Other BriefingsForeign Ownership Rules in the Philippines: What’s Allowed and Restricted
The Philippines is one of Southeast Asia’s most promising investment destinations, offering growing opportunities in sectors such as manufacturing, infrastructure, and digital services. Yet, foreign investors must navigate a complex regulatory environment that determines which sectors are open, restricted, or entirely closed to foreign equity.
Recent legislative reforms have introduced new flexibility in some industries, but constitutional and statutory limitations remain in place. A clear understanding of the foreign ownership framework is critical for structuring investments that are both compliant and commercially viable.
Constitutional limits on foreign ownership
The 1987 Philippine Constitution remains the foundation of investment restrictions. Its most notable feature is the “60-40 rule,” which requires at least 60 percent Filipino ownership in certain enterprises. This rule applies to land ownership, mass media, and traditionally defined public utilities. These restrictions are fixed by law and cannot be bypassed through ordinary legislation, limiting the legal options available to foreign investors in these sensitive sectors.
Foreign Investments Act and the role of the FINL
The Foreign Investments Act of 1991 supplements the Constitution by outlining how foreign equity may be introduced into the Philippine market. It is operationalized through the Foreign Investment Negative List (FINL), which classifies restricted sectors under two categories: List A, based on constitutional and statutory limits; and List B, based on defense, health, or SME protection concerns. The FINL is updated periodically to reflect shifting policy priorities and investment strategies.
Fully liberalized sectors open to foreign investors
Several sectors have been liberalized to allow up to 100 percent foreign equity. These include export-oriented manufacturing, IT and business process outsourcing (BPO), tourism and hospitality ventures, and wholesale trade that meets minimum capital requirements.
These industries are supported by investment promotion agencies such as the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA), which facilitate business setup and sector entry.
Sectors with ownership caps and strategic entry routes
Other industries remain partially open, imposing foreign equity ceilings or conditional entry. For example, retail trade allows foreign participation only if specific paid-in capital and scale conditions are met. The Public Service Act amendments in 2022 removed telecommunications, shipping, and railways from the definition of “public utility,” allowing full foreign ownership, while sectors like water and electricity distribution remain subject to the constitutional 60-40 rule.
Real estate development, mining, and similar capital-intensive sectors may be open but still require compliance with equity caps and regulatory approvals.
Industries closed to foreign participation
Certain sectors remain off-limits to foreign ownership. These include land ownership (except through long-term leases or condominium purchases within the legal limits), small-scale mining, mass media (excluding recording and online content), and regulated professional services such as law, accounting, and engineering. These restrictions are grounded in constitutional or national interest concerns and offer little room for legal workaround.
CREATE MORE Act and expanded investment incentives
In November 2024, the government enacted the CREATE MORE Act (RA 12066), enhancing the Philippines’ investment incentives framework. This legislation builds on the original CREATE Act by offering extended income tax holidays, new allowable deductions for R&D, power costs, and net operating losses, as well as broader VAT zero-rating for qualifying activities.
With implementation rules finalized in 2025, CREATE MORE positions the Philippines as a more competitive destination for high-value, long-term foreign investments in innovation, green infrastructure, and export manufacturing.
Structuring investments within legal boundaries
To comply with equity restrictions while still entering attractive markets, foreign investors often form joint ventures with Filipino partners or invest through domestic corporations that satisfy ownership thresholds. For land use, long-term leases (up to 50 years, renewable) are commonly used. Foreigners may also own condominium units if the building’s foreign equity does not exceed 40 percent. Arrangements involving nominee shareholders — where a Filipino holds equity on behalf of a foreigner — are illegal and increasingly targeted by regulators.
Compliance, reporting, and tax considerations
Investors must undertake thorough due diligence to determine whether their target activity is listed on the FINL or otherwise regulated. Once operational, businesses are subject to registration, tax, and reporting obligations with agencies such as the Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), and Department of Trade and Industry (DTI).
Those availing tax incentives under CREATE MORE must comply with specific documentation and reporting requirements based on their selected regime and business classification.
How the Philippines compares regionally
Relative to its ASEAN peers, the Philippines has traditionally maintained more restrictive foreign ownership rules in sectors like land and public utilities. By contrast, Vietnam and Indonesia have taken a more liberal approach to manufacturing and technology sectors, while Malaysia allows full foreign ownership in most services. However, with the CREATE MORE Act and recent liberalization of infrastructure and digital services, the Philippines is narrowing the competitiveness gap, especially for strategic and long-term investors.
This article first appeared on ASEAN Briefing, our sister platform.
