TIMES are changing, and now is the best time to bring the Philippines’ investment structure up to date to make it more competitive as full implementation of the Asean economic integration draws near, a top CPA lawyer said on Wednesday.
Atty. Alexander Cabrera, chairman and senior partner of PwC Philippines (Isla Lipana and Co.), presented during his short talk at the 2nd Manila Times Business forum some of the investment structures that no longer work.
He said one example is the 60-40 structure of land ownership wherein 60 percent of the land should be owned by Filipinos and 40 percent by the foreign investor.
Although it appears that the Filipino investor is the controlling owner, it does not mean that he has direct control of the land, the lawyer pointed out.
Cabrera presented a “foolproof structure” of land ownership wherein the 60-40 ownership distribution is retained but there are changes to the capital structure.
Cabrera, a taxation specialist, also touched on the restrictions in retail trade in the country during his lecture, noting that retail trade is generally reserved for Filipinos.
This is because under the Retail Law, enterprises with a paid-up capital of less than $2.5 million are exclusively reserved for Filipino citizens and corporations wholly owned by Filipino citizens, and only enterprises with a minimum paid-up capital of $2.5 million or more may be wholly owned by foreigners.
He also commented on the distribution of goods in the Philippines, noting that there are two types — one that is the “not doing business” type and the other is the “doing business” type.
He said the “not doing” business happens when a foreign supplier directly sells goods to a distributor, who will then distribute it to third party sellers, while the “doing business’ scenario happens when foreign suppliers themselves either distribute the goods directly to the third parties while they also charge a service fee to a commission agent.