QuestionsQuestions (IRR OF Republic Act No. 11647)
The IRR defines “doing business” to include acts such as soliciting orders, service contracts, opening offices/liaison offices/branches, appointing representatives or distributors under full control of the foreign corporation, participating in management/supervision/control of a domestic entity, and other acts implying continuity of commercial dealings for progressive commercial gain. It also lists specific exclusions such as mere shareholding/investor rights, having a nominee director/officer, appointing a representative/distributor that transacts in its own name/account, general advertisements, maintaining a stock of goods solely for processing by another entity, consignment of equipment for export processing, collecting information, and performing auxiliary services to an isolated contract (e.g., installation, servicing, training domestic workers), when not on a continuing basis.
Foreign investment is defined as an equity investment made by a non-Philippine national in the form of foreign exchange (FX) or the monetary equivalent in Philippine pesos of other assets actually transferred to the Philippines, and duly registered with the BSP. The IRR also explains how it is monitored/recorded for specific purposes (e.g., existing foreign investment for equity determination; FDIs flows monitored by BSP; actual investments monitored and recorded by IPAs).
“Investment” refers to paid-in equity participation in a Philippine enterprise, recorded in its stock and transfer book or equivalent ownership registry. It includes original and additional investments (e.g., stock subscription or indirect transfer of equity via stock purchase). It excludes ownership of bonds/debentures/notes or other evidence of indebtedness, and stock options/warrants are not investment until exercised and stock is actually acquired.
A branch office carries out the business activities of the head office in the Philippines and derives income from the host country. A representative/liaison office deals directly with clients of the parent company but does not derive income from the host country and is fully subsidized by the head office; its activities are typically information dissemination/promotion and quality control.
The FINL is the list of areas of economic activity whose foreign ownership is limited to a maximum of 40% of the equity capital of enterprises engaged therein (as described in the IRR’s definition). The IRR further provides two components for the Regular FINL: Lists A and B.
A domestic market enterprise produces foods for sale or renders services to the domestic market entirely or not exporting 60% or more of its output. An export enterprise exports 60% or more of its output (for manufacturers/processors/services including tourism) or, for traders, purchases domestically and exports 60% or more of such purchases.
Exports are based on the Philippine port FOB peso value of products exported directly by an export enterprise and the value of services sold by service-oriented enterprises to non-resident foreigners, or net selling price in certain export-sales chains. It also includes “constructively exported” sales without actual exportation, such as sales to bonded manufacturing warehouses, export processing zone enterprises, bonded trading warehouses supplying raw materials for export manufacturing, and sales to foreign military bases/diplomatic missions and other tax-immunized entities, among others. The IRR also treats certain sales to Filipinos abroad/overseas Filipinos under specific programs and paid in convertible foreign currency remitted through the Philippine banking system as exports.
Export ratio is (i) the percentage share of export volume or peso value to total volume or value of goods sold (for manufacturing/processing), (ii) the percentage share of peso value of services sold to foreigners to total earnings/receipts from services (for service-oriented), and (iii) for merchandise trading, the percentage share of export volume/peso value to total goods purchased domestically.
The IIPCC includes heads/representatives from DTI (Chair), DOF (Vice-chair), BOI managing head, DTI-PEZA, DFA (multicultural affairs and international economic relations), NEDA (Socioeconomic Planning), DICT, CHED, TESDA, and four private sector representatives (one each from NCR, Luzon, Visayas, Mindanao). Private sector members bring expertise and serve for three-year terms (renewable), subject to presidential appointment and security/background checks.
Quorum requires a majority or at least seven members present, with at least two-thirds (2/3) of those present being government representatives, and either the Chairperson or Vice-chairperson present. Resolutions must be signed by two-thirds (2/3) of the IIPCC members and by either the Chairperson or Vice-chairperson.
Any IIPCC member with personal and pecuniary interests in any matter on the meeting agenda must disclose the interest to the IIPCC and withdraw from the meeting when that matter is taken up.
The FIPMP is a medium-term (5-year) and long-term (10-year) comprehensive plan developed by the IIPCC (consistent with SIPP, PDP, and RDPs) to promote the Philippines as a premier investment destination. Its purposes include creating high-skilled jobs, increasing sophistication of domestically produced/sourced products/services, expanding domestic supply sources, attracting significant foreign capital, promoting export diversification, and accelerating countryside development.
The first medium and long-term FIPMP must be formulated within one (1) year after the effectivity of the Rules and Regulations.
The IIPCC is responsible for establishing, operating, and maintaining an online single-portal accessible to the public. It must contain, among others: (1) IIPCC procedures/contacts/schedules, (2) FIPMP information, (3) rights and obligations of investors and government, (4) links to relevant government websites, (5) IIPCC issuances/resolutions for public circulation, (6) databases (investment statistics, local partners, land locations, and other databases), and (7) a registration link to the Central Business Portal (CBP) for filing/permit/clearance facilitation.
Up to 100% foreign capital is allowed if the non-Philippine national is: (i) investing in a domestic market enterprise in areas outside the FINL, or (ii) investing in an export enterprise whose products/services do not fall within Lists A and A of the FINL (with the IRR also indicating an exception/approval pathway for defense-related activities). The IRR also notes reciprocal treatment requirements under existing laws (that the applicant’s country/state must allow Filipinos/corporations to do business there).
Application is filed with the SEC for foreign corporations and domestic corporations/partnerships; for sole proprietors, Metro Manila is filed with DTI-NCR and provincial areas may be filed with SEC extension offices for corporations/partnerships or provincial DTI offices for sole proprietors. Approvals: for domestic corporations/partnerships/sole proprietors—within seven (7) working days from official acceptance; for foreign corporations—within twenty (20) working days. If not acted upon within the period for a cause not attributable to the applicant, the application is considered automatically approved.
Enterprises seeking to source foreign exchange (FX) from the banking system resources for remittance of profits abroad, earnings/dividends, and capital repatriation must be registered with the BSP, subject to BSP rules on registration of foreign investments.