Query: What are the restrictions on setting up a fully foreign-owned company for marketing services in the Philippines, and are there any capital requirements?

In the Philippines, establishing a fully foreign-owned company for marketing services involves specific regulations and capital requirements, as outlined by the country's legal framework.

Legal Framework and Restrictions

Foreign Ownership Limits: The Philippines allows 100% foreign ownership of companies engaged in certain activities, including marketing services, under the Foreign Investments Act of 1991 (Republic Act No. 7042), as amended by Republic Act No. 8179. This law liberalizes the entry of foreign investments into the country and removes the need for prior government approval, except in specific industries listed in the Foreign Investment Negative List (FINL).
Negative List: The FINL enumerates industries where foreign ownership is either restricted or prohibited. Marketing services are not typically included in this list, allowing full foreign ownership. However, it's crucial to check the latest version of the FINL to ensure compliance.

Capital Requirements

Minimum Capital Requirement: The Foreign Investments Act mandates that fully foreign-owned enterprises in the Philippines must have a minimum paid-up capital of USD 200,000. This requirement is in place to ensure that foreign businesses contribute meaningfully to the local economy.
Reduced Capital Requirement: If the enterprise engages in activities involving advanced technology or employs at least 50 direct employees, the minimum paid-up capital can be reduced to USD 100,000. This provision aims to encourage the entry of technologically advanced businesses and promote job creation.

Incorporation Process

Business Registration: Foreign investors must register their business with the Securities and Exchange Commission (SEC). This involves submitting the necessary documents, including the Articles of Incorporation and By-Laws, along with proof of the minimum capital requirement.
Other Registrations: After SEC registration, the business must also register with other government agencies, such as the Bureau of Internal Revenue (BIR) for tax purposes, the Social Security System (SSS), the Philippine Health Insurance Corporation (PhilHealth), and the Home Development Mutual Fund (Pag-IBIG) for employee benefits.

Compliance and Reporting

Foreign-owned companies must comply with local laws and regulations, including annual reporting requirements to the SEC and adherence to tax laws enforced by the BIR. Non-compliance can result in penalties and legal issues.

Conclusion

Setting up a fully foreign-owned marketing services company in the Philippines is feasible under the current legal framework, provided the business meets the minimum capital requirements and complies with the necessary registration and reporting obligations. Regularly consulting with legal experts and staying updated with any changes in regulations can ensure smooth business operations.