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What you need to know when investing in the Philippines

The Law Firm of Mallari Fiel Brillante Ronquillo

These days, anyone looking to invest and set up a business would be very wise to consider the Philippines. Here’s why. The Philippines is an open economy. It allows 100% foreign ownership in almost all sectors and is geared towards a Build-Operate-Transfer (BOT) investment scheme that other Asian countries emulate. Currently, government corporations are being privatized, and there has been a deregulation in the banking, insurance, shipping, telecommunications, and power industries. Being a business-friendly economy, the Philippine government provides tax incentive packages, i.e. corporate income tax, reduced to a current 32%, with companies in the Special Economic Zones (ecozones) subject to only 5% overall tax rates. Multinationals looking for regional headquarters are entitled to incentives such as tax exemptions and tax and duty-free importation of specific equipment and materials. Added to this, every year there are some 350,000 graduates enriching the professional pool[1]. With higher education priority, the literacy rate in the Philippines is 94.6%— among the highest[2]. Another compelling advantage of the Filipino workforce is the high proficiency in English of Filipinos. Since English is taught in all schools, the Philippines is in fact the world’s third largest English-speaking country. While the Philippines rightly trumpets its strong and competent workforce, of equal importance is its strategic business location. “The Philippines is located right in the heart of Asia, today the fastest growing region. It is located within four hours flying time from major capitals of the region. Sited at the crossroads of the eastern and western business, it is a critical entry point to over 500 million people in the Association of Southeast Asian Nations (ASEAN) market and a gateway of international shipping and air lanes suited for European and American businesses”[3]. Doing business in the Philippines is economically practicable. “Wages are typically less than a fifth of that in the United States. Local communication, electricity, and housing costs are also 50% lower compared to the US rates. Foreign companies that are now outsourcing programming and business processes to the Philippines estimate 30%-40% business cost savings, 15%-30% call center services and application systems, and 35%-50% software development.”[4] If all you’ve read up to now has convinced you to choose the Philippines, you might be wondering how to get started. To give you an overview, below are the requirements a foreign corporation must satisfy before engaging in business in the Philippines. It must first secure the necessary licenses or registration certificates from the appropriate government agencies. Generally, the registration process starts with the Securities and Exchange Commission (SEC), the government agency responsible for the registration, licensing, regulation and supervision of all corporations licensed to engage in business or to establish a branch office in the Philippines[5]. If the proposed project or activity qualifies for incentives, the foreign corporation may file its application with the appropriate government agency depending on the project’s location, as follows[6]:
  1. Board of Investments (BOI). Website: www.boi.gov.ph. For projects outside the special economic zones
  2. Philippine Economic Zone Authority (PEZA). Website: www.peza.gov.ph. For projects in any Special Economic Zone under PEZA
  3. Subic Bay Metropolitan Authority (SBMA). Website: www.sbma.com. For projects in Subic Bay Freeport
  4. Clark Development Authority (CDC). Website: www.clark.com.ph. For projects in Clark Special Economic Zone
  5. John Jay Poro Point Development Corporation. For projects in John Jay Special Economic Zone, Poro Point Freeport and Special Economic Zone
  6. Cagayan Economic Zone Authority. Website: www.ceza.gov.ph. For projects in Cagayan Special Economic Zone
  7. Zamboanga Economic Authority. Website: http://www.zfa.gov.ph. For projects in Zamboanga City Special Economic Zone
Setting up a business in a foreign country may appear daunting, but with expert, specialist legal assistance from a reputable law firm the experience can be headache-free and profitable.  Should you have any questions please visit us at www.mflegal.com.ph.

The Law Firm of Mallari Fiel Brillante Ronquillo

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