The 13th Foreign Investment Negative List and BIR RMC 24-2026: What Every Foreign Investor in the Philippines Must Know in 2026

Introduction: Two Shifts That Change the Investment Calculus

For foreign investors considering entry into the Philippine market, the first four months of 2026 have been unusually consequential. On April 13, 2026, President Ferdinand R. Marcos Jr. signed Executive Order No. 113, series of 2026, promulgating the Thirteenth (13th) Regular Foreign Investment Negative List (FINL) — the first update to the Philippines’ definitive foreign ownership framework since the 12th FINL was issued in 2022. Less than three weeks later, on March 30, 2026, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 24-2026, a significant clarification of how cross-border service income is taxed under the Philippine situs rules.

Both developments carry direct implications for the structuring decisions foreign investors face: which sectors they can enter, at what equity levels, under what regulatory approvals, and — critically — how the income generated from those investments will be taxed. This guide provides a comprehensive, senior-attorney-level analysis of both issuances, with particular attention to their combined effect on the day-to-day decisions foreign businesspeople make when establishing and operating a Philippine presence.

The analysis assumes the reader is a foreign national — whether an individual investor, a multinational deploying capital through a holding vehicle, or a founder evaluating the Philippines as a base for regional operations. Where appropriate, it distinguishes between the different entity structures available (subsidiary, branch, representative office, ROHQ) and flags the specific compliance obligations each development creates.

Part I: The 13th Foreign Investment Negative List (EO No. 113, s. 2026)

1.1 What the FINL Is — and Why It Matters

The Regular Foreign Investment Negative List is issued pursuant to Republic Act No. 8756, which amended Republic Act No. 7042 (the Foreign Investments Act of 1991). Under RA 8756, the President is required to publish, at minimum every two years, a list of industries and economic activities in which foreign investment is restricted or prohibited — either by constitutional mandate, by specific statutory reservation, or by national security concerns.

The 13th FINL took effect on May 2, 2026, fifteen days after its publication in major newspapers on April 17, 2026. It replaced the 12th FINL in its entirety. For foreign investors, the FINL is the single most important gatekeeping document for ownership decisions: if an activity is on the list, the applicable foreign equity cap governs regardless of what the parties’ commercial agreement provides.

1.2 Architecture of the 13th FINL

The 13th FINL, like its predecessors, is organized into two lists:

• List A: Activities where foreign ownership is restricted by mandate of the Constitution or specific statutes (i.e., the restriction is constitutionally or legislatively required and cannot be lifted by executive action).
• List B: Activities where foreign ownership is restricted on grounds of national security, defense, or public health and safety (i.e., the restriction is policy-based and potentially subject to future recalibration).

The 13th FINL contains several significant departures from the 12th. Each is analyzed below.

1.3 Key Changes in the 13th FINL

1.3.1 Corporate Practice of Architecture: Express Prohibition

One of the most explicit additions in the 13th FINL is the inclusion of the corporate practice of architecture as a reserved activity with zero foreign equity. This was previously a gray area: prior FINLs listed “practice of professions” broadly but did not specifically address whether a corporation — as distinct from an individual professional — could practice architecture. The 13th FINL resolves this ambiguity firmly against foreign participation.

The constitutional basis is Article XII, Section 14 of the 1987 Constitution, which reserves professional practice to Filipino citizens. The Supreme Court, in a line of cases going back to Apo Mining Corporation v. CIR (G.R. No. 162578, April 13, 2009), has consistently held that corporate vehicles cannot possess the personal qualifications required for professional practice. The Professional Regulatory Board of Architecture (PRBoA) and the Department of Justice have both affirmed this position.

Practical implications for foreign investors:

• A foreign investor cannot hold any equity stake — even minority — in a domestic corporation whose primary purpose is the practice of architecture.
• This restriction applies regardless of whether the corporation is registered with the SEC as an architecture firm or simply engages in architecture-adjacent work.
• Foreign nationals who are licensed architects in their home jurisdiction cannot practice architecture in the Philippines through a Philippine corporate vehicle.
• If you are a foreign investor evaluating acquisition of a firm that includes architectural services, a careful review of the target’s actual business activities is essential.

1.3.2 Telecommunications: Full Ownership with Reciprocity

The 13th FINL formally allows up to 100% foreign equity in telecommunications, reflecting the policy shift inaugurated by the 2022 amendments to the Public Service Act (RA 11659), which reclassified telecommunications from “public utility” to “public service” and removed the constitutionally-mandated 40% cap. However, the 13th FINL introduces a reciprocity condition: where the foreign investor’s home jurisdiction does not grant equivalent market access to Philippine nationals or enterprises, equity is capped at 50%.

Practical implications for foreign investors:

• A US, EU, or Singapore-based telecom investor may find the 100% ownership path open, subject to a jurisdiction-specific analysis.
• A foreign state-owned enterprise (SOE) remains prohibited from owning telecom infrastructure regardless of reciprocity.
• Additional requirements apply under the Critical Infrastructure Protection Act and related rules, including mandatory ISO certifications on information security.

1.3.3 Retail Trade: Clarified Capital Threshold

The 13th FINL resolves a prior ambiguity regarding retail trade for enterprises with paid-up capital below the PHP 25 million (approximately USD 430,000) threshold established by the Retail Trade Liberalization Act (RA 11595). The 13th FINL now expressly confirms that retail enterprises with capital below PHP 25 million are limited to 40% foreign equity, rather than being absolutely prohibited from foreign participation. Full foreign ownership requires capital of PHP 25 million or more, with a per-store investment requirement of PHP 10 million.

Practical implications for foreign investors:

• Foreign investors looking to enter the Philippine retail market with mid-sized format stores (e.g., specialty retail, boutique formats) now have a clear path: maintain paid-up capital below PHP 25 million and accept a 40% equity cap, or commit to the PHP 25 million threshold for full ownership.
• This clarifies structuring for foreign retail brands evaluating franchise or ownership models.

1.3.4 Renewable Energy: Codification and Residual Limits

The 13th FINL provides the most definitive statement yet that solar, wind, and ocean energy projects are no longer subject to the 40% foreign equity limitation — a position first mooted in the 12th FINL era following DOJ Opinion No. 21, series of 2022, which drew a legal distinction between “inexhaustible” kinetic resources (sun and wind) and depletable natural resources protected by the Constitution. By early 2026, the Department of Energy had already awarded over 1,400 service contracts, including several to wholly foreign-owned entities.

However, a residual restriction remains: the appropriation of water directly from a natural source for hydropower still requires a minimum of 60% Filipino ownership, due to the Water Code of the Philippines (P.D. No. 1067) and its implementing rules.

Practical implications for foreign investors:

• Solar and wind project developers can structure as 100% foreign-owned corporations in the Philippines, subject to PEZA or BOI registration and applicable fiscal incentives.
• Hydropower developers must still comply with the 60-40 ownership requirement and must navigate the Water Code’s permit regime.

1.3.5 Defense and Materiel: Reintroduction of Equity Limits

Perhaps the most surprising change in the 13th FINL is the reintroduction of a 40% foreign equity cap on the development and operation of defense materiel — a departure from the 12th FINL, which had removed such restrictions. This policy shift is driven by Republic Act No. 12024 (the Self-Reliant Defense Posture Revitalization Act of 2024), signed in late 2024, which aims to build domestic defense manufacturing capacity.

Practical implications for foreign investors:

• Foreign defense firms seeking to participate in the Philippine market — whether as suppliers, coproduction partners, or technology transfer vehicles — must now accept a 40% equity cap if they wish to operate in-country.
• This is not a soft preference but a binding limitation that will affect how technology transfer agreements are structured.

1.3.6 MSME Protection and the Innovation Exception

The 13th FINL retains the framework from the 12th FINL that limits foreign ownership in micro and small domestic market enterprises to 40%, measured against a paid-in capital threshold. Critically, it also preserves the innovation-based exception introduced by RA 11647 (amending the Foreign Investments Act): enterprises that utilize advanced technology, are endorsed as startup enterprises by an authorized government agency, or employ at least 15 Filipino nationals may qualify for a reduced capital threshold of USD 100,000 (versus USD 200,000 for non-qualifying enterprises).

Practical implications for foreign investors:

• A foreign tech entrepreneur looking to launch a startup in the Philippines can now do so with a minimum paid-in capital of USD 100,000 (approximately PHP 5.8 million at current exchange rates), provided the enterprise meets the innovation or employment criteria.
• This is a material improvement over the historical default threshold and reflects the Philippines’ desire to attract knowledge-intensive, capital-light ventures.

Part II: BIR RMC No. 24-2026 — Cross-Border Services Taxation

2.1 Background: The Problem RMC 24-2026 Addresses

The taxation of cross-border services has been one of the most contested areas in Philippine tax law over the past two years. The BIR issued RMC No. 5-2024 and RMC No. 38-2024 to implement the tax treatment of cross-border services — broadly defined to include consulting, IT outsourcing, financial services, telecommunications, engineering and construction, education and training, and tourism and hospitality services — based on the expanded situs rule articulated by the Supreme Court in ACEST Philippines, Inc. v. BIR (G.R. No. 241389, March 6, 2024).

The ACEST ruling held that income from services is not automatically taxed at the place of performance; instead, the BIR could assert Philippine tax jurisdiction where the service, viewed holistically, produces economic benefit within the Philippines — even if its physical performance occurred abroad. This created significant uncertainty for foreign service providers, who argued that the earlier BIR issuances went beyond what the ACEST doctrine actually authorized.

2.2 What RMC 24-2026 Clarifies

RMC 24-2026, issued on March 30, 2026, is the BIR’s response to the compliance confusion generated by RMC 5-2024 and 38-2024. Its core holding: cross-border services are not automatically taxable in the Philippines simply because they are classified as such. Taxability still requires a fact-based, holistic examination of the service agreement.

The key analytical framework established by RMC 24-2026 requires all four of the following elements to be present before Philippine income tax or final withholding tax can be imposed on a cross-border service payment:

1. Parties: The transaction involves a Philippine resident payor and a non-resident service provider.
2. Economic benefit: The service performed is integral to the completion of the non-resident’s service and resulted in actual payment or accrual constituting economic benefit to the non-resident service provider.
3. Situs in Philippines: The situs of the income-producing activity is within the Philippines.
4. No treaty or domestic exemption: No applicable income tax exemption applies under a tax treaty or provisions of the National Internal Revenue Code (NIRC).

If any one of these four elements is absent, the payment is not subject to Philippine tax as a cross-border service.

2.3 The “Situs” Question: Where Is the Activity Performed?

RMC 24-2026 reaffirms the baseline rule: income from services is sourced where the service is performed. The ACEST expansion permits consideration of where the benefit is received or where the service is completed in full, but the BIR emphasizes that this expansion does not mean every service paid by a Philippine entity is automatically taxable.

The Circular requires revenue officers to examine the service agreement as a whole and prohibits isolating a single activity as the sole income-producing act. An obligation is deemed performed only upon the complete delivery or rendering of the service. Tax assessments must state the factual and legal bases with specificity.

2.4 Documentary Burden and Audit Preparedness

RMC 24-2026 places the burden of proof squarely on the taxpayer to establish that payments to a non-resident service provider are derived from sources outside the Philippines. To support this position during a BIR audit, taxpayers may be required to produce:

• Sworn statements from the non-resident provider attesting to the source of income;
• Service agreements showing the scope, performance terms, and delivery location of services;
• Proof of non-registration in the Philippines (for the non-resident entity);
• Tax residency certificates from the non-resident’s home jurisdiction;
• Proof of outward remittance of payments from the Philippines (where applicable);
• BIR rulings or treaty entitlement certificates, where the taxpayer claims exemption under a tax treaty or domestic law.

The Circular notes that certified photocopies of documents may be accepted, subject to verification within the authorized scope of audit.

2.5 No Prior BIR Ruling Required

Critically, RMC 24-2026 clarifies that a prior confirmatory BIR ruling is not a condition precedent for applying the correct tax treatment. The absence of such a ruling does not, by itself, prejudice the taxpayer’s legal position, provided the factual and legal bases for non-taxability are established during assessment. Taxpayers who wish to obtain certainty in advance may still request a ruling under the BIR’s established rules, but they are no longer at a compliance disadvantage for not having done so.

2.6 Exclusions from the Framework

RMC 24-2026 expressly carves out:

• Passive income (interest, dividends, royalties);
• Income from the sale of goods (governed by separate rules on source and transfer pricing);
• Pass-through payments to another non-resident for services rendered entirely outside the Philippines.

Part III: How the 13th FINL and RMC 24-2026 Interact — Structuring Implications for Foreign Investors

For foreign investors, the two issuances are not independent developments. A foreign corporation registered in the Philippines (whether a subsidiary or a branch) that receives payments for cross-border services from affiliated or third-party Philippine entities will be directly affected by both — and the interaction creates both opportunities and compliance pitfalls.

3.1 Foreign-Owned Philippine Subsidiaries Receiving Cross-Border Service Fees

Consider the common scenario where a foreign parent company charges its Philippine subsidiary a management fee, technical support fee, or license fee for intellectual property. Before RMC 24-2026, there was real risk that the BIR would assert Philippine tax on these payments under the cross-border services framework, even if the services were rendered entirely from the parent company’s home jurisdiction.

RMC 24-2026 provides a more defensible position for taxpayers — but only if the four-element test is carefully analyzed and documented. Foreign investors should:

1. Audit service agreements between the parent and Philippine subsidiary to confirm that services are rendered entirely abroad (element 3: situs outside Philippines).
2. Document the economic benefit analysis — if the benefit of the service is consumed by the Philippine subsidiary within the Philippines, the BIR may still assert tax under the ACEST doctrine.
3. Maintain tax residency certificates and any applicable treaty exemption documentation (particularly if a tax treaty exists between the Philippines and the investor’s home jurisdiction).
4. Review transfer pricing compliance — while RMC 24-2026 addresses income tax withholding, transfer pricing rules under RR No. 2-2022 (the transfer pricing regulations) remain independently applicable to related-party transactions.

3.2 100% Foreign-Owned Enterprises in Liberalized Sectors

The 13th FINL’s expansion of sectors where 100% foreign ownership is permitted (telecommunications with reciprocity, renewable energy, and qualified startups) means more foreign investors will be operating as majority- or wholly-owned Philippine subsidiaries. These entities will be treated as resident foreign corporations for Philippine tax purposes and will be subject to corporate income tax at the same rate as domestic corporations — currently 25% under the Tax Reform for Acceleration and Inclusion (TRAIN) Act (RA 10963) for large corporations. They are also subject to:

• Minimum corporate income tax (MCIT) of 2% on gross income, after two years of operations, if regular corporate income tax would be lower;
• Improperly accumulated earnings tax (IAET) under Section 29 of the NIRC if the corporation accumulates earnings beyond reasonable business needs;
• Branch profit remittance tax of 15% on after-tax net profits remitted abroad (under the NIRC and applicable tax treaties).

Foreign investors should model these costs at the structuring stage rather than discovering them at filing time.

3.3 The Startup Route: USD 100,000 Capital with Advanced Technology

The 13th FINL’s innovation exception deserves particular attention from tech founders and venture-backed startups. Under the exception, a foreign entrepreneur can establish a Philippine subsidiary with paid-in capital as low as USD 100,000 if the enterprise:

• Utilizes advanced technology, or
• Is endorsed as a startup by an authorized government agency (e.g., the Department of Information and Communications Technology or the Startup Venture Fund), or
• Employs at least 15 Filipino nationals.

This is a compelling option for foreign founders who want to test the Philippine market before committing larger capital, and who may qualify for the Startup Act (RA 11337) incentives — including the 6-year income tax holiday for qualified startups — in parallel with the FINL’s reduced capital threshold.

Part IV: Compliance Calendar and Action Items

Foreign investors with an existing Philippine presence, or those in the process of establishing one, should treat the following as urgent compliance priorities:

Immediate (within 90 days of May 2, 2026):

• Review existing corporate structure against the 13th FINL’s updated sector restrictions. Industries that appeared open under the 12th FINL may now carry new restrictions (e.g., defense materiel).
• Audit intercompany service agreements for cross-border payments. Confirm whether all four RMC 24-2026 elements are satisfied and document the analysis.
• Update transfer pricing documentation for related-party service fees.

Short-term (within 6 months):

• Evaluate whether the USD 100,000 innovation exception applies to your Philippine subsidiary, and if so, whether registering with the DICT or another endorsing agency adds structural advantage.
• For renewable energy investors: confirm that your project type (solar, wind, ocean) is fully liberalized and not subject to the hydropower water-rights restriction.
• For telecommunications investors: conduct a reciprocity analysis for your home jurisdiction before asserting 100% ownership.

Ongoing:

• Monitor the draft 2025-2028 Strategic Investment Priority Plan (SIPP), which is expected to be released before the President’s State of the Nation Address and which will outline the priority sectors eligible for fiscal and non-fiscal incentives that complement the 13th FINL framework.
• Track BIR audit activity in your sector and maintain contemporaneous documentation of all cross-border service payments.

Conclusion: The Regulatory Direction Is Clearer — and Demanding

The 13th FINL and BIR RMC 24-2026 represent a Philippine regulatory environment that is simultaneously more open and more demanding. More open, because 100% foreign ownership is now available in significant new sectors — renewable energy, telecommunications with reciprocity, and qualified startups — and the BIR has provided a more defensible framework for cross-border service taxation. More demanding, because the precision of these frameworks means that informal or undocumented structuring arrangements that might have survived casual scrutiny under the 12th FINL will not survive under the 13th.

For foreign investors, the path forward is not simply “enter the Philippines.” It is: enter with a precise understanding of which sector you are in, what equity ceiling applies, what approvals are required, and how your income flows will be taxed at each level. That precision is not optional — it is the price of admission.

The lawyers at Tungol & Tan are available to advise on sector-specific structuring, FINL compliance, cross-border taxation, and the full range of corporate and immigration matters affecting foreign investors in the Philippines.

This article is for general informational purposes only and does not constitute legal advice. Laws and regulations are subject to change. Please consult a qualified attorney for advice on your specific circumstances.