Before a foreign corporation can open an office in the Philippines, it must first secure the necessary licenses or registration certificates from the appropriate government bodies. Generally, the registration process starts with the Securities and Exchange Commission (SEC).

If the proposed project or activity qualifies for incentives, the foreign investor may file its application with the Board of Investments (BOI) or with the Philippine Economic Zone Authority (PEZA) for registration under the 1987 Omnibus Investments Code Executive Order No. 226) or Republic Act 7916, as the case may be.

For the projects which will be located in the Subic Bay Free Port or the Clark Special Economic Zone, the applications shall be filed with the Subic Bay Metropolitan Authority (SBMA) or the Clark Development Corporation (CDC), respectively.

Under the Foreign Investment List, no foreign equity is allowed in mass media; services involving the practice of professions such as engineering, medical and allied profession, accountancy, criminology, architecture, law, etc.; retail trade; cooperatives; small-scale mining, utilization of marine resources; ownership and operation of cockpits; manufacture, repair of nuclear weapons and other biological, chemical weapons, etc; and other areas.

Up to 25% foreign ownership is allowed for private recruitment, whether for local or overseas employment; locally-funded public works, except for infrastructure/development projects and foreign-funded or assisted projects. Up to 30% foreign equity is allowed in advertising while a maximum of 40% is granted for exploration, development and utilization of natural resources; ownership of private lands; operation and management of public utilities, educational institutions; rice and corn administration; contracts to supply materials, good and commodities to government-owned or controlled corporations, and government agencies; project proponent of a BOT project in public utilities; deep-sea commercial fishing vessels operation and condominiums.

The law also allows 60% ownership in financing companies regulated by the Securities and Exchange Commission (SEC) and investment houses.

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Under the 1987 Constitution, foreign investors are given the same constitutional rights and privileges accorded to local investors. These privileges are provided for in the Omnibus Investments Code of 1987, to wit:

Pursuant to said measure, the Supreme Court of the Philippines has recently issued the Rules on Electronic Evidence which provides for a framework for admitting pieces of electronic evidence in court proceedings. However, it should be noted that said Rules do not apply to criminal cases.

Republic Act 8792, otherwise known as the Electronic Commerce Act of 2000 provides for the legal recognition and admissibility of electronic data messages, documents and signatures. This was signed into law on June 14, 2000. The Act mandates all government departments and offices to accept electronic data messages and documents in their transactions within two years from its effectivity; it provides for penalties on computer hacking, introduction of viruses and piracy of copyrighted works of at least P100,000 and maximum commensurate to the damage incurred, and imprisonment of six months to three years among others. The law also promotes e-commerce in the country, particularly in business-to-business and business-to-consumer transactions whereby business relations are enhanced and facilitated and consumers are able to find and purchase products online.

The Department on Trade and Industry and the Department of Science and Technology recently signed Joint Department Administrative No. 02, Series of 2001 last 28 September 2001, providing for the implementing rules and regulations (IRR, for brevity) on electronic authentication and electronic signatures. This IRR, enacted pursuant to Section 29 of the Electronic Commerce Act, seeks to establish an environment conducive to electronic commerce by providing a clear, enforceable, stable, and predictable set of guidelines on giving legal validity and recognition to electronic signatures. This measure further strengthens the fundamental principles enshrined in the Electronic Commerce Act, such as non-denial from a signature, contract, or record legal validity or enforceability solely because it is in electronic form, and technology neutrality. The IRR on electronic authentication and signatures also provides for liability clauses for unauthorized use of electronic signatures and for incorrect and defective certificates. Moreover, it also contains provisions on recognition of foreign certificates and electronic signatures and a reciprocity clause whereby the benefits granted by the IRR shall be extended to foreign parties or entities whose countries of origin grant similar benefit to Philippine nationals.

In the area of electronic banking, the Bangko Sentral ng Pilipinas (BSP) issued a circular (BSP Circular No. 269, Series of 2000; in relation to BSP Circular No. 240 on Electronic Banking Services in the Philippines, series of 2000) which provides for the guidelines for electronic banking activities. Said circular mandates banks interested in engaging or enhancing their electronic banking services to submit an application with the BSP and to comply with the minimum pre-conditions imposed by the same. Said pre-conditions include:

Aside from this, the Philippine government is establishing a comprehensive on-line access to public information and services. This plan, dubbed as the Government Information Systems Plan, serves as the backbone for optimizing the use of IT in government and serves as the framework for increasing transparency and efficiency in governance.

EO 226 sets the rules and parameters within which foreign investments in the Philippines may be made, with emphasis on the grant of incentives to certain sectors, under conditions that will encourage competition and discourage monopolies

An important aspect of the law is the provision of incentives, fiscal and non-fiscal, to preferred areas of investments, pioneer or non-pioneer, export production as well as rehabilitation or expansion of existing operations. Pioneer enterprises are registered enterprises engaged in the manufacture and processing of products or raw materials that are not yet produced in the Philippines in large volume. It also involves the design, formula or system applied as well as agricultural, forestry and mining activities, the services and energy sectors. Non-pioneer enterprises refer to all registered producer enterprises not included in the pioneer enterprise list.

Qualified projects, depending on their category, are granted a host of incentives, including income tax holidays, tax credits, tax and duty exemption for imported raw materials and equipment, hiring of foreign labor, exemption from contractors tax, simplified customs procedure, and other tax incentives. Investors are assured the right to repatriate of profits and earnings, payment of foreign loans and interests, and freedom from expropriation. As an attached agency of the Department of Trade and Industry (DTI), the BOI is the implementing agency authorized to grant incentives, set investment priorities programs and promote the country as an investment site.

Under the Code, any individual, corporation, partnership, or association that meets the criteria set forth in Article 32 thereof shall be entitled to registration. These criteria include:

Former natural-born Filipinos are granted the same investment rights of a Philippine citizen based on existing investment and related laws. However, former natural-born Filipinos are restricted in some areas such as defense-related activities, exercise of profession, activities covered by the Retail Trade Act, Small Scale Mining Act, Rice and Corn Industry Act and other laws. Also, all industrial enterprises, regardless of the citizenship of owners, are required to comply with existing environmental standards.

Without need of prior approval, a non-Philippine national and not otherwise disqualified by law may, upon registration with the Philippine Securities and Exchange Commission (SEC) or with the Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry (in case of sole proprietorships), do business in the Philippines or invest in domestic enterprise up to 100% of its capital, unless participation of non-Philippine nationals is totally or partially proscribed by existing laws (see discussion on Constitutional Guarantees and Prohibitions). The SEC or BTRCP shall not impose any additional limitations on the extent of foreign ownership in an enterprise.

An investor can be considered a non-Philippine national in the following instances:

Seeking to encourage wider foreign participation in the country's economic activities, the Philippine legislature enacted Republic Act 8756 which provides for terms and conditions for the establishment and operation of Regional or Area Headquarters (RHQ, for brevity) and Regional Operating Headquarters (ROHQ, for brevity) of multinational companies, and grants incentives thereof.

An RHQ is an office whose purpose is to act as an administrative branch of a multinational company engaged in international trade which principally serves as a supervision, communication, and coordination center for its subsidiaries, branches, or affiliates in the Asia-Pacific region and other foreign markets and which does not earn or derive income in the Philippines. Meanwhile, an ROHQ, is a foreign business entity which is allowed to derive income in the Philippines by performing qualifying services to its affiliates, subsidiaries, or branches in the Philippines, in the Asia-Pacific region, and in other foreign markets. These qualifying services include the following:

In line with the policy of promoting consumer welfare by attracting, promoting, and welcoming investments that will lower retail prices for Filipino consumers, create more employment opportunities, and establish a more competitive local retail market, the Retail Trade Liberalization Act of 2000 allows foreign investors to invest in the retail sector. As a rule, Philippine retail enterprises must be owned and operated by Philippine citizens or corporations or entities owned exclusively by Philippine citizens. Under the new law, foreign entities are now permitted to engage in retail trade business in the Philippines, provided that they comply with the requirements for capitalization, net worth, and other criteria.

Foreign-owned partnerships, associations, and corporations organized under Philippine laws may, upon registration with the SEC and the Department of Trade and Industry (DTI, for brevity), or with the DTI alone in case of sole proprietorship, engage or invest in the retail trade business, subject to the following categories. Cick Here.

The Special Economic Zone Act of 1995 provides a framework for establishing special economic areas, called ecozones throughout the country whereby companies and industries establishing their operations therein are given incentives and privileges. An ecozone is a selected area with highly developed enterprises or which have the potential to be developed into agro-industrial, industrial, tourist/recreational, commercial, banking, investment, and financial centers.

Firms registered with the Philippine Export Zone Authority (PEZA, for brevity) and operating within the ecozones shall be entitled to similar incentives granted to those enterprises covered by the Omnibus Investments Code of 1987 (see discussion on The Omnibus Investments Code of 1987) and by Presidential Decree 66. These include:

Aside from the establishment of ecozones and providing for incentives to firms operating within said areas, other special economic zones were established under separate laws. These are the Subic Bay Free Port Zone (under the administration of the Subic Bay Metropolitan Authority), the Clark Field Development Zone (under the management of the Clark Development Corporation), and the special economic zones in Zamboanga City (located in the southwestern Mindanao) established by Republic Act 7903, and in the province of Cagayan (in the northern Luzon) established by Republic Act 7922. Firms located in these special economic zones are entitled to the same benefits and privileges extended to PEZA-registered firms.

The Securities and Exchange Commission (SEC, for brevity) is a government agency tasked with regulation and supervision organized enterprises in the Philippines, such as partnerships and corporations. Any corporation or partnership, including foreign corporations licensed to engage in business or to set up a branch in the Philippines, is required to seek SEC registration before starting its operations. The Corporation Code of the Philippines outlines the requirements for registration.

The Bangko Sentral ng Pilipinas (BSP, for brevity) is the country’s central monetary authority. If a foreign investor wishes to repatriate capital or remit dividends and earnings using foreign currency sourced from the Philippine banking system, he must secure BSP registration respecting his investment. With the BSP registration, the foreign investor is entitled to repatriate capital and remit profits and dividends and concerned banks are authorized to repatriate and remit the same in the desired foreign currency at the exchange rate prevailing. On the other hand, unregistered foreign investments are free to source their foreign exchange outside the Philippine banking system.

Corporate Taxes. Domestic corporations, i.e., established under the laws of the Philippines, are taxed at 32% on their net taxable income derived from all sources. The same tax rate is imposed on foreign corporations, whether or not engaged in trade or business in the Philippines, on their income derived in the Philippines. However, a foreign corporation engaged in trade or business in the Philippines, called a resident foreign corporation, computes its income tax liability based on its net income and has the option to pay 15% tax on gross income. A non-resident foreign corporation, i.e., a foreign corporation not engaged in trade or business in the Philippines, is taxed on its gross income.

The following are additional points to consider as regards individual and corporate taxation in the Philippines. Click Here.

As earlier mentioned, the Intellectual Property Code of the Philippines (IPC, for brevity) provides a legal framework that secures the intellectual property rights of authors, inventors, scientists, engineers, artists, writers and composers, among others. Under the IPC, intellectual property consists of copyright and related rights; trademarks and service marks; geographic indications; industrial designs; patents; layout designs or topographies of integrated circuits, and protection of undisclosed information. The Intellectual Property Office (IPO, for brevity) is tasked to administer and implement the provisions of said law within the Philippines.

Foreign entities who want to engage in inventive undertakings are covered by the protection granted by the IPC. In addition, the IPC espouses a principle of reciprocity whereby, any person who is a national or is domiciled or has a real and effective industrial establishment in a country which is a party to any convention, treaty, or agreement relating to intellectual property rights or the repression of unfair competition, to which the Philippines is also a party, or extends reciprocal rights to Philippine nationals by law, shall be entitled to the benefits under such convention, treaty, or reciprocal law.

The IPC also provides for reverse reciprocity. This principle states that any condition, restriction, or limitation imposed by a foreign country’s law on a Philippine national seeking protection of intellectual property rights in that foreign country shall reciprocally be enforceable upon nationals of said country within the Philippine jurisdiction.

The IPC also regulates technology transfer arrangements (TTA, for brevity) and requires that the same be registered with the Documentation, Information, and Technology Transfer Bureau of the IPO. A TTA is a contract or agreement involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or rendering of a service including management contracts, and the transfer, assignment, or licensing of all forms of intellectual property rights, including licensing of software except computer software developed for the mass market.
As expressly provided for in the IPC, a TTA must provide among others, that:

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