Question & AnswerQ&A (NEDA IMPLEMENTING RULES AND REGULATIONS OF RA 7042)
The Foreign Investments Act of 1991 (Republic Act No. 7042) promotes foreign investments in the Philippines, prescribes procedures for registering enterprises doing business in the country, and regulates foreign equity participation in various investment areas.
A Philippine national includes a Filipino citizen, a domestic partnership or corporation wholly owned by Filipinos, or a corporation with at least 60% Filipino ownership of capital stock and control, as determined by beneficial ownership and voting rights.
Foreign investment means equity investments made by non-Philippine nationals, including foreign exchange or assets transferred to the Philippines, duly registered with the Central Bank and Securities and Exchange Commission.
The Act covers all investment areas except banking and other financial institutions, which are regulated under other laws.
The FINL is a list of economic activity areas where foreign ownership is limited to a maximum of 40% of the capital stock or partnership capital, comprising Lists A and B, with specific restrictions on foreign equity.
Applicants must submit valid documents such as Articles of Incorporation, proof of inward remittance, clearances from relevant authorities (e.g., DND for defense-related activities), and comply with additional requirements like advanced technology certification or labor undertakings for small and medium enterprises.
Penalties include written warnings, fines ranging from P1,000 up to millions, daily fines, and ultimately cancellation of the certificate of registration for repeated violations or fraudulent reports by the enterprise or its responsible officers.
Doing business includes activities such as soliciting orders, appointing representatives, managing domestic entities, or maintaining commercial dealings with continuity; mere investment or appointing nominee directors do not constitute doing business.
They may continue their activities subject to prior terms or opt to be governed by the Act by surrendering their BOI certificates and being automatically registered with the SEC, with possible refund of incentives.
Former natural born Filipinos have the same investment rights as Philippine citizens in certain cooperatives, banks, financing companies, and activities listed under List B, including specific defense-related activities authorized by the Secretary of National Defense.