INVESTMENT LAW

(Syllabus by: Atty. Minda C. Gapuz)

INVESTMENT

• Equity participation in any enterprise formed, organized or existing under the laws of the Philippines.

FOREIGN INVESTMENT

• Equity investments owned by a non-Philippine national made in the form of FOREIGN EXCHANGE or OTHER ASSETS actually transferred to the Philippines and registered with the Central Bank and the Board, which shall assess and appraise the value of such assets other than foreign exchange.

PHILIPPINE NATIONALS

• A CITIZEN of the Philippines; or
• A DOMESTIC PARTNERSHIP or ASSOCIATION wholly-owned by citizens of the Philippines; or
• A CORPORATION organized under the laws of the Philippines of which at least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or
• A TRUSTEE for pension or other employee retirement or seperation benefits, where the trustee is a Philippine national and at least 60% of the fund will accrue to the benefit of the Philippine Nationals.

*** Provided, that where a corporation and its non-Filipino stockholders own stock in a registered enterprise, at least 60% of the capital stock outstanding and entitled to vote of both corporations must be owned and held by the citizens of the Philippines and at least outstanding 60% of the members of the Board of Directors of both corporations must be citizens of the Philippines in order that the corporation shall be considered a Philippine National.

INVESTING

• Covers making an equity investment in the Philippines through ACTUAL REMITTANCE of foreign exchange, TRANSFER of assets, whether capital goods, patents formulae or OTHER TECHNOLOGICAL PROCESSES etc., which requires registration with the Bangko Sentral, SEC and other concerned entity.

CLASSIFICATION OF INVESTMENTS:

1. Foreign
2. Local

FORM OF INVESTMENT:

1. Foreign Exchange
2. Technical Services
3. Assets (Machineries, Equiptment etc.)
4. Intangible Assets ( Patents, Franchise, Inventions etc.)

WHAT CONSTITUTES "DOING BUSINESS" IN THE PHILIPPINES?

It includes: SAPA

1. Soliciting orders, service contracts, opening of office/liason/branch
2. Appointing representatives or distributors operating under the full control of foreign corporation domiciled in the Philippines
3. Participating in management, supervision control of any domestic corporation
4. Any other acts which imply a CONTINUITY OF COMMERCIAL DEALINGS/ARRANGEMENTS in a progressive prosecution of commercial gain/purpose/object of the organization.

OBJECTIVE OF GOVERNMENT

• To Accelerate sound development of national economy which are enshrined in the 1987 Philippine Constitution.

WHAT ARE THE POLICIES OF THE GOVERNMENT IN RELATION TO INVESTMENT?

1. To encourage investment in agriculture industry, mining, tourism, etc.
2. To extend fiscal incentives to compensate for market imperfections and as a reward for economic development
3. To provide a climate for growth and attain industrial peace
4. To encourage private initiative

ROLE OF INVESTMENT:

1. Instrument for peace and order/employment
2. Engine of growth - balanced economy
3. Come-on to tourism

WHO MAY INVEST?

• Anyone regardless of nationality up to 100% ownership.
• Except to some areas of economic activities reserved to Philippine Nationals or to those areas which are reserved/ limited by the Philippine Constitution to Philippine Nationals; or
• Except those areas listed in the Foreign Investment Negative List (FINL).

FINL LIST:

1. List A shall enumerate the areas of activities reserved to Philippine Nationals by mandate of the Constitution and Specific Laws.
2. List B shall contain the areas of activities and enterprises regulated pursuant to law;

• which are defense-related activities
• which have implications on public health and morals

AREAS WHERE NO FOREIGN EQUITY/OWNERSHIP IS ALLOWED

This list of activities must be owned by 100% filipino citizens such as the following:

1. Mass Media - except recording business (Art 6 sec. 11 Phil. Consti)
2. Services involving the practice of a licensed Profession such as: Lawyers, CPAs, Engineers, Nurses, Doctors, etc.
3. Cooperatives
4. Private Security Agencies (RA 5487)
5. Small-scale Mining (RA 7076)
6. Utilization of Marine Resources (Art. 12 sec. 2 Phil. Consti)
7. Operation, Ownership and Management of Cockpits (PD 449)
8. Manufacture, repair, distribution of Nuclear Weapons (Art 2 sec 8 Phil. Consti)
9. Manufacture, repair, distribution of biological chemical radiological weapons (Treaties)
10. Retail Trade (RA 1180, as amended) However, Foreign Equity is now allowed. Provided a minimum foreign equity of more than USD 2.5 Million is invested. Otherwise it should be 100% filipino-owned.

SMALL AND MEDIUM-SIZED DOMESTIC MARKET ENTERPRISES

• Small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent of USD200,000.00 are reserved to the Philippine Nationals; Provided, that if:

1. they involve advanced technology as determined by the DOST, or
2. they employ at least 50 direct employees, then a minimum paid-in capital of USD100,000.00 shall be allowed to non-Philippine Nationals.

INCENTIVES TO REGISTERED ENTERPRISES:

1. Income Tax Holiday
2. Additional deduction for Labor Expense
3. Tax and duty exemption on imported capital equipment and its accompanying spare parts
4. Tax credit on Domestic capital equipment
5. Simplification of customs procedures
6. Unrestricted use of consigned equipment
7. Employment of Foreign Nationals
8. Exemptions on breeding stocks and genetic materials
9. Tax credit on duty portion of domestic breeding stocks and genetic materials
10. Tax credit for taxes and duties on raw materials
11. Access to bonded manufacturing/trading system
12. Exemption from taxes and duties on imported spare parts.
13. Exemption from wharfage dues and Export tax, duty impost and fee.

INCENTIVES TO EXPATRIATES

1. Multiple Entry Visa
2. Withholding Tax of 15%
3. Tax and duty free importation
4. Travel Tax Exemption

INCENTIVES TO THE REGIONAL HEADQUARTERS

1. Exemption from Income tax
2. Exemption from contractor's tax
3. Exemption from all kinds of local licenses, fees, dues
4. Tax and duty free importation of training materials; importation of motor vehicles
5. Exemption from registration requirements

SPECIAL INVESTORS RESIDENT VISA

• An alien shall be entitled to reside in the Philippines while investment subsists. For this purpose he shall submit an annual report, in the form duly prescribed for the purpose, to prove that he has maintained his investment in the country.
• Should the alien withdraw his said investment from the Philippines, then the VISA issued to him will automatically expire.

MULTIPLE ENTRY SPECIAL VISA

• Foreign nationals employed, their spouses, and unmarried children under 21 years of age who are not excluded by Sec. 29 of C.A. No. 613, as amended, shall be permitted to enter and reside in the Philippines during the period of employment of such foreign nationals.
• Validity of this, is up to the period of 3 years and extendible yearly.
• Once issued, they will be exempted from obtaining alien certificate of registration and emigration clearances certificates and all types of clearances required by any government department or agency.