Posted on August 2nd, 2009
A lot of business minded people wanted to know about some information regarding putting up investment in the Philippines. These questions often come from entrepreneurs who have tied up with foreign investors. This article aims to clarify some frequently asked question about joint ventures in the Philippines such as:
â€¢ Up to what percent of its equity will the SEC allow joint ventures to hold
â€¢ How can foreign investors obtain control of operation despite being limited to a 40% equity holding
â€¢ If there is a law requiring that the directors and other officers must be a citizen or a resident of the Philippines
â€¢ The policies on taxing joint ventures
Engaging in a joint venture with investors from the Philippines is allowed to hold up to 50% or more of its equity. That is provided that the area of activity involved is not under the Executive Order No.11 which put some foreign investments under the negative lists.
Majority ownership of the voting capital stock of the corporation is how most enterprises determine which group will have control over the enterprise. However, minority group could be provided with working control under certain arrangements like agreement in licensing and majority ownership diffusion.
Under the law, there must be more Philippine residents directors and the secretary needs to be a resident Filipino citizen. Under the policy of SEC, it requires the treasurer to be a resident of the Philippines. In cases of banks and domestic carriers, members of the board of directors should be made up of at least two-thirds citizens of the Philippines. The highest number of foreign directors in firms that are engaged in a nationalized or partially nationalized activity must not be above the proportion of actual foreign equity in the firm. Also its executives and managing officers are required to be Filipino citizens.
The share of the joint venture partners of an unincorporated joint venture will no longer be taxable because they are taxed like a corporation. On the other hand, share of joint venture partners will be taxed if the unincorporated joint venture is engaged in construction project or petroleum operations which makes them not qualified to be subject to a corporate income tax.