QuestionsQuestions (IRR OF Republic Act No. 11647)
“Doing business” includes soliciting orders, service contracts, opening offices (liaison/branches), appointing representatives/distributors under full control, participating in management/supervision/control of a domestic enterprise, and other acts implying continuity of commercial dealings for profit. It is NOT doing business when it involves: (i) mere investment as a shareholder; (ii) having a nominee director/officer; (iii) appointing a representative/distributor transacting in their own name/account; (iv) general advertisement; (v) maintaining a stock of goods solely for processing by another entity; (vi) consignment of equipment for processing/export; (vii) collecting information; and (viii) auxiliary services to an isolated contract of sale (e.g., installing/s servicing and training workers) not on a continuing basis.
“Foreign investment” is an equity investment by a non-Philippine national via foreign exchange (FX) or its peso equivalent of other assets actually transferred to the Philippines and duly registered with the BSP. For determining foreign ownership, peso investments by non-Philippine nationals are considered. For monitoring, the IRR distinguishes: (i) “existing foreign investment” means equity registered with SEC/DTI in the form of FX/other assets transferred; (ii) “FDI flows” are monitored/recorded by BSP; and (iii) “actual foreign investments” are monitored/recorded by IPAs.
The FINL is a list of economic activity areas where foreign ownership is limited to a maximum of forty percent (40%) of the equity capital of enterprises engaged therein.
An “Export enterprise” is one where: (a) the manufacturer/processor/service (including tourism) exports at least sixty percent (60%) of its output; or (b) a trader purchases products domestically and exports at least sixty percent (60%) of such purchases. “Export ratio” is the share of export volume/value to total sales/earnings/receipts (for manufacturing/processing, services oriented, or merchandise trading), computed for the taxable year using defined measures.
“Exports” refers to the Philippine port F.O.B. peso value of products exported, or value of services/tourism sold to non-resident foreigners, or net selling price in the case of export products sold to another export enterprise that subsequently exports. Constructively exported (without actual exportation) include: (1) sales to bonded manufacturing warehouses; (2) sales to export processing zone enterprises; (3) sales to bonded trading warehouse supplying raw materials for export products; (4) sales to foreign military bases/diplomatic missions/agencies granted tax immunities of locally manufactured/assembled/repacked products. It also considers certain sales to Filipinos abroad/overseas Filipinos under the Internal Export Program paid in convertible foreign currency inward remitted through the Philippine banking system.
It is the date when the enterprise actually begins production for commercial purposes or commercial harvest (agriculture); for service-oriented activities, when it begins catering/servicing clients commercially; for export traders/service exporters, when the initial export shipment in commercial quantity has been made or initial performance of service is made, based on supporting documents.
IPAs include government entities created by law/EO/decree/other issuance responsible for promoting investments, granting/administering incentives, overseeing economic zones/freeports. Examples listed: BOI, RBOI-BARMM, PEZA, BCDA, SBMA, Clark Development Corporation, John Hay Management Corporation, Poro Point Management Corporation, Cagayan Economic Zone Authority, Zamboanga City Special Economic Zone Authority, Phividec Industrial Authority, APECO, AFAB, TIEZA, and all other similar authorities unless specifically exempted from coverage.
The IIPCC integrates promotion and facilitation efforts to encourage foreign investments. It is convened after issuance of the IRR and is tasked to establish promotion/marketing plans, coordinate with IPAs and other agencies, and monitor performance and targets, among other functions detailed in the IRR.
The IIPCC includes: DTI Secretary (Chair), DOF Secretary/Undersecretary (Vice-chair), BOI Managing Head, PEZA Director-General, DFA Undersecretary, NEDA Secretary, DICT Secretary, CHED Chairperson, TESDA Director-General, and four private sector representatives (one each from NCR, Luzon, Visayas, Mindanao). Private sector members serve for three years (renewable for another three years) and participate in resolutions.
Quorum requires a majority or at least seven (7) members present, with at least two-thirds (2/3) of those present being government representatives, and either the Chair or Vice-chair present. Resolutions are signed by two-thirds (2/3) of IIPCC members and either the Chairperson or Vice-chairperson.
In addition to RA 6713, any IIPCC member with personal and pecuniary interests in a matter in the agenda must disclose the interest to the IIPCC and withdraw from the meeting when the matter is taken up.
The FIPMP provides strategies to promote the country as a premier investment destination, consistent with SIPP, PDP, and RDPs. It aims to create high-skilled jobs, increase sophistication of domestic products/services, expand domestic supply sources, attract significant foreign capital, promote export diversification, and accelerate countryside development.
The IIPCC formulates the FIPMP in consultation with IPAs, other government agencies, LGUs, and business chambers/enterprises. It is developed for a medium five (5)-year and long ten (10)-year plan. The first medium and long-term FIPMP must be formulated within one (1) year after effectivity of the IRR.
For domestic market enterprises, foreign equity may be up to 100% unless prohibited/limited by the Constitution, existing laws, or the FINL. For export enterprises, foreign investments are allowed up to 100% provided products/services do not fall within Lists A and B of the FINL.
Applications are filed with: (i) SEC for foreign corporations and domestic corporations/partnerships; (ii) DTI-National Capital Region (Metro Manila) for sole proprietors; and (iii) DTI provincial offices/SEC extension offices for provinces depending on entity type (corporations/partnerships with SEC extensions; sole proprietors with DTI provincial offices). Decision periods: SEC/DTI for domestic corporations, partnerships, and sole proprietors—7 working days from official acceptance; SEC for foreign corporations—20 working days; otherwise, automatic approval applies if not acted upon within the period for causes not attributable to applicant.
For defense-related activities: clearance from DND or PNP. For non-Philippine nationals in micro/small domestic market enterprises with paid-in equity capital at least US$100,000 but not equal to or more than US$200,000: (1) DOST certificate that investment involves advanced technology; or (2) DICT/DTI/DOST endorsement endorsing startups/startup enablers; or (3) notarized undertaking that majority of direct employees are Filipinos with a minimum of 15 Filipino direct employees—validated/monitored by DOLE within six (6) months from start of commercial operations; failure can trigger report to SEC to require higher investment and possible penalties.