President Rodrigo Duterte signed into law the bill seeking to further liberalize the foreign equity restrictions for retail business in the Philippines. Republic Act (RA) 11595, which amends RA 8762 or the Retail Trade Liberalization Act of 2000 (“RTLA”), was signed by the President on 10 December 2021.
Minimum Paid-Up Requirement
RA 11595 lowered the minimum paid-up requirement for foreign retailers to only P25,000,000 or $500,000 from $2,500,000, or approximately P129 million. The minimum paid-up requirement shall be subject to review by the Department of Trade and Industry (DTI), Securities and Exchange Commission (SEC) and the National Economic and Development Authority (NED) every three years from the effectivity of RA 11595.
As part of the retailers’ registration requirements with the SEC or the DTI, RA 11595 allows other proofs certifying that the capital investment is deposited and maintained in a bank in the Philippines, in lieu of the certification from the Bangko Sentral ng Pilipinas of the inward remittance of the capital investment. The SEC and the DTI are required to monitor the actual use in Philippine operations of the minimum paid-up capital of foreign retailers.
The foreign retailer is required to always maintain the minimum paid-up capital in the Philippines. Should the foreign retailer intend to repatriate its capital and cease operations in the Philippines, it shall notify the SEC or the DTI, whichever is appropriate.
Minimum investment per store
Additionally, RA 11595 lowered the minimum investment requirement per store to at least P10,000,000 or about $200,000 from the previous $830,000 or about P43,000,000 in current foreign exchange rate.
Minimum investment per store is defined to include the value of the gross assets, tangible or intangible, including but not limited to buildings, leaseholds, furniture, equipment, inventory, and common use investments and facilities such as administrative offices, warehouses, preparation or storage facilities. The investment for common use and facilities, as reflected in the financial statements, shall be pro-rated among the number of stores being served.
RA 11595 further clarified that the paid-up capital may be used to purchase assets for purposes of complying with the investment requirement per store.
The P10-million minimum investment per store shall not apply to foreign investors and foreign retailers who are legitimately engaged in retail trade and were not required to comply with the minimum investment per store at the time of the effectivity of RA 11595.
Other changes
RA 11595 also removed the qualification requirements for foreign retailers, which include a minimum net worth for parent corporations, five-year track record in retailing, and a minimum number of retailing branch or franchise in operation anywhere around the world.
However, RA 11595 maintained that requirement that the foreign retailer’s country of origin should not prohibit the entry of Filipino retailers to be allowed to register in the Philippines.
RA 11595 also deleted the requirement for retail trade enterprises, in which foreign ownership exceeds 80 percent of equity, to offer a minimum of 30 percent of their equity to the public through any stock exchange in the Philippines within eight years from the start of their operations.
Foreign retailers may employ foreign nationals only upon determination of nonavailability of a competent, able and willing Filipino citizen. Foreign retailers are also encouraged to have a stock inventory of products that are made in the Philippines.
The implementing rules and regulations is expected to be issued within ninety (90) days from the approval of RA 11595.
RA 11595 shall take effect 15 days after its publication in the Official Gazette or at least two newspapers of general circulation in the Philippines. It is a consolidation of Senate Bill 1840 and House Bill 59. The bill to amend the RTLA was certified urgent by the President last year to encourage the entry of foreign investors as an effort to boost economic recovery from the effects of the coronavirus disease 2019 pandemic.
First published on The Daily Tribune.
