c. Foreign Investments

Foreign Investments Act of 1991 (Republic Act No. 7042, as amended by Republic Act No. 8179)

Under the Foreign Investments Act of 1991 (Republic Act No. 7042), it is the policy of the State to attract, promote, and welcome productive investments from foreign individuals, partnerships, corporations, and governments in activities that significantly contribute to national industrialization and socioeconomic development, to the extent allowed by the Constitution and relevant laws. As a general rule, there are no restrictions on the extent of foreign ownership of export enterprises¹. In domestic market enterprises, foreign investors may hold up to one hundred percent (100%) equity, except in areas included in the Foreign Investment Negative List¹.

For purposes of the Foreign Investments Act, key terms are defined as follows:

• Investment: Equity participation in any enterprise organized or existing under the laws of the Philippines².
• Foreign Investment: An equity investment made by a non-Philippine national in the form of foreign exchange and/or other assets².
• Philippine National: A citizen of the Philippines; a domestic partnership or association wholly owned by Filipino citizens; or a corporation organized under Philippine laws of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines². Where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of both corporations, and at least sixty percent (60%) of the members of the board of directors of both corporations, must be citizens of the Philippines for the corporation to be considered a Philippine national².

Under Section 8 of Republic Act No. 7042, as amended by Republic Act No. 11647, the general minimum paid-in capital for a foreign-owned domestic market enterprise is Two hundred thousand US dollars (US$200,000). The minimum may be reduced to One hundred thousand US dollars (US$100,000) if the enterprise uses advanced technology as determined by the Department of Science and Technology, is endorsed as a startup or startup enabler under Republic Act No. 11337, or employs a majority of Filipino direct employees numbering at least fifteen (15)³. Amendments to List B of the Foreign Investment Negative List may be made upon recommendation of the Secretary of National Defense, the Secretary of Health, or the Secretary of Education, Culture and Sports, indorsed by the National Economic and Development Authority (NEDA), or upon recommendation motu proprio of NEDA, approved by the President, and promulgated by Presidential Proclamation³. Subsequent Foreign Investment Negative Lists become effective fifteen (15) days after publication in a newspaper of general circulation, are prospective in operation, and in no way affect prior foreign investments³.