1. What is retail trade?
“Retail trade” shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption. (Section 3 (1) of RA 8762, Retail Trade Liberalization Act of 2000.)
The Supreme Court, in Marsman & Company, Inc. vs. First Coconut Central Company, Inc. (G.R. No. L-39841, June 20, 1988), held that for a sale to be considered as retail, the following elements should concur:
(1) The seller should be habitually engaged in selling;
(2) The sale must be direct to the general public; and
(3) The object of the sale is limited to merchandise, commodities or goods for consumption.
2. Can foreigners engage in retail trade?
Yes, foreigners can register corporations in the Philippines that will engage in the retail trade provided they comply with the following rules.
If the paid-up capital is less than the peso equivalent of US$2.5 million, retail trade is exclusive only for Filipino citizens and corporations wholly owned by Filipino citizens.
If the minimum paid-up capital is equal to or more than the peso equivalent of US$2.5 million, the retail corporation may now be 100% owned by foreigners. But the investment for putting up a store should not be less than US$830,000.00 each store. If foreign ownership exceeds 80% of equity, the corporation must offer a minimum of 30% of their equity to the public through any stock exchange in the Philippines within 8 years from their start of operations.
Enterprises selling high-end or luxury products with a paid-up capital of the peso equivalent of US$250,000.00 per store may be wholly owned by foreigners.
3. Is there a move to lower the capital requirement?
Yes. Senate Bill No. 14 filed by Senator Franklin M. Drilon and Senate Bill no. 921 under Sen. Sherwin T. Gatchalian proposed to amend Republic Act 8762: The Retail Trade Liberalization Act of 2000. The bill seeks to allow foreign-owned partnerships, associations and corporations to engage in retail trade provided they comply with the minimum paid up capital of US$200,000, which is a far cry from US$2.5 million.
4. What kind of sales are not considered as retail, and therefore may be engaged in by foreigners?
The following sales are not considered as retail:
(a) Sales by a manufacturer, processor, laborer, or worker, to the general public of products manufactured, processed or produced by him whose capital does not exceed One hundred thousand pesos (P100,000.00);
(b) Sales by a farmer or agriculturist selling the products of his farm, regardless of capital;
(c) Sales arising from restaurant operations by a hotel owner or inn-keeper irrespective of the amount of capital, provided, that the restaurant is incidental to the hotel business;
(d) Sales to the general public, through a single outlet owned by a manufacturer of products manufactured, processed or assembled in the Philippines, irrespective of capitalization;
(e) Sales to industrial and commercial users or consumers who use the products bought by them to render service to the general public and/or produce or manufacture of goods which are in turn sold by them; or
(f) Sales to the government and/or its agencies and government-owned and controlled corporations.
5. What are examples of sales that are not considered retail?
The sale of chemical reagents, equipment and instruments directly to hospitals and laboratories cannot be considered as retail trade because it is not a sale of goods for consumption to the general public as end-user. (SEC-OGC Opinion No. 12-14, [June 2, 2014])
The Commission has previously opined that the sale of or control, automatic and revolving door, glass fittings and systems, room dividing systems and the like, to the real estate developer, which shall be used by the same in the construction of buildings and other infrastructure, is not considered as retail trade. (SEC-OGC Opinion No. 07-13, [July 30, 2013])
6. Are former natural born Filipinos allowed to engage in retail trade?
Any natural born Filipino citizen who has lost his Philippine citizenship and who has legal capacity to enter into a contract under Philippine laws may be allowed to engage in retail trade, provided that he resides in the Philippines.
7. Are businesses in PEZA Zones exempt from RA 8762?
No. The fact that a retail enterprise is registered in a zone managed by the Philippine Economic Zone Authority does not mean that it is exempt from the applications of the Retail Trade Liberalization Act of 2000. If the area of investments of the said enterprises falls within Lists A and B of the Foreign Investments Act of 1991, then the applicable nationality, ownership or control requirements of the said law would still need to be observed.
Unless the enterprise falls within any of the exceptions enumerated in Section 3 of the Retail Trade Liberalization Act of 2000, the fact that a retail enterprise is PEZA-registered does not mean that said business entity is exempt from the application of the Retail Trade Liberalization Act of 2000 vis-à-vis the Foreign Investments Act of 1991.
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