1 Give an overview of the country’s economy, its structure and main characteristics, and prevailing government economic policy, particularly as regards foreign investment.
The Philippines is an archipelago composed of more than 7,000 islands with 82 provinces divided in 18 regions. Rich in natural resources, it has a total land area of about 300,000 square kilometres. It is divided into three major island groups: Luzon, Visayas and Mindanao. Manila, the capital, is located in Luzon.
The Philippine economy grew in 2017, with an increase in its gross domestic product by 6.5 per cent in the second quarter of 2017 and 6.4 per cent in the first half of the year. Manufacturing, trade and real estate, renting and business activities contributed significantly to the economic growth in the country. With regard to the major economic sectors, the industry sector recorded the fastest growth at 7.3 per cent.
Foreign investments are gladly welcomed in the Philippines. However, there are restrictions on foreign investments in certain industries.
2 Describe the legal framework and legal culture in your jurisdiction as regards business and commerce.
The Philippines is a democratic state. It has a presidential form of government and power is equally divided among the three co-equal and independent branches:
- Executive Branch, which is represented by the Office of the President;
- Legislative Branch, which is composed of the Senate and the House of Representatives; and
- Judicial Branch, which is composed of the Supreme Court and lower courts established by law.
The legal system of the Philippines is primarily a civil law system, but has also incorporated certain aspects of Anglo-American (common law) systems as well as customary usage. The rule of law is respected in the Philippines. The Preamble of the 1987 Philippine Constitution echoes the call of the Filipino people for independence and democracy under the rule of law. With respect to the presence of a culture of litigation, the State highly encourages the use of alternative dispute resolution as an efficient tool to resolve disputes. The legal framework in the Philippines is regarded as investment and business-friendly. Foreign investments are welcomed in the Philippines, with the exception of particular economic activities that have foreign ownership restrictions.
3 What are the main sources of civil and administrative law applicable to companies?
The main sources of civil law applicable to companies consist of the Corporation Code of the Philippines (Corporation Code), the Civil Code of the Philippines (Civil Code), the Foreign Investments Act of 1991 (Foreign Investments Act), and the National Internal Revenue Code of 1997 (Tax Code). Being primarily a civil law system, statutory laws play an important role in the Philippines. However, government authorities in the Philippines are vested with administrative powers, which include rule-making power. Under its rule-making power, government authorities have the power to issue regulations that are applicable to companies.
4 How does the court system operate with regards to large commercial disputes?
Under the Securities Regulation Code, jurisdiction over the following is vested with the regional trial courts: (i) cases involving fraud and misrepresentation committed by the board of directors of a company, or its officers which may be detrimental to the interest of the public or the stockholders; (ii) intra-corporate controversies; and (iii) controversies in the election or appointment of directors, officers or managers of corporations.
Jurisdiction over other types of commercial disputes is also vested with the regional trial courts.
5 What legal recourse do consumers typically have against businesses?
Consumers may file an administrative complaint, a civil case, or a criminal case against businesses. With respect to class suits, these are allowed, but are uncommon, in the Philippines, owing to the high bar for class suit characterisation. Particularly, for a class suit to prosper, it must be proven that the subject matter of the controversy is one of common or general interest to persons so numerous that it is impracticable to join all as parties.
6 How significant is arbitration as a method of dispute resolution?
It is a declared state policy to actively endorse party autonomy in the resolution of disputes. Hence, the state highly encourages and actively promotes the use of alternative dispute resolution methods as an important means to resolve disputes impartially and efficiently. Towards this end, the use of arbitration as a method of dispute resolution is highly favoured in the Philippines.
7 What other methods of dispute resolution are commonly used?
The Alternative Dispute Resolution Act of 2004 actively endorses the use of mediation and conciliation.
With respect to labour disputes, conciliation and preventive mediation are highly encouraged. The National Conciliation and Mediation Board is an attached agency to the Department of Labour and Employment (DOLE) that was established to oversee the settlement of labour disputes through conciliation and mediation and to promote voluntary approaches to labour dispute prevention and settlement.
8 How easy is it to have foreign court judgments and foreign arbitral awards recognised and enforced in your jurisdiction?
In the case of a foreign court judgment upon a specific thing, the judgment is conclusive upon the title to the thing. On the other hand, in case of a foreign court judgment against a person, the judgment is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title. In either case, a foreign court judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.
With regard to foreign arbitral awards, the New York Convention is controlling, if it is established that the country in which the foreign arbitral award was made is a party to the New York Convention. Under the New York Convention, proceedings for the recognition and enforcement of foreign arbitral awards are deemed as special proceedings and are filed with the regional trial courts. A foreign arbitral award, when confirmed by a court of a foreign country, shall be recognised and enforced as a foreign arbitral award and not as a judgment of a foreign court. The recognition and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in accordance with procedural rules to be promulgated by the Supreme Court.
Foreign investment and trade
9 Outline any relevant treaty organisations, economic or monetary unions, or free trade agreements.
The Philippines is a member of various international trade organisations, such as the following:
- World Trade Organization;
- ASEAN Free Trade Area;
- ASEAN–China Free Trade Area;
- ASEAN–Korea Free Trade Area;
- ASEAN–Australia-New Zealand Free Trade Area;
- ASEAN and Japan Comprehensive Economic Partnership; and
- ASEAN–India Free Trade Area.
10 Are foreign exchange or currency controls in place?
The exchange control and currency regulations in the Philippines are principally set out in the Manual of Regulations on Foreign Exchange Transactions issued by the Bangko Sentral ng Pilipinas (Central Bank). Prior registration with, or consent of, the Central Bank may be required to convert the local currency into foreign exchange through a bank in the Philippines for certain transactions, such as the repayment of a foreign loan or remittance of dividends to a shareholder that is a foreign corporation.
11 Are there restrictions on foreign investment?
The Constitution and special laws impose nationality and minimum capitalisation requirements which depend on the type of business of the domestic corporation or the branch office of a foreign corporation.
Examples of industries where foreign ownership is limited are landholding (up to 40 per cent only), the utilisation of natural resources (up to 40 per cent only), and advertising (up to 30 per cent only).
A domestic corporation that will operate as a domestic market enterprise (ie, will primarily sell goods or services within the Philippines) generally has to have a minimum paid-up capital of US$200,000 if it will have foreign equity of more than 40 per cent. A branch office of a foreign corporation that will engage in business as a domestic market enterprise has to have an assigned capital of at least US$200,000.
An export market enterprise (ie, will export at least 60 per cent of its output), on the other hand, can be wholly foreign-owned even with a capital of 5,000 pesos.
The Foreign Investments Act contains two lists on the restrictions on foreign ownership in specific industry sectors. List A contains the industries where foreign ownership is restricted based on the Constitution and special laws. List B pertains to activities with nationality restrictions pursuant to laws and which are defence-related or affect public health or public morals (eg, gambling). Amendments to List B are set out in a Presidential proclamation (referred to as the Regular Foreign Investment Negative List) that can be amended once every two years. A new Regular Foreign Investment Negative List is expected to be released in the next couple of months with changes that will allow higher foreign equity in certain industries.
12 Are there grants, incentives or tax reliefs for foreign investors or businesses?
Special laws provide for tax incentives to certain corporations depending on their business activities and subject to registration with the appropriate government agency. Examples of such special laws are the Omnibus Investments Code of 1987 (Omnibus Investments Code), which applies to companies registered with the Board of Investments (BOI), and the Special Economic Zone Act of 1995 (PEZA Law), which grant incentives to Philippine Economic Zone Authority (PEZA)-registered entities.
Under the Omnibus Investments Code, pioneer enterprises are entitled to income tax holiday (ITH) on income from their BOI-registered activities, which is exemption from the 30 per cent corporate income tax, for six years from start of commercial operations. Non-pioneer enterprises may have a four-year ITH period. BOI-registered companies may also enjoy duty-free importation of capital equipment.
The PEZA Law allows the establishment of special economic zones in suitable and strategic locations, with the view of attracting legitimate and productive investments, whether local or foreign.
The tax incentives under PEZA Law apply to the PEZA-registered activities of the company and these may include ITH, a 5 per cent special tax on gross income earned in lieu of all national and local taxes upon expiry of the ITH, and tax and duty-free importation of equipment, and zero-rating of the value-added tax (VAT) of local purchases of goods and services.
13 What are the main taxes that apply to cross-border or foreign-owned business and investors?
Foreign corporations, whether residents or non-residents of the Philippines, are liable for income tax in the Philippines on income derived from Philippine sources. Subsidiaries of foreign corporations, on the other hand, are subject to income tax in the Philippines on income from sources from within and outside the Philippines.
Under the Tax Code, a resident foreign corporation is subject to a 30 per cent regular corporate income tax on its net taxable income from sources within the Philippines. Non-resident foreign corporations, on the other hand, are subject to a final tax of 30 per cent on its gross income from sources within the Philippines. A different rate may apply to a certain type of income.
VAT is payable on the sale within the Philippines, in the course of trade or business, of goods, properties, or services, and on the importation of goods into the Philippines. The rate is generally 12 per cent of the gross receipts. However, certain transactions may be exempt from VAT or subject to a zero per cent rate.
Documentary stamp tax is an excise tax payable on the certain transactions, such as the execution of a loan agreement, subscription to or purchase of shares of stock in a domestic corporation, and the transfer or mortgage of real property. The rate depends on the transaction.
Cash dividends remitted by a Philippine subsidiary to its non-
resident foreign parent company are generally taxed at 30 per cent on the gross amount of dividends. The rate can be 15 per cent if tax sparing applies or it can be the rate prescribed in an income tax treaty between the Philippines and country of residence of the parent company.
Branch profits to be remitted to the head office are generally subject to a 15 per cent tax on the total profits applied or earmarked for remittance without any deduction for the tax component.
14 Which industry sectors are regulated or controlled by the government?
Most of the industry sectors in the Philippines are subject to a certain degree of government regulation. However, industry sectors that are of public interest are subject to strict government regulation, such as mass media, mining, banking, insurance, securities, energy, medicine, transportation and construction.
15 Who are the key industry regulators, and what are their powers?
The key general industry regulators and their corresponding powers are as follows:
- Department of Trade and Industry (DTI) – This is the primary government agency tasked with coordinating, promoting and facilitating trade, industry and investment activities in the Philippines;
- BOI – This agency is part of the DTI and is tasked to regulate and promote investment in the Philippines; and
- Securities and Exchange Commission (SEC) – This has jurisdiction and supervision over all corporations, partnerships or associations that are grantees of primary franchises or licences or permits issued by the Philippine government to operate in the Philippines.
Industry sectors that are of public interest are also subject to specialised regulation by specific government agencies. For example, banking and financial institutions are subject to the regulation of the Central Bank, insurance companies, pre-need companies and health maintenance organisations are supervised by the Insurance Commission (IC), the mining sector is regulated by the Department of Environment and Natural Resources, and the primary regulator for the telecommunications sector is the National Telecommunications Commission.
16 What are the other main enforcement authorities relevant to businesses?
Other main enforcement authorities relevant to business are the following:
- Philippine Competition Commission (PCC);
- Bureau of Internal Revenue; and
- Anti-Money Laundering Council (AMLC).
17 On which areas have regulators particularly focused their recent enforcement activities?
At present, regulators in the Philippines have particularly focused their enforcement activities on banking, tax, mining, energy and telecommunications. The PCC has also been very active in the area of merger control and has started some cartel investigations.
18 What are the principal bribery, corruption and money laundering concerns for businesses?
Bribery of public officials is penalised under the Revised Penal Code and persons in the private sector involved in bribery of public officials are penalised as co-conspirators for the felony of corruption of public officers. Bribery occurring solely in the private sector is not covered by Philippine penal laws.
There is special penal legislation against graft and corruption which prohibits, among others:
- receiving gifts in connection with any contract between the government or any other party;
- receiving any gift or material benefit in consideration for help to be given or given in obtaining a permit or licence; and
- entering, on behalf of the government, into any transaction manifestly and grossly disadvantageous to the same.
While the law concerns graft and corruption committed by public officers, private individuals may be held liable if they knowingly induce any public official to commit such offenses.
The Anti-Money Laundering Act of 2001 requires covered financial institutions to establish customer identification requirements to record the true identity of individual clients or verify the legal existence of corporate clients. Covered transactions involving a total amount in excess of 500,000 pesos within one business day must be reported to the AMLC. Failure to report such covered or suspicious transactions renders institutions covered liable for fines or imprisonment.
19 What are the main data protection and privacy risks for businesses?
Under the Data Privacy Act of 2012, companies that serve as personal information controllers are required to implement reasonable and appropriate organisational, physical and technical measures intended for the protection of personal information against any accidental or unlawful destruction, alteration and disclosure, as well as against any other unlawful processing. Personal information must be collected for specified and legitimate purposes, processed lawfully and fairly, accurate, relevant, and kept up to date.
Unauthorised processing of personal information as well as the unauthorised or malicious disclosure of personal information shall render the responsible officers or employees criminally liable for fines, imprisonment or both.
The Cybercrime Prevention Act of 2012 prohibits illegal access and illegal interception of computer systems, data and system interferences, computer-related forgeries and fraud, and computer-related identity theft.
20 What are the main anti-fraud and financial statements duties?
Stock and non-stock corporations, branch offices and regional operating headquarters of foreign corporations that meet a certain threshold are required by the SEC to annually file audited financial statements. Such financial statements must be audited by an accredited independent auditor and submitted to the SEC at the end of every fiscal year. The corporation and its responsible officers are liable for fines and other penalties prescribed by the SEC for failure to submit such financial statements or for any material deficiencies or misrepresentations therein.
The Securities Regulation Code (SRC) prohibits companies from employing any device, scheme, article, act, transaction, practice or course of business which operates or would operate as fraud or deceit upon any person in connection with the sale of any securities.
21 What are the main competition rules companies must comply with?
The main competition rules in the Philippines are set out in the Philippine Competition Act (PCA) and the regulations issued by the PCC.
The PCA prohibits anticompetitive practices that aim to eliminate competitive forces in the Philippine market, such as anticompetitive agreements, abuse of dominant position and anticompetitive mergers and acquisitions.
A violation of the provisions of the PCA exposes the perpetrator to administrative fines and criminal prosecution. In the case of corporations, the penalty of imprisonment shall be imposed on its officers, directors or employees holding managerial positions, who are knowingly and wilfully responsible for such violation.
22 Outline the corporate governance regime.
The Philippine corporate governance regime is laid out in the Corporation Code and the issuances of the SEC, as well as a series of codes of corporate governance to be issued by the SEC, in line with its Philippine Corporate Governance Blueprint issued in 2015. The first of such codes is the Code of Corporate Governance for Publicly Listed Companies (Code of Corporate Governance), which was issued by the SEC in 2016.
Philippine corporate governance regime adopts the ‘comply or explain’ approach, which is a combination of voluntary compliance and mandatory disclosure. Companies are not required to faithfully comply with the Code of Corporate Governance but are required in their annual corporate reports to identify areas of noncompliance and provide justification for such noncompliance.
The Principle of Proportionality is also applied to allow flexibility in corporate governance arrangements. Larger entities are expected to follow most of the provisions of the Code of Corporate Governance, while smaller entities are given more leeway.
23 Can business entities incur criminal liability? What are the sanctions for businesses, related companies and their directors and officers for wrongdoing and compliance breaches?
The concept of corporate criminal liability is yet to be legislated in the Philippines. Penal statutes involving acts committed by corporations impose criminal sanctions, such as imprisonment on the corporation’s directors, officers and responsible employees. Corporations, however, may be held liable for fines and for civil liability arising from crimes committed by its personnel.
24 What types of business entity are most commonly used by foreign investors and why? What are the main requirements for their establishment and operation?
Business entities most commonly used by foreign investors in the Philippines are the subsidiary and the branch office.
A subsidiary is a domestic corporation is formed in accordance with the laws of the Philippines. It has a juridical personality separate from that of its shareholders. It is subject to Philippine law requirements as to corporate structure. It must be incorporated by at least five but not more than 15 natural persons, a majority of whom must be Philippine residents and all of whom will hold at least one share in the subsidiary upon its incorporation’s capital stock. Upon its establishment, it has to have at least five but not more than 15 directors, all of whom must own at least one share in the corporation’s capital stock, and a majority of whom must be Philippine residents. The board of directors is required to annually elect the officers of the corporation. The President must be a director and cannot simultaneously act as the Treasurer or the Corporate Secretary. The Corporate Secretary must be a resident Philippine citizen.
On the other hand, a branch office is the extension of the juridical personality of the head office thus the governance requirements are based on the laws of the head office’s country of incorporation. A branch office is, however, required to appoint a resident agent in the Philippines on whom summonses and other legal processes may be served in all actions or legal proceedings against the foreign corporation.
Given the above, a branch office provides more flexibility in operations. Generally, a branch office is bound by Philippine laws, rules and regulations applicable to domestic corporations, except with respect to the creation, formation, organisation and dissolution of corporations, and the relations or duties of stockholders or officers of the corporation to each other or to the corporation.
Special types of branch offices may also be established, such as a representative office, regional headquarters, or regional operating headquarters. The activities of these offices are, however, limited, compared to those of a regular branch office.
25 Describe the M&A market and the merger control regime. How easy is it to complete deals in your jurisdiction?
M&A transactions in the Philippines are generally governed by the Corporation Code and the Civil Code. They may also be subject to special laws that regulate the business involved in the transaction.
The pace for completion of transactions depend on the prior consents required from regulators or third parties. Generally, M&A transactions involving companies that have a licence in addition to the licence to do business from the SEC (eg, banks, insurance companies) require prior consent of the regulator. The sale of all or substantially all assets of a company may qualify as a bulk sale and the company has to comply with the requirements under the Bulk Sales Law unless all creditors waive them.
The PCA may also apply to an M&A transaction, depending on several factors, such as whether the value of the transaction (as this term is defined under the PCA rules) exceeds PhP1 billion, and the percentage of shares in a Philippine company that will be acquired. Compulsory notification requirements within 30 days of the signing of definitive agreements may have to be complied with by the parties and they may have to wait for the lapse of the applicable review period or obtain approval of the transaction from the PCC before consummating them.
26 Outline the corporate insolvency regime. Is bankruptcy protection available for corporates?
The Financial Rehabilitation and Insolvency Act (FRIA) primarily governs corporate insolvency. Under the FRIA, insolvent corporations have the option to undergo rehabilitation or liquidation if there is no substantial likelihood for the debtor to be successfully rehabilitated.
In rehabilitation proceedings, should the court find that the rehabilitation of an insolvent corporation is feasible, it shall appoint a rehabilitation receiver to supervise the claims. The management of the corporation retains control of the business, but all disbursements, payments, transfers, or encumbrances of property will be subject to the approval of the rehabilitation receiver. In case of gross mismanagement, or actual or imminent danger of dissipation, loss, wastage or destruction of the company’s assets or other property, any interested party may ask that the court order that the business of the corporation be managed by the rehabilitation receiver or by a management committee.
Any party at any stage of the proceedings may file a motion for termination of the rehabilitation proceedings. After hearing such motion, the court may order the termination of the proceedings and either declare a successful implementation of the rehabilitation plan or a failure of rehabilitation.
Liquidation of an insolvent corporation may be done voluntarily or involuntarily. An insolvent company may file a petition for liquidation with the court. Involuntary liquidation may be initiated by three or more creditors with an aggregate claim of at least 1 million pesos or at least 25 per cent of the subscribed capital stock through the filing of a verified petition for liquidation with the court, or a verified motion in rehabilitation proceedings. A liquidator is then appointed by the court, and has the duty of preserving and maximising the assets of the insolvent corporation with the goal of liquidating them and then to use them to discharge, to the possible extent, all the claims against the insolvent corporation. An order of liquidation has the effect of dissolving the juridical existence of the insolvent corporation.
27 How easy is it to enter into and terminate employment contracts?
In entering into contracts of employment, businesses are given the prerogative to set the standards and qualifications for hiring, subject to legislation prohibiting discrimination on the basis of age, sex, religion, affiliation with a labour organisation or disability. There is generally no prescribed form for employment contracts in the Philippines.
Termination of employment is much stricter as it requires faithful compliance with the procedure laid down in the Labour Code and related issuances by the DOLE. The ground for termination must either be for a just or authorised cause.
Just causes for termination include:
- serious misconduct or wilful disobedience of lawful orders;
- gross and habitual neglect of duties;
- fraud or wilful breach of trust;
- commission of a crime or offence by the employee against the employer or any immediate member of his or her family or his or her duly authorised representatives; and
- other causes analogous to the foregoing.
Authorised causes for termination include:
- Installation of labour-saving devices;
- Redundancy or retrenchment; and
- Closure or cessation of operation of the establishment.
An employer is also authorised to terminate the employment of an employee on the ground of disease.
For termination due to just causes, the employer must observe the twin-notice rule: the employee must be apprised of the charge against him and his opportunity to be heard; and a second notice informing such employee of his dismissal, after having been afforded the opportunity to be heard.
For termination due to authorised causes, notice must be furnished to the DOLE and the employees at least 30 days prior to the effective date of termination.
In case of termination due to disease, there must be a certification from a competent public health authority that the disease is of such nature that it cannot be cured within a period of six months even with proper medical treatment.
28 What are the key rights of local employees?
The Constitution guarantees the key rights of workers, which include the following:
- right to self-organisation, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with the law;
- security of tenure, humane conditions of work and a living wage; and
- participation in policy and decision-making processes affecting their rights and benefits as may be provided by law.
The Labour Code of the Philippines lays down the minimum standards, terms and conditions local employees are entitled to, such as equal work opportunities or anti-discrimination, hours of work and rest days, minimum wage and other wage-related benefits, safe working conditions and workmen’s compensation as a result of work-related sickness or injury.
29 What are the main restrictions on engaging foreign employees?
Any foreigner seeking employment in the Philippines or any employer desiring to engage a foreigner for employment in the Philippines must obtain an Alien Employment Permit (AEP) from the DOLE and work visa or permit from the Bureau of Immigration. The AEP may be issued to a non-resident alien or applicant employer, after a determination of the non-availability of a person in the Philippines who is competent, able and willing at the time of the application to perform the services for which the employment of the alien is desired.
A foreigner granted an AEP is not allowed to transfer to another job or change his employer without prior approval by the DOLE.
Foreigners may not be employed in certain ‘nationalised’ businesses, pursuant to the Philippines’ Anti-Dummy Law, except when there is authorisation from the Department of Justice of the employment of technical personnel.
30 What are the other key employment law factors that foreign counsel, investors and businesses should be aware of?
The DOLE recently issued Department Order No. 174-17, in line with its ongoing campaign against contractualisation. The new regulation reiterates the prohibition against labour-only contracting.
31 Describe the intellectual property environment. How effective is enforcement and what are the key current issues?
The main source of intellectual property law in the Philippines is the Intellectual Property Code of the Philippines (IPC) as well as major international treaties concerning intellectual property rights, such as the Paris Convention, the Rome Convention and the Agreement on Trade-Related Aspects of Intellectual Property Rights. The Philippines has recently acceded to the Madrid Protocol concerning the international registration of marks.
The IPC protects the following intellectual property rights: patents, utility models, industrial designs, layout designs of integrated circuits, trademarks and service marks, protection of undisclosed information and copyright.
The Intellectual Property Office (IPO) is the government agency responsible for the registration and the resolution of disputes concerning intellectual property rights.
Individuals and entities whose intellectual property rights have been violated in the Philippines may seek relief from the IPO by filing an administrative complaint, or from a court by filing a civil or criminal action. Aggrieved intellectual property owners may seek an injunction and the payment of damages.
Legal reform and policy
32 What are the key issues in legal reform, government policy and the economy?
With the election of President Rodrigo Duterte in 2016, his administration has promised an array of sweeping reforms. The new administration has made eradication of crime a priority, and has launched a ‘war on drugs’ aimed to curb the illegal drug trade.
Amendments to the Constitution, changing the present system of government from a presidential-unitary model to a parliamentary-federal model, have been proposed in Congress, and the administration has recently presented a timeline to have a new Constitution ratified by 2020.
The government has also embarked on a massive infrastructure program, dubbed ‘Build Build Build’. For 2017, 5.4 per cent of the Gross Domestic Product has been allotted for infrastructure development, with aims to increase infrastructure spending to 7.4 per cent in 2022.
Republic Act No. 10963, the Tax Reform for Acceleration and Inclusion Act (TRAIN), which amends the Tax Code, took effect on 1 January 2018. The TRAIN provides for the adjustment of income tax rates on income of resident individuals, the decrease in the rate of estate tax, the adjustment of the rate of donor’s tax, the increase in the rates of excise tax on various goods and commodities such as such as cigarettes, manufactured oil and fuel, automobiles, coal and other mineral products, the imposition of excise tax on sweetened beverages. It also removed the exemption from VAT under special laws of certain entities, and increased the rate of capital gains tax on the sale of shares not traded on the stock exchange by an individual or by a domestic corporation and the rate of stock transaction tax, and doubled many of the rates of documentary stamp taxes on various transactions such as those on the original issuance of shares, the sale of shares and on the mortgage or a pledge of property. Bills for the further amendment of the Tax Code are expected to be filed in Congress in 2018.
The current government is also looking into the relaxation of foreign investment restrictions in certain industries. These proposals include the increase of allowed foreign equity in public utilities, which currently stands at 40 per cent; extension of foreigners’ maximum lease term on private land; and legal amendments in order to trim the Philippines’ foreign investment negative list.
33 Are there any significant legal developments ongoing or pending? What are their effects on the business environment?
The administration of President Rodrigo Duterte has recently unveiled its timeline to change the Philippine political system from a unitary-presidential system to a federal-parliamentary system. The proposed shift to federalism is touted as a necessary step to ensure a more equitable distribution of resources between different parts of the country and spur development in regions outside of Metro Manila. However, aside from the proposed amendments to the Constitution which have been released to the public, the government has yet to unveil a more detailed plan and this has caused some concern within the business community.
The enactment of the PCA in 2015 introduced a comprehensive competition policy for the first time in the Philippines. Innovations such as its merger review procedure has changed the country’s M&A landscape in that M&A reaching thresholds under the law have to be notified to the PCC within 30 days of the signing of the definitive agreements and require clearance by the PCC (or the lapse of the applicable waiting periods) before they can be consummated.
Resources and references
34 Please cite helpful references, for example sources of law, websites of major regulators and government agencies.
1987 Philippine Constitution
Anti-Money Laundering Act of 2001
Corporation Code of the Philippines
Foreign Investments Act of 1991
Labour Code of the Philippines and its implementing rules
National Internal Revenue Code of 1997, as amended by the TRAIN
Omnibus Investments Code of 1987
Philippine Competition Act
Securities Regulation Code
Official Gazette (the official journal of the Republic of the Philippines) - www.officialgazette.gov.ph/
Anti-Money Laundering Council – www.amlc.gov.ph/
Bangko Sentral ng Pilipinas – www.bsp.gov.ph/
Board of Investments – http://boi.gov.ph/
Department of Trade and Industry – www.dti.gov.ph/
Insurance Commission – www.insurance.gov.ph/
Philippine Competition Commission – http://phcc.gov.ph/
Securities and Exchange Commission – www.sec.gov.ph/
Published November 2017