Law Summary
Definitions
- Retail Trade: selling goods directly to the public, with exceptions such as small manufacturers, farmers, restaurant operations incidental to hotels, and single outlets for manufacturer products
- High-end or luxury goods: non-essential goods demanded by high-income groups (e.g., jewelry, designer apparel, electronics)
Equal Treatment for Natural-Born Citizens Losing Philippine Citizenship
- Natural-born Filipinos residing in the Philippines who lost citizenship have the same retail trade rights as Filipino citizens under the Act
Foreign Equity Participation Categories
- Category A: < $2.5 million capital reserved for Filipinos
- Category B: $2.5M to < $7.5M capital, foreigners can own up to 60% for first 2 years, then 100%
- Category C: ≥ $7.5M capital, foreigners may have full ownership
- Category D: High-end luxury goods stores, $250,000 capital minimum per store, foreign full ownership allowed
- Minimum capital must be maintained and repatriation notified to SEC/DTI
- Certification of capital inward remittance required from BSP and DTI
Foreign Acquisition of Local Retail Shares
- Foreign investors limited to 60% ownership for retail stores worth more than $2.5 million during first 2 years, then may acquire remaining shares
Public Offering Requirement
- Retail enterprises with foreign ownership > 80% must offer at least 30% equity publicly on Philippine stock exchange within 8 years
Qualifications for Foreign Retailers
- Net worth of $200M for Categories B and C, $50M for Category D in parent company
- At least 5 operating branches/franchises worldwide; or one store with $25M capitalization
- 5-year track record in retailing
- Only foreign investors from countries allowing Filipino retailers entry
- DTI to pre-qualify foreign retailers and keep records
- NEDA to monitor high-end foreign retailers and report to Congress annually
Promotion of Locally Manufactured Products
- Foreign retailers in Categories B and C to maintain at least 30% of inventory cost from Philippine-made goods for 10 years
- Category D foreign retailers to maintain at least 10%
Prohibited Activities for Foreign Retailers
- No mobile or rolling stores, door-to-door selling, use of sales reps outside accredited stores
- No restaurants or sari-sari stores operated by foreign retailers
- DTI to define detailed prohibited activities
Implementing Agency and Rules
- DTI responsible for monitoring and regulation of foreign-owned retail businesses
- Coordination with SEC, NEDA, BSP for rule-making
- Rules to be issued within 90 days after approval
Penalties for Violation
- Imprisonment: 6 years and 1 day to 8 years
- Fine: P1,000,000 to P20,000,000
- Responsible officers of corporations also penalized
- Foreign offenders deported after sentence
- Filipino public officers also face dismissal and permanent disqualification
Repealing Clauses
- Repeals Republic Act No. 1180 and inconsistent laws or regulations
Separability Clause
- Invalidity of any provision does not affect other provisions
Effectivity Clause
- Act takes effect 15 days after approval and publication in two newspapers