The previous administration of President Dutertre took measures in favor of the liberalization of foreign investments in the Philippines which translate into:
- The possibility for foreigners to invest in retail, subject to minimum investment conditions and per store, with an holding limited to 40% of the capital:
- The new law lowers the minimum paid-up capital for foreign owned retail trade enterprises from USD 2.5 Million to PHP 25 million.
- The new law lowers the minimum investment per store for foreign owned retail trade enterprises from USD 830,000 per store to PHP 10 million.
- Excluding retail, the amount of minimum capital is 200,000 USD for foreigners wishing to invest in the Philippines for a holding of 100% of the share capital. This amount can be reduced to 100,000 USD under the following conditions:
- The enterprises involved in advanced technology, as determined by the Department of Science and Technology.
- Enterprise having majority of its employees as Filipinos, and where the number of Filipino employees are not less than 15.
Finally, the amount of share capital is limited to PHP5,000 for a foreign investor if the company exports more than 60% of its activity provided that the business is not on the list of sensitive or prohibited activities for foreigners.
In addition, the new law has taken a series of measures aimed at reducing the burden of corporate tax:
- The tax rate is reduced to 25% and gradually reduced to 20% until 2027,
- The tax rate is reduced to 20% for SME,
- Tax incentives have been decided for companies deemed to be innovative under the following conditions:
- Be engaged in a project or activity included in the Strategic Investment Priority Plan (“SIPP”)
- Meet the target performance metrics after the agreed time period
- Comply with accounting requirements and the e-receipting and e-sales requirement of the Tax Code
- Submit annual reports of beneficial ownership of the organization and related parties.
The incentives are the following:
- VAT exemption on importation and VAT zero-rating on domestic purchases
- Special Corporate Income Tax (SCIT) 5% taxation rate on gross income (after ITH period) in lieu of all national and local taxes or enhanced deductions at the option of the qualified exporters
- Income Tax Holiday (ITH) Profits are exempted from tax for 4 to 7 years, depending on the combination of both location and industry priorities, as determined in the Strategic Investment Priority Plan (SIPP)
- Customs duty exemption for importations of capital equipment, raw materials, spare parts, or accessories
- Enhanced Deductions (ED) such as Depreciation of qualified capital expenditure (10% for buildings and 20% for machinery and equipment), Labor expense (50%), Research and development (100%), Training expense (100%), Domestic input expense (50%), Power expense (50%), Reinvestment allowance for manufacturing industry, Net Operating Loss Carry Over (NOLCO) allowed as deduction from gross income within the next 5 years.
Opko Finance, an accounting and outsourcing services company based in Cebu in the Philippines and managed by a French expatriate, helps Start up, SME, Entrepreneurs, subsidiaries of big companies to set up and develop their business in the best hubs in Asia and Middle East, faster and with fewer resources through outsourcing solutions in the Philippines.
For any information relative to the foreign investment in the Philippines, please contact our team to info@opkofinance.com.
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