By Chiara Axibal | 4 February 2022
On December 10, 2021, President Rodrigo Duterte enacted into law RA 11595, an act amending Republic Act No. 8762 or the Retail Trade Liberalization Act of 2000 (RTLA). It was published in the Official Gazette on January 6, 2022 and took effect fifteen (15) days after its publication, January 21, 2022.
Retail businesses were initially exclusively limited to Filipino citizens or entities. When the RA 8762 (RTLA) was signed into law in 2000, foreign retailers were allowed to invest or engage in a retail trade business in the Philippines and were classified into four categories, which required a steep paid-up capital depending on the retail goods being sold.
Relaxing the barriers to entry for foreign investor engagement in the sector will allow more Filipinos to have access to more jobs created by new businesses, assist local manufacturers of goods, and competitively lower the prices for retail goods sold in the market.
Here is what we need to know about the amended law:
Amendments to the Retail Trade Liberalization Act:
- Removal of investment categories and simplification of entry requirements. RA 11595 amended RTLA to remove categories of retail investments and simplified the entry requirements for foreign retailers to invest or engage in retail trade activities in the Philippines, as long as they comply with the following requirements:
- The foreign retailer shall have a minimum paid-up capital of Php 25 million;
- The foreign retailer’s country of origin does not prohibit the entry of Filipino retailers; and
- In the case of foreign retailers engaged in retail trade through more than one (1) physical store, the minimum investment per store must be at least Php 10 million.
- Review of the minimum paid-up capital requirement. The minimum paid-up capital is subject to review by the Department of Trade and Industry (DTI), Securities and Exchange Commission (SEC), and the National Economic Development Authority (NEDA) every three (3) years.
- Removes the provision on public offering of shares. Previously, retail enterprises that are foreign-owned or with foreign ownership of more than eighty percent (80%) are required to offer a minimum of thirty percent (30%) of their equity to the public through any stock exchange in the Philippines within eight (8) years from the start of operations. Under RA 11595, newly established foreign retail enterprises can stay privately owned.
- Preferential use of Filipino labor. RA 11595 mandates compliance with the Labor Code of the Philippines, which requires foreign retail enterprises to hire Filipino citizens before engaging the services of a foreign national.
- Promotes locally manufactured products. The amendment to the law also encourages having a stock inventory of Philippine-manufactured products.
- Change of monitoring and regulatory agency. Foreign retailers that have established or will establish corporations, associations, or partnerships engaged in retail trade will now be monitored and regulated by the Securities and Exchange Commission (SEC), instead of the DTI. The DTI, however, will continue to hold its regulatory powers over the industry.
- Reduced penalties. Penalties provided in the RTLA for the violations of its provisions have also been reduced. From imprisonment of six (6) to eight (8) years, it has been lowered to four (4) to six (6) years. There has also been a reduction in the fine to Php 1 million – Php 5 million, from Php 1 million – Php 20 million fine.