Guide to Living and Doing Business in the Philippines for Expats
The Philippines remains one of the top destinations in Southeast Asia for travel and living.
Beautiful beaches, a melting pot of cultures, and hospitality at its finest make attractive points to move into our tropical archipelago paradise. Moreover, the Filipino’s proficiency in English makes it easier for foreigners to integrate and get around. English communication skills of locals certainly make getting around the country safer and easier.
On the business side of things, a lot can still be improved. We still lag behind some of our ASEAN neighbors e.g. infrastructure, transparency, and efficiency in our government, financial, and legal systems–as seen in the latest current actions against the COVID crisis.
But as messy the political scene is at the moment, the general direction in foreign investments and foreign-owned businesses has been positive. GDP growth has been consistently growing averaging 6%. The growth potential across industries in the Philippines is still immense.
For international visitors who want to be more than tourists in the Philippines, you may consider investing in doing business in the country. As a developing economy, there is still plenty of room for growth. The only way forward is up.
Guide to Living and Doing Business in the Philippines for Expats will delineate your options:
1. FOR WORK
Expats can come here for work via their companies sponsoring or petitioning their employees to work in the country.
Different permits and visas are required depending on the nature and duration of the assignment.
– Short Term Work
For short-term assignments or those ranging from 3 to 6 months, a Special Work Permit (SWP)1 is required. These workers are usually: service suppliers on temporary stay, consultants and specialists.2 Other categories of workers include: chefs, journalists, commercial models, professional athletes and coaches.
– Long Term Work
More long term assignments or those that last beyond 6 months require an Alien Employment Permit (AEP) from the Department of Labor and Employment (DOLE) which is issued for the duration of the contract term but for a maximum of 3 years at a time.3
Along with the AEP, the sponsoring company must assist the worker to apply for a pre-arranged employment visa or 9G visa4.
All foreign nationals have to get an Alien Certificate of Registration (ACR) Identification Card or an ACR I-card if intending to stay for more than 2 months, whether on an extended tourist visa, work visa or other visa.
2. FOR BUSINESS
Can Expats Start a Business in the Philippines?
The short answer is: YES. The advantage of doing business in the Philippines is the minimal capital requirements.
To start a Philippine corporation, at least 60% of the capital stock outstanding and entitled to vote must be owned by a Filipino citizen. Equity in the company is limited to a maximum of 40% for foreigners. Partner with Filipino citizens that you know and trust in your enterprise.
Expats will need a 9G visa. Your company can petition your pre-arranged employment (9G) visa so you can work here.
– Business Options for Foreigners
Expat Guide to the Philippines and Doing Business – Here are the best options for business activities and industry areas for foreign nationals:
- Export. Export enterprise is defined as when the business exports 60% or more of its output. Those involved in manufacturing, processing, service, and tourism can be 100% foreign-owned; as long as the economic activity does not fall under the Negative List.
- Domestic Trade. Overseas companies or foreign individuals can operate or invest on enterprises producing goods or services to the domestic market or fails to meet the export requirement of 60%. It requires capitalization of $100,000, or if employing more than 50 workers.5
- Retail Trade. Selling of consumer goods and merchandise directly to the public, such as restaurants, require a minimum paid-up capital of at least $2,500,000 in investments, or establishing a store not less than $830,000.
- Business-to-Business. Servicing and selling to other businesses can fully own companies while investing the relatively minimal sum of $100,000.
Incentives are available for businesses, both foreign and domestic, that are located in designated Special Economic Zones (SEZs), such as Cebu IT Park and Mactan Economic Zone. Such benefits include tax holiday for 4 years or more and tax exemptions from import and export fees.
3. FOR RETIREMENT
The indefinite stay and exemptions from the regular entry and exit requirements makes this an ideal option for some foreign nationals.
– Buy a Condominium (and Get a Visa in the Process)
Condominiums are common options for foreign nationals who want to establish a residence in the Philippines. The funds to buy the condo can be used in acquiring a retiree’s visa, in particular, the SRRV Classic, offered by the Philippine Retirement Authority (PRA).
The SRRV Classic is available to foreign nationals, aged 35 to 49, who have at least $50,000 visa deposit which will be used to purchase a condominium unit or lease real property in the Philippines.
The minimum visa deposit is reduced to $20,000 for foreign nationals at least 50 years of age.
The retiree’s visa does not prohibit the foreign national from working, subject to the requirement of an Alien Employment Permit (AEP).
The SRRV offers other benefits such as exemption from the need to have an ACR I-card, indefinite stay with multiple-entry/ and exit privileges, and a one-time, tax-free importation of personal effects up to $7,000.
4. FOR INVESTMENT
If you have existing investments in the Philippines, you can use these investments to acquire a Special Investor Resident Visa (SIRV).
The SIRV requires proof of inward remittance of at least $75,000 within the 12 months prior to filing the application.
– Where Expats can Invest
For purposes of SIRV, the following are valid forms of investments:
a. Publicly- listed companies
b. Companies engaged in areas listed in the Investment Priorities Plan (IPP) of the Board of Investments
c. Companies engaged in the manufacturing and services sectors; or The companies whose activities fall in any of the following major sectoral classifications:6
- Business services (such as BPO, consultancy)
- Communication services
- Construction and related engineering services
- Distribution services
- Educational services
- Environmental services
- Financial services
- Health related and social services
- Tourism and travel related services;
- Recreational, cultural and sporting services;
- Transport services
- Other services not included elsewhere.
- Government securities
The SIRV entitles the holder indefinite stay in the Philippines with multiple-entry/exit privileges, exemption from the need to obtain an ACR I-card, among others.
The SIRV holder enjoys these benefits as long the investments are maintained in the Philippines.
Mere holding of shares does not constitute “doing business” under the Foreign Investment Act. The actual operation or management of a business will require the appropriate licenses with the SEC and relevant regulatory agencies.
Living and Doing Business in the Philippines for Expats
There are several options for you to staying in the Philippines. It is important to know your legal obligations, laws, and regulations, so seek legal representation or counsel prior before making the jump.
We hope this Guide to Doing Business in the Philippines for expats will help clear your mind about the next steps. Good luck.
(1) The regulation that governs SWP is the Bureau of Immigration (BI) Operations Order No. JHM-2019- 008.
(2) These workers usually fall under Section 1. (4) service suppliers on temporary stay, or Section 1. (14) consultants and specialists. Other categories of workers under the aforementioned rule are chefs, commercial models, professional athletes and coaches, journalists, and chefs.
(3) Department Order No. 186 – Series of 2017.
(4) The visa approval is subject to a hearing with an immigration examiner who must be convinced that the standard in Section 20 of the Philippine Immigration Act is satisfied, namely, that “no person can be found in the Philippines willing and competent to perform the labor or service for which the nonimmigrant is desired and that the nonimmigrant’s admission would be beneficial to the public interest”
(5) If the enterprise involves advanced technology as certified by the Department of Science and Technology (DOST), or if the enterprise employs at least 50 workers as certified by the Department of Labor and Employment (DOLE)
(6) found under the services sectoral classification lists which are based on the UN Central Product Classification shall be deemed in the service sectors for purposes of evaluating the qualification of SIRV applicants.
About Atty. Kenneth
Atty. Kenneth C. Varona is a lawyer with experience in civil and criminal litigation, contracts, immigration law, and intellectual property law. He worked in Metro Manila for three years before starting his own firm Varona Law in 2020. He also writes at Economerienda, a blog offering snackable insights on personal finance, business and life.