Investment regulation – Philippines
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.
Holding restrictions
There are restrictions on foreign ownership in the Philippines.
The general foreign ownership limit (FOL) in shares of a listed company in the Philippines is 40% as mandated by the Constitution. The Regular Foreign Investment Negative List (RFINL) is updated and published by the Philippine government. If the FOL has been reached, no approval for an exception will be granted by the Securities and Exchange Commission (SEC) or Philippine Stock Exchange (PSD) and the shares exceeding the FOL must be sold as they will not be allowed for registration in the books of the issuer.
Segregation of holdings requirements
BTr-eligible securities (Bureau of the Treasury)
There is no requirement to segregate BTr-eligible securities that are held by foreign or local investors.
BTr-eligible securities can therefore be held by both local investors and foreign investors within the same omnibus account at Clearstream Banking S.A. (CBL).
PDTC-eligible securities (Philippine Depository & Trust Corporation)
According to Rule 1.7 of the Rules of the Philippine Central Depository (PDTC Depository Rules), PDTC-eligible securities that are held by foreign investors and local investors cannot be commingled within the same account, and therefore need to be segregated. Thus, local residents of the Philippines may not hold PDTC-eligible securities on their CBL omnibus account.
Note:
Amendments to the Foreign Investments Act (under Republic Act No. 11647), signed into law on 2 March 2022, allow foreign investors to engage in any business transaction in the Philippines or invest in a domestic enterprise, up to 100% of its capital.
The amendments to the Public Service Act, signed into law on 21 March 2022, allow full foreign ownership for industries excluded from the definition of public utilities (that is, telecommunications, airlines, railways and subways, among others).
Executive Order 175, which promulgates the 12th Regular Foreign Investment Negative List (FINL), effectively updates the list of investment areas or activities which are open to foreign investors and/or reserved to Philippine Nationals. The 12th FINL reflects the changes to the following 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 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 BSP-registered investments and/or properties located in the Philippines, where ownership by non-residents is allowed under existing laws;
- Onshore PHP receipts from residents, for rendered services and trade transactions;
- PHP proceeds from the onshore sale by non-resident issuers of their equity and debt securities;
- Cash collateral used for investments under securities borrowing and lending or similar arrangements;
- PHP receipts of non-residents from residents, for payment of private-sector foreign loans or borrowings and other loan- or borrowing-related transactions duly approved by, registered with and/or reported to the BSP.
Funds that are converted to PHP from inward remittance must be invested in BSRD-registrable instruments. Such investments are to be registered with the BSP 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 subscriptions, investments or oversubscriptions in equities and debt securities issued by residents and non-residents or 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.
- Assigned Capital and Operational Working Fund ‒ for onshore branches, regional headquarters or regional operating headquarters and offices or representative offices; and Contributed Capital ‒ for onshore partnerships or joint ventures;
- Ownership or purchase of condominium unit; and
- Capitalised expenses incurred by foreign firms pursuant to government-approved service contracts and similar contracts for oil, gas, and geothermal energy exploration or 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:
- Equity securities that are not listed; and listed at an onshore exchange;
- 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;
- Exchange traded funds (ETFs);
- Investment funds [e.g., mutual funds (MFs) and unit investment trust funds (UITFs)]; and
- 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
- Equity securities issued onshore or offshore that are listed at an onshore exchange; and
- 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.