IRR of RA 11647 on Foreign Investments

Definitions and operative terms

“Act” refers to Republic Act No. 7042 entitled “An Act to Promote Foreign Investments, Prescribe the Procedures for Registering Enterprises Doing Business in the Philippines, and for other Purposes”, also known as the Foreign Investments Act of 1991, as amended.
“Doing business” includes soliciting orders, service contracts, opening offices (liaison offices or branches), appointing representatives or distributors under full control of a foreign corporation, and participating in the management, supervision, or control of any domestic business in the Philippines; it also includes other acts implying continuity of commercial dealings for progressive commercial gain.
“Doing business” excludes, among others: mere shareholder investment; having a nominee director or officer; appointing a representative/distributor who transacts business in the representative’s or distributor’s own name and account; general advertising; maintaining stock solely for processing by another entity; consignment of equipment for export processing; collecting information; and servicing incidental to an isolated contract.
“Foreign investment” means an equity investment made by a non-Philippine national in foreign exchange (FX) or the peso equivalent of other assets actually transferred to the Philippines and duly registered with the Bangko Sentral ng Pilipinas (BSP); it also includes peso investments for determining foreign ownership.
“Foreign Investment Negative List (FINL)” means a list of areas of economic activity whose foreign ownership is limited to a maximum of forty percent (40%) of the equity capital.
“Investment” means paid-in equity participation recorded in the enterprise’s stock and transfer book (or equivalent registry); it excludes ownership of bonds, debentures, notes, or other evidence of indebtedness.
“Investment promotion agencies (IPAS)” include government entities created by law/EO/decree to promote investments and administer incentives and zones/freeports; listed examples include BOI, PEZA, BCDA, SBMA, CDC, JHMC, PPMC, CEZA, ZCSEZA, PIA, APECO, AFAB, TIEZA, and similar authorities unless specifically exempted from the Act.
“Exports” defines export volume/value using Philippine port F.O.B. peso value and includes specific constructive-export situations without actual exportation (e.g., bonded manufacturing warehouses, EPZA enterprises, bonded trading warehouses supplying raw materials, and foreign military bases/diplomatic missions and other tax-immunized agencies).
“Export enterprises” are enterprises exporting sixty percent (60%) or more of output or purchasing products domestically for export at sixty percent (60%) or more.
“Strategic industries” refers to foreign investments in military-related industries, cyber infrastructure, pipeline transportation, or other activities threatening territorial integrity and safety/security/well-being of Filipinos—especially when made by foreign government-controlled entities/state-owned enterprises (except independent pension funds, sovereign wealth funds, and multinational banks) or located in geographical areas critical to national security.
“Foreign government-controlled entity, or state-owned enterprises” are entities where a foreign state owns over fifty percent (50%), controls through voting rights, appoints a majority of the board, or can interfere with management/control.
“Pipeline transportation” covers transport through pipelines and related ownership, operations, supply, and services.

Inter-Agency Investment Promotion Coordination Committee (IIPCC)

The Inter-Agency Investment Promotion Coordination Committee (IIPCC) integrates all promotion and facilitation efforts to encourage foreign investments.
Section 2 requires the Chairperson, through the Secretariat, to convene the IIPCC after issuance of the IRR.
Section 3 sets the IIPCC composition as follows: DTI Secretary (Chairperson); DOF Secretary/Undersecretary (Vice-chairperson); BOI Managing Head; DTI-PEZA Director-General; DFA-OUMAIER Undersecretary; NEDA Socioeconomic Planning Secretary; DICT Secretary; CHED Chairperson; TESDA Director-General; and four (4) private sector representatives (one each from National Capital Region, Luzon, Visayas, and Mindanao).
The principal members may designate primary and secondary alternate representatives as the official next-in-rank, and their acts are treated as acts of principals when principals are unavailable.
Section 4 requires government representatives to prepare a nominees list for the four private representatives; nominees must have competence, probity, integrity, expertise, and at least ten (10) years of outstanding management/leadership experience; nominations must be recommended by recognized industry/business chambers or the largest private sector organization by geography/sector/membership.
Private representatives serve three (3) years, subject to reappointment for another three (3) years; vacancies are filled by Presidential appointment for the remainder of the term.
Security clearance and background checks are required as a condition for serving.
The IIPCC meets at least semi-annually; special meetings may be called by the Chairperson.
Quorum requires a majority or at least seven (7) members present; among those present, at least two-thirds (2/3) must be government representatives, and either the Chairperson or the Vice-chairperson must be present.
Resolutions must be signed by two-thirds (2/3) of IIPCC members and either the Chairperson or the Vice-chairperson.
The Chairperson may invite representatives of relevant agencies/sectors as resource persons in a non-voting capacity.
Section 6 imposes a full disclosure rule: IIPCC members with personal/pecuniary interests in agenda matters must disclose interest to the IIPCC and withdraw when the matter is taken up.

IIPCC powers, functions, and secretariat

The Chairperson must provide leadership and ensure effective functioning, call meetings, set agendas, preside over meetings, oversee output quality/quantity/timeliness, ensure good-governance compliance, and ensure informed decisions based on relevant facts and data.
The Chairperson may request participation of other departments/agencies, LGUs, NGOs, and local business chambers/enterprises depending on foreign investment needs.
The Chairperson signs resolutions that are agreed by majority of IIPCC members.
The Chairperson performs such other powers/duties as vested by the IIPCC pursuant to its mandate.
The Secretariat is headed by the Executive Director for Investments Promotion, with the BOI acting as Secretariat of the IIPCC.
The BOI Secretariat provides administrative support to the IIPCC and the IIPCC Technical Committee; consolidates budget/work plan/report inputs and presents recommendations; issues meeting notices and organizes meeting documentation/records; monitors policies/resolutions; performs other assigned duties; and reports directly to the Chairperson and the Technical Committee Chairperson.

Technical committee and coordination

The IIPCC Technical Committee is headed by DOF as Chairperson and National Security Council (NSC) as Co-Chairperson, with NEDA and DTI as permanent members.
The Technical Committee conducts risk-assessment to identify and recommend:
- Strategic industries (including other threatening activities); and
- Geographical areas critical to national security.
The Technical Committee recommends the list to the President for approval, and approved recommendations form part of the initial list under Section 16 of the Act and Rule XXII of the IRR; the initial list may be amended anytime as necessary, subject to Presidential approval.
The Technical Committee may, upon IIPCC order, conduct initial risk assessment of foreign investment transactions satisfying Section 69, Rule XXII conditions and may conduct comprehensive national security review of foreign investments.
Findings/recommendations from initial and comprehensive reviews are submitted to the IIPCC.
The Technical Committee Chairperson calls meetings, approves agendas, presides, ensures informed decision-making, and may request other government agencies/LGUs/NGOs/local business chambers/enterprises for discussions.
The IIPCC ensures cohesion by aligning the FIPMP with the Strategic Investment Priority Plan (SIPP), and with national development plans (PDP, RDPs).
The IIPCC coordinates with the Office of the President prior to orders reviewing foreign investments with national security implications under Section 16 of the Act and Rule XXII.
The IIPCC solicits information from the Fiscal Incentives Review Board (FIRB) on whether foreign investments are registered, applying to be registered, or applying for incentives under Title XII of the National Internal Revenue Code (NIRC), as amended.
The IIPCC coordinates with the NSC for foreign investments with national security implications.
The IIPCC coordinates with the Philippine Competition Commission (PCC) for mergers and acquisitions involving foreign investments and with the Governance Commission for GOCCs (GCG) for investments involving GOCCs, when policy parameters under Section 16 of the Act and the IRR apply.
The IIPCC harmonizes investment promotion/marketing initiatives and facilitates investment facilitation to streamline processes and enable ease of doing business.
The IIPCC coordinates with other interagency bodies/councils where close coordination is required due to mandate, functions, or scope.

Foreign Investment Promotion and Marketing Plan (FIPMP)

The IIPCC establishes a medium- and long-term Foreign Investment Promotion and Marketing Plan (FIPMP) integrating existing investment development plans and programs under BOI, PEZA, and various IPAs, investment promotion units of LGUs, and other agencies into a single national framework and strategy.
The IIPCC designs a comprehensive marketing strategy/campaign to promote the Philippines in accordance with the FIPMP.
The IIPCC coordinates (and when necessary partners/assists) IPAs and similar authorities to promote foreign investments.
The IIPCC supports inbound and outbound foreign direct investment or trade missions to promote the country as a premier investment location.
The IIPCC encourages and supports R&D in priority investment areas indicated in the FIPMP.
The IIPCC creates a technical committee to lead strategic industry review.
The IIPCC monitors performance against measurable, time-bound targets in the FIPMP including job generation, revenue generated, realized investments, and other indicators.
The IIPCC submits annual evaluation and reports to the President and Congress on its activities.
The IIPCC establishes and updates an online database/directory of ready local partners in priority sectors under the FIPMP for business matching in local supply chains.
The IIPCC supports local government efforts to promote foreign direct investments, facilitate processing of national requirements for faster compliance in highly desirable projects, and address requested safeguards/services.
The FIPMP must be consistent with the SIPP, PDP, and RDPs, and must promote strategies that create high-skilled jobs, increase product/service sophistication sourced domestically, expand domestic supply sources, attract significant foreign capital, promote export diversification, and accelerate countryside development.
The IIPCC formulates the FIPMP in consultation with IPAs and other government departments/agencies, LGUs, and business chambers/enterprises, based on the country’s competitive advantages and market potential; the IIPCC issues separate guidelines on formulation.
The IIPCC develops a comprehensive FIPMP for five (5) years (medium term) and ten (10) years (long term); the first medium and long-term FIPMP is formulated within one (1) year after effectivity of the IRR.
The IIPCC may review and amend the FIPMP every two (2) years subject to consultation and publication requirements, updating policies/strategies/programs/projects/activities including investment targets for remaining FIPMP periods considering local and global market developments.
The FIPMP must integrate a monitoring tool including investment targets, revenue generated, approved/realized investments, job generation, and other necessary indicators, considering Sustainable Development Goal (SGD) indicators and future global indicator frameworks.
The Department of Education (DepEd), CHED, TESDA, DOLE, PRC, and other training agencies direct curriculum and training efforts toward manpower requirements of the FIPMP.

Online single-portal system

The IIPCC establishes, operates, and maintains an online portal containing IIPCC procedures/contacts/schedules; the FIPMP; investor and government rights/obligations information; links to relevant government websites; IIPCC issuances/resolutions/documents for public circulation; and database modules.
The online portal includes database items for investment-related statistics (value/amount of approved investments and actual investments materialized), local partners/enterprises for business matching, available land locations, and other databases as necessary.
The online portal must provide a registration link to the Central Business Portal (CBP) for filing or applying for necessary registrations, clearances, permits, or authorizations facilitating foreign investments.
The online single-portal must be publicly accessible and functions as a tool to promote investments and enable business matching in local supply chains, using FAQs, infographics, and other digital marketing tools.
The IIPCC operationalizes the portal with DICT consultation to enhance efficiency in attracting and facilitating qualified foreign investments.
The DICT provides assistance regarding technical portal requirements.
The IIPCC may formulate and promulgate further guidelines on the portal.

Registration rules for non-Philippine nationals

Non-Philippine nationals may do business or invest up to one hundred percent (100%) of capital when investing in a domestic market enterprise in areas outside the FINL, or investing in an export enterprise whose products/services do not fall within Lists A and A of the FINL (except defense-related activities which may be approved pursuant to Section 8(b)(1) of the Act).
Foreign investments are also subject to existing laws requiring that the applicant’s country/state allows Filipino citizens and corporations to do business therein.
A non-Philippine national qualified to do business but engaging in more than one investment area may be registered under the Act; however, the investor cannot engage in FINL areas subject to foreign equity limitations.
Existing enterprises that are non-Philippine nationals at Act effectivity and intend to increase foreign equity beyond previously authorized levels must follow the qualifications in Section 18(a) and may increase foreign equity beyond current holdings only if the investment area is not in the FINL.
Existing foreign corporations may increase capital even if their existing investment area is in the FINL.
Transfer of ownership from one foreign company to another is allowed even for enterprises engaged in an area in the FINL as long as there is no increase in foreign equity percentage share.
Applications for registration are filed with the SEC for foreign corporations and domestic corporations/partnerships; for sole proprietors, applications are filed with DTI-National Capital Region for Metro Manila, and with SEC extension offices for corporations/partnerships and provincial DTI offices for sole proprietors outside Metro Manila.
Pre-processing is done to assist investors in determining document completeness; applications become officially accepted only upon submission of complete documents to SEC or DTI.
Additional requirements include:
- For enterprises engaging in defense-related activities: clearance from DND or PNP.
- For non-Philippine nationals engaged in micro and small domestic market enterprises with paid-in equity capital at least US$100,000 but not equal to or more than US$200,00: one of (1) a DOST certificate that the investment involves advanced technology; or (2) a certificate endorsing startups/startup enablers by DICT/DTI/DOST; or (3) a certificate from the appropriate DOLE Regional Office endorsing a notarized undertaking that the majority of direct employees are Filipinos and that no fewer than fifteen (15) Filipino direct employees are maintained.
DOLE validates and monitors compliance with the undertaking within six (6) months from start of commercial operations; upon failure to satisfy, DOLE submits a report to SEC which causes the investor to satisfy the appropriate higher investment requirement and may impose the appropriate penalty.
Agency issuance of certificates and related undertakings follows Republic Act No. 11032 (Ease of Doing Business and Efficient Government Services Delivery Act of 2018).
For strategic industries, Section 16 of the Act and Rule XXII apply.
A registration platform link is provided via the online single portal system once operable.
Approval timing:
- SEC/DTI must decide within seven (7) working days for domestic corporations, partnerships, and sole proprietors.
- For foreign corporations, SEC must decide within twenty (20) working days.
- Applications are automatically approved if not acted upon within the applicable period for a cause not attributable to the applicant.
SEC or DTI must monitor compliance with foreign equity participation requirements and monitor minimum paid-up equity capital by using an inward remittance certificate of FX issued by an authorized agent bank in the BSP-prescribed format, or other proof such as a bank certification that capital is deposited and maintained in a bank in the Philippines.
SEC registration of corporations, partnerships, and joint ventures follows Republic Act No. 11232 (Revised Corporation Code), Securities Regulation Code, Civil Code of the Philippines, and other SEC-implemented laws; SEC online registration is linked via the online single portal system once operable.
DTI registration of sole proprietors follows DTI existing guidelines, including basic and additional requirements; DTI online registration is linked via the online single portal system once operable.
Registration with investment promotion agencies follows existing IPAs’ procedures, with platform links provided via the online single portal system once operable.

BSP registration and profit repatriation

Enterprises seeking to source foreign exchange (FX) from banking system resources for remittance of profits abroad, earnings and dividends, and capital repatriation in connection with the Act foreign investment must register with the BSP.
BSP registration follows BSP rules on procedures for registering foreign investments.
BSP registration platform linkage is made available on the online single portal system once operable.

Foreign investments in export enterprises

Foreign investments in export enterprises are allowed up to one hundred percent (100%) provided their products and services do not fall within Lists A and B of the FINL.
As a general rule, non-Philippine national export enterprises register with the BOI, using platform links on the online single portal system once operable.
Export enterprises registered under the Act seeking incentives must apply for registration with IPAs following Title XIII of the NIRC, as amended, and its implementing rules.
Within seven (7) working days from issuance of the certificate of registration, SEC or DTI transmits to BOI copies of the certificate and the prescribed application form duly accomplished.
Registered foreign export enterprises must submit to BOI a duly accomplished reporting form within six (6) months after the end of each taxable year.
The IIPCC issues guidelines for a uniform template for these reports to support recordkeeping and monitoring of approved and realized foreign investments.
Failure to submit required reports within the prescribed period or submission of fraudulent reports constitutes grounds for sanctions under Section 62, Rule XXI.
Upon receipt of reports, BOI determines export requirement compliance.
If an export enterprise fails to comply with the export requirement, BOI informs the concerned IPAs, which advise SEC (for corporations/partnerships) or DTI (for sole proprietors).
SEC/DTI requires the export enterprise to immediately reduce sales to the domestic market to not more than forty percent (40%) of total production.
If the enterprise fails to comply with the order without justifiable reason, it is penalized under Section 62, Rule XXI.

Foreign investments in domestic market enterprises

Foreign equity participation in domestic market enterprises is allowed up to one hundred percent (100%) unless prohibited or limited by the Constitution and existing laws or the FINL.
A domestic market enterprise may change status to an export enterprise any time by notifying SEC or DTI through the online platform link once operable.
SEC/DTI decides on status change within seven (7) working days for domestic corporations/partnerships/sole proprietors; for foreign corporations, SEC decides within twenty (20) working days.
For foreign export enterprise changes from domestic to export status, Section 26, Rule VIII applies and the application must be supported by reports showing export of sixty percent (60%) or more of output.
Once notified, SEC requires the enterprise to amend articles of incorporation to include exporting activity in primary purposes.
Non-Philippine national new export enterprises are subject to reportorial requirements and monitoring for export requirement compliance under Sections 27 and 28 of Rule VIII.

Regular Foreign Investment Negative List (FINL)

The Regular FINL has two (2) component lists: List A and List B, which reserve certain activities to Philippine nationals.
NEDA formulates the Regular FINL following the process and criteria in Section 8 of the Act and the guidelines in Rules XI and XII.
NEDA submits the proposed Regular FINL to the President for approval and promulgation.
NEDA submits the first Regular FINL and subsequent proposed Regular FINLs to the President at least forty-five (45) calendar days before the scheduled publication date.
Publication rules for Regular FINL:
- The first Regular Negative List is published not later than sixty (60) days before the end of the transitory period.
- Subsequent Negative Lists are published not later than fifteen (15) calendar days before the end of the effectivity of the current Negative List.
Effectivity rules for Regular FINL:
- The first Regular Negative List becomes immediately effective at the end of the transitory period.
- Subsequent Regular FINLs become effective fifteen (15) calendar days after publication in a newspaper of general circulation or in the official gazette.
- Except for List A, each Regular FINL remains in force for two (2) years from the date of effectivity.
Each Regular FINL applies only to new foreign investments and does not affect existing foreign investments at the time of publication.

List A: Philippine-nationals only (40%)

List A consists of reserved areas of activity where foreign investments are limited to a maximum of forty percent (40%) as prescribed by the Constitution and specific laws.
NEDA enumerates the Constitution and other-law reserved activities that make up List A.
Amendments to List A are made by NEDA to reflect changes in laws affecting the extent of foreign equity participation in specific economic activities.

List B: regulated sectors and thresholds

List B includes activities where prior clearance/authorization is required, including:
- Defense or law enforcement-related activities requiring clearance from DND or PNP, covering manufacture, repair, storage, or distribution of firearms, ammunition, armored vests and other bulletproof attires, lethal weapons, military ordnance, explosives, pyrotechnics, and similar materials.
List B also includes activities with negative implications on public health and morals, including manufacture and distribution of dangerous drugs, all forms of gambling, nightclubs, bars, beerhouses, dance halls, sauna and steam bathhouses, and massage clinics.
List B also reserves micro and small domestic market enterprises with paid-in equity capital of less than US$200,000 (or its equivalent) to Philippine nationals, subject to exceptions under the Retail Trade Utilization Act of 2000 (R.A. No. 8762, as amended by R.A. No. 11595) and other relevant laws.
Non-Philippine national micro and small domestic market enterprises must have a minimum paid-in capital of US$100,000 (or its equivalent) and are allowed when they:
- involve advanced technology as determined by DOST; or
- are endorsed as startup or startup enablers by lead host agencies (DTI, DICT, or DOST) pursuant to R.A. No. 11337 (Innovative Startup Act); or
- execute a notarized undertaking that the majority of direct employees are Filipinos and that the number of Filipino direct employees is not less than fifteen (15).
Enterprises registered as foreign enterprises employing foreign nationals and enjoying fiscal incentives must develop and implement an understudy training program or skills development program to ensure transfer of technology skills to Filipino employees within the same enterprise.
For List B determination:
- Activities in defense/public health/morals are determined through NEDA recommendation (motu proprio or endorsed) based on recommendations of the Secretary of National Defense or Secretary of Health, approved by the President, and promulgated via issuance of the Regular FINL by Executive Order; List B is submitted for Presidential action together with List A.
- For defense-related industries requiring PNP clearance falling under List B, the DND consults and coordinates with the PNP in recommending or determining foreign equity participation as needed.
Amendments to List B are made no more often than once every time-period determined by the rule’s “once every” requirement, only upon recommendation/endorsement and Presidential approval and promulgation via Executive Order; this amendment process is keyed to the Secretary of National Defense or Secretary of Health recommendations endorsed by NEDA or NEDA motu proprio recommendation, as applicable.