Can a foreigner engage in retail trade in the Philippines? The simple answer is YES but the requirements are not as simple.
Every day we get several inquiries from foreigners who came to the Philippines to introduce their businesses abroad locally. We have foreigner clients selling pharmaceuticals, cosmetics, religious items from the Dead Sea, and various other products.
They have the capital. They have the source. And they have the marketing know-how. Philippine laws, however, has set certain limitations before these foreigners can engage in retail business.
With good reason, retail trade is reserved to Filipinos. Filipinos who do not have as much capital as these foreigners have will be deprived of earning their living off their sari-sari stores.
The Bureau of Immigration has repeatedly warned foreigners to not engage in retail trade without satisfying the requirements, lest they be arrested or deported for violation retail trade and immigration laws. (December 2012, BID Bulletin)
When is a business a RETAIL business?
If one is habitually selling merchandise, commodities or goods for consumption to the general public, then he or she is engaged in a retail business as defined by law.
What is the requirement before a foreigner can engage in retail trade?
The foreigner or the corporation with a foreign equity must have a capital of not less than Two million five hundred thousand US dollars (US$2,500,000.00).
Are all retail businesses covered by the Retail Trade Liberalization Law?
Not all retain businesses are covered. There are exceptions where foreign ownership is allowed.
For one, sales by a manufacturer of products manufactured by him, when his capital does not exceed One hundred thousand pesos (P100,000.00), is not considered retail trade. The same is true with a farmer selling the products of his farm. Sales in restaurant operations by a hotel owner or inn-keeper, irrespective of the amount of capital, where the restaurant is incidental to the hotel business, is also exempt. Finally, sales which are limited only to products manufactured, processed or assembled by a manufacturer through a single outlet, irrespective of capitalization, are likewise outside the coverage of the Retail Trade Liberalization Law.
If the foreigner has Two million five hundred thousand US dollars (US$2,500,000.00) capitalization, can the business be wholly foreign-owned?
If the capitalization is at least 2.5 Million dollars but not more than 7.5 Million dollars, the foreigner can own up to sixty percent (60%) of the business. If the capitalization is at least seven million five hundred dollars, then it can be wholly foreign-owned.
Also, enterprises specializing in high-end or luxury products with a paid -up capital of the equivalent in Philippine Pesos of Two hundred fifty thousand US dollars (US$250,000.00) per store may be wholly owned by foreigners.
Is the foreigner required to keep the amount of capitalization in a Philippine bank?
While the foreign investor shall be required to maintain in the Philippines the full amount of the prescribed minimum capital, it is not required to be kept in the bank. It is required to be actually used in their operations in the Philippines. Actual use of the funds will be monitored by the Securities and Exchange Commission.
So if you are a foreigner who wish to engage in retail trade in the Philippines, identify your product and your capitalization and allow us to assess your qualifications. If you want to know more about doing business in the Philippines, contact us at +632-8231090 or email Atty. Joyce Domingo at email@example.com.