For any country hoping to attract foreign capital, policy and infrastructure tend to matter as much as economic fundamentals. Investors don’t just look at growth potential — they look at how easy it is to set up and run a business, from ownership rules and tax incentives to the roads, ports, and digital networks that keep operations running smoothly. A market can have all the right ingredients on paper, but without the regulatory and physical groundwork to support it, that potential often goes untapped.
In recent years, the Philippines has made a deliberate push to strengthen both sides of that equation. On the regulatory front, sweeping reforms have opened sectors once closed to foreign ownership and streamlined processes that once slowed market entry to a crawl. At the same time, government-led infrastructure programs are steadily addressing the logistical bottlenecks that have long been cited as a drawback to doing business in the country.
Opening the Economy: Foreign Ownership Reforms
For decades, foreign investment in the Philippines was shaped by a constitutional and legal framework that capped foreign ownership across a wide range of industries, often requiring foreign companies to partner with local investors just to enter the market. That began to shift with a series of legislative amendments aimed at loosening these restrictions and bringing the country’s investment rules closer in line with regional competitors.
The first major reform on foreign equity participation took place in 2022 with the passage of Republic Act (R.A.) No. 11595, or the Retail Trade Liberalization Act, reducing the minimum capital requirements for foreign retailers from US$2.5 million to ₱25 million, and each subsequent branch from US$830 thousand to ₱10 million, opening the door for smaller international brands to enter the market without the steep upfront investment previously required. Furthermore, foreign investors no longer need to secure a Certificate of Prequalification with the Board of Investments (BOI) so long as they maintain the minimum paid-up capital required.
In the same year, three more amendments were promulgated, allowing greater foreign participation in several key sectors. R.A. No. 11647 amended the Foreign Investment Act, providing for lower minimum capital for foreign companies utilizing advanced technology, endorsed start-up companies, or those employing a majority of Filipino workers (lowering the employment requirement to at least 15 Filipino workers instead of 50). On the other hand, amendments to the Public Service Act (R.A. No. 11659) redefined what counts as a “public utility” under foreign ownership restrictions, narrowing it to only 5 industries, thereby allowing full foreign ownership in sectors like telecommunications, transportation, and other services that were previously capped at minority foreign stakes. Finally, the Department of Energy (DOE) issued DOE Circular No. DC2022-11-0034, allowing greater foreign equity participation in the Renewable Energy sector. Specifically, it allows 100% foreign ownership of open-air kinetic energy projects such as solar, wind, and hydropower.
Together, these reforms mark a significant departure from the Philippines’ historically protectionist stance. Industries that once required complex joint ventures or local partnerships to access are now open to full foreign ownership, giving international companies more control over their operations and a faster, less complicated path to establishing a presence in the country.
Incentive Programs That Make Investment Easier
Beyond loosening ownership restrictions, the Philippine government has also built out a range of incentive programs designed to make investment more financially attractive. An important reform is the enactment of R.A. No. 12066, or the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act. The law enhances the earlier CREATE Act (R.A. No. 11534) and addresses some of the more persistent complaints from foreign investors — including inconsistent local tax treatment and burdensome documentation requirements, as well as expanding coverage of VAT zero-rated purchases of registered business enterprises (RBE).
Among the advantages introduced by CREATE MORE are a lower corporate income tax under the Enhanced Deduction (ED) incentive (from 25% to 20%) availed by RBEs. Note that RBEs do not automatically enjoy the reduced tax rate, and such only applies to RBEs specifically availing of ED.
Furthermore, the law expanded the coverage of goods and services purchased by RBEs entitled to VAT zero-rating. Under the earlier CREATE, only those purchases “directly and exclusively used” by the RBEs are entitled to 0% VAT. This is now amended to a more relaxed standard, using the term “directly attributable” instead. The new term now covers goods and services that are incidental to and reasonably necessary for the registered project or activity of the RBE, including but not limited to professional services, janitorial/utility services, marketing and promotion expenses, and other administrative expenses. The determination of what falls under “directly attributable” goods and services rests with the Investment Promotion Agencies (IPAs) based on the registered project or activity of the RBE.
Other features of the law include specific provisions on local business tax, expanded import duty exemption, and the creation of High-Value Domestic Market Enterprises (HVDMEs), a new business classification for high-value domestic corporations which does not fall under export-oriented enterprise classification.
Infrastructure Upgrades Supporting Growth
Regulatory reform only goes so far if the physical infrastructure cannot keep pace, and the Philippine government has made infrastructure development a parallel priority. Major transport and logistics projects, including new expressways, rail systems, and port upgrades, are steadily addressing bottlenecks that have long added cost and delay to doing business in the country. For companies dependent on moving goods, people, or materials efficiently, these improvements translate directly into lower operating costs and more reliable supply chains.
At the same time, economic zones and IT parks are expanding well beyond the traditional hub of Metro Manila. Cities like Cebu, Clark, and Davao have seen significant growth in dedicated business districts and special economic zones, offering companies viable alternatives to the congestion and higher costs often associated with the capital. This expansion is not just about relieving pressure on Metro Manila, but it is also about opening up new regional labor markets, giving companies access to talent pools they might not have considered previously.
For foreign investors, this geographic spread has real implications for site selection. Rather than defaulting to Metro Manila by necessity, companies now have a genuine range of options — each offering its own mix of infrastructure readiness, labor availability, and cost — allowing them to choose a location that best fits their specific operational needs rather than settling for the only viable option available.
Building Momentum: What These Changes Mean for Investors
Regulatory reform and infrastructure investment do not operate in isolation — they reinforce each other. Loosened ownership restrictions make it easier for foreign companies to enter the market, incentive programs make that entry more financially attractive, and infrastructure upgrades ensure the operational groundwork exists to support sustained growth once companies are on the ground. Together, these changes represent a coordinated effort to lower the barriers that once made the Philippines a harder market to break into.
That said, the transformation is not complete. Infrastructure projects take time to deliver, and execution across different regions can be uneven. Regulatory changes, while significant on paper, still depend on consistent implementation at the local level, and investors should expect some variability as agencies and local governments adjust to the new rules. These are the kinds of gaps that tend to narrow over time, but they’re worth factoring into any near-term market entry decision.
Still, the direction is clear, and the pace of change suggests the window for early movers to establish themselves ahead of increased competition may not last indefinitely. For foreign businesses evaluating the Philippines as part of their regional strategy, understanding these reforms and the momentum behind them are useful starting points for deciding when, and how, to enter the market.
If you or someone you know is considering expanding into the Philippines and would like guidance on how recent foreign investment reforms and incentives apply to your business, STLAF would be pleased to assist. We look forward to sharing more insights on corporate law and cross-border investment matters in our upcoming blog posts.
Disclaimer: The content of this blog is intended for general informational and educational purposes only and does not constitute legal advice. Laws and regulations may vary by jurisdiction, and the applicability of the information herein may differ depending on specific facts and circumstances. Accessing or reading this content does not create an attorney–client relationship. For legal concerns or tailored guidance, please consult a qualified lawyer licensed in your jurisdiction.
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Author(s): Gabriel D. Adora is an associate partner, and Juliana Sales is a research assistant, both at STLAF.