Foreign Investments Act
Definition
Foreign Investments Act
The Foreign Investments Act (FIA) is the Philippine law that lets foreign nationals own up to 100% of a domestic enterprise, subject to a Negative List. Enacted as Republic Act 7042 in 1991 and amended in 2022, it governs how foreign capital enters the country.
Congress passed the FIA to shift the Philippines from a permission-first regime to a registration-first one. Foreign investors register with the SEC or the Board of Investments (BOI), an arm of the Department of Trade and Industry (DTI).
Once registered, they can operate outside the Foreign Investment Negative List (FINL) without further permission. Non-compliance triggers SEC sanctions and possible divestment to Philippine nationals.
Republic Act 11647, signed in March 2022, further liberalized the framework by cutting paid-up capital thresholds for qualifying firms and creating an Inter-Agency Investment Promotion Coordination Committee.
Key takeaways
- The Foreign Investments Act allows 100% foreign equity in most Philippine domestic enterprises, opening the country to full-control investment.
- The Foreign Investment Negative List (FINL) names the sectors closed or restricted to foreigners, and it is updated every two years.
- RA 11647 (2022) cut paid-up capital floors, added a national security review, and streamlined inter-agency approvals.
- Foreign investors register with the SEC (corporations) or DTI (single proprietorships) before hiring or invoicing.
- Outsourcing buyers use the FIA to plan a legal, tax-efficient entry into the Philippine BPO market.
How it works
The foreign investments act operates on a simple default — foreign equity is allowed up to 100% unless a sector sits on the Negative List. Investors file with the Securities and Exchange Commission, then with the Board of Investments if incentives apply.
The FINL has two parts. List A names sectors restricted by the Constitution or existing statutes, such as mass media and public utilities. List B names sectors restricted for reasons of security, defense, health, or the protection of small local enterprises.
The Executive Order enumerating the FINL is updated every two years — the 12th list took effect in 2022. Common categories look like this:
| Category | Foreign equity cap | Examples |
|---|---|---|
| Fully open | 100% | BPO, export manufacturing, IT services |
| Restricted (List A) | 25–40% | Mass media, advertising, private radio |
| Restricted (List B) | 40% | Small-scale mining, gambling, private security |
RA 11647 also lowered the paid-up capital floor from US$200,000 to US$100,000 for foreign firms hiring at least 15 Filipino staff or using advanced tech. Section 8 of the amended act sets the qualifying tests and the transitional deadline for existing investors.
Examples
Real-world use of the foreign investments act shows up most clearly in the BPO sector, where offshore capital finances Manila and Cebu delivery centers. Below are three cases that illustrate how the act reshapes corporate structures across services and industry.
Concentrix, a Nasdaq-listed U.S. contact center firm, runs more than 40,000 seats across the Philippines under 100% foreign equity. It registered with the SEC and PEZA under the FIA’s default rule for export-oriented BPO, and it later expanded to Baguio and Iloilo.
TaskUs, which listed on Nasdaq in 2021, built its Cavite and Antipolo campuses as fully foreign-owned Philippine subsidiaries — a structure only possible because BPO sits outside the Negative List and qualifies for full expat control.
In 2022, Japanese trading house Marubeni raised its stake in Manila-based Aboitiz Power’s coal unit past the historic 40% cap. The RA 11647 amendments to the foreign investments act cleared the deal above prior thresholds without a Congressional waiver.
Related terms
- Foreign direct investment: capital flowing across borders to build or buy operating assets, tracked by the BSP.
- Offshoring: the strategic decision to move a business function to another country, often enabled by the FIA.
- Business process outsourcing: the outsourced service industry that the FIA opened to 100% foreign ownership.
- Board of Investments: the DTI agency that registers FIA-covered enterprises seeking incentives.
- Special economic zone: peza-administered zones where FIA-registered exporters get fiscal perks.
- Market entry: the operational playbook clients follow after clearing FIA registration.
FAQ
Who does the Foreign Investments Act apply to?
The act covers any non-Philippine national, whether individual or entity, investing in a domestic Philippine enterprise. Export-oriented firms and BPO providers fall inside its scope by default rather than as a special exception granted case by case.
What is the Foreign Investment Negative List?
The FINL is the Executive-issued list of sectors where foreign equity is capped or barred. It is updated roughly every two years and split into List A (constitutional bars) and List B (policy bars).
How did RA 11647 change the Foreign Investments Act?
RA 11647 cut minimum paid-up capital, added a national security review for sensitive investments, and created an inter-agency committee to speed approvals. It took effect in April 2022, three decades after the original FIA reshaped Philippine investment law.
Do BPO firms need FIA registration?
Yes, foreign-owned BPOs register with the SEC under FIA rules before hiring or invoicing.
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