These frequently asked questions provide basic information and guidelines on investing and doing business in the Philippines. If you have questions which you cannot find here, please use our Free Information Service. We would encourage you to seek our professional advice should you need more help in pursuing your plans.

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Are foreign investments encouraged in the Philippines? Are there restrictions?

Almost all sectors of the economy are now opened for participation by foreign investors. In particular, foreign enterprises are encouraged to locate in the numerous export processing zones where liberal tax and other incentives are provided. The areas where foreign investors are restricted are listed in the so-called Foreign Investment Negative List.

What are the entry modes a foreign company can use to do business here?

• Appointing a country distributor or agent; 
• Opening a representative office; 
• Establishing a regional headquarters; 
• Establishing a branch office; 
• Incorporating a 100%-owned local subsidiary; 
• Establishing a joint venture company. 

What are the basic requirements a foreign company has to comply before doing business?

A foreign company will need to find out first if it is allowed to engage in the proposed business activity. Are there restrictions as to extent of ownership? The foreign company will then secure the necessary licenses and registration certificates from the appropriate government agencies. In general, the application starts with the Securities and Exchange Commission (SEC) which administers the Foreign Investment Act of 1991. 

How can foreign investors be sure that that they can get their profits out of the country?

The Philippine Constitution guarantees the basic rights of all investors and enterprises, foreign or local. Among these are the freedom from expropriation without just compensation and the right to remit profits, capital gains and dividends within the guidelines of the Bangko Sentral ng Pilipinas (BSP), the central monetary authority.

How could you characterize the Philippine judicial system in protecting the rights of foreign investors or in resolving disputes with local partners?

The Philippines has an American-style judicial system, a legacy of its commonwealth period. Foreigners can expect reasonable and fair treatment in resolving disputes or suits brought before the courts. They are advised to retain local attorneys to counsel them on legal matters. 

What are the income and business taxes imposed on foreign investors or companies doing business in the Philippines?

Generally, a domestic corporation, whether local or foreign-owned, pays a tax rate of 32% of net taxable income. Dividends declared by a domestic corporations to its foreign parent are generally taxed at 32%. However, this rate may be reduced to 15% if the country of the foreign corporation has a tax treaty with the Philippines providing for reciprocal tax treatments and which are designed to eliminate double taxation.

A 10% Value Added Tax (VAT) is imposed on importation of goods and sale, exchange or lease of goods, properties and services, subject to certain exemptions. Other business taxes include  gross receipts tax on such businesses as life insurance, passenger carriers and utilities. 

What has become the Philippines' key strengths in the face of trade liberalization and globalization?

The Philippines has an abundant supply of highly trainable, English- speaking workforce which are needed in many service- oriented and knowledge-based businesses. With these skills, many Filipinos find good-paying jobs abroad, from seamen, nurses, domestic helpers and skilled construction workers to IT professionals, engineers, and accountants. The remittance of these overseas workers constitute the largest category of foreign exchange earnings of the country. 

How are foreign companies taking advantage of these key strengths?

Many foreign companies have put up assembly-type operations, such as those in the electronics, semiconductor and garment industries, to manufacture products for the export markets. A growing number is into software development, back-end office and administrative support, data processing and outsourcing services. Other foreign companies are recruiting professional and skilled workers to work on construction and operation and maintenance projects in the Middle East.