What are the acts that greatly affect businesses in the Philippines?
- Foreign Investments Act
- Corporate Recovery and Tax Incentives for Enterprises Act
- Philippine Competition Act
- Barangay Micro Business Enterprises Act
- Revised Corporation Code of the Philippines
The Philippine government has established various acts that affect businesses operating in the Philippines. These laws cover many areas, including labor standards, taxation, consumer protection, and environmental regulations. By following these legal provisions, businesses can operate ethically and avoid legal issues that could harm their reputation.
To help businesses understand these laws, this blog will provide an overview of some of the business laws that every entrepreneur should know. Whether you’re planning to start a business or are already operating one, understanding these laws is crucial for maintaining compliance and ensuring your success in the Philippine market.
Foreign Investments Act
Republic Act No. 7042 or the Foreign Investments (FI) Act, is a Philippine law that seeks to entice foreign investment. Its primary purpose is to create a comprehensive framework for foreign investment. The act outlines the rules and regulations for foreign-owned businesses to enter, establish, and operate in the Philippines. Since it was enacted in 1991, the law has undergone multiple amendments to attract more foreign investors to Philippine businesses.
One of its amendments allows foreign investors to own up to 100% of a business, with some limitations and requirements. It also provides them with benefits such as tax holidays and simplified customs procedures. To avail of these benefits, foreign investors must register their investments with authorized government agencies and secure the necessary permits and licenses to operate their businesses in the country.
Corporate Recovery and Tax Incentives for Enterprises Act
One of the newer acts implemented in the Philippines is Republic Act No. 11534, also called the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. This became effective in 2021 to provide economic relief to businesses affected by the COVID-19 pandemic. It offers support by reducing corporate income tax rates and granting additional incentives to companies.
Under this, small businesses with a taxable income of up to PHP 5 million can benefit from a corporate income tax rate of 20%. In comparison, larger businesses with a taxable income of over PHP 5 million will have their corporate income tax rate from 30% to 25% over the next few years.
To be eligible for the incentives, businesses must register with the Philippine Economic Zone Authority (PEZA) or the Board of Investments (BOI). On top of that, they must also fulfill specific criteria such as investing in certain industries, creating jobs, and using locally sourced materials.
Philippine Competition Act
Republic Act No. 10667 or the Philippine Competition Act (PCA), is a law established in 2015 that aims to promote fair competition in trade and commerce within the country. This law sets out the legal framework for competition policy and regulation to prevent anti-competitive behavior in the market.
The PCA includes provisions that safeguard consumers from fraudulent, unjust, and unreasonable sales practices brought by close-fisted sellers. It also requires businesses to disclose product information to consumers. Furthermore, this law promotes fair competition in public procurement and government contracts, aiming to create a transparent procurement process.
Barangay Micro Business Enterprises Act
To support the growth of micro-enterprises in the Philippines, Republic Act No. 9178, the Barangay Micro Business Enterprises (BMBE) Act, was signed into law in 2002. If your business has assets not exceeding 3 million with not more than 10 workers, it qualifies for BMBE.To register, your business needs to comply with the requirements set by the Department of Trade and Industry (DTI) or the local government unit where you operate.
This law offers a way for micro-businesses to register as BMBEs and gain access to benefits, such as exemption from income tax and other fees for the first three years of operation. They are also exempted from the minimum wage law and can avail of government financing programs and technical assistance.
Revised Corporation Code of the Philippines
Finally, Republic Act No. 11232, also known as the Revised Corporation Code of the Philippines, was fully effective in 2019, which updated the previous Corporate Code in 1980. This law was recently updated to make good changes to the requirements for the establishment and operation of corporates in the country.
For instance, it reduces the minimum number of incorporators required to form a corporation from five to two and a one-person corporation and allows the formation of a one-person corporation. This law also allows the use of electronic signatures and documents to simplify the process of incorporating a company.
It’s clear that this offers more protection for minority shareholders and strengthens the corporate governance framework, which is now enjoyed by many corporations.
These several acts that greatly affect businesses in the Philippines aim to promote and support businesses. They offer tons of benefits and incentives depending on their eligibility and compliance with certain criteria. So, fast-growing industries need to familiarize themselves with these laws to take advantage of the benefits by providing the requirements.