Doing Business in the Philippines: Government regulations every business should know

With a flourishing economy, the Philippines offers great opportunities for investments and business development. The positive growth rates, along with the massive pool of skilled workers, lower overhead cost, business-friendly policies, and other essential resources, have fueled the investment interest here and abroad and have led to the establishment of various businesses in the country. When setting up a business or starting a company, there are certain government regulations to take note of:

Business registration
Before the business can go fully operational, it must secure the necessary licenses and certificate of registration. The requirements vary for different structures of business.

• For single proprietorship, the business should apply for a business name and get registered with the Department of Trade and Industry (DTI).
• For partnerships or corporations, a certificate of registration must be obtained from the Securities and Exchange Commission (SEC).
• For cooperatives, the business must register with the Cooperative Development Authority (CDA).

Aside from the certificate of registration, the business would also need to comply with other requirements and must apply for certifications/permits/licenses/identification numbers from other government agencies and organizations.

• A homeowner's clearance is required if the business will operate within the village or subdivision.
• The business must secure a barangay clearance and acquire a community tax certificate (CTC).
• With complete requirements, it must secure a business license or mayor's permit at the local government unit (municipality or city hall office).
• A business tax payer identification number (TIN) from the Bureau of Internal Revenue (BIR) must be obtained along with an SSS number (for the business and employees). The business should also register with Home Development Mutual Fund (HDMF), Philippine Health Insurance Corp. (PhilHealth), and Department of Labor and Employment (DOLE).

*Special clearances and permits must be acquired by certain businesses from select government agencies in order for them to operate legally. For example, businesses that deal with animals, animal products and facilities, and veterinary drugs must apply for certification from the Bureau of Animal industry. For the list of required certifications for certain businesses, visit this link.

Foreign ownership, equity, and investment
The Philippine government supports foreign investments that will create employment opportunities, increase export volume and value, encourage the productivity of resources, and help set the foundation for economic development in the country. With a liberalized foreign investment law, the country allows 100% foreign equity on some areas of investment, excluding some industries and activities under the Foreign Investment Negative List.

In Negative List A, certain businesses and industries have restricted foreign ownership (see the complete list here), as specified by the Constitution and some specific laws. Some sectors (e.g., mass media, small-scale mining, private security agencies, etc.) prohibit foreign equity, while other areas of investment maintain a limited percentage of foreign equity (20%, 25%, 30%, 40%, and 60%).

In Negative List B, foreign ownership is restricted to businesses and industries (see the complete list here) that involve security and defense and may pose health risks and may have an adverse moral effect. Restrictions are also set in place to protect small- and medium-scale enterprises.

Ownership land/real properties in the Philippines by foreign investors/corporations
Foreign companies and investors can acquire lands as long as these are privately owned and foreign equity doesn't surpass the 40% cap. There are, however, some exceptions to land ownership by foreign investors and corporations (check the stipulations here). Aside from private lands, foreign corporations and investors can also own real properties like buildings and condo units and may invest on land improvements. They can even lease lands according to the conditions set by the Investor's Lease Act (refer to the conditions here).

Incentives for a registered enterprise
There are several tax incentives offered to foreign investors and corporations and any registered enterprise. These include fiscal and non-fiscal incentives by various authorities and implementing agencies (for a complete list of requirements and specifications, check out the listing here). Various incentive schemes are available depending on the location, business activity, and registration. Foreign companies and investors, for instance, can take advantage of the Philippine Economic Zone Authority (PEZA) incentives and benefits through accreditation (for the list of PEZA benefits and requirements, check out this article).