New Law Eases Requirements for Foreign Retail Investors in the Philippines

Feb 2022

A bill that amends the Retail Trade Liberalization Act (RTLA) of 2000 was signed by President Rodrigo Duterte into law. Known as RA 11595, the new law will lower the amount of investment required of foreign-owned retail trade enterprises, effective January 21, 2022.

Under RA 11595, foreign-owned corporations, partnerships, and sole proprietorships may invest in or engage in a retail business, subject to the following:

  • The foreign retailer shall have a minimum paid-up capital of PHP 25 million (USD 487,000)
  • The foreign retailer’s country of origin does not prohibit the entry of Filipino retailers
  • The minimum investment per store must be at least PHP 10 million (USD 194,700) (It should be noted that the “minimum investment per store” covers the gross assets, tangible or intangible, including but not limited to buildings, leaseholds, furniture, equipment, inventory, and common use investments and facilities such as administrative offices, warehouses, preparation or storage facilities. Investments for common use and facilities, as reflected in the financial statements following the accounting standards adopted by the SEC and DTI shall be pro-rated among the number of stores being served.)

Other key provisions include:

  • Retail enterprises with foreign ownership of more than 80% are no longer required to offer a minimum of 30% of their equity to the public through any stock exchange in the Philippines within 8 years from start of operations.
  • RA 11595 encourages foreign retailers to have a stock inventory that is made in the Philippines.
  • RA 1195 mandates compliance with the provisions of the Labor Code of the Philippines on the determination of non-availability of a competent, able, and willing Filipino citizen before engaging the services of a foreign national.
  • Foreign retailers that have established or will establish corporations, associations, or partnerships engaged in retail trade are now subject to the monitoring and regulation by the SEC, instead of the DTI. The DTI will continue to have regulatory authority over foreign retailers that have or will establish sole proprietorships in the Philippines.

The DTI, SEC, and the National Economic Development Authority (NEDA) are tasked to review the minimum paid-up capital requirement every three (3) years.

The new law aims to liberalize the Philippine retail sector in a bid to lure investors and spur economic growth which was being hampered by the Covid-19 pandemic.

(Sources: Philippine Star; Philippine News Agency; Global Compliance News)

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