Franchising 2025

PHILIPPINES Law and Practice Contributed by: Patricia A O Bunye, Anica Angela G Gomez, Angel Rae N Balbin and Bianca Marie J Angela M Rañola, Cruz Marcelo & Tenefrancia

8. Dispute Resolution 8.1 Enforcement of Foreign Judgments Under Rule 39, Section 48 of the Rules of Court, the effect of a judgment or final order of a tribunal of a foreign country having jurisdiction to render the judg - ment or final order is as follows: • in case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title to the thing; and • in case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right between the parties and their successors-in-interest by subsequent title. Notably, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact. The process therefor is straightforward. A party seeking the enforcement of a foreign judgment may file a Petition for Recognition of Foreign Judgment before the proper Regional Trial Court (RTC), where the foreign judgment must be proved as a matter of fact. Furthermore, the RTC will determine: • whether the foreign judgment is contrary to an overriding public policy in the Philippines; and • whether there exists an extrinsic ground to repel the foreign judgment (ie, want of jurisdiction, want of notice, collusion, fraud or clear mistake of law or fact). Absent any of the foregoing, the court will enforce the judgment as if it was issued by a Philippine court. The Philippines is a party to the New York Convention (the “Convention”) and thus adheres to its procedure for the recognition and enforcement of foreign arbi - tral awards, as affirmed by Section 42 of the Alterna - tive Dispute Resolution Act of 2004, which provides that the Convention shall govern the recognition and enforcement of arbitral awards covered by said Con - vention. Philippine courts generally uphold the validity of arbitral awards, and there are very limited grounds to question such decision by the arbitral tribunal.

9. Payment and Taxes 9.1 Restrictions or Limits on Franchisee Fees and Royalties Currently, there are no specific laws and regulations that impose restrictions on the payment of franchise fees, royalties or service fees. No set standards are provided under Philippine law and jurisprudence regarding a reasonable range or cap on the amount of franchise fees, royalties or service fees to be paid. In any event, the general rules on contract law apply, wherein parties may freely establish such stipulations, clauses, terms and conditions as they may deem con - venient, provided they are not contrary to law, morals, good customs, public order or public policy. While there are no statutory or jurisprudential stand - ards for the payment of franchise fees, royalties or service fees, there are industry standards for each sector that may serve as a benchmark for franchisors and franchisees in assessing the reasonableness of the rates. 9.2 Withholding Tax The Tax Code imposes a final tax on royalties, with the applicable rate varying based on the classification of the taxpayer, whether an individual, a non-resident alien not engaged in trade or business in the Philip - pines, a domestic corporation or a non-resident for - eign corporation. Generally, royalties derived from sources within the Philippines that are paid to resident individuals or cor - porations are subject to a final tax at a rate of 20%, while royalties paid to non-residents are subject to a final tax at a rate of 25%, unless a tax treaty provides a lower rate. Furthermore, the Tax Code imposes a value added tax (VAT) of 12% on gross receipts from the sale, bar - ter, exchange or lease of goods or properties. If the licensor transfers or leases the right to use IP in the course of trade or business, they becomes liable for VAT. This VAT applies regardless of where the licence agreement is executed, as long as the IP is leased or used within the Philippines.

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