Foreigners may own and invest in Philippine businesses, and many activities now allow up to 100% foreign ownership, but the Foreign Investment Negative List identifies areas where foreign equity is limited or prohibited. Some activities are fully closed to foreigners, such as mass media, while others are capped, commonly at 40% foreign ownership under the 60-40 rule for partly nationalized activities. Foreign-owned enterprises serving the domestic market generally face a minimum paid-in capital requirement, and schemes that use Filipino dummies to evade these limits are punishable under the Anti-Dummy Law.
Foreign investors and their Filipino partners repeatedly ask the same question: how much of this company can the foreigner own? The answer is not a single number — it depends entirely on what the business does, because the law regulates foreign equity activity by activity.
The Default: Foreign Investment Is Welcome
The starting policy, under the Foreign Investments Act, is that foreign investment is encouraged, and a great many activities permit up to 100% foreign ownership. A foreigner can fully own an export enterprise, and many domestic-market businesses, unless the activity appears on the restricted list. So the correct first step is never to assume a cap, but to check the specific activity.
The Foreign Investment Negative List
The restrictions are gathered in the Foreign Investment Negative List (FINL), periodically issued by the government. It has two parts:
- List A — activities reserved to Philippine nationals by the Constitution and specific laws; and
- List B — activities restricted for reasons of security, defense, health, morals, and the protection of small and medium enterprises.
The caps vary by activity. Some are fully closed to foreigners — most notably mass media and certain professions and small-scale activities. Others are partly nationalized, typically allowing up to 40% foreign equity (the 60-40 rule: at least 60% Filipino-owned). Ownership of land and the operation of public utilities in the constitutional sense are the classic examples of the 60-40 requirement, though recent reforms have opened parts of the utilities and infrastructure sectors.
The 60-40 Rule Explained
Where an activity is partly nationalized, the corporation must be at least 60% owned by Filipino citizens, leaving a maximum of 40% for foreigners. This is measured on the capital of the corporation, and the Supreme Court has clarified how “capital” is counted for the sensitive sectors. Structuring a company to genuinely meet the 60-40 requirement — with real Filipino ownership and control, not a facade — is essential in these areas.
Minimum Capital for Foreign-Owned Domestic Enterprises
Even where an activity allows majority or full foreign ownership, a minimum paid-in capital requirement usually applies to a foreign-owned enterprise that serves the domestic market. The long-standing benchmark is US$200,000, which may be reduced to US$100,000 where the enterprise involves advanced technology, is endorsed as a startup, or directly employs a significant number of Filipino workers. Export-oriented enterprises (exporting most of their output) are generally exempt from this domestic-market capital floor. Certain regulated sectors, such as retail trade, have their own capital thresholds under their specific laws, which recent liberalization has adjusted.
The Anti-Dummy Law
Because the caps frustrate some investors, the temptation is to use a Filipino “dummy” — a nominal Filipino shareholder or officer who holds shares or a position on paper while the foreigner really controls the business. This is illegal. The Anti-Dummy Law penalizes arrangements that allow foreigners to evade nationality requirements, and it also restricts the participation of foreigners in the management of nationalized activities. The penalties fall on both the foreigner and the cooperating Filipino, and the arrangement is legally void, so it offers no real protection.
Practical Guidance
- Identify the exact activity and check it against the current Negative List before deciding on a structure.
- For a fully foreign-owned domestic-market company, plan for the US$200,000 (or reduced) capital.
- For a partly nationalized activity, ensure genuine 60% Filipino ownership and control.
- Avoid dummy arrangements entirely — they are criminal, void, and offer no security.
Because the list changes and the rules interact with tax and incentive laws, structuring a foreign-invested business is best done with current legal advice.
Frequently Asked Questions
Can a foreigner own 100% of a Philippine company? In many activities, yes. A great many businesses, including export enterprises and numerous domestic-market activities, allow up to 100% foreign ownership. Only activities on the Foreign Investment Negative List are limited or closed to foreigners.
What is the 60-40 rule? For partly nationalized activities, a corporation must be at least 60% owned by Filipino citizens, leaving a maximum of 40% for foreigners. Land ownership and public utilities in the constitutional sense are classic examples.
How much capital does a foreign-owned business need? A foreign-owned enterprise serving the domestic market generally needs a minimum paid-in capital of US$200,000, reducible to US$100,000 with advanced technology or by directly employing a significant number of Filipino workers. Export enterprises are generally exempt.
What is the Anti-Dummy Law? It penalizes arrangements that use Filipino nominees to let foreigners evade nationality requirements, and it restricts foreigner participation in managing nationalized activities. Such schemes are void and criminally punishable for both parties.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you are structuring a foreign-invested business, getting the equity and capital right from the start is essential, and our firm can help. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.