Investment regulation - Philippines

24.08.2021

Market entry restrictions

There is no requirement for foreign investors who want to invest in shares and fixed income products to obtain approval or register with a regulatory body. However, foreign investments are required to be registered with the Bangko Sentral ng Pilipinas (BSP) and evidenced by the Bangko Sentral Registration Document (BSRD). The BSRD will be used to support repatriation of proceeds on the investment.

Foreign investors in the Philippines are required to submit a one-time "authority to disclose information" form. 

Investment restrictions

There are restrictions on foreign ownership in the Philippines.

The general foreign ownership limit (FOL) is 40% as mandated by the Constitution. The Regular Foreign Investment Negative List (RFINL) is updated and published by the Philippine government. If an FOL has been reached, no approval for an exception will be granted by the SEC or PSD and the shares exceeding the FOL must be sold or converted to the local registry.

Foreign exchange restrictions

There are no restrictions on remittance (inflow) of foreign currency into the Philippines.

Please note that non-resident PHP cash accounts may be funded only through:

  • inward remittances;
  • income or proceeds of conversion from property located in the Philippines;
  • onshore PHP receipts from residents for rendered services; or
  • PHP proceeds from the onshore sale by non-resident issuers of their PSE-listed equity securities.

With BSP Circular 1030, the following are included as allowable funding for peso deposit accounts of non-residents:

  • Cash collateral used for investments under Securities Borrowing and Lending or similar arrangements;
  • Peso proceeds from the onshore sale by non-resident issuers of their: 
    • Equity securities issued onshore or offshore that are listed at an onshore exchange
    • Debt securities issued onshore

Funds that are converted to PHP from inward remittance must be invested in BSRD registrable instruments in order for proceeds to be eligible for repatriation. 

There are no restrictions on repatriation (outflow) of foreign currency as long as there is no conversion from PHP to foreign currency involved. Excess PHP, which is derived from initial remittance of a foreign currency, and interest earned on excess PHP can be repatriated without prior BSP approval provided that the excess PHP was not used to fund any investment and that at least 50% of the funds brought in were invested in the country and duly-registered with the BSP. In February 2019, BSP Circular 1030 provided some relaxation such that the repatriation of excess PHP from disapproved subscription or over-subscription to / investments in equities and debt securities and erroneously remitted funds relating to investments are now allowed without complying with the 50% minimum utilisation requirement. All FX transactions are reported to the BSP as prescribed in the Manual of Regulations for Foreign Transactions (MORFXT).

Inward Investments

The BSRD-registrable instruments are as follows:

I. Inward Foreign Investments in Instruments Issued by Residents

A. Foreign Direct Investments covered - a category of cross-border investment associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise that is resident in another economy.

  1. Assigned Capital and Operational Working Fund - for onshore branches/regional headquarters/regional operating headquarters and offices/representative offices; and Contributed Capital - for onshore partnerships/joint ventures;
  2. Ownership or purchase of condominium unit; and
  3. Capitalised expenses incurred by foreign firms pursuant to government-approved service contracts/similar contracts for oil, gas, and geothermal energy exploration/development.

B. Foreign Portfolio Investments - a cross-border transaction and position involving debt or equity securities, other than those included in foreign direct investment. This includes debt securities issued by the National Government and other public sector entities. 
Note: The following investment instruments may fall under the category of foreign direct investments or foreign portfolio investments depending on the degree of control or influence of the investor in the investee firm:

  1. Equity securities that are not listed; and listed at an onshore exchange 
  2. Debt securities issued by private sector residents that are not covered by the provisions of Part Three, Chapter I of the FX Manual (Loans and Guarantees) not listed; and listed at an onshore exchange
  3. Exchange traded funds (ETFs); 
  4. Investment funds [e.g., mutual funds (MFs) and unit investment trust funds (UITFs); and 
  5. Philippine Depositary Receipts (PDRs) that are not listed; and listed at an onshore exchange.

C. Other Investments - a residual category of financial account other than those included in direct investment, portfolio investment and financial derivatives. This includes investment in peso time deposits with an AAB with a maturity of at least 90 days.

II. Inward Investments in Instruments Issued by Non-Residents

  1. Equity securities issued onshore or offshore that are listed at an onshore exchange; and
  2. Debt securities issued onshore that are not listed; and listed at an onshore exchange.

III. Other Forms of Investments

For registration purposes, these refer to investments by non-residents in instruments issued by residents and non-residents which are not covered by Sections 33, 34 and the provisions of Part Three, Chapter I of the FX Manual (Loans and Guarantees), and not contrary to applicable laws, rules and regulations. (b) Debt securities issued onshore that are not listed; and listed at an onshore exchange.

Foreign Holding Limits

The Executive Order 65 promulgates the 11th Foreign Investment Negative List (RFINL) and was published in November 2018 (provided under Section 8 of Republic Act 7042 or the Foreign Investments Act of 1991).  It is composed of two lists:

  • List A:
    Foreign ownership is limited by mandate of the Constitution and specific laws.
  • List B:
    Foreign ownership is limited for reasons of security, defence, risk to health and morale and protection of small and medium scale enterprises.

Foreign investors may purchase shares of a listed company without prior approval until the limit for foreign ownership. If the FOL has been reached, no approval for an exception will be granted by the SEC or PSE and the shares exceeding the FOL must be sold or converted to local registry.