{"id":67063,"date":"2020-09-24T23:33:36","date_gmt":"2020-09-24T15:33:36","guid":{"rendered":"https:\/\/primer.com.ph\/blog\/?p=67063"},"modified":"2022-09-24T23:34:35","modified_gmt":"2022-09-24T15:34:35","slug":"expats-quick-guide-to-starting-a-business-in-the-philippines","status":"publish","type":"post","link":"https:\/\/primer.com.ph\/blog\/2020\/09\/24\/expats-quick-guide-to-starting-a-business-in-the-philippines\/","title":{"rendered":"Expat\u2019s Quick Guide to Starting a Business in the Philippines"},"content":{"rendered":"

\"\"IMAGE Energepic.com<\/em><\/span><\/p>\n

Among other burgeoning industries, the startup scene in the Philippines is booming. By 2020, the country aims to have 500 startup companies that have raised a total of US$200 million in funding and US$2 billion in valuation. The country has huge plans for its startup ecosystem, which makes the present a very good time for starting a business in the Philippines.<\/p>\n

Also read:\u00a0How to Register Your Start-up Business Name<\/a><\/em><\/p>\n

If you\u2019re a foreigner and have decided to make the Philippines your next entrepreneurial area, here\u2019s a short guide on how to open your business.<\/p>\n

Foreign Equity Restrictions<\/strong><\/p>\n

It is a common misconception that foreigners cannot own their businesses in the Philippines. In fact, in most industries, foreign investment is not only allowed, but promoted by fiscal and non-fiscal incentives. The country\u2019s Republic Act No. 7042 or the Foreign Investments Act of 1991 (FIA) outlines these incentives and their requirements for\u00a0availment.<\/p>\n

That being said, there do remain some industries that place restrictions on foreign equity in terms of maximum capital investment, and all of them can be found in the Philippine Foreign Investment Negative List1<\/sup>.\u00a0If your business of choice falls into the industries outlined in the negative list, you have to follow the defined cap.<\/p>\n

In cases other than above, the rules for foreign equity capital are as follows:<\/p>\n

    \n
  1. For domestic market enterprises (which are defined as companies deriving at least 40% of their revenue from sources within the Philippines), Foreign equity is limited to 40%. It also means that you cannot be\u00a0company\u00a0president.However, if your domestic market business has a minimum\u00a0paid in\u00a0capital of US$200,000 or more, the equity cap can be lifted and foreigners can fully own their businesses. Moreover, if your business will employ 50 people or more, or operate with advanced technology, the cap-related capital can be reduced to just US$100,000.<\/li>\n
  2. For\u00a0export oriented\u00a0enterprises (which are defined as companies deriving at least 60% of their revenue from sources outside the Philippines), they can do away with the capitalization requirement and go beyond the 40 percent cap on equity owned by foreigners.<\/li>\n<\/ol>\n

    The Philippines also has an Anti-Dummy Law, formally known as the Commonwealth Act No. 108, which penalizes individuals who violate the restrictions on foreign equity and those who evade laws on nationalization.<\/p>\n

    The Anti-Dummy Law also forbids the so-called \u201cdummy arrangement\u201d wherein foreign investors arrange for locals to buy a land in the Philippines and register the property under the local\u2019s name. Both locals and foreign nationals caught violating this law could be jailed for five to 15 years or asked to pay a hefty fine.<\/p>\n

    It has been a practice by foreign investors to use their marriage partner\u2019s name or partner with a local to work around the restrictions, but this arrangement poses several risks as well.<\/p>\n

    Procedures Needed to Open a Business in the Philippines<\/strong><\/p>\n

    Here are the main steps you need comply with when starting a business in the Philippines.<\/p>\n

    Business Registration<\/em><\/p>\n