBMA operates the Subic Bay Freeport Zone (Subic Bay, Zambales). Clark and Subic have their own airports, power plants, telco networks, housing, and tourist facilities. These ecozones offer comparable incentives to PEZA. Enterprises already receiving incentives under the BCDA law are disqualified from receiving incentives and benefits offered by other laws.

Other Zones

Incentives available to investors in the below zones are similar to PEZA but administered independently. These zones include: the Phividec Industrial Estate (Misamis Oriental Province, Mindanao; Zamboanga City Economic Zone and Freeport (Zamboanga City, Mindanao); Cagayan Special Economic Zone (CEZA) and Freeport (Santa Ana, Cagayan Province); and Freeport Area of Bataan (FAB) (Mariveles, Bataan). CEZA grants gaming licenses in addition to export incentives. The Regional Economic Zone Authority (Cotabato City, Mindanao) is operated by the Bangsamoro Autonomous Region in Muslim Mindanao.

Performance and Data Localization Requirements

The BOI imposes a higher export performance requirement on foreign-owned enterprises (70 percent of production) than on Philippine-owned companies (50 percent of production) when providing incentives under SIPP.

Companies registered with BOI and PEZA may employ foreign nationals in supervisory, technical, or advisory positions for five years from date of registration (possibly extendable upon request). Senior positions and elective officers of majority foreign-owned BOI-registered enterprises (such as president, general manager, and treasurer, or their equivalents) are exempt from employment term limitation. Foreigners intending to work locally must secure an Alien Employment Permit from the Department of Labor and Employment (DOLE), renewable every year for the duration of employment. Both BOI and PEZA facilitate special investor’s resident visas and extend visa facilitation services to foreigners and their families.

The Philippines does not impose restrictions on cross-border data transfers. However, sensitive personal information is protected under the 2012 Data Privacy Act.

Real Property

The Philippines recognizes and protects property rights, but the enforcement of laws is weak and fragmented. The Land Registration Authority and the Register of Deeds, which facilitate the registration and transfer of property titles, are responsible for land administration, with more information available on their websites ( http://www.lra.gov.ph/). Property registration processes are tedious and costly. Multiple agencies are involved in property administration, which results in overlapping procedures for land valuation and titling processes. Records management is weak due to a lack of funds and trained personnel. Corruption is also prevalent among land administration personnel and the court system is slow to resolve land disputes.

Intellectual Property Rights

The Philippines is not listed on the United States Trade Representative’s (USTR) Special 301 Watch List. The country has a generally robust intellectual property rights (IPR) regime in place, although enforcement is irregular and inconsistent. The value of counterfeit goods sold online dramatically increased during the COVID-19 pandemic.

The Intellectual Property (IP) Code provides a legal framework for IPR protection, particularly in key areas of patents, trademarks, and copyrights. The Intellectual Property Office of the Philippines (IPOPHL) is the implementing agency of the IP Code, with more information available on its website ( https://www.ipophil.gov.ph/). The Philippines generally has strong patent and trademark laws. IPOPHL’s IP Enforcement Office (IEO) reviews IPR-related complaints and visits establishments reportedly engaged in IPR-related violations.

The inconsistent judicial system keeps most IP owners from pursuing cases in court. Many IP owners opt for out-of-court settlements (such as Alternative Dispute Resolutions) rather than filing a lawsuit.

The Philippines has been a member of the World Intellectual Property Organization (WIPO) since 1980. See WIPO’s country profiles at http://www.wipo.int/directory/en/.

Resources for Rights Holders

Contacts at Mission:
John Avrett, Economic Officer
U.S. Embassy Manila
Telephone: (+632) 5301.2000
Email: ManilaEcon@state.gov

A list of local lawyers can be found on the U.S. Embassy’s website: https://ph.usembassy.gov/legal-assistance/?_ga=2.250544256.746233144.1677639988-1302173016.1666313074.

Capital Markets and Portfolio Investment

The Philippines welcomes the entry of foreign portfolio investments, including in local and foreign-issued equities listed on the Philippine Stock Exchange (PSE), which had 288 listings as of February 2023. In 2022, companies raised USD 2 billion on the PSE, including nine initial public offerings (IPOs). Corporate bond issuances are growing and reached $9.3 billion in 2022.

Non-residents are allowed to issue bonds/notes or similar instruments in the domestic market with prior approval from the Central Bank (Bangko Sentral ng Pilipinas, or BSP); they may also obtain financing in Philippine pesos from authorized agent banks without prior BSP approval.

The BSP does not restrict payments and transfers for current international transactions. Purchases of foreign currencies from banks requires submission of an application form (below a threshold of USD 500,000 for individuals and USD 1 million for corporates/other entities) and minimum documentary requirements (above these thresholds).

Money and Banking System

The Philippine banking system is strong and stable, with a capital adequacy ratio well-above the eight percent international regulatory threshold. Non-performing loans only comprised 3.6 percent of banking loan portfolio as of end-2022.

Twenty-six (of 45) universal and commercial banks are foreign branches and subsidiaries, including three U.S. banks (Citibank, Bank of America, and JP Morgan Chase).

Foreign residents and non-residents may open foreign and local currency bank accounts. Non-residents’ foreign currency accounts, however, cannot be funded from purchases from local banks and/or subsidiary.

Foreign Exchange and Remittances

Foreign Exchange

The BSP allows residents and non-residents to purchase foreign exchange from the domestic market, subject to registration and documentary requirements. No mandatory foreign exchange surrender requirement is imposed on exporters or foreign currency earners. The BSP adheres to a market-determined exchange rate absent excessive volatility. Details on foreign exchange regulations are found here: ( https://www.bsp.gov.ph/SitePages/Regulations/GuideToFx.aspx).

Remittance Policies

BSP approval of inward foreign direct and portfolio investments is not mandatory unless the investor will purchase foreign currency from banks to convert its local currency earnings for repatriation or remittance. Foreign investors are entitled to full and immediate repatriation of capital and remittance of dividends, profits, and earnings. Government-guaranteed private sector foreign loans/borrowings require prior BSP approval. Most private sector loan agreements should be registered with the BSP if serviced through the purchase of foreign exchange from the banking system.

Sovereign Wealth Funds

The Philippines does not have a sovereign wealth fund (SWF) as of March 2023.

Privatization Program

The Philippine Government’s privatization program is managed by the Privatization and Management Office (PMO) ( http://www.pmo.gov.ph/. The privatization of government assets undergoes a public bidding process. Apart from restrictions stipulated in FINL, no regulations discriminate against foreign buyers. The Philippine Public-Private Partnership Center (PPPC) promotes public-private partnerships (PPPs).

OECD Guidelines for Multinational Enterprises

While not an OECD member country, the Philippine government supports RBC practices.

Additional Resources

Department of State

• Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/)
• Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/)
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/)
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/)
• Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/)

Department of the Treasury

• OFAC Recent Actions ( https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions)

Department of Labor

• Findings on the Worst Forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings )
• List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods)
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab)
• Comply Chain ( https://www.dol.gov/ilab/complychain/)

Climate Issues

The Philippines is one of the most climate-vulnerable countries in the world, and President Marcos has made increasing resiliency to climate related disasters a national priority.
The Asian Development Bank estimates the Philippines will lose 6 percent of its GDP annually by 2100 due to climate related disasters if it fails to build sufficient resiliency.

While the Philippines emits less than 0.4 percent of the world’s greenhouse gas (GHG) emissions, through its Nationally Determined Contribution (NDC) under the Paris Agreement, it committed to reduce or avoid 75 percent of GHG emissions by 2030. The Philippine Securities and Exchange Commission adopted measures to develop a sustainable financial market, including ASEAN Green Bond Standards, ASEAN Social Bond Standards, and ASEAN Sustainability Bond Standards.

The Philippine Climate Change Commission (CCC) formulated the National Climate Change Action Plan (NCCAP) which outlines the country’s agenda for climate adaptation and mitigation for 2011 to 2028.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

The Philippines ratified the United Nations Convention against Corruption in 2003. It is not a signatory to the OECD Convention on Combating Bribery.

Resources to Report Corruption

Contact at the government agency or agencies that are responsible for combating corruption:

Office of the Ombudsman
Ombudsman Building, Agham Road, North Triangle
Diliman, Quezon City
Hotline: (+632) 8926.2662
Telephone: (+632) 8479.7300
Email/Website: pab@ombudsman.gov.ph / http://www.ombudsman.gov.ph/

Presidential Complaint Center
Gama Bldg., Minerva St. corner Jose Laurel St.
San Miguel, Manila
Telephone: (+632) 8736.8645, 8736.8603, 8736.8606
Email: pcc@malacanang.gov.ph / https://op-proper.gov.ph/presidential-action-center/

Contact Center ng Bayan
Text: (+63) 908 881.6565
Email/Website: email@contactcenterngbayan.gov.ph / https://contactcenterngbayan.gov.ph/