photo credit: gruntzooki

photo credit: gruntzooki

Many foreigners ask us if they can engage in retail trade in the Philippines. The short answer is yes. The long answer is that there are a number of laws that make the process more complex than it has to be.

Everyday foreigners visit to the Philippines with the intention of expanding their business locally. Businessmen who are selling anything from clothes to pharmaceutical products to cosmetics and other merchandise want to open shop in the Philippines. They have the capital, the products and the marketing skills to start selling but local laws impose certain limitations that prevent them from engaging in retail business right away.

These laws have been enacted in part to protect local vendors. Locals who do not have as much capital as foreigners would be wiped off, competitively speaking.

Philippines’ Bureau of Immigration has put out several warnings, cautioning foreigners to not engage in retail trade without meeting the requirements, lest they be arrested or deported for violating immigration and retail trade laws.

When is a business considered to be a retail business?

The law defines retail business as an enterprise that sells merchandise, commodities and/or goods to the general public. If your business fits this criteria then it’s safe to say that you have a retail business.

What are the requirements for a foreigner to engage in retail trade?

Foreigners or corporations with foreign equity must have a capital no less than two million five hundred thousand dollars ($2,500,000).

Does the Retail Trade Liberalization Law cover all types of retail businesses?

There are some exceptions to the rule where foreign ownership is allowed.

For example, sales of products by a manufacturer whose capital does not exceed one hundred thousand pesos (P100,000.00) is not considered retail trade. The same exception applies to farmers selling their own produce.

Hotel owners or inn-keepers who have a restaurant that is incidental to their business are also exempt from this law.

Lastly, sales related to products where a single outlet is manufacturing, processing or assembling the product are also exempt.

If the requirements for capitalization are met ($2,500,000) can the business be foreign-owned 100%?

If business capitalization is between $2.5 million and $7.5 million then foreign ownership of the business can extend to 60% of the business. If the capitalization is above $7.5 million, then foreigners can own the business wholly.

Are foreigners required to keep their business capitalization in a Philippines bank?

No. The only requirement is that the foreign investor use the actual funds in the Philippines operation. Use of the funds will be monitored by the SEC (Security and Exchange Commission).

Perhaps you have been thinking of opening up a retail shop in the Philippines for quite some time. Now that you know the actual requirements for doing so, you should select your product and make sure that you have the required capital to operate a business here. Some business owners find trust-worthy Filipinos who agree to register the business in their name, for a small fee. This way, assuming you know and trust the person, you can open a business in the Philippines without the required $2.5 million.

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