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MEMORANDUM

FROM: ASISCLO CASTANEDA

RE: Laws on Purchase of Land

DATE : 1 February 2018


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This memorandum discusses the different issues affecting foreign investors planning to
do business and to purchase land in the Philippines. Thus, you inquire to know the applicable
laws on corporation, taxation, foreign investments, labor and property in relation to opening a
business entity and purchase of land.

Rules and regulations governing foreign


investments in the Philippines.

The more recent policies of the Philippine government have been aimed towards the
enhancement of the climate for more foreign investors to do business in the Philippines by
streamlining the process of making investments and emphasizing the promotional rather than
the regulatory role of the government. Towards this goal the Foreign Investments Act of 1991,
as amended (Republic Act No. 7042, the "Act"), the Omnibus Investments Code of 1987
(Executive Order No. 226, the "Investments Code") and the Corporation Code (Batas Pambansa
Blg. 68, the "Code") were enacted to govern the doing of business within the Philippines and
the making of investments in Philippine corporations by foreign or non-Philippine nationals.

These laws prescribe the procedures, rules and regulations for registering enterprises
doing business in the Philippines and the formation of corporate entities. The Act, in particular,
defines the policy of the Philippine government to attract investments from foreign individuals,
entities and governments, in activities which significantly contribute to the development of the
Philippine economy to the extent that foreign investment is allowed in such activity by the
Philippine Constitution and applicable statutes. The Investment Code sets out the policies of
the government in respect of foreign investments in the Philippines and its policy towards the
grant of incentives to qualified investors. The Code, on the other hand, provides the laws
governing private corporations. In specialized industries, special laws govern the conduct of
business therein and should likewise be considered in the evaluation of an investor's plans.

The government agencies primarily involved in the registration of foreign investments


are the Securities and Exchange Commission (SEC), the Board of Investments (BOI) and the
Bangko Sentral of the Philippines (BSP, formerly the Central Bank).

Foreign Ownership of Corporations in the Philippines

Foreign investors usually have the same rights as Filipino citizens and must register their
businesses with the Securities and Exchange Commission (SEC) (corporation, partnership,
branch office or representative office) or with the Department of Trade and Industry’s Bureau of
Trade Regulation and Consumer Protection (sole proprietorship). Foreign ownership of
corporations is defined in the Corporation Code of the Philippines. The Foreign Investment Act
(R.A. 7042, 1991, amended by R.A. 8179, 1996) liberalized the entry of foreign investment into
the Philippines.

Businesses with Foreign Investment Restrictions

Within the 1991 Foreign Investment Act (FIA) there are two negative lists also known as the
“Foreign Investment Negative List” which defines the foreign investments which are limited or
restricted by the constitution and specific laws. Negative List A & Foreign ownership is limited
for reasons of security, defense, risk to health and morals and protection of small and medium
scale enterprises. Negative List B

Domestic Corporations (subsidiary)

A registered company with at least 60% Filipino ownership is considered as having Philippine
nationality; if more than 40% foreign-owned, it is considered a foreign owned domestic
corporation.

More than 40% and up to 100% foreign ownership of a Domestic Market Enterprise is allowed
as long as the paid-in capital is a minimum of USD 200,000.00. Employing a minimum of 50
direct employees or using advanced technology may allow a paid-in capital of less than USD
100,000.00 (R.A. 7042 as amended by R.A. 8179).

Retail Trade Enterprises

100% foreign ownership is allowed for Philippine retail trade enterprises: (a) with paid-up
capital of USD 2,500,000.00 or more provided that investments for establishing a store is not
less than USD 830,000.00; or (b) specializing in high end or luxury products, provided that the
paid-up capital per store is not less than USD 250,000.00 (Sec. 5 of R.A. 9762). No foreign
equity is allowed in Retail Trade Enterprises with less than the above mentioned capital.

Export Businesses

An export enterprise is defined as a business who exports at least 60% of its output.
Export Business Enterprises may be 100% fully foreign owned and may file with the SEC for
an exemption of the paid-up capital requirement of USD 200,000.00.
KPO, BPO, Back Office, IT, Web Development and call centers are all considered Philippines
Export Enterprises.

Requirements for setting up a CORPORATION

Requirements:
 Articles of Incorporation and By-Laws
 Verification Slip Form (Re: Corporate Name)
 Accomplished Registration Data Sheet
 Treasurer’s Affidavit
 Authority to Verify Bank Accounts
 Written Undertaking to Change Corporate Name, when necessary
 Subscriber’s Information Sheet
 TIN Numbers and Address

Number of incorporators:

Incorporators are required to be not less than five [5] but not more than fifteen [15].

Residency requirement:

Majority of the incorporators are required to be residents of the Philippines.

Subscription requirement:

All incorporators must subscribe to at least one (1) share of stock of the corporation being
organized.

Corporation, minimum subscription:

The law requires that the total capital stock to be subscribed at the time of incorporation should
at least be twenty five percent [25%] of the authorized capital stock of the corporation being
organized.

Corporation, minimum paid-up capital:

The paid-up capital of a Philippine corporation must not be less than PhP5,000.00. Thus, it is
required that at least twenty five percent [25%] of the subscribed capital stock should be fully
paid up but the amount of which should not be less than said PhP5,000.00.

Corporation, what should be stated:

[a] the name of the corporation which must not be identical or deceptively or confusingly
similar to any existing corporation;

[b] the purpose of the corporation;

[c] principal office of the corporation;

[d] the term or life of the corporation which should not exceed fifty [50] years. This corporate
lifetime may, however, be extended for another fifty [50] years but the extension must not be
effected earlier than five [5] years before the expiration of its term.