PREQUALIFICATION OF FOREIGN RETAILERS UNDER REPUBLIC ACT NO. 8762

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Published — December 15, 2020 

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Read also: RIGHTS OF FORMER NATURAL BORN FILIPINOS TO ENGAGE IN RETAIL TRADE

• 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 qualifications provided by the Implementing Rules and Regulations of Republic Act No. 8762 (RA 8762) or Retail Trade Liberalization Act of 2000.

• A request for pre-qualification by the aforementioned foreign retailer must be submitted to the Board of Investments (BOI) before filing a formal application to engage in the retail business or invest in an existing retail store.

• The BOI shall issue, after evaluation and verification, a Certification that the foreign retailer meets the qualifications prescribed by the law.

Republic Act No. 1180 provides that, no person who is not a citizen of the Philippines, and no association, partnership, or corporation the capital of which is not wholly owned by citizens of the Philippines, shall engage directly or indirectly in the retail business. This law however was repealed by RA 8762 or Retail Trade Liberalization Act of 2000.

Under RA 8762, 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:

1. 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.
2. 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.
3. 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.
4. 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.

Is there a prequalification for a foreign retailer to engage in retail trade?

Yes.

The Implementing Rules and Regulations of Retail Trade Liberalization Act of 2000 provides that:

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:

1. 1. 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;
   2. 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):
   3. 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.

   4. 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.
   • Application for Pre-Qualification.

   A request for pre-qualification by the aforementioned foreign retailer must be submitted to the BOI 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:

   1. Latest Annual Financial Statement showing the net worth of the applicant;
   2. Certification by a responsible officer of the applicant-foreign retailer duly authenticated by the Philippine Embassy/Consulate stating that:
      1. it has been engaged in retailing for the past five years; and
      2. 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);
   3. 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
   4. 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.
   • 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.

   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.

   • Issuance of Certificate of Compliance with Prequalification.

   The 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.

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   Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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