Question & AnswerQ&A (BI MEMORANDUM ORDER NO. ADD-03-005)
Foreign nationals, regardless of their immigration status, are prohibited from engaging in retail trade in the Philippines, except as allowed under specific categories with prescribed minimum capital investments under Republic Act No. 8762.
Category A - enterprises with paid-up capital less than $2.5 million USD reserved exclusively for Filipino citizens; Category B - enterprises with a minimum paid-up capital of $2.5 million USD may be wholly owned by foreigners with conditions; Category C - enterprises with minimum paid-up capital of $7.5 million USD or more may be wholly foreign-owned; Category D - enterprises specializing in luxury products with paid-up capital of $250,000 USD per store may be wholly foreign-owned.
Foreign investors must maintain the full amount of the prescribed minimum capital in the Philippines unless they notify the SEC and DTI of their intention to repatriate the capital and cease operations.
Foreign investors may acquire up to 60% of the equity within the first two years from the effectivity of the Act in retail stores with a net worth exceeding $2.5 million USD and thereafter may acquire the remaining percentage consistent with allowable foreign participation.
Retail enterprises under Categories B and C with foreign ownership exceeding 80% must offer at least 30% of their equity to the public via a Philippine stock exchange within 8 years from starting operations.
They must have a parent corporation net worth of $200 million USD (Categories B and C) or $50 million USD (Category D); have five retail branches/franchises worldwide or at least one store with minimum $25 million USD capitalization; have a 5-year retailing track record; and be from countries that allow Filipino retailers.
Imprisonment of 6 years and 1 day to 8 years, a fine from Php1,000,000 to Php20,000,000; for associations or corporations, penalties apply to responsible officers; foreign offenders shall be deported after serving sentence.
The Bureau will arrest, charge, and deport foreign nationals caught engaging in retail trade illegally under Republic Act 6785 and Section 37(a)(7) of the Philippine Immigration Act of 1940 as amended.
Minimum paid-up capital is $2.5 million USD; in the first two years after the Act's effectivity, foreign ownership is limited to 60% of equity, and afterwards, it may be wholly foreign-owned.
They are responsible for registration and monitoring of foreign-owned retail businesses' capital use and approvals; businesses must notify and register with them upon inward remittance of capital.