The Foreign Investment Negative List in the Philippines: What You Can and Cannot Own as a Foreigner

If you are a foreign investor considering the Philippines, the first question you need to answer is not how to set up a business — it is whether you are legally allowed to own one in your chosen industry. The Foreign Investment Negative List (FINL) is the single most important document that determines what foreigners can and cannot own in the Philippines.

This guide breaks down the FINL in plain language, explains the recent landmark liberalizations signed into law in 2022, and gives you a practical roadmap for determining whether your business idea is open to 100% foreign ownership or subject to equity caps.

What Is the Foreign Investment Negative List (FINL)?

The FINL is an official list of economic sectors where foreign ownership is either prohibited or limited to a certain percentage. It is issued by the President of the Philippines through an Executive Order and is updated every two years.

The legal basis for the FINL is Republic Act No. 7042, also known as the Foreign Investments Act of 1991, as amended by Republic Act No. 8179 (1996) and most recently by Republic Act No. 11647 (signed March 2, 2022). The FIA establishes the general rule that foreign investors may own up to 100% equity in any Philippine business — unless that business falls within the Negative List.

The current version in effect is the 12th Regular Foreign Investment Negative List, promulgated under Executive Order No. 175, Series of 2022, signed by President Rodrigo Duterte on June 27, 2022.

The Two Lists: List A and List B

The FINL is divided into two component lists, each with different legal bases and policy rationales.

List A: Restrictions Mandated by the Constitution or Specific Laws

List A contains sectors where foreign ownership is limited by the 1987 Philippine Constitution or by specific statutes. These restrictions cannot be changed by executive action alone — they require a constitutional amendment or an act of Congress.

List A is organized by the maximum percentage of foreign equity allowed:

No Foreign Equity Allowed (0%)

• Mass media (except recording and internet businesses)
• Practice of licensed professions (e.g., law, medicine, accountancy, engineering, architecture), except where specific laws allow foreign practice subject to reciprocity
• Retail trade enterprises with paid-up capital of less than ₱25,000,000
• Cooperatives (except investments by former natural-born Filipino citizens)
• Private detective, watchmen, or security guard agencies
• Small-scale mining
• Utilization of marine resources in archipelagic waters, territorial sea, and exclusive economic zone
• Ownership, operation, and management of cockpits
• Manufacture, repair, stockpiling, and/or distribution of nuclear, biological, chemical, and radiological weapons and anti-personnel mines
• Manufacture of firecrackers and other pyrotechnic devices

Up to 25% Foreign Equity

• Private recruitment agencies (whether for local or overseas employment)
• Contracts for the construction of defense-related structures

Up to 30% Foreign Equity

• Advertising (under the Constitution's provisions on mass media)

Up to 40% Foreign Equity

• Exploration, development, and utilization of natural resources
• Ownership of private lands
• Operation of public utilities (as defined under the amended Public Service Act)
• Educational institutions (with exceptions for religious, diplomatic, and short-term skills training institutions)
• Rice and corn industry (culture, production, milling, processing, and trading except retailing)
• Government procurement contracts for goods and commodities supplied to GOCCs
• Deep-sea commercial fishing vessel operations
• Ownership of condominium units (up to 40% of the total project)
• Private radio communications networks

List B: Restrictions for Security, Health, Morals, and SME Protection

List B contains sectors where foreign ownership is limited for reasons of national security, defense, public health, morals, or the protection of local small and medium enterprises (SMEs). Unlike List A, these restrictions can be adjusted by the President through the regular FINL update process.

Up to 40% Foreign Equity

• Manufacture, repair, storage, and/or distribution of products requiring Philippine National Police (PNP) clearance — including firearms, ammunition, gunpowder, dynamite, blasting supplies, and related explosive ingredients
• Manufacture and distribution of dangerous drugs
• Sauna and steam bathhouses, massage clinics, and similar activities regulated for public health and morals (except wellness centers)
• All forms of gambling (except those covered by investment agreements with PAGCOR)

The US$200,000 Capital Threshold

This is one of the most important provisions for foreign entrepreneurs. Under List B, domestic market enterprises with paid-in equity capital of less than US$200,000 are reserved for Filipino nationals. This means that if you are a foreigner and your business primarily serves the Philippine domestic market, you must invest at least US$200,000 in paid-in capital.

However, there are three exceptions where the threshold is reduced to US$100,000:

1. The business involves advanced technology as determined by the Department of Science and Technology (DOST)
2. The business is endorsed as a startup or startup enabler by the Department of Trade and Industry (DTI) or DOST
3. The business employs at least 50 direct employees

Note that under RA 11647, the amended FIA further clarified that these capital thresholds apply specifically to domestic market enterprises, not to export enterprises (those exporting 60% or more of their output).

The 2022 Liberalization: Three Laws That Changed the Game

In March 2022, President Duterte signed three landmark laws that significantly opened the Philippine economy to foreign investment. Understanding these reforms is essential for any foreign investor assessing opportunities in the country.

1. Amended Foreign Investments Act (RA 11647)

Signed on March 2, 2022, Republic Act No. 11647 amended RA 7042 to modernize the foreign investment framework. Key changes include:

• Streamlined registration: Foreign enterprises can now register with the SEC or DTI within a shorter processing period
• Startup-friendly provisions: The reduced US$100,000 threshold for startups endorsed by DTI or DOST
• Anti-dummy enforcement: Strengthened provisions against the use of Filipino nominees to circumvent foreign ownership restrictions (violations of the Anti-Dummy Law under Commonwealth Act No. 108 carry criminal penalties)
• Investment Promotion Agencies (IPAs) are required to establish One-Stop Action Centers to facilitate business registration

2. Amended Public Service Act (RA 11659)

Signed on March 21, 2022, and effective April 9, 2022, Republic Act No. 11659 amended Commonwealth Act No. 146 (the Public Service Act). This was arguably the most transformative of the three reforms.

The key change: RA 11659 narrowed the definition of "public utility" — which is constitutionally limited to 40% foreign ownership — to cover only:

• Distribution of electricity
• Transmission of electricity
• Petroleum and petroleum products pipeline transmission systems
• Water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems
• Seaports
• Public utility vehicles

All other public services — including telecommunications, airlines, railways, expressways, and shipping — are now open to 100% foreign ownership, provided they are not classified as critical infrastructure. For entities operating critical infrastructure, foreign ownership is capped at 50%, subject to reciprocity requirements.

3. Amended Retail Trade Liberalization Act (RA 11595)

Signed on December 10, 2021, and effective January 21, 2022, Republic Act No. 11595 amended RA 8762 (the Retail Trade Liberalization Act of 2000). The key changes:

• Lowered the minimum paid-up capital for foreign retail enterprises from US$2,500,000 to ₱25,000,000 (approximately US$450,000)
• Removed the previous category system that imposed different capital requirements based on the type of retail activity
• Foreign retailers must maintain the ₱25,000,000 paid-up capital at all times while operating in the Philippines
• The SEC, DTI, and NEDA are mandated to review the minimum paid-up capital requirement every three years

Sectors Fully Open to 100% Foreign Ownership

If your business does not appear on List A or List B of the FINL, and you meet the applicable capital requirements, you can own 100% of your Philippine enterprise. Some of the most attractive sectors for foreign investors include:

• IT and Business Process Outsourcing (BPO)
• Software development and technology services
• Export manufacturing (enterprises exporting 60% or more of output)
• Restaurants and food service (with the required capital)
• Tourism and hospitality (hotels, resorts, travel agencies)
• E-commerce and online businesses
• Consulting and professional services (non-licensed professions)
• Telecommunications (under the amended PSA)
• Renewable energy projects (subject to specific DOE regulations)
• Warehousing and logistics

Tax Incentives: The CREATE and CREATE MORE Acts

Foreign investors should also be aware of the Philippine tax incentive framework, which has been significantly reformed in recent years.

Republic Act No. 11534, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, signed in 2021, reduced the corporate income tax rate from 30% to 25% (or 20% for domestic corporations with net taxable income not exceeding ₱5,000,000 and total assets not exceeding ₱100,000,000).

Building on this, Republic Act No. 12066, the CREATE MORE Act, signed in November 2024, further enhanced the incentive framework by:

• Extending income tax holiday (ITH) periods for qualifying registered business enterprises
• Allowing new deductions for research and development expenses, power costs, and net operating losses
• Broadening VAT zero-rating for registered export enterprises
• Simplifying registration and compliance processes through Investment Promotion Agencies (IPAs) like the Board of Investments (BOI) and Philippine Economic Zone Authority (PEZA)

These incentives are available to both foreign and domestic investors who register with the appropriate IPA and meet the qualifying criteria under the Strategic Investment Priority Plan (SIPP).

Practical Steps: How to Determine If Your Business Is Open to Foreign Ownership

Here is a step-by-step approach for foreign investors:

1. Identify your business activity. Be specific — the FINL classifies restrictions by activity, not by industry in the broadest sense.
2. Check List A. Is your activity restricted by the Constitution or a specific law? If so, what is the maximum foreign equity allowed?
3. Check List B. Does your activity involve security-sensitive products, gambling, or regulated health/morals activities?
4. Assess your capital. If your business is a domestic market enterprise, do you meet the US$200,000 (or US$100,000) paid-in capital threshold?
5. Consider the recent liberalizations. Sectors like telecommunications, airlines, and shipping that were previously restricted may now be fully open under RA 11659.
6. Consult a Philippine lawyer. The interaction between constitutional restrictions, statutory amendments, and executive orders creates complexity that requires professional guidance.

Common Pitfalls for Foreign Investors

The Anti-Dummy Law

Some foreign investors attempt to circumvent ownership restrictions by using Filipino nominees — individuals who hold shares on behalf of the foreign investor. This practice violates Commonwealth Act No. 108, the Anti-Dummy Law, as amended by Presidential Decree No. 715 and further strengthened by RA 11647.

Penalties include imprisonment of five to fifteen years, fines, and forfeiture of the business interest. The SEC and other regulators have become increasingly aggressive in investigating and prosecuting dummy arrangements.

The 60-40 Rule for Corporations

For sectors capped at 40% foreign ownership, the corporate structure must ensure that at least 60% of the capital stock is owned by Philippine nationals at all times. This applies not just at the time of incorporation but throughout the life of the corporation. Any share transfer that would breach this ratio can be blocked by the SEC.

Land Ownership

Foreign nationals generally cannot own land in the Philippines (Article XII, Section 7 of the 1987 Constitution). However, foreigners can:

• Lease land for up to 50 years, renewable for another 25 years (under RA 7652, the Investors' Lease Act)
• Own condominium units (up to 40% of the total units in a project, under RA 4726, the Condominium Act)
• Own land through a corporation where Filipino ownership is at least 60%

What About PEZA and BOI-Registered Enterprises?

Registration with the Philippine Economic Zone Authority (PEZA) or the Board of Investments (BOI) does not exempt a business from FINL restrictions. However, enterprises registered with these agencies enjoy significant fiscal and non-fiscal incentives, and export enterprises (those exporting at least 70% of output for PEZA, or 60% for BOI) are not subject to the US$200,000 minimum capital requirement under List B.

If your business qualifies as an export enterprise, this is one of the most efficient ways to establish a fully foreign-owned company in the Philippines with relatively low capital requirements.

Looking Ahead: Is a 13th FINL Coming?

The FINL is supposed to be updated every two years. With the 12th Regular FINL issued in June 2022, a 13th version is anticipated. The Marcos administration has signaled continued commitment to investment liberalization, and the passage of the CREATE MORE Act (RA 12066) in late 2024 reinforces this direction.

Foreign investors should monitor developments from the National Economic and Development Authority (NEDA) and the DTI for any updates to the Negative List.

Conclusion

The Philippines has made significant strides in opening its economy to foreign investment. The 2022 trifecta of RA 11647, RA 11659, and RA 11595 removed many of the barriers that historically made the country less competitive compared to its ASEAN neighbors. However, important restrictions remain — particularly in constitutionally protected sectors like land ownership, mass media, and certain natural resources.

The key takeaway: most business activities in the Philippines are open to 100% foreign ownership, provided you meet the applicable capital requirements. The FINL is not a list of what foreigners can do — it is a list of the exceptions.

If you are planning to invest in the Philippines, our team at Tungol Tan Fordan Campos Law can help you navigate the FINL, structure your investment, and ensure full compliance with Philippine law. Contact us today for a consultation.

For a step-by-step guide on the actual process of setting up your business, read our companion article: How to Start a Business in the Philippines as a Foreigner.