PHILIPPINES Law and Practice Contributed by: Francis L. Fragante and Jennifer Marie G. Castro, Cruz Marcelo & Tenefrancia
• water pipeline distribution systems and wastewa - ter pipeline systems, including sewerage pipeline systems; • seaports; and • public utility vehicles. Section 4 of Republic Act No 11659 further provides that no other person shall be deemed a public utility unless otherwise subsequently provided by law. Thus, the definition introduced by Republic Act No 11659 limits the coverage of public utility to specific sec - tors that will remain subject to the 40% foreign equity ownership limit provided for by the 1987 Constitution. Considering this amendment, Republic Act No 11659 allows for 100% foreign ownership in public servic - es that are not categorised as public utilities. This includes sectors such as telecommunications, trans - Republic Act No 12066, also known as the CREATE MORE Act, was passed to further enhance the Philip - pines’ investment climate by making the tax incentive system more competitive, predictable and investor- friendly while still safeguarding government revenues. The law responds to concerns from investors about the complexity and rigidity of the existing tax regula - tions. Republic Act No 12066 allows for longer and more flexible incentive periods for business enterprises (RBEs) which are registered with Investment Promo - tion Agencies, especially those engaged in high-value, strategic or export-oriented activities. This provision helps investors achieve long-term planning stabil - ity and encourages large-scale and capital-intensive investments. portation, tollways and airports. Amendment to Tax Incentives The law refines the 5% Special Corporate Income Tax on Gross Income Earned, making it more attractive and clearer in application. This tax option remains in lieu of all national and local taxes, reducing the overall tax burden and simplifying compliance for qualified RBEs. Republic Act No 12066 expands and clarifies VAT zero-rating and VAT exemption provisions, particular -
ly for export enterprises and domestic market enter - prises with export activities. These measures aim to lower production costs and enhance competitiveness in global markets. The law likewise promotes a more balanced incen - tive structure that benefits both domestic and foreign investors, encourages reinvestment, and supports technology transfer, job creation and regional devel - opment. The CREATE MORE Act fosters investment by mak - ing tax incentives more competitive, predictable and responsive to investor needs. By refining corporate tax incentives and improving administrative clarity, the law aims to attract more investments, gener - ate employment and support sustainable economic growth in the Philippines. To engage in business activities in the Philippines, for - eign investors may either establish: (i) a representative office/liaison office; (ii) regional or area headquarters; (iii) regional operating headquarters; (iv) branch office; or (v) domestic subsidiary. Representative Office A representative office acts merely as a liaison office between its head office and the latter’s Philippine- based clients or customers. Its permitted activities are restricted to tasks such as information sharing, prod - uct promotion, quality control and similar functions. The representative office is prohibited from conclud - ing sales agreements on behalf of its head office or generating income in the Philippines. All expenses incurred by the representative office are covered by its head office. Regional or Area Headquarters (RHQ) An RHQ is meant to act as an administrative branch in the Philippines of a multinational company engaged in international trade. It principally serves as a supervi - sion, communications and co-ordination centre for its 3. Mergers and Acquisitions 3.1 Transaction Structures
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