Pursuant to
the provisions of Section 11 of Republic
Act No. 8762, the following rules and regulations are hereby
promulgated.chanrobles virtual law library
RULE IDEFINITION
OF TERMS
Section
1. For purposes of this Rules and Regulations:
(a) “Retail
Trade” shall mean any act, occupation or calling of habitually
selling
direct to the general public merchandise, commodities or goods for
consumption.chanrobles virtual law library
(b) “High-end
or Luxury Goods” shall refer to goods which are not necessary for
life
maintenance and whose demand is generated in large part by the higher
income
groups. Luxury goods shall include, but are not limited to, products
such
as: jewelry, branded or designer clothing and footwear, wearing
apparel,
leisure and sporting goods, electronics and other personal
effects.
(c) “Investment”
shall mean assets, tangible or intangible including but not limited to
buildings, leasehold rights, furniture, equipment and inventory.
(d) “Foreign
Retailer” shall mean a non-Filipino citizen, if a natural person,
or
if a juridical person, a duly formed and organized corporation,
partnership,
association or entity that is not wholly-owned by Filipinos, engaged in
retail trade.
(e) “Foreign
Investor” shall mean a non-Filipino citizen, if a natural person,
or
if a juridical person, a duly formed and organized corporation,
partnership,
association or entity that is not wholly-owned by Filipinos, whether or
not engaged in retail trade.
(f)
“Natural-born
Filipino Citizen” are those who are citizens of the Philippines
from
birth without having to perform any act to acquire or perfect their
citizenship.
Those who elect Philippine citizenship in accordance with Article IV,
paragraph
3 of the 1987
Constitution
shall be deemed natural-born citizens.chanrobles virtual law library
(g) “Consumption”
shall mean the utilization of economic goods in the satisfaction of
want
resulting in immediate destruction, gradual decay or deterioration or
transformation
into other goods.chanrobles virtual law library
(h)
“Manufacturer”
refers to a person who alters raw material or manufactured or partially
manufactured products, or combines the same in order to produce
finished
products for the purpose of being sold or distributed to others.chanrobles virtual law library
(m) “Processor”
refers to a person who converts raw materials into marketable form by
special
treatment or a series of action that changes the nature or state of the
product, like slaughtering, milling, pasteurization, drying, or
dessicating,
quick freezing and the like. Mere packing, packaging, sorting or
classifying
does not make a person a processor.chanrobles virtual law library
(n) “Farmer
or Agriculturist” refers to an individual personally engaged in
dairy
farming, fish farming, aquaculture, poultry or livestock raising, and
his
principal income is derived from any one or more of the foregoing
operations.chanrobles virtual law library
(o) “Capital”
shall mean the working capital for sole proprietorships and
partnerships,
while for corporations, it shall be the paid-up capital.chanrobles virtual law library
(l) “Paid-Up
Capital” shall mean the total investment in a business that has
been
paid-in in a corporation or partnership or invested in a single
proprietorship,
which may be in cash or in property. It shall also refer to inward
remittance
or assigned capital in the case of foreign corporations.chanrobles virtual law library
(m) “Retail
Store” shall mean the company that owns the retail store
and/or
the physical location, such as a shop, where goods are sold on a retail
basis. It includes the administrative offices, warehouse, preparation
facility
or storage facility of such goods, regardless of whether or not it is
adjacent
to such outlet.chanrobles virtual law library
In cases
where
the administrative office, warehouse, preparation facility or storage
facility
services several stores, the capital for such administrative office,
warehouse
preparation or storage facility to be included in the investment
requirement
for one store shall be pro-rated to the number of stores being serviced.chanrobles virtual law library
(n) “Locally
Manufactured Goods” shall mean goods produced in the Philippines.chanrobles virtual law library
(o) “Branch
Office” shall mean an office of a foreign company that carries out
the business activities of such head office and derives income from the
host country.chanrobles virtual law library
(p)
“Franchise”
shall mean a business relationship wherein, for a consideration, the
franchisor
grants to the franchisee a licensed right, subject to agreed-upon
requirements
and restrictions, to conduct business utilizing the trade and/or
service
marks of the franchisor, and also provides to the franchisee, advice
and
assistance in organizing, merchandising, and managing the business
conducted
pursuant to the license. This type of agreement may include a licensing
agreement or any similar arrangement.chanrobles virtual law library
(q) “Net
Worth” shall mean total equity of a business; total assets less
total
liabilities.chanrobles virtual law library
(r) “Track
record” shall include the track record of the
applicant-foreign
retailer, its predecessors, or its principal stockholders, affiliates
and
subsidiaries.chanrobles virtual law library
(s) “Reciprocity
Rights” shall denote the relation between two states when each of
them,
by their respective laws or by treaty, gives the citizens or nationals
of the other certain privileges, as in the undertaking of retail trade
activities, on condition that its own citizens or nationals shall enjoy
similar privileges in the latter state.chanrobles virtual law library
Notwithstanding
the law allowing one hundred percent foreign ownership of retail
activities
subject to the capitalization requirements, a foreign retailer shall
only
be allowed to own up to the extent of the foreign ownership allowed for
retailing in its home country.chanrobles virtual law library
(t) A
former
natural born Filipino citizen is deemed “residing in the
Philippines”
if he physically stays in the country for at least one hundred eighty
(180)
days within a given year.chanrobles virtual law library
Sec. 2. Sales
Not Considered As Retail. – The following sales are not considered
as retail:
(a) Sales of
a manufacturer, processor, laborer, or worker of products manufactured,
processed or produced by him to the general public whose capital does
not
exceed One hundred thousand pesos (100,000.00);
(b) Sales
by
a farmer or agriculturist selling the products of his farm, regardless
of capital;
(c) Sales
arising
from restaurant operations by a hotel owner or inn-keeper irrespective
of the amount of capital, provided, that the restaurant is incidental
to
the hotel business
(d) Sales
through
a single outlet owned by a manufacturer of products manufactured,
processed
or assembled in the Philippines, irrespective of capitalization;
(e) Sales
to
industrial and commercial users or consumers who use the products
bought
by them to render service to the general public and/or produce or
manufacture
of goods which are in turn sold by them; or
(f) Sales
to
the government and/or its agencies and government-owned and controlled
corporations.chanrobles virtual law library
RULE IIRIGHTS
OF FORMER NATURAL BORN FILIPINOSTO
ENGAGE
IN RETAIL TRADE
Section
1. Rights of Former Natural born Filipinos. - Any natural born
Filipino
citizen who has lost his Philippine citizenship and who has legal
capacity
to enter into a contract under Philippine laws may be allowed to engage
in retail trade, provided that he resides in the Philippines.chanrobles virtual law library
Sec. 2.
Documentary Evidences. – Any person who meets the
requirements
provided
for under the preceding paragraph shall be considered as a Filipino
citizen
for purposes of this Act, upon showing any of the following documents:
1. Copy of
birth certificate (i) certified by the local civil registrar or the
National
Statistics Office; or (ii) for those born abroad, certificate of birth
from the appropriate government agency of the country where the birth
is
recorded showing the father or mother to be a Filipino at the time of
birth
or if the citizenship of the parents is not indicated, additional proof
that the parent/s is a Filipino citizen or has not lost his/her
Filipino
citizenship at the time of the applicant’s birth; or (iii) those born
before
17 January 1973 of Filipino mothers must additionally submit all of the
following: certified true copies of his/her sworn statement of election
of Filipino citizenship, oath of allegiance from the civil registrar
where
the documents were filed and/or forwarded, and identification
certificate
issued by the Bureau of Immigration;
2. In case
of
loss and/or destruction of the record of birth or non-registration of
birth,
a (i) Certificate of non-availability of birth certificate on account
of
loss and/or destruction of birth record from the local civil registrar
and/or appropriate government agency if birth was registered abroad; or
(ii) copy of birth certificate of mother or father certified by the
local
civil registrar or the NSO; and (iii) affidavit of two (2)
disinterested
persons attesting to their personal knowledge that at the time of the
applicant’s
birth, the child was born of a Filipino mother or father.chanrobles virtual law library
Any document
executed or issued abroad must be authenticated by the Philippine
Embassy/Consulate
having jurisdiction over the place of execution or issuance of the
document.chanrobles virtual law library
RULE IIICAPITALIZATION
AND EQUITY REQUIREMENTS
Section 1.
Foreign Equity Participation. – Foreign-owned partnerships,
associations
and corporations formed and organized under the laws of the Philippines
may, upon registration with the Securities and Exchange Commission
(SEC),
or in case of foreign-owned single proprietorships, with the Department
of Trade and Industry (DTI), engage or invest in the retail trade
business,
subject to the following categories:
Category
A – Enterprises with paid-up capital of the equivalent in
Philippine
Pesos of less than Two million five hundred thousand US dollars
(US$2,500,000.00)
shall be reserved exclusively for Filipino citizens and corporations
wholly
owned by Filipino citizens.chanrobles virtual law library
Category
B – Enterprises with a minimum paid-up capital of the equivalent in
Philippines Pesos of Two million five hundred thousand US dollars
(US$2,500,000.00)
but less than Seven million five hundred thousand US dollars
(US$7,500,000.00)
may be wholly owned by foreigners except for the first two (2) years
after
the effectivity of this Act wherein foreign participation shall be
limited
to not more than sixty percent (60%) of total equity.chanrobles virtual law library
Category
C – Enterprises with a paid-up capital of the equivalent in
Philippine
Pesos of Seven million five hundred thousand US dollars
(US$7,500,000.00)
or more may be wholly owned by foreigners.chanrobles virtual law library
Category
D – Enterprises specializing in high-end or luxury products with a
paid-up capital of the equivalent I Philippine Pesos of Two hundred
fifty
thousand US dollars (US$250,000.00) per store may be wholly owned by
foreigners.chanrobles virtual law library
Sec.
2. Branches/Stores. - Opening of branches/stores by the
registered
foreign retailer shall be allowed, provided that the investments for
each
branch/store established by registered foreign retailers falling under
Categories B and C must be no less than the equivalent in Philippine
Pesos
of Eight hundred thirty thousand US dollars (US$830,000.00).chanrobles virtual law library
RULE IVPREQUALIFICATION
OF FOREIGN RETAILERS
Section
1. Prequalification Requirements. - Before a foreign
retailer
is allowed to engage in the retail trade business or invest in an
existing
retail store in the Philippines, it must possess all of the following
qualifications:
(a) A minimum
of Two hundred million US dollars (US$200,000,000.00) net worth in its
parent corporation for Categories B and C, and Fifty million US dollars
(US$50,000,000.00) net worth in its parent corporation for Category D;
(b) Five
(5)
retailing branches or franchises in operation anywhere around the world
unless such retailer has at least one (1) store capitalized at a
minimum
of Twenty-five million US dollars (US$25,000,000.00):
(c) Five
(5)-year
track record in retailing; and
For
purposes
of determining compliance with the above requirements, the net worth,
track
record and existence of branches and franchises of the parent company,
its branches and subsidiaries and of its affiliate companies, as well
as
their predecessors, which substantially owns, controls or administers
the
operations of the applicant shall be considered.chanrobles virtual law library
(d) Only
nationals
from, or juridical entities formed or incorporated in countries which
allow
the entry of Filipino retailers shall be allowed to engage in retail
trade
in the Philippines.chanrobles virtual law library
Sec. 2. Application
for Pre-Qualification. - A request for pre-qualification by the
aforementioned
foreign retailer must be submitted to the Board of Investments before
filing
a formal application to engage in the retail business or invest
in
an existing retail store. Said request for pre-qualification must be
accompanied
by the following documents:
(a) Latest
Annual Financial Statement showing the net worth of the applicant;
(b)
Certification
by a responsible officer of the applicant-foreign retailer duly
authenticated
by the Philippine Embassy/Consulate stating that:
i. it has
been
engaged in retailing for the past five years; and
ii. has
at least
five (5) retailing branches anywhere in the world, or at least one
branch
is capitalized at a minimum of Twenty-five million US dollars
(US$25,000,000.00);
(c) Copies
of
franchise or licensing agreements between the applicant and its
franchisee/licensee
if the applicant fails to meet the preceding requirement of at least
five
(5) retailing branches; and
(d)
Certification
by the proper official of the home state of the applicant-foreign
retailer
to the effect that the laws of such state allows or permits reciprocal
rights to Philippine citizens and enterprises together with the extent
of participation allowed.chanrobles virtual law library
Sec. 3. Enterprises
composed of Two (2) or More Stockholders/Partners. - If
a single retailing corporation/partnership to be formed and organized
under
Philippine laws will be owned by several foreign retailers and foreign
investors, an application for all of the stockholders/partners for
pre-qualification
must be filed with the BOI. The foreign retailer-stockholder/partner
with
the highest equity in said company should satisfy the conditions
mentioned
under Rule IV, Sections 1 and 2.chanrobles virtual law library
However, In
cases where all or two or more of the foreign stockholders/partners
have
equal shares, the prequalification condition shall be deemed complied
with
if the stockholders/partners owning or controlling at least majority of
the stocks or interests meet the aforementioned conditions.chanrobles virtual law library
Sec. 4. Issuance
of Certificate of Compliance with Prequalification. - The Board of
Investments (BOI), shall issue, within twenty (20) working days from
submission
of all necessary documents, after evaluation and verification, a
Certification
that the foreign retailer meets the qualifications prescribed by the
law.chanrobles virtual law library
Sec. 5. List
of Qualified Foreign Retailers. - The DTI through the Board of
Investments
(BOI) shall keep a record of foreign retailers who have been
pre-qualified
to establish retail stores in the Philippines. It shall ensure that the
parent retail trading company of the foreign investor complies with the
qualifications on capitalization and track record.chanrobles virtual law library
RULE VINVESTMENTS
IN EXISTING RETAIL STORES
Section
1. Foreign Investments in Existing Stores. - Any foreign
investor,
whether or not it is presently engaged in retail trade, may be allowed
to invest in existing retail stores, publicly listed or not, subject to
the paid up capitalization amounts expressed in net worth,
investment
per store and equity requirements under Rule III hereof.chanrobles virtual law library
Sec. 2.
Pre-qualification Requirements. - In addition to the
foregoing,
foreign investors which are also retailers that will invest in existing
retail stores are required to be pre-qualified before they may actually
buy shares thereto.chanrobles virtual law library
RULE VIHIGH-END
OR LUXURY GOODS
Section
1. List of Retailers selling High-End or Luxury Goods. - An
annual
list of foreign retailers selling high-end or luxury goods shall be
formulated
and regularly updated by the Inter-Agency Committee on Tariff and
Related
Matters of the National Economic Development Authority (NEDA) Board, in
coordination with the relevant organizations and the private sector
concerned.
(Section 8, second to the last paragraph)
Sec. 2.
Annual Report to Congress. – The Inter-Agency Committee
on
Tariff
and Related Matters of the National Economic Development Authority
(NEDA)
Board shall annually report to Congress the list of foreign retailers
selling
high-end or luxury goods. (Section 8, last paragraph)
RULE VIIAPPLICATION
FOR REGISTRATION
Section 1.
Filing of Application. - Applications for registration together with
supporting
documents, shall be filed with the Securities and Exchange Commission
(SEC)
in the case of domestic corporations or partnerships that are owned
wholly
or partially by foreign retailers, or the DTI through its Regional and
Provincial Offices, in the case of single proprietorships.chanrobles virtual law library
All applications
shall be subject to the payment of the prescribed filing fees.chanrobles virtual law library
Sec. 2. Certificate
of Compliance with Pre-qualification Requirements. – No
corporation/partnership/association
or sole proprietorship owned wholly or partially by foreign retailers
may
be allowed to register without securing the necessary certificate of
compliance
with the prequalification conditions from the Board of Investments.chanrobles virtual law library
Sec. 3. Issuance
of Certificate of Incorporation/Business Name. - Upon
submission
of all the required documents, the Securities and Exchange Commission
(SEC),
in cases of corporations/partnerships/association and the Department of
Trade & Industry, through its Regional or Provincial Offices in
cases
of sole proprietorships, shall issue the Certificate of Incorporation
and
the Business Name, respectively, granting legal personality to the
applicant-retailer.chanrobles virtual law library
In addition,
the foreign retailers shall secure all necessary permits and licenses
from
the concerned government agencies.chanrobles virtual law library
Sec. 4.
BSP Registration of Inward Remittance. – Prior to
operations,
foreign
retail stores and foreign investors shall register their investments
with
the Bangko Sentral ng Pilipinas (BSP) to ensure that the inward
remittance
of the required capital investment is fully documented.chanrobles virtual law library
The BSP
shall issue the Bangko Sentral Registration Certificate (BSRC) upon
submission
of a bank certification of remittance of foreign exchange converted and
sold to pesos through the authorized agent bank and compliance with
such
other BSP rules for such registration.chanrobles virtual law library
Sec. 5. Establishment
of Branches. – All registered foreign retailers that will
establish
additional branches shall be required to file an application with the
DTI,
supported by documents showing proof of compliance with the US$830,000
investment requirement per branch, and the Certificate of
Incorporation/DTI
Certificate issued to the retailer.chanrobles virtual law library
Sec. 6.
Reporting Requirements. – Every registered foreign retail
enterprise
shall submit annually to the Department of Trade and Industry (DTI) the
following reports:
(a) A general
information sheet in the prescribed form showing, among others, the
accredited
stores of the enterprise and the status of operations of the entity;
(b) An
audited
financial statement and income tax return;
(c)
Certification
by a responsible officer of the company showing the maintenance of the
required minimum capital unless the foreign investor has notified the
SEC
and the DTI of its intention to repatriate its capital and cease
operations
in the Philippines;
RULE
VIIIPROHIBITED
ACTIVITIES OF QUALIFIED FOREIGN RETAILERS
Section 1.
Accredited Stores. - Qualified foreign retailers shall not
be
allowed
to engage in certain retailing activities outside their accredited
stores
through the use of mobile or rolling stores or carts, the use of sales
representatives, door-to-door selling, restaurants and sari-sari stores
and such other similar retailing activities.chanrobles virtual law library
Sec. 2. List
of Prohibited Activities. - A detailed list of these prohibited
activities
shall be formulated by the DTI.chanrobles virtual law library
RULE IXCOMPLIANCE
REQUIREMENTS
Section
1. Maintenance of Prescribed Minimum Capital. - The foreign
investor
shall be required to maintain in the Philippines the full amount of the
prescribed minimum capital, unless the foreign investor has notified
the
SEC and the DTI of its intention to repatriate its capital and cease
operations
in the Philippines.chanrobles virtual law library
The SEC shall
establish mechanisms to monitor the actual use in Philippine operation
of the inwardly remitted minimum capital requirement.chanrobles virtual law library
Failure
to maintain the full amount of the prescribed minimum capital prior to
notification of the SEC and the DTI, shall subject the foreign investor
to penalties or restrictions on any future trading activities/business
in the Philippines.chanrobles virtual law library
Sec.
2. Public Offering of Shares of Stock. – All registered retail
enterprises
under Categories B and C in which foreign ownership exceeds eighty
percent
(80%) of equity shall offer a minimum of thirty percent (30%) of their
equity to the public through any stock exchange in the Philippines
within
eight (8) years from their start of operations. (Section 7)
Affected
registered retailers shall then be required to list their shares at any
stock exchange duly formed and organized under Philippine laws.chanrobles virtual law library
Compliance
with this requirement shall be supervised and monitored by the SEC.chanrobles virtual law library
Sec. 3. -
Promotion of Locally Manufactured Products. – For ten (10) years
after
the effectivity of this Act, at any given time, at least thirty percent
(30%) of the aggregate cost of the stock inventory situated in the
Philippines
of foreign retailers falling under Categories B and C and ten percent
(10%)
for Category D shall be made in the Philippines.chanrobles virtual law library
All registered
foreign retailers shall be required to maintain books of accounts
showing
the inventory situated in the Philippines and its origin at all times
and
these books may be examined at any time, by the duly authorized
representative
of the Department of Trade and Industry.chanrobles virtual law library
Furthermore,
these registered foreign retailers shall be required to submit
quarterly
statements under oath certifying the ratio of their local and imported
inventory.chanrobles virtual law library
Sec. 4.
Visitorial Powers. – In the public interest and/or for
the
enforcement
of any applicable law, rules and regulations, the DTI/BOI, SEC or any
government
office having jurisdiction on the matter may, through any of its duly
authorized
representatives, conduct necessary examination of records, inventory
and
books of accounts of the registered foreign retail enterprise in the
Philippines,
make pertinent inquiries from its officials and take such action as may
be necessary for the proper exercise of its authority.chanrobles virtual law library
Sec. 5. Implementing
Agency. – The monitoring and regulation of foreign sole
proprietorships,
partnerships, associations, or corporations allowed to engage in retail
trade shall be the responsibility of the DTI. This shall include
resolution
of conflicts, through mediation.chanrobles virtual law library
Sec. 6.
Withdrawal/Closure of Retail Establishments. -
Applications for
withdrawal or closure of retail establishments shall be filed with the
Securities and Exchange Commission for
corporations/partnerships/associations
or the DTI, through its Regional or Provincial Offices with respect to
sole proprietorships.chanrobles virtual law library
The DTI
shall be notified by the concerned agency of actions taken on requests
for withdrawal or closure of foreign retail establishments.chanrobles virtual law library
Sec. 7. Penalties.
- Any person who shall be found guilty of violation of any provision of
this Act, or its implementing rules and regulations, or other terms and
conditions of its registration, shall be punished by imprisonment of
not
less than six (6) years and one (1) day but not more that eight (8)
years,
and a fine of not less than One million pesos (P1,000,000.00) but not
more
than Twenty million pesos (P20,000,000.00).chanrobles virtual law library
In the case
of associations, partnerships or corporations, the penalty shall be
imposed
upon its partners, president, directors, manager and other officers
responsible
for the violation. If the offender is not a citizen of the Philippines,
he shall be deported immediately after service of sentence. If the
Filipino
offender is a public officer of employee, he shall, in addition to the
penalty prescribed herein, suffer dismissal and permanent
disqualification
from public office.chanrobles virtual law library
RULE XREPEALING
AND EFFECTIVITY CLAUSES
Section
1. All other rules and regulations or parts thereof, inconsistent with
the foregoing rules and regulations are repealed, amended or modified
accordingly.
Sec.
2.
These Rules shall take effect fifteen (15) days upon publication in two
(2) newspapers of general circulation.chanrobles virtual law library
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