On 2 March 2022, President Rodrigo R. Duterte signed into law Republic Act No. 11647 ("Amended FIA"), amending Republic Act No. 7042 or the Foreign Investments Act of 1991.
The Amended FIA aims to attract and promote productive investments in activities which significantly contribute to sustainable, inclusive, resilient, and innovative economic growth, productivity, global competitiveness, employment creation, technological advancement, and countrywide development to the extent that foreign investment in such activities is allowed by the Constitution and relevant laws. It is the policy of the law to: (i) encourage foreign investments in enterprises that significantly expand livelihood and employment opportunities for Filipinos, (ii) enhance the economic value of agricultural products; and (iii) promote the welfare of Filipino consumers.
In addition to existing requirements under the law, the Amended FIA now requires export enterprises to register and comply with the export requirements under the Tax Code in order to avail themselves of any tax incentive or benefit.
Prior to the Amended FIA, as a rule, non-Philippine nationals (i.e. corporations with more than 40% foreign equity) which are domestic market enterprises (i.e. cater primarily to the domestic market) must have a minimum paid-in capital equivalent to US$200,000 or US$100,000 under certain circumstances. The Amended FIA added situations where non-Philippine nationals which are domestic market enterprises may have a minimum paid-in capital of US$100,000 (underscored below):
- the domestic market enterprise involves advanced technology as determined by the Department of Science and Technology, or
- the domestic market enterprise is endorsed as startup or startup enablers by the lead host agencies pursuant to Republic Act No. 11337, otherwise known as the Innovative Startup Act; or
- the domestic market enterprise has a majority of its direct employees Filipinos, but in no case shall the number of Filipino employees be less than 15; provided, that registered foreign enterprises employing foreign nationals and enjoying fiscal incentives shall implement an understudy or skills development program to ensure the transfer of technology or skills to Filipinos. Compliance with this requirement shall be regularly monitored by the Department of Labor and Employment (DOLE).
Furthermore, the Amended FIA established the Inter-Agency Investment Promotion Coordination Committee ("Committee") which will integrate all promotion and facilitation efforts to encourage foreign investments in the country. The Committee shall develop a comprehensive and strategic Foreign Investment Promotion and Marketing Plan based on competitive advantages, natural resources, skill and educational development, traditional linkages, and international market potential that is fully consistent with the strategic investment priorities plan provided in the Tax Code.
Finally, public officials and employees involved in foreign investment promotions who shall commit any of the punishable acts under the Anti-Graft and Corrupt Practices Act ("AGCP Act") shall, in addition to the penalties under the AGCP Act, pay a fine of not less than PhP2 million (equivalent to US$37,000) but not more than PhP 5 million (equivalent to US$93,000).
The Amended FIA took effect on 19 March 2022, namely 15 days after its publication in the Official Gazette. However, the Amended FIA requires the National Economic Development Authority (the country’s primary socio-economic planning body), in consultation with the Department of Trade and Industry and Department of Finance, to issue implementing rules and regulations (and thus amend existing rules and regulations) necessary for the efficient implementation of the Amended FIA.
