Doing Business In.. 2024 Comparisons

The Philippine legal system is a mixture or hybrid of civil law and common law. The Philippine Constitution safeguards a broad spectrum of rights including the protection of environmental rights, assurance of labour rights, and the restriction on foreign ownership and control of certain industries. The Civil Code of the Philippines, the primary law that governs the civil rights of persons, encapsulates the principles and statutes of civil law that govern private relationships and obligations while the Revised Penal Code, including other special penal laws, defines and punishes crimes. Aside from the codified laws, jurisprudence – ie, decisions of the Supreme Court interpreting a provision of law, are binding on lower courts, and become part of the legal system. The judicial system comprises the Supreme Court, the highest court of the land, followed by the appellate collegiate court such as the Court of Appeals and Court of Tax Appeals and finally, the lower-level courts such as the Municipal or Metropolitan Trial Court and Regional Trial Court. As a general rule, the Philippine judicial system requires strict observance of the court hierarchy, which requires initiatory pleadings to be filed on the lowest-level court before raising their issues to the next level court.

Foreign individuals, corporations or other entities are allowed to engage in business in the Philippines, without need of prior approval. Foreign nationals, however, must first register with the Securities and Exchange Commission (SEC), or with the Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry (DTI) in the case of single proprietorships, before they may do business in the Philippines.

Unless participation of foreigners in the enterprise is prohibited or limited under Philippine law, foreigners may do business or own up to 100% of a domestic enterprise.

Under the Philippine Constitution and special laws, the extent of equity held by foreigners in some business activities is restricted or limited as enumerated in the “Negative List” issued pursuant to the “Foreign Investments Act of 1991” (FIA). The maximum amount of equity held by a foreigner in a corporation will therefore depend on the type of activity that the entity will engage in.

Among the business activities which are included in the Negative List, and are therefore subject to limitations on foreign equity, are the following: mass media; practice of professions; retail trade enterprises with paid-up capital of less than PHP25 million; small-scale mining; exploration, development and utilisation of natural resources; ownership of private lands; ownership and management of public utilities; lending companies; financing companies; and domestic market enterprise with paid-in equity of less than USD200,000.

As mentioned in 2.1 Approval of Foreign Investments, foreign investments do not require approval, but a foreign corporation must register its investment in the Philippines by submitting the relevant documents before the SEC or with the DTI.

Under the Revised Corporation Code of the Philippines (RCC), a foreign corporation transacting business in the Philippines without a licence shall not be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines. However, such corporation may be sued before the Philippine courts or administrative tribunals on any valid cause of action recognised under Philippine law.

Once registered with either the SEC or the DTI, the foreign investor must also undergo the registrations with the (i) Bureau of Internal Revenue (BIR) and (ii) local government unit (LGU) for the application for a business permit. In addition, if the foreign investor will have employees in the Philippines, registrations with the Department of Labor and Employment (DOLE), Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (HDMF) are necessary.

Corresponding sanctions including fines, imprisonment and closure of business, may be imposed for operating a business without the registrations with the BIR, LGU, SSS, PhilHealth, and HDMF.

Certain laws require foreign investors to maintain a certain amount of investments, not as a condition for the registration or approval of foreign investment, but to allow foreigners to own a certain percentage of the equity of the business. For example, under the FIA, domestic market enterprises which have more than 40% foreign equity must have a minimum paid-in equity of at least USD200,000. “Domestic market enterprises” are enterprises which produce goods for sale, or render services to the domestic market entirely. Retail trading also has a prescribed minimum capital requirement for foreigners. Under the Retail Trade Liberalization Act, foreign retailers must have and must maintain a minimum paid-up capital of PHP25 million at all times.

The RCC provides that the SEC may investigate an alleged violation of the RCC, or of a rule, regulation, or order of the SEC. Under the SEC Rules of Procedure, the SEC allows the filing of petitions concerning the registrations of corporations, provided that the registration matter involves violation of laws and rules. The action shall be brought and heard at the principal office of the SEC and shall be acted upon by the SEC Company Registration and Monitoring Department (CRMD). The action shall commence upon the filing of a verified petition, accompanied by any relevant documents with the CRMD.

Available Corporate Vehicles

Acceptable corporate vehicles in the Philippines typically take on the form of subsidiary, branch office, representative office, regional headquarters and regional operating headquarters. Corporations are granted a separate juridical personality from their shareholders, except branch offices, which are considered an extension of the head office. Thus, except for branch office, the liabilities of corporations are not considered the liabilities of their shareholders.

General Characteristics of Corporations

The decision-making power of corporations is vested in the board of directors. The corporate decision must be approved by the majority of the directors constituting a quorum. Except for foreign-owned corporations, foreign retailers or businesses engaged in certain types of activities (eg, lending activities, insurance, etc), there is no minimum share capital requirement. Generally, there is also no minimum number of shareholders for corporations. However, it is recommended that corporations have at least three shareholders to avoid deadlock situations.

Subsidiaries are generally free to engage in any type of business that is not declared illegal in the Philippines. The branch office of a foreign corporation typically carries out the business activities of the head office and derives income from the host country. A representative office deals directly with the client of the parent company but does not derive income from the host country and is fully subsidised by its head office. Similarly, a regional headquarters acts as a supervisory, communications and co-ordinating centre for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets. Neither the representative office nor regional headquarters earn income from the Philippines. However, regional operating area headquarters are allowed to derive income in the Philippines.

Due to the absence of separate juridical personality of branch offices and limitations of business activities that may be engaged by representative offices, regional headquarters and regional operating headquarters, foreign investors opt to incorporate a subsidiary to do business in the Philippines.

All corporations planning to operate in the Philippines must be registered with the SEC, which is the government agency charged with the supervision of the corporate sector, capital market participants, and the securities and investment instruments market. Initially, incorporators are required to reserve their desired corporate name and provide general information about the juridical entity such as company type and sub-type, company classification, number of incorporators, company sub-class, major industry classification and principal place of business. The availability of the reserved company name and completeness of information provided will take one day to process.

Once the SEC confirms that the company name is available and the general nature of the company is completely provided, the incorporators will submit the incorporation documents such as the Articles of Incorporation (AOI), by-laws, Foreign Investments Act Form No F-100 (if the new corporation has more than 40% foreign equity), endorsement/clearance from appropriate government agencies depending on the company’s line of business, and if the incorporator is a foreign entity, notarised and apostilled/consularised board resolution authorising the subscription of shares and designating an authorised representative for the incorporation and registration of the corporation. The SEC usually takes two to three weeks to complete its evaluation of submitted documents.

After the SEC determines that the submission is complete, the SEC will assess application filing fees which must be paid within 45 days from issuance of the payment assessment form. Thereafter, the Certificate of Incorporation may be released within two weeks to one month from payment.

Corporations are generally required to submit their General Information Sheet (GIS), which contains a declaration of the ultimate beneficial owner and Audited Financial Statements (AFS). Changes in the GIS (eg, change of directors/officers) must also be reported to the SEC. Branch office, representative office, regional operating headquarters and regional headquarters, aside from the GIS and AFS, are also required to submit a notification update form in case of change of principal office address, accounting period, list of directors and officers, subsidiaries and affiliate and other notifications to the SEC. Some corporations issued with secondary licences by the SEC (eg, issuer of securities, broker/dealer in securities, transfer agent, financing and lending companies, etc), have additional reporting requirements. Changes in the AOI and by-laws require prior consent of the shareholders and board of directors and approval of the SEC, while the AFS requires the approval of the board of directors.

Unless otherwise provided in the RCC, the corporation shall act through a board of directors, which shall exercise the corporate powers, conduct all business and control all properties of the corporation. The board of directors must be composed of a minimum of two individuals and a maximum of 15 individuals and may be composed of foreign directors, depending on whether the activity of the corporation is partly nationalised or not. Under the RCC and/or the shareholders’ agreement, certain corporate actions, however, may require the approval of the shareholders aside from the board of directors, such as amendment of the AOI and by-laws, sale of substantially all corporate property, incurring indebtedness, merger or consolidation and dissolution.

Section 30 of the RCC provides that directors who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any interest in conflict with their duty shall be liable for all damages resulting therefrom. Penal provisions of special laws may also impose fines and imprisonment to responsible officers and directors of the erring corporation.

Piercing of the Veil Doctrine

Philippine law also recognises the concept of “piercing the corporate veil” as an exception to the general rule that the corporation has a legal personality distinct and separate from its shareholders, directors, or officers. To warrant the piercing of the corporate veil, the total and absolute control of the parent company over the finances, policies, and business practices of the subsidiary, such that the latter has no separate mind of its own, must be demonstrated. Furthermore, it must be shown that such control is being used to perpetuate fraud or violation of legal duty.

The Philippines has a very robust and comprehensive framework for labour relations and standards that govern labour protection, promote equal work opportunities, and regulate employment relationships. The Philippine Constitution is the basic and paramount law in the Philippines to which all other laws, including the Philippine Labor Code and employment statutes, must conform. The Constitution prescribes a balanced treatment of labour and capital. It recognises the right of labour to its just share in the fruits of production on one hand, and on the other, the right of enterprises to reasonable returns on investments and to expansion and growth, while acknowledging the indispensable role of the private sector and encouraging private enterprise. The legal landscape of Philippine labour and employment is molded primarily by the Philippine Labor Code, special labour legislation, Supreme Court decisions and administrative rules and regulations. These govern the relationship of labour and capital in all aspects including labour standards, labour relations, pre-employment, and post-employment matters.

There is no legally required format for employment contracts in the Philippines, nor is there a requirement for it to be in writing. It is nevertheless recommended to be written in order to clearly specify the terms and conditions of employment.

In the Philippines, the relationship between capital and labour is not merely contractual. It is so impressed with public interest that labour contracts must yield to the Philippine Labor Code and other regulations made by the state. In other words, labour contracts are not ordinary private contracts; rather, they are imbued with public interest and a proper subject matter of police power measures. The duration of employment would depend on the type of employment relationship; however, all regular employees have the right to security of tenure.

The normal hours of work of an employee must not exceed eight hours a day and should be exclusive of the one-hour daily lunch break. Philippine laws, however, do not prohibit work done for less than eight hours. Overtime pay is regulated by law. The Labor Code of the Philippines sets an employee’s overtime pay rate at 25% of their hourly rate on regular working days. However, this can change if a company or a collective bargaining agreement (a legal contract between a business and a worker’s union) sets more generous pay rates.

Philippine labour laws allow employers to terminate their employees only under either just or authorised causes, and upon due compliance with the prescribed procedure. This is anchored on the principle of security of tenure, which is not only statutorily provided, but is also guaranteed by the Philippine Constitution.

The following are just causes for termination:

• serious misconduct or wilful disobedience;
• gross and habitual neglect of duties;
• fraud or wilful breach of trust;
• commission of a crime or offence by the employee against their employer, the employer’s immediate family or their duly authorised representatives; and
• other causes analogous to the foregoing. Based on Philippine case law, examples of such analogous causes include: (i) theft committed by an employee against a person other than their employer, if proven by substantial evidence; (ii) gross incompetence or inefficiency, such as the failure to attain a reasonable work quota which was fixed by the employer in good faith; (iii) failure to meet the standards of a bona fide occupational qualification; and (iv) a severe failure to comply with company rules and regulations. Further, no act or omission shall be considered as an analogous cause unless expressly provided in the company rules, regulations, or policies.

On the other hand, the following are authorised causes for termination:

• installation of labour-saving devices;
• redundancy;
• retrenchment to prevent losses;
• closure or cessation of business; and
• disease not curable within six) months as certified by a competent public authority, and continued employment of the employee is prejudicial to their health or to the health of their co-employees.

Separation pay, as a result of termination of employment, is set by law and given only in cases of dismissals due to authorised causes.

If the authorised cause is the installation of labour-saving devices or redundancy, the separation pay is equivalent to one month’s pay or one month’s pay for every year of service, whichever is higher.

If the authorised cause is retrenchment, closure or cessation of business, or an incurable disease, the separation pay is equivalent to one month’s pay or one-half month’s pay for every year of service, whichever is higher.

The only time employers are not compelled to pay separation pay when terminating due to authorised cause is when they closed their establishment or undertaking due to serious business losses or financial reverses.

On the other hand, if the dismissal is due to any of the just causes enumerated under the Philippine Labor Code, separation pay is not required to be given to employees.

Large numbers of dismissals would still require that they fall under any of the authorised causes for termination: installation of labour-saving devices, redundancy, retrenchment, and closure of business.

The Labor Code provides that as part of the workers’ rights, they should be able to participate in policy and decision-making processes of the establishment they are employed in if the same will directly affect their rights, benefits and welfare. There is no express requirement that an agreement should be reached, as long as the consultation requirement has been satisfied, facilitated by labour-management councils, if any.

While the workers are given the right to participate in policy and decision-making processes if the same will directly affect their rights, benefits and welfare, including in cases of redundancy, an agreement does not need to be ultimately reached with them. Thus, regardless of whether or not the employees agree to the restructuring after consultation, it is still the prerogative of management to implement a redundancy programme.

The National Internal Revenue Code (the “Tax Code”) adopts a schedular system of taxation where a fixed and variable tax is imposed depending on the individual’s annual gross income for a particular taxable year. The individual tax rate ranges from 15% to 35%. The reach of taxation depends on the employee’s citizenship and residency status in the Philippines. If the employee is a citizen, they are taxable on all income derived within and outside the Philippines while a non-resident citizen. An alien individual is only subject to tax for income derived within the Philippines.

Substituted Filing of Returns

In order to facilitate collection of taxes from employees, the Tax Code mandates the employer to withhold and file the income tax returns of employees purely receiving compensation income from one employer. Aside from the withholding tax on compensation, employers are also obligated to contribute their share, deduct statutory contributions from employees’ salary and remit such amount to the Social Security System, Philippine Health Insurance Corporation, and Home Development Mutual Fund accordingly.

General Taxes Applicable to Corporations

In general, corporations formed and organised under the laws of the Philippines (ie, domestic corporations) are subject to corporate income tax of either 20% or 25%, depending on their net taxable income and total assets. Aside from corporate income tax, corporations are also required to pay 12% Value-Added Tax (VAT) for imports and sale of goods and services, withholding tax on certain income payments, excise tax on the manufacture or production of certain goods for domestic sale or consumption as well as services performed in the Philippines. Interests received by domestic corporations are generally subject to 15% final income tax while local-sourced dividends are not subject to tax. Foreign-sourced dividends are subject to income tax except when the dividends are reinvested in the business operations in the Philippines within the next taxable year to fund working capital requirements, capital expenditures, dividend payments, investment in domestic subsidiaries, and infrastructure project and the domestic corporation holds directly at least 20% of the outstanding shares of the foreign corporation for at least two years at the time of dividend distribution. Other passive income such as capital gains from sale of shares of stock, including land and/or buildings, are subject to final tax.

Situs of Taxation

Domestic corporations are taxable on all income derived from sources within and outside the Philippines, while foreign corporations, whether engaged or not in trade or business in the Philippines, are taxable only on income derived from sources within the Philippines.

The Philippines has neither implemented Pillar Two of the OECD which set forth a global minimum tax at 15% for multinational enterprises with turnover of more than EUR750 million nor introduced a domestic top-up tax.

Tax Credits

Subject to certain limitations and proof of payment, the Tax Code allows taxes paid in foreign countries as tax credit or deduction in the taxable income of a taxpayer. Additionally, the BIR may issue tax credit certificates in case of overpayment of taxes.

Fiscal Incentives

To boost and attract foreign investment, the Tax Code also offers tax incentives to business engaged in certain activities and industries as listed in the Strategic Investment Priority Plan (SIPP) such as green ecosystems, health-related activities, defence-related activities, industrial value-chain gaps, food security-related activities, etc. The SIPP is valid for a period of three years, subject to review and amendment thereafter unless a supervening event necessitates an earlier review.

These tax incentives include (i) income tax holiday; (ii) special corporate income tax rate; (iii) enhanced deductions; (iv) duty exemption on importation of capital equipment, raw materials, spare parts, or accessories; and (v) VAT exemption on importation and VAT zero-rating on local purchases. The availability and period of tax incentives depends on several factors such as (i) whether the entity is a domestic market enterprise or export enterprise which must export at least 70% of its output; (ii) the tier in which the registered activity is classified; and (iii) the location of the registered business activity.

The Philippine government does not implement a tax consolidation scheme for corporations. Corporations are granted a separate juridical personality from their shareholders, natural or juridical. Consequently, each corporation is tasked to handle their respective tax filings, regardless of it belonging to a group of company.

There are no formal rules and regulations in the Philippines prescribing a maximum debt-to-equity ratio to be maintained by domestic corporations. However, the SEC checks the debt-to-equity ratio of a Philippine branch of a foreign corporation against a benchmark value of 3:1.

Based on the transfer pricing rules in the Philippines, a transaction entered into between related parties must comply with two main requirements: (i) the transaction should be made at arm’s length (ie, it should be made under comparable conditions and circumstances as a transaction with an independent party); and (ii) transfer pricing documentation must be maintained by the corporation to demonstrate that their transfer prices are consistent with the arm’s length principle. For transfer pricing purposes, two or more entities are deemed related if one participates directly or indirectly in the management, control or capital of the other.

The BIR Transfer Pricing Audit Guidelines introduced standardised audit procedures to be used by the BIR applicable to audit of taxpayers with related-party transactions. With this issuance, which requires a covered taxpayer to file a prescribed tax form along with transfer pricing documentation when certain conditions are met, it is expected that the BIR may aggressively conduct transfer pricing audits and impose deficiency tax assessments on related-party transactions.

The Tax Code grants the Commissioner of Internal Revenue the ability to distribute, apportion or allocate gross income or deductions among related entities if it is determined that such distribution, apportionment, or allocation is necessary to prevent evasion of taxes or clearly to reflect the income of such organisation, trade or business.

The Tax Code also imposes criminal penalties on taxpayers who have purposely attempted to evade the payment of taxes. To facilitate the collection against tax evaders, the Tax Code extends the prescriptive period to assess and collect taxes to within ten years after the discovery of the falsity, fraud or omission.

Mandatory Notification

Based on Philippine Competition Commission (PCC) Resolution No 01-2024, parties to mergers, acquisitions and joint ventures shall be required to provide notification when: (i) the Size of Party exceeds PHP7.8 billion; and (ii) the Size of Transaction exceeds PHP3.2 billion.

“Acquisition” refers to the purchase or transfer of securities or assets, through contract or other means, for the purpose of obtaining control, while “merger” refers to the joining of two or more entities into an existing entity or to form a new entity. “Joint venture” refers to a business arrangement whereby two or more entities or group of entities contribute capital, services, assets, or a combination of any or all of the foregoing, to undertake an investment activity or a specific project, where each entity shall have the right to direct and govern the polices in connection therewith, with the intention to share both profits and risks and losses subject to agreement by the entities.

Tests for Mandatory Notification

The “Size of Party” test refers to the aggregate annual gross revenues in, into or from the Philippines, or value of assets in the Philippines of the ultimate parent entity of at least one of the acquiring or acquired entities, including that of all entities that the ultimate parent entity controls, directly or indirectly. The “Size of Transaction” test refers to the (i) aggregate value of the joint venture partners’ assets that will be combined in the Philippines or contributed into the proposed JV, or (ii) the gross revenues generated in the Philippines by assets to be combined in the Philippines or contributed into the proposed joint venture.

A compulsory merger notification with the PCC must be filed within a period of 30 days from the signing of the definitive agreement. The PCC has a period of 15 days to conduct its sufficiency review (the “Sufficiency Period”), and in the event a Notice of Deficiency (NOD) is issued by the PCC, the filing parties will have 15 days to submit compliance with the NOD. 

The PCC then assesses if the NOD was complied with, within the period remaining from the 15-day Sufficiency Period, which in no case shall be less than five days from submission of compliance with the NOD. If it believes the compliance with NOD is insufficient or the parties did not comply within the period provided, the PCC may return the Notification Form without prejudice to refiling. Otherwise, if found sufficient, the PCC will issue the order of payment of filing fee which must be settled within ten days. The Phase 1 review shall commence on the first business day following the payment of filing fees and must be completed within 30 days thereafter. Thus, assuming that the periods given are fully utilised by the parties and by the PCC, Phase 1 approval of the PCC can be secured within 105 days from signing the definitive agreement.

If, after the conduct of Phase 1 review, the PCC is unable to conclude that the notified merger does not raise competition concerns, it will provide the merger parties a notice and request for additional information for the purpose of commencing a Phase 2 review. The PCC shall post its decision on its website. If no PCC decision is released within the 60-day period, the transaction shall be deemed approved by the PCC. 

The Philippine Competition Act (PCA) prohibits, among others, anti-competitive agreement and/or abuse of dominant position. Anti-competitive agreements are those that substantially prevent, restrict, or lessen competition. The agreement may be any type or form of contract, arrangement, or understanding between or among businesses to fix prices or manipulate bids. It does not matter if the agreement is formal or informal, explicit (ie, written or announced) or tacit, or in written or oral (ie, verbal) form. It is illegal for business rivals to act together in ways that can limit competition or hinder other businesses from entering the market.

The following are examples of anti-competitive agreements.

• Price fixing – competitors collude with one another to fix prices for goods or services, rather than allowing prices to be determined by market forces.
• Bid rigging – parties participating in a tender process co-ordinate their bids, rather than submit independent bid prices.
• Output limitations – competitors agree to limit production or set quotas, or else to co-ordinate investment plans.
• Market sharing – competitors agree to restrict their sales to specific geographic areas, effectively creating local monopolies for each of them.

A cartel is an organisation formed by competitors in a specific industry, which enables them to set prices or control levels of production. Agreements to form cartels or to collude are considered anti-competitive agreements.

The PCA likewise penalises abuse of dominant position or the conduct of an entity, whether a company or an individual, with dominant position, that substantially prevents, restricts, or lessens competition in the market. It is not illegal per se to be dominant, provided that the business does not take advantage of its dominance to substantially lessen competition in the market.

According to the PCC, a “dominant position” refers to a position of economic strength that an entity holds, making it capable of controlling the relevant market independently from any or a combination of: (i) competitors; (ii) customers; (iii) suppliers; or (iv) consumers. There shall be a rebuttable presumption of market dominant position if the market share of an entity in the relevant market is at least 50%. The PCC, however, may also set a new market share threshold for any particular sector, and it shall, from time to time, determine and publish the threshold for dominant position or minimum level of share in the relevant market that could give rise to a presumption of dominant position.

The PCC considers other factors in determining the existence of a market dominant position, including:

• its market share in the relevant market and whether it is able to fix prices unilaterally or restrict supply in the relevant market;
• the existence of barriers to entry;
• the existence and power of its competitors;
• the possibility of access by its competitors or other entities to its sources of inputs;
• the power of its customers to switch to other goods or services;
• its recent conduct; and
• such other criteria that it may deem to be relevant.

In particular, the PCC has noted that the imposition of restrictions on the sale or trade of goods concerning where, to whom or in what form goods may be sold or traded, such as fixing prices, is a form of abusive anti-competitive behaviour.

Remedial Measure

The PCC can minimise the threat of abuse of dominance by requiring players with dominant position to comply with ex ante rules, which are preventive measures (ie, significant market power (SMP) obligations) to help big businesses avoid anti-competitive practices, provide safeguards for non-dominant businesses, and ensure that the market remains competitive.

Definition

A patent is an exclusive right granted to an inventor over a product, process, or an improvement thereof, that provides a technical solution to a problem in any field of human activity which is new, involves an inventive step, and is industrially applicable.

Length of Protection

The term of a patent is 20 years from its filing date, subject to the payment of annual fees starting on the fifth year after the application was published and on each subsequent anniversary of such date.

Registration Process

Patent applications are filed online through the Philippine Intellectual Property Office (IPOPHL) website, except for voluminous applications. Upon submission of the complete documents, the application is accorded a filing date and undergoes formality examination and then a prior art search. The application will be published for opposition in the E-Gazette together with the IPOPHL’s search report after the expiration of 18 months from the filing or priority date of the application, and any person may present observations on the invention’s patentability within six months from the publication date. The application will be deemed withdrawn unless a written request for its substantive examination is filed within six months from its date of publication. If the application is deemed to have met the requirements, the IPOPHL will grant the patent and issue the Letters of Patent Certificate.

Enforcement and Remedies

The making, using, offering for sale, selling, or importing of a patented product or a product obtained directly or indirectly from a patented process, or the use of a patented process, without the authorisation of the patent owner, constitutes patent infringement.

An action for patent infringement may be administrative, civil and/or criminal in nature. If infringement is repeated after the finality of the judgment of the court against an infringer, the offender will also be criminally liable. The owner of the patent may recover damages and obtain any of the following remedies:

• impounding of sales invoices and other documents evidencing sales during the pendency of the action;
• preliminary and/or permanent injunction; and
• disposal or destruction of the infringing goods and/or paraphernalia used for infringement.

Independent of the civil and administrative sanctions imposed by law, criminal cases confer the penalties of imprisonment from six months to three years and/or a fine ranging from PHP100,000 to PHP300,000 at the court’s discretion. The criminal action prescribes in three years from the date of commission of the crime.

A patent owner may also record their patent with the Bureau of Customs (BOC) on the basis of which the BOC will monitor and inspect suspect imports to determine if they are liable to seizure and forfeiture, and/or further action before other government agencies or the courts.

Definition

A mark is any visible sign capable of distinguishing the goods (trade mark) or services (service mark) of an enterprise. It also includes stamped or marked containers of goods.

Length of Protection

A trade mark registration lasts for ten years (from the date of registration) and is renewable for periods of ten years. It must also be kept active by filing a Declaration of Actual Use (DAU), together with proofs of use of the mark in the Philippines within the following periods:

• three years from the filing date;
• one year from the fifth anniversary of the registration date;
• one year from the renewal date; and
• one year from the fifth anniversary of the renewal date.

Registration Process

The Philippines follows the first-to-file rule for trade mark registration. Trade mark applications are filed online through the IPOPHL website. An application is granted a filing date upon the filing of complete requirements, then undergoes substantive examination to determine registrability. Once a mark is deemed registrable, it will be published for opposition in the IPOPHL E-Gazette. If no opposition is filed within 30 days from the publication date, the mark will be granted registration, and an electronic Certificate of Registration will be issued. The IPOPHL will only issue a physical certificate upon request and payment of the required fee.

Enforcement and Remedies

The use of any reproduction or colourable imitation of a registered mark, or the same container or a dominant feature thereof in commerce without the consent of the registered owner is considered trade mark infringement. Any person who employs deceptive or fraudulent means to pass off their own goods and/or services for another’s by giving them the general appearance of another’s goods or using the mark of another, whether registered or not, shall be guilty of unfair competition.

An action for trade mark infringement and/or unfair competition may be administrative, civil and/or criminal in nature. The owner of the mark may recover damages and obtain any of the following remedies:

• impounding of sales invoices and other documents evidencing sales during the pendency of the action;
• preliminary and/or permanent injunction; and
• disposal or destruction of the infringing goods and/or paraphernalia used for infringement.

Independent of the civil and administrative sanctions imposed by law, criminal cases confer the penalties of imprisonment from two to five years and a fine ranging from PHP50,000 to PHP200,000.

A registered trade mark owner may also record their mark with the BOC on the basis of which the BOC will monitor and inspect suspect imports to determine if they are liable to seizure and forfeiture, and/or further action before other government agencies or the courts.

Definition

Industrial design is the ornamental or aesthetic aspect of an article. It is any composition of lines, colours, or any three-dimensional form, whether or not associated with lines or colours, which gives a special appearance to and can serve as a pattern for an industrial product or handicraft.

Length of Protection

An industrial design registration is valid for five years from the filing date of the application, renewable for only two consecutive five-year terms.

Registration Process

Applications are filed online through the IPOPHL website. Once the complete documents are submitted, the application will be accorded a filing date and undergo formality examination and then publication for 30 days. In general, an industrial design application will not undergo substantive examination, but the Director of Patents has the discretion to require the examiner to issue a registrability report to confirm the novelty of the industrial design at any time prior to the issuance of the Certificate of Registration.

Enforcement and Remedies

The actions and remedies granted to a patent owner shall apply to an industrial design registrant.

Definition

Copyright is the legal protection granted to the creators of original literary, scientific, and artistic works, and to their successors-in-interest. Persons or entities involved in making copyrighted works available to the public through the application of substantial creative, technical, or organisation skills, such as performers, producers, and broadcasting organisations, are also granted neighbouring or related rights.

Length of Protection

Works are protected from the moment of creation and generally extend for the lifetime of the author plus 50 years after. Different rules apply to the following works.

• Anonymous or pseudonymous works – 50 years from the date of their first lawful publication, or if un-published, 50 years from their date of creation.
• Works of applied art – 25 years from their date of creation.
• Photographic works – 50 years from the date of their first publication, or if un-published, 50 years from their date of creation.
• Audio-visual works – 50 years from the date of their first publication, or if un-published, 50 years from their date of creation.

An author’s right to attribution lasts their lifetime and in perpetuity after their death, while other moral rights are coterminous with the economic rights.

Registration Process

Registration is not necessary for the protection of a copyrighted work. Nonetheless, copyright registrations can be obtained from the National Library or the IPOPHL-Bureau of Copyright and Related Rights (BCRR) to put in official records the registrant’s ownership claim over a work and to put others on notice of such claim. After submission of the complete documentary requirements and payment of fees, the granting body will issue the Certificate of Registration. The IPOPHL-BCRR can deny an application for registration if: (i) the work does not fit the statutorily defined categories of works under the copyright law; or (ii) the work is the subject of a prior registration.

Enforcement and Remedies

Copyright infringement occurs when one: (i) directly commits an infringement (ie, violates an economic right of a copyright owner or of the owner of a related right); (ii) knowingly benefits from the infringing activity of another who commits an infringement; or (iii) knowingly induces, causes, or materially contributes to the infringing conduct of another.

An action for copyright infringement may be administrative, civil and/or criminal in nature. The copyright owner may recover damages and obtain any of the following remedies:

• impounding of sales invoices and other documents evidencing sales during the pendency of the action;
• preliminary and/or permanent injunction; and
• disposal or destruction of the infringing goods and/or paraphernalia used for infringement.

Independent of the civil and administrative sanctions imposed by law, criminal cases confer the penalties of imprisonment from one to nine years and fines ranging from PHP50,000 to PHP1.5 million, depending on whether it is the first, second, third, or subsequent offence.

A copyright owner may also record their right with the BOC on the basis of which the BOC will monitor and inspect suspect imports to determine if they are liable to seizure and forfeiture.

Trade Secrets

A trade secret is a plan or process, tool, mechanism or compound known only to its owner and those of its employees to whom it is necessary to confide it. Trade secrets are not registered with the IPOPHL. Philippine laws are instead tailored towards preventing compulsory disclosure of such secrets, and parties usually resort to non-disclosure agreements.

Databases

Derivative works, including compilations of data, are copyrightable by reason of the selection, co-ordination, or arrangement of their contents.

Software

Software and computer programs are explicitly recognised as copyrightable “literary and artistic works” under Section 172.1 (n) of the IP Code. Thus, the source code, the architecture of the software, and its interface are all protected by copyright. In contrast, computer programs are not patentable unless claimed as computer-implemented inventions.

The Data Privacy Act protects the sanctity of personal information, sensitive personal information (collectively, “Protected Information”), and privileged information by imposing administrative, civil and criminal penalties against unauthorised processing, improper disposal, and malicious and unauthorised disclosure of Protected Information, among others. As a guiding principle, the Data Privacy Act generally requires personal information to be (i) collected for specific and legitimate purpose; (ii) processed fairly and lawfully; (iii) accurate and updated; (iv) retained when only necessary; and (v) kept in a form which permits identification of data subjects. Confidentiality of information may also be protected through contractual stipulation among the parties.

The provisions of the Data Privacy Act apply to acts done or practice engaged in and outside of the Philippines as long as:

• the information pertains to a Philippine citizen or resident; and
• the processing entity has a link in the Philippines such as when:
1. the contract is executed in the Philippines;
2. the processing entity is unincorporated in the Philippines but has central management and control in the country;
3. the processing entity has a branch, agency, office or subsidiary in the Philippines and its parent or affiliate has access to personal information;
4. the entity carries on business in the Philippines; or
5. the personal information was collected or held by an entity in the Philippines.

The Data Privacy Act created the National Privacy Commission (NPC) tasked to administer and implement the provisions of the Data Privacy Act, as well as monitor and ensure compliance of the country with the international standards set for data protection. The NPC is also vested with investigatory and adjudicatory powers, including authority to grant ancillary remedies, to facilitate settlement of complaints involving data privacy.

To stimulate tax collection to meet revenue goals, the following bills are expected to pass in the future:

(i) VAT on Digital Service Providers;

(ii) Excise Tax on Single-Use Plastic Bags;

(iii) Excise Tax on Sweetened Beverages and Junk Food;

(iv) the Real Property Valuation Assessment Reform (RPVAR); and

(v) the VAT refund for non-resident tourists.

The RPVAR bill seeks to increase tax collections by updating valuations of real property without increasing or imposing new taxes.

The IPOPHL has also submitted a bill to Congress seeking to introduce reforms in the Intellectual Property Code such as the power to take down online sites with violations of the intellectual property rights as well as enabling copyright owners to claim damages from these infringing sites.