Foreign Investor 100 % Ownership of a Restaurant in the Philippines: A Comprehensive Legal Guide (2025)
Abstract
This article synthesises the entire body of Philippine law and practice that determines whether—and on what terms—a foreign national or foreign-owned corporation may own 100 % of a restaurant business in the Philippines. It covers the 1987 Constitution, the Foreign Investments Act and its Negative List, the Retail Trade Liberalization Act (as amended), the CREATE tax-incentive regime, land-ownership rules, immigration and labour compliance, and common structuring and practical issues. Nothing here is legal advice; it is an academic summary dated 28 June 2025.
1. Constitutional & Policy Framework
| Provision | Key Rule | Relevance to Restaurants |
|---|---|---|
| Art. XII, Sec. 10, 1987 Constitution | Congress may reserve certain areas of investment to Filipinos or impose foreign-equity limits by law. | The default rule is full liberalisation unless Congress has restricted the sector. |
| Art. XII, Sec. 11 (Public Utilities) | 40 % foreign-equity cap—but public utilities do not include restaurants. | Irrelevant. |
| State policy on MSMEs | Small‐scale retail and cottage industries may be reserved to Filipinos. | Reflected today in the Foreign Investment Negative List (FINL). |
2. Core Statutes Governing Equity Eligibility
| Statute | Citations | Core Mechanism |
|---|---|---|
| Republic Act (RA) 7042 as amended by RA 8179 – Foreign Investments Act of 1991 (FIA) | Implementing Rules & Regs (IRR) last revised June 2022 | Creates the Regular Foreign Investment Negative List (currently the 8th FINL, May 2022). Anything not on the list may be up to 100 % foreign-owned, subject to minimum paid-in capital for “domestic-market enterprises.” |
| RA 8762 (2000) as amended by RA 11595 (2022) – Retail Trade Liberalization Act (RTLA) | DTI‐BOI JMC No. 22-01 | Covers “retail trade” by foreigners; sets ₱25 million paid-in capital for the first store (~US$450 k) and ₱10 million per additional store. |
| RA 11534 (2021) – CREATE Act | FIRB and PEZA/BOI rules | Grants income-tax holidays & special corporate tax (5 % of gross) to qualified investors, but restaurants—classified as “domestic-market enterprises”—normally get incentives only if located in an economic zone and meet performance criteria. |
2.1 Is a Restaurant “Retail Trade”?
Philippine regulators have long treated full-service, quick-service, food kiosks and catering alike as service enterprises, not “retail trade,” because the principal activity is the preparation & serving of food, not the mere sale of goods. Hence the RTLA rarely applies. Exception: “Take-out–only” food marts whose principal activity is selling pre-packaged goods may be reclassified as retail; conservative investors sometimes comply with both regimes.
3. The Foreign Investment Negative List (FINL)
8th Regular FINL (May 2022) – Items Relevant to Food Service
| List | Activity | Foreign Cap | Why Not a Problem |
|---|---|---|---|
| List A (constitutional/statutory caps) | Mass‐media, firearms, public utilities etc. | 0–40 % | Restaurants not listed. |
| List B (defence, Filipinos’ health, SMEs) | Rice/corn trading, small-scale mining, massage clinics | 40 % or 0 % | Restaurants not listed. |
Conclusion: A restaurant is eligible for 100 % foreign equity under the FINL.
4. Minimum Paid-in Capital Rules
If the enterprise will sell ≥ 60 % of output to the domestic market, it is a Domestic-Market Enterprise (DME) under the FIA. A fully foreign-owned DME must comply with either of two tests:
| Test | Threshold | Use Case |
|---|---|---|
| Standard Capital Test | US$200,000 (≈ ₱11 million) paid-in capital | Typical single-branch restaurant. |
| Reduced Capital Test | US$100,000 if (a) the enterprise employs ≥ 50 Filipino direct employees, or (b) it uses “advanced technology” as certified by DOST. | Large-format or high-tech restaurants. |
Tip: Minimum capital is aggregate, not per branch. Subsequent capital infusions are permitted but the initial SEC filing must show at least the threshold.
Enterprises whose paid-in capital is below US$200 k but employ fewer than 50 Filipinos are reserved to Filipino nationals.
5. Corporate & Tax Structuring
Vehicle – Incorporate a stock corporation with 100 % foreign subscribers, or use a branch office of a foreign corporation.
SEC Registration – Show proof of inward remittance of capital; reserve an English business name.
BIR, LGU & Regulatory Permits – BIR Certificate, Mayor’s Permit, Sanitary & Health, Fire Safety, BFAD (for commissaries).
Taxes (post-CREATE)
- Regular corporate income tax: 25 % of net taxable income (domestic corp) or 25 % of Philippine-sourced income (branch).
- VAT: 12 % on food sales (take-out & delivery); dine-in is VATable service.
- LGU business tax: up to 3 % of gross receipts (cities) or 2 % (municipalities).
- Incentives: Usually none unless the restaurant locates in a tourism economic zone (TEZ) or ecozone hotel, in which case VAT & duty exemptions on imports and a 5 % GIE may apply.
6. Land & Premises
- Land ownership: Foreigners cannot own land (Art. XII, Sec. 7); they may lease for 25 years, renewable once for 25 years (RA 7652).
- Condominium space: Up to 40 % of total project’s unit area may be foreign-owned (RA 4726).
- Shopping-mall tenancy: No equity limit; governed by lease contracts and mall’s foreign-tenant quota.
7. Labour & Immigration
| Requirement | Details |
|---|---|
| Alien Employment Permit (AEP) | Required for each foreign employee unless exempt (e.g., intra-corporate transferee, special investor/officer visa). |
| DOLE local-hiring ratio | No fixed ratio, but AEPs are denied if Filipinos are “competent & willing”; executive chefs & managers often qualify. |
| Investor visas | ➤ SIRV (Special Investor’s Resident Visa) for ≥ US$75 k investment. ➤ 47(a)(2) PEZA visa if in an ecozone. ➤ Special Non-Immigrant Clause (EO 226) for BOI-registered projects. |
8. Franchising & Intellectual Property
- Foreign investor may own the Philippine master franchise outright.
- Technology-transfer or trademark licensing contracts must be registered with IPOPHL to enjoy tax deductibility and enforceability (RA 8293).
- Franchise fees remitted abroad incur royalty withholding tax—20 %, unless reduced by treaty (e.g., 15 % under PH-Japan treaty).
9. Anti-Dummy & Beneficial-Ownership Rules
- Anti-Dummy Act (CA 108): Nominee arrangements designed to evade foreign-equity limits are criminal.
- SEC Memorandum Circular 1-2019: Requires disclosure of the natural-person beneficial owner (≥ 25 % equity or control). Although restaurants may be 100 % foreign-owned, the rules still apply to show transparency.
10. Special Regimes & Incentive Zones
| Zone | Statute | Perk | Caveat |
|---|---|---|---|
| PEZA IT Parks & Tourism Ecozones | RA 7916 | 4–6 yr Income-Tax Holiday + 5 % GIE | Must serve primarily ecozone locators/guests. |
| Subic, Clark, John Hay, Aurora | Separate charters | Similar 5 % GIE regime | Customs‐bonded entry. |
| BARMM | Bangsamoro Organic Law | Regional Board of Investments incentives | Political autonomy, different permitting timeline. |
11. Compliance Timeline (simplified)
- Name verification & Articles of Incorporation – SEC (2 working days online).
- Capital remittance via BSP-registered bank – 1 day.
- SEC Certificate of Incorporation – 3–5 days after payment.
- LGU Permits, Sanitary, Fire, DTI Standards – 2–4 weeks (varies per city).
- BIR Registration & Invoicing Authority – 1 week.
- FDA Licence to Operate (if central kitchen) – 15–30 days.
- PEZA/BOI registration (optional) – 30–60 days.
12. Common Pitfalls & Risk Areas
- Under-capitalisation: SEC rejects filings < US$200 k for 100 % foreign-owned DMEs.
- Treating restaurant as MSME retail: Leads to inadvertent 40 % cap.
- Land ownership via dummy Filipino: Exposes investor to Anti-Dummy liability and forfeiture.
- Unregistered foreign loans: Must be approved by the Bangko Sentral ng Pilipinas if to be serviced with foreign currency.
- Unsecured franchise/tech-transfer contracts: Loss of deductibility and enforceability.
- Failure to obtain AEPs/working visas: Grounds for deportation and employer fines.
13. Pending & Recent Reforms (as of 2025)
| Bill / Law | Status | Possible Impact |
|---|---|---|
| 10th FINL draft | Under NEDA review | May further shorten List B or scrap US$200 k minimum for “low-impact” services—watch list. |
| Proposed Land‐Administration Reform | House Bill 9805 | Would allow 60-year lease + 30-year renewal; helpful for long-term site control. |
| Digital Services VAT Bill | Bicameral conference | No direct equity effect, but food-delivery platforms’ VAT pass-through may affect margins. |
14. Practical Checklist for a 100 % Foreign-Owned Restaurant
- Decide capital: ≥ US$200,000 (or US$100,000 + 50 Filipino employees).
- Reserve name & draft Articles (100 % foreign equity allowed).
- Open peso & FX bank accounts; remit capital; secure BIR Form 2303.
- Lease premises (25 + 25 years max) or locate in condominium or ecozone.
- File SEC registration; obtain Mayor, Fire-Safety, Sanitary permits.
- Register books of accounts & official receipts with BIR.
- Hire staff; obtain AEPs/visas for foreign officers.
- (Optional) Register with PEZA/BOI for incentives.
- Protect IP; record franchise or tech-transfer agreements with IPOPHL.
- Maintain compliance: Annual SEC GIS & AFS, BIR returns, LGU renewals, labour standards.
Conclusion
Under present Philippine law, a restaurant is one of the most liberalised service sectors: it is absent from the Negative List, not classed as a public utility, and ordinarily escapes the Retail Trade Law. Consequently, a foreign investor may legally own 100 % of the equity so long as the enterprise meets the minimum paid-in capital of US$200,000 (or US$100,000 under the reduced-capital test). Aside from that threshold, conventional business considerations—site control, labour compliance, tax planning, and brand protection—dominate. Forthcoming reforms appear to favour even greater openness, but investors should continue to monitor updates to the FINL, land-lease rules, and incentive regimes to ensure lasting compliance and optimal structuring.