REPUBLICACTNO.8762

REPUBLICACTNO.8762‐ANACTLIBERALIZINGTHERETAILTRADEBUSINESS,REPEALINGFORTHEPURPOSEREPUBLICACTNO.1180,ASAMENDED,ANDFOROTHERPURPOSES.

Section1.Title.‐ThisActshallbeknownasthe"RetailTradeLiberalizationActof2000."

Sec. 2. Declaration of Policy. ‐ It is the policy of the State to promote consumerwelfare in attracting, promoting and welcoming productive investments that willbring down prices for the Filipino consumer, createmore jobs, promote tourism,assistsmallmanufacturers,stimulateeconomicgrowthandenablePhilippinegoodsandservicestobecomegloballycompetitivethroughtheliberalizationoftheretailtradesector.

Pursuant to this policy, the Philippine retail industry is hereby liberalized toencourageFilipinoandforeigninvestorstoforgeanefficientandcompetitiveretailtrade sector in the interest of empowering the Filipino consumer through lowerprices,higherqualityifgoods,betterservicesandwiderchoices.

Sec.3.Definition.‐AsusedinthisAct:

(1) "Retail Trade" shall mean any act, occupation or calling of habitually sellingdirect to the general publicmerchandise, commodities or goods for consumption,buttherestrictionofthislawshallnotapplytothefollowing:

(a)Salesbyamanufacturer,processor, laborer,orworker, to thegeneralpublicthe productsmanufactured, processed or produced by him if his capital does notexceedOneHundredThousandPesos(P100,000.00);

(b)Salesbyafarmeroragriculturistsellingtheproductsofhisfarm;

(c)Salesinrestaurantoperationsbyahotelownerorinn‐keeperirrespectiveofthe amount of capital: Provided, that the restaurant is incidental to the hotelbusiness;and

(d) Sales which are limited only to products manufactured, processed orassembledbyamanufacturerthroughasingleoutlet,irrespectiveofcapitalization.

(2)"High‐endorluxurygoods"shallrefertogoodswhicharenotnecessaryforlifemaintenanceandwhosedemand is generated in largepartby thehighest incomegroups.Luxurygoodsshallinclude,butarenotlimitedto,productssuchas:jewelry,brandedor designer clothing and footwear,wearing apparel, leisure and sportinggoods,electronicsandotherpersonaleffects.

Sec.4.TreatmentofNatural‐BornCitizenWhoHasLostHisPhilippineCitizenship.‐Anatural‐borncitizenofthePhilippineswhohaslosthisPhilippinecitizenshipbutwhoresidesinthePhilippinesshallbegrantedthesamerightsasFilipinocitizensforpurposesofthisAct.

Sec.5.ForeignEquityParticipation.‐Foreign‐ownedpartnerships,associationsandcorporations formed and organized under the laws of the Philippinesmay, uponregistration with the Securities and Exchange Commission (SEC) and theDepartment of Trade and Industry (DTI) or in case of foreign‐owned singleproprietorships,withtheDTI,engageorinvestintheretailtradebusiness,subjecttothefollowingcategories:

CategoryA‐Enterpriseswithpaid‐upcapitaloftheequivalentinPhilippinePesosoflessthanTwoMillionFiveHundredThousandUSDollars(US$2,500,000.00)shallbe reserved exclusively for Filipino citizens and corporations wholly‐owned byFilipinocitizens.

Category B ‐ Enterprises with a minimum paid‐up capital of the equivalent inPhilippine Pesos of Two Million Five Hundred Thousand US Dollars(US$2,500,000.00)maybewhollyownedbyforeignersexceptforthefirsttwo(2)yearsaftertheeffectivityofthisActwhereinforeignparticipationshallbelimitedtonotmorethan(60%)oftotalequity.

Category C ‐ Enterprises with a paid‐up capital of the equivalent in PhilippinePesos of Seven Million Five Hundred Thousand US Dollars (US$7,500,000.00) ormoremaybewhollyownedbyforeigners:Provided,however, that innocaseshallthe investments for establishing a store in Categories B and C be less than theequivalent in Philippine Pesos of Eight Hundred Thirty Thousand US Dollars(US$830,000.00).

CategoryD‐Enterprisesspecializing inhigh‐endor luxuryproductswithapaidupcapitaloftheequivalentinPhilippinePesosofTwoHundredFiftyThousandUSDollars(US$250,000.00)perstoremaybewholly‐ownedbyforeigners.

TheforeigninvestorshallberequiredtomaintaininthePhilippines,thefullamountoftheprescribedminimumcapital.UnlesstheforeigninvestorhasnotifiedtheSECand the DTI of its intention to repatriate its capital and cease operations in thePhilippines. The actual use in Philippine operations of the inwardly remittedminimumcapitalrequirementsshallbemonitoredbytheSEC.

FailureretailstoresshallsecureacertificationfromtheBangkoSentralngPilipinas(BSP)andtheDTI,whichwillverifyorconfirminwardremittanceoftheminimumrequiredcapitalinvestment.

Sec.. 6. Foreign Investors Acquiring Shares of Stock of Local Retailers. ‐ ForeignInvestorsacquiringsharesfromexistingretailstoreswhetherornotpubliclylistedwhosenetworth is in excessof thepeso equivalentofTwoMillionFiveHundredThousand US Dollars (US$2,500,000.00) may purchase only up to a minimum ofsixty percent (60%) of the equity thereofwithin the first two (2) years from theeffectivity of this Act and thereafter, theymay acquire the remaining percentageconsistentwiththeallowableforeignparticipationashereinprovided.

Sec. 7. Public Offering of Shares of Stock. ‐ All retail trade enterprises underCategories B and C in which foreign ownership exceeds eighty percent (80%) ofequity shall offer aminimumof thirtypercent (30%)of their equity to thepublicthroughanystockexchangeinthePhilippineswithineight(8)yearsfromtheirstartofoperations.

Sec. 8.Qualificationsof ForeignRetailers. ‐No foreign retailer shall be allowed toengage in retail trade in thePhilippines unless all the followingqualifications aremet:

(a) A minimum of Two Hundred Million US Dollars (US$200,000,000.00) networthinitsparentcorporationforCategoriesBandC,andFiftyMillionUSDollars(US$50,000,000.00)networthinitsparentcorporationforCategoryD;

(b) Five (5) retailingbranchesor franchises inoperationanywherearound theworldunless such retailershasat leastone (1) store capitalizedat aminimumofTwenty‐FiveMillionUSDollars(US$25,000,000.00);

(c)Five(5)‐yeartrackrecordinretailing;and

(d)Onlynationalsfrom,orjudicialentitiesformedorincorporatedin,countrieswhichallowtheentryofFilipinoretailers,shallbeallowedtoengageinretailtradeinthePhilippines.

The DTI is hereby authorized to pre‐qualify all foreign retailers, subject to theprovisions of this Act, before they are allowed to conduct business in thePhilippines.

TheDTIshallkeeparecordofqualifiedforeignretailerswhomay,uponcompliancewith law, establish retail stores in thePhilippines. It shall ensure that theparentretail trading companyof the foreign investor complieswith thequalificationsoncapitalizationandtrackrecordprescribedinthisSec..

TheInter‐AgencyCommitteeonTariffandRelatedMattersoftheNationalEconomicDevelopmentAuthority(NEDA)Boardshallformulateandregularlyupdatealistofforeign retailers of high‐end or luxury goods and render an annual report on thesametoCongress.

Sec.9.PromotionalofLocallyManufacturedProducts.‐Forten(10)yearsaftertheeffectivityofthisAct,atleastthirtypercent(30%)oftheaggregatecostofthestock

inventory of foreign retailers falling under Categories B and C and ten percent(10%)forCategoryD,shallbemadeinthePhilippines.

Sec. 10. Prohibited Activities of Qualified Foreign Retailers. ‐ Qualified foreignretailers shallnotbeallowed toengage in certain retailingactivitiesoutside theiraccreditedstoresthroughtheuseofmobileorrollingstoresorcarts,theuseofsalesrepresentatives, door‐to‐door selling, restaurants and sari‐sari stores and suchothersimilarretailingactivities:Provided,thatadetailedlistofprohibitedactivitiesshallhereafterbeformulatedbytheDTI.

Sec. 11. Implementing Agency; Rules and Regulations. ‐ The monitoring andregulation of foreign sole proprietorships, partnerships, associations orcorporationsallowedtoengageinretailtradeshallbetheresponsibilityoftheDTI.Thisshallincluderesolutionofconflicts.

TheDTI, incoordinationwiththeSEC, theNEDAandtheBSP,shall formulateandissue the implementing rules and regulations necessary to implement this Actwithinninety(90)daysafteritsapproval.

Sec.12.PenaltyClause. ‐Anypersonwhoshallbe foundguiltyofviolationofanyprovision of this Act shall be punished by imprisonment of not less than six (6)yearsandone(1)daybutnotmorethaneight(8)years,andafineofnotlessthanOne Million Pesos (P1,000,000.00) but not more than Twenty Million Pesos(P20,000,000.00).

In the case of associations, partnerships or corporations, the penalty shall beimposed upon its partners, president, directors, managers and other officersresponsible for theviolation. If theoffender isnota citizenof thePhilippines,heshallbedeportedimmediatelyafterserviceofsentence.IftheFilipinooffenderisapublic officer or employee, he shall, in addition to the penalty prescribed herein,sufferdismissalandpermanentdisqualificationfrompublicoffice.

Sec.13.RepealingClause.‐RepublicActNo.1180,asamended,isherebyrepealed.RepublicActNo.3018,asamended,andallotherlaws,executiveorders,rulesandregulations or parts thereof inconsistent with this Act are repealed or modifiedaccordingly.

Sec. 14. Separability Clause. ‐ If any provision of this Act shall be heldunconstitutional, theotherprovisionsnototherwiseaffected therebyshall remaininforceandeffect.

Sec.15.Effectivity.‐ThisActshalltakeeffectfifteen(15)daysafteritsapprovalandpublicationinatleasttwo(2)newspapersofgeneralcirculationinthePhilippines.

MANUELB.VILLAR,JR.

SpeakeroftheHouseofRepresentatives

BLASF.OPLE

PresidentoftheSenate

[ThisAct,which isaconsolidationofSenateBillNo.153andHouseBillNo.7602,was finally passed by the Senate and House of Representatives on February 15,2000].

ROBERTOP.NAZARENO

SecretaryGeneral

HouseofRepresentatives

HEZELP.GACUTAN

Secretary

Senate

Approved:

JOSEPHEJERCITOESTRADA

PresidentofthePhilippines

RULESANDREGULATIONSIMPLEMENTING

REPUBLICACTNO.8762,

ANACTLIBERALIZINGTHERETAILTRADEBUSINESS,

REPEALINGREPUBLICACTNO.1180,ASAMENDED

Pursuant to the provisions of Section 11 of Republic Act No. 8762, the followingrulesandregulationsareherebypromulgated.

RULEI

DEFINITIONOFTERMS

Section1.ForpurposesofthisRulesandRegulations:

(a) “RetailTrade”shallmeananyact,occupationorcallingofhabituallysellingdirecttothegeneralpublicmerchandise,commoditiesorgoodsforconsumption.

(b)“High‐endorLuxuryGoods”shallrefertogoodswhicharenotnecessaryforlifemaintenanceandwhosedemandisgeneratedinlargepartbythehigherincomegroups.Luxurygoodsshallinclude,butarenotlimitedto,productssuchas:jewelry,brandedor designer clothing and footwear,wearing apparel, leisure and sportinggoods,electronicsandotherpersonaleffects.

(c) “Investment” shall mean assets, tangible or intangible including but notlimitedtobuildings,leaseholdrights,furniture,equipmentandinventory.

(d)“ForeignRetailer”shallmeananon‐Filipinocitizen,ifanaturalperson,orifajuridicalperson,adulyformedandorganizedcorporation,partnership,associationorentitythatisnotwholly‐ownedbyFilipinos,engagedinretailtrade.

(e)“ForeignInvestor”shallmeananon‐Filipinocitizen,ifanaturalperson,orifajuridicalperson,adulyformedandorganizedcorporation,partnership,associationor entity that is notwholly‐owned by Filipinos, whether or not engaged in retailtrade.

(f) “Natural‐bornFilipinoCitizen”are thosewhoare citizensof thePhilippinesfrombirthwithouthavingtoperformanyacttoacquireorperfecttheircitizenship.ThosewhoelectPhilippinecitizenshipinaccordancewithArticleIV,paragraph3ofthe1987Constitutionshallbedeemednatural‐borncitizens.

(g) “Consumption” shall mean the utilization of economic goods in thesatisfaction of want resulting in immediate destruction, gradual decay ordeteriorationortransformationintoothergoods.

(h)“Manufacturer”referstoapersonwhoaltersrawmaterialormanufacturedor partially manufactured products, or combines the same in order to producefinishedproductsforthepurposeofbeingsoldordistributedtoothers.

(m)“Processor”referstoapersonwhoconvertsrawmaterialsintomarketableformbyspecialtreatmentoraseriesofactionthatchangesthenatureorstateoftheproduct, like slaughtering, milling, pasteurization, drying, or dessicating, quickfreezingandthelike.Merepacking,packaging,sortingorclassifyingdoesnotmakeapersonaprocessor.

(n)“FarmerorAgriculturist”referstoanindividualpersonallyengagedindairyfarming, fish farming, aquaculture, poultry or livestock raising, and his principalincomeisderivedfromanyoneormoreoftheforegoingoperations.

(o) “Capital” shall mean the working capital for sole proprietorships andpartnerships,whileforcorporations,itshallbethepaid‐upcapital.

(l)“Paid‐UpCapital”shallmeanthetotalinvestmentinabusinessthathasbeenpaid‐ininacorporationorpartnershiporinvestedinasingleproprietorship,whichmaybe incashor inproperty. Itshallalsorefer to inwardremittanceorassignedcapitalinthecaseofforeigncorporations.

(m)“RetailStore”shallmeanthecompanythatownstheretailstoreand/orthephysicallocation,suchasashop,wheregoodsaresoldonaretailbasis.Itincludestheadministrativeoffices,warehouse,preparationfacilityorstoragefacilityofsuchgoods,regardlessofwhetherornotitisadjacenttosuchoutlet.

In cases where the administrative office, warehouse, preparation facility orstorage facility services several stores, the capital for such administrative office,warehouse preparation or storage facility to be included in the investmentrequirementforonestoreshallbepro‐ratedtothenumberofstoresbeingserviced.

(n)“LocallyManufacturedGoods”shallmeangoodsproducedinthePhilippines.

(o)“BranchOffice”shallmeananofficeofaforeigncompanythatcarriesoutthebusinessactivitiesofsuchheadofficeandderivesincomefromthehostcountry.

(p)“Franchise”shallmeanabusinessrelationshipwherein, foraconsideration,the franchisor grants to the franchisee a licensed right, subject to agreed‐uponrequirements and restrictions, to conduct business utilizing the trade and/orservice marks of the franchisor, and also provides to the franchisee, advice andassistance in organizing, merchandising, and managing the business conductedpursuanttothelicense.Thistypeofagreementmayincludea licensingagreementoranysimilararrangement.

(q) “Net Worth” shall mean total equity of a business; total assets less totalliabilities.

(r)“Trackrecord”shallincludethetrackrecordoftheapplicant‐foreignretailer,itspredecessors,oritsprincipalstockholders,affiliatesandsubsidiaries.

(s)“ReciprocityRights”shalldenotetherelationbetweentwostateswheneachofthem,bytheirrespectivelawsorbytreaty,givesthecitizensornationalsoftheothercertainprivileges,asintheundertakingofretailtradeactivities,onconditionthatitsowncitizensornationalsshallenjoysimilarprivilegesinthelatterstate.

Notwithstanding the law allowing one hundred percent foreign ownership ofretail activities subject to the capitalization requirements, a foreign retailer shallonly be allowed to own up to the extent of the foreign ownership allowed forretailinginitshomecountry.

(t)AformernaturalbornFilipinocitizenisdeemed“residinginthePhilippines”if he physically stays in the country for at least one hundred eighty (180) dayswithinagivenyear.

Sec.2.SalesNotConsideredAsRetail.–The followingsalesarenotconsideredasretail:

(a) Sales of a manufacturer, processor, laborer, or worker of productsmanufactured, processed or produced by him to the general publicwhose capitaldoesnotexceedOnehundredthousandpesos(100,000.00);

(b)Salesbyafarmeroragriculturistsellingtheproductsofhisfarm,regardlessofcapital;

(c) Sales arising from restaurant operations by a hotel owner or inn‐keeperirrespectiveof theamountofcapital,provided, that therestaurant is incidental tothehotelbusiness

(d) Sales through a single outlet owned by a manufacturer of productsmanufactured, processed or assembled in the Philippines, irrespective ofcapitalization;

(e)Salestoindustrialandcommercialusersorconsumerswhousetheproductsbought by them to render service to the general public and/or produce ormanufactureofgoodswhichareinturnsoldbythem;or

(f) Sales to the government and/or its agencies and government‐owned andcontrolledcorporations.

RULEII

RIGHTSOFFORMERNATURALBORNFILIPINOS

TOENGAGEINRETAILTRADE

Section 1. Rights of Former Natural born Filipinos. ‐ Any natural born Filipinocitizenwhohas losthisPhilippinecitizenshipandwhohas legal capacity toenterinto a contract under Philippine laws may be allowed to engage in retail trade,providedthatheresidesinthePhilippines.

Sec.2.DocumentaryEvidences.–Anypersonwhomeetstherequirementsprovidedfor under the preceding paragraph shall be considered as a Filipino citizen forpurposesofthisAct,uponshowinganyofthefollowingdocuments:

1.Copyofbirthcertificate(i)certifiedbythelocalcivilregistrarortheNationalStatistics Office; or (ii) for those born abroad, certificate of birth from theappropriategovernmentagencyofthecountrywherethebirthisrecordedshowingthefatherormothertobeaFilipinoatthetimeofbirthorifthecitizenshipoftheparentsisnotindicated,additionalproofthattheparent/sisaFilipinocitizenorhasnotlosthis/herFilipinocitizenshipatthetimeoftheapplicant’sbirth;or(iii)those

bornbefore17January1973ofFilipinomothersmustadditionallysubmitallofthefollowing: certified true copies of his/her sworn statement of election of Filipinocitizenship, oath of allegiance from the civil registrarwhere the documentswerefiled and/or forwarded, and identification certificate issued by the Bureau ofImmigration;

2.Incaseoflossand/ordestructionoftherecordofbirthornon‐registrationofbirth,a(i)Certificateofnon‐availabilityofbirthcertificateonaccountoflossand/ordestruction of birth record from the local civil registrar and/or appropriategovernmentagencyifbirthwasregisteredabroad;or(ii)copyofbirthcertificateofmotherorfathercertifiedbythelocalcivilregistrarortheNSO;and(iii)affidavitoftwo(2)disinterestedpersonsattestingtotheirpersonalknowledgethatatthetimeoftheapplicant’sbirth,thechildwasbornofaFilipinomotherorfather.

Anydocumentexecutedor issuedabroadmustbeauthenticatedby thePhilippineEmbassy/Consulate having jurisdiction over the place of execution or issuance ofthedocument.

RULEIII

CAPITALIZATIONANDEQUITYREQUIREMENTS

Section1.ForeignEquityParticipation.–Foreign‐ownedpartnerships,associationsandcorporationsformedandorganizedunderthelawsofthePhilippinesmay,uponregistration with the Securities and Exchange Commission (SEC), or in case offoreign‐ownedsingleproprietorships,with theDepartmentofTradeand Industry(DTI), engage or invest in the retail trade business, subject to the followingcategories:

Category A – Enterprises with paid‐up capital of the equivalent in PhilippinePesosoflessthanTwomillionfivehundredthousandUSdollars(US$2,500,000.00)shallbereservedexclusivelyforFilipinocitizensandcorporationswhollyownedbyFilipinocitizens.

CategoryB –Enterpriseswith aminimumpaid‐up capital of the equivalent inPhilippines Pesos of Two million five hundred thousand US dollars(US$2,500,000.00) but less than Seven million five hundred thousand US dollars

(US$7,500,000.00)maybewhollyownedbyforeignersexceptforthefirsttwo(2)yearsaftertheeffectivityofthisActwhereinforeignparticipationshallbelimitedtonotmorethansixtypercent(60%)oftotalequity.

CategoryC–Enterpriseswithapaid‐upcapitalof theequivalent inPhilippinePesosofSevenmillionfivehundredthousandUSdollars(US$7,500,000.00)ormoremaybewhollyownedbyforeigners.

CategoryD–Enterprisesspecializinginhigh‐endorluxuryproductswithapaid‐up capital of the equivalent I Philippine Pesos of Two hundred fifty thousand USdollars(US$250,000.00)perstoremaybewhollyownedbyforeigners.

Sec. 2. Branches/Stores. ‐ Opening of branches/stores by the registered foreignretailer shall be allowed, provided that the investments for each branch/storeestablishedbyregisteredforeignretailersfallingunderCategoriesBandCmustbenolessthantheequivalentinPhilippinePesosofEighthundredthirtythousandUSdollars(US$830,000.00).

RULEIV

PREQUALIFICATIONOFFOREIGNRETAILERS

Section1. PrequalificationRequirements. ‐Before a foreign retailer is allowed toengage in the retail trade business or invest in an existing retail store in thePhilippines,itmustpossessallofthefollowingqualifications:

(a) A minimum of Two hundred million US dollars (US$200,000,000.00) networthinitsparentcorporationforCategoriesBandC,andFiftymillionUSdollars(US$50,000,000.00)networthinitsparentcorporationforCategoryD;

(b)Five (5) retailingbranchesor franchises inoperationanywherearound theworld unless such retailer has at least one (1) store capitalized at aminimum ofTwenty‐fivemillionUSdollars(US$25,000,000.00):

(c)Five(5)‐yeartrackrecordinretailing;and

For purposes of determining compliancewith the above requirements, the networth,trackrecordandexistenceofbranchesandfranchisesoftheparentcompany,its branches and subsidiaries and of its affiliate companies, as well as theirpredecessors,which substantially owns, controls or administers the operations oftheapplicantshallbeconsidered.

(d)Onlynationalsfrom,orjuridicalentitiesformedorincorporatedincountrieswhichallowtheentryofFilipinoretailersshallbeallowedtoengageinretailtradeinthePhilippines.

Sec. 2. Application for Pre‐Qualification. ‐ A request for pre‐qualification by theaforementioned foreign retailer must be submitted to the Board of Investmentsbefore filing a formal application to engage in the retail business or invest in anexistingretailstore.Saidrequestforpre‐qualificationmustbeaccompaniedbythefollowingdocuments:

(a)LatestAnnualFinancialStatementshowingthenetworthoftheapplicant;

(b) Certification by a responsible officer of the applicant‐foreign retailer dulyauthenticatedbythePhilippineEmbassy/Consulatestatingthat:

i.ithasbeenengagedinretailingforthepastfiveyears;and

ii. has at least five (5) retailingbranches anywhere in theworld, or at leastone branch is capitalized at a minimum of Twenty‐five million US dollars(US$25,000,000.00);

(c) Copies of franchise or licensing agreements between the applicant and itsfranchisee/licensee if the applicant fails tomeet the preceding requirement of atleastfive(5)retailingbranches;and

(d)Certificationbytheproperofficialofthehomestateoftheapplicant‐foreignretailertotheeffectthatthelawsofsuchstateallowsorpermitsreciprocalrightstoPhilippinecitizensandenterprisestogetherwiththeextentofparticipationallowed.

Sec. 3. Enterprises composed of Two (2) or More Stockholders/Partners. ‐ If asingle retailing corporation/partnership to be formed and organized underPhilippinelawswillbeownedbyseveralforeignretailersandforeigninvestors,anapplication for all of the stockholders/partners for pre‐qualificationmust be filedwith the BOI. The foreign retailer‐stockholder/partnerwith the highest equity insaidcompanyshouldsatisfytheconditionsmentionedunderRuleIV,Sections1and2.

However, In caseswhere all or twoormore of the foreign stockholders/partnershaveequalshares, theprequalificationconditionshallbedeemedcompliedwithifthe stockholders/partnersowningor controllingat leastmajorityof the stocksorinterestsmeettheaforementionedconditions.

Sec. 4. Issuance of Certificate of Compliancewith Prequalification. ‐ The Board ofInvestments(BOI),shallissue,withintwenty(20)workingdaysfromsubmissionofall necessary documents, after evaluation and verification, a Certification that theforeignretailermeetsthequalificationsprescribedbythelaw.

Sec. 5. List of Qualified Foreign Retailers. ‐ The DTI through the Board ofInvestments (BOI) shall keep a record of foreign retailers who have been pre‐qualifiedtoestablishretailstoresinthePhilippines.Itshallensurethattheparentretail trading companyof the foreign investor complieswith thequalificationsoncapitalizationandtrackrecord.

RULEV

INVESTMENTSINEXISTINGRETAILSTORES

Section1.ForeignInvestmentsinExistingStores.‐Anyforeigninvestor,whetherornotitispresentlyengagedinretailtrade,maybeallowedtoinvestinexistingretailstores, publicly listed or not, subject to the paid up capitalization amountsexpressed innetworth, investmentperstoreandequityrequirementsunderRuleIIIhereof.

Sec. 2. Pre‐qualification Requirements. ‐ In addition to the foregoing, foreigninvestors which are also retailers that will invest in existing retail stores arerequiredtobepre‐qualifiedbeforetheymayactuallybuysharesthereto.

RULEVI

HIGH‐ENDORLUXURYGOODS

Section 1. List of Retailers selling High‐End or Luxury Goods. ‐ An annual list offoreignretailerssellinghigh‐endorluxurygoodsshallbeformulatedandregularlyupdated by the Inter‐Agency Committee on Tariff and Related Matters of theNationalEconomicDevelopmentAuthority(NEDA)Board,incoordinationwiththerelevantorganizationsand theprivate sector concerned. (Section8, second to thelastparagraph)

Sec. 2. Annual Report to Congress. – The Inter‐Agency Committee on Tariff andRelated Matters of the National Economic Development Authority (NEDA) Boardshall annually report to Congress the list of foreign retailers selling high‐end orluxurygoods.(Section8,lastparagraph)

RULEVII

APPLICATIONFORREGISTRATION

Section 1. Filing of Application. ‐ Applications for registration together withsupportingdocuments,shallbefiledwiththeSecuritiesandExchangeCommission(SEC)inthecaseofdomesticcorporationsorpartnershipsthatareownedwhollyorpartiallybyforeignretailers,ortheDTIthroughitsRegionalandProvincialOffices,inthecaseofsingleproprietorships.

Allapplicationsshallbesubjecttothepaymentoftheprescribedfilingfees.

Sec. 2. Certificate of Compliance with Pre‐qualification Requirements. – Nocorporation/partnership/association or sole proprietorship owned wholly or

partially by foreign retailers may be allowed to register without securing thenecessary certificate of compliance with the prequalification conditions from theBoardofInvestments.

Sec.3. IssuanceofCertificateofIncorporation/BusinessName.‐ Uponsubmissionof all the required documents, the Securities and Exchange Commission (SEC), incases of corporations/partnerships/association and the Department of Trade &Industry,throughitsRegionalorProvincialOfficesincasesofsoleproprietorships,shall issue the Certificate of Incorporation and the Business Name, respectively,grantinglegalpersonalitytotheapplicant‐retailer.

Inaddition,theforeignretailersshallsecureallnecessarypermitsandlicensesfromtheconcernedgovernmentagencies.

Sec.4.BSPRegistrationof InwardRemittance.–Prior tooperations, foreignretailstoresandforeigninvestorsshallregistertheirinvestmentswiththeBangkoSentralng Pilipinas (BSP) to ensure that the inward remittance of the required capitalinvestmentisfullydocumented.

The BSP shall issue the Bangko Sentral Registration Certificate (BSRC) uponsubmissionofabankcertificationofremittanceofforeignexchangeconvertedandsold to pesos through the authorized agent bank and compliancewith suchotherBSPrulesforsuchregistration.

Sec. 5. Establishment of Branches. – All registered foreign retailers that willestablishadditionalbranchesshallbe required to fileanapplicationwith theDTI,supported by documents showing proof of compliance with the US$830,000investment requirement per branch, and the Certificate of Incorporation/DTICertificateissuedtotheretailer.

Sec. 6. Reporting Requirements. – Every registered foreign retail enterprise shallsubmit annually to the Department of Trade and Industry (DTI) the followingreports:

(a)Ageneral informationsheet in theprescribed formshowing,amongothers,theaccreditedstoresoftheenterpriseandthestatusofoperationsoftheentity;

(b)Anauditedfinancialstatementandincometaxreturn;

(c) Certification by a responsible officer of the company showing themaintenance of the required minimum capital unless the foreign investor hasnotified the SEC and the DTI of its intention to repatriate its capital and ceaseoperationsinthePhilippines;

RULEVIII

PROHIBITEDACTIVITIESOFQUALIFIEDFOREIGNRETAILERS

Section 1. Accredited Stores. ‐ Qualified foreign retailers shall not be allowed toengageincertainretailingactivitiesoutsidetheiraccreditedstoresthroughtheuseofmobile or rolling stores or carts, the use of sales representatives, door‐to‐doorselling,restaurantsandsari‐saristoresandsuchothersimilarretailingactivities.

Sec.2.ListofProhibitedActivities.‐AdetailedlistoftheseprohibitedactivitiesshallbeformulatedbytheDTI.

RULEIX

COMPLIANCEREQUIREMENTS

Section1.MaintenanceofPrescribedMinimumCapital.‐Theforeigninvestorshallbe required to maintain in the Philippines the full amount of the prescribedminimumcapital,unlesstheforeigninvestorhasnotifiedtheSECandtheDTIofitsintentiontorepatriateitscapitalandceaseoperationsinthePhilippines.

The SEC shall establish mechanisms to monitor the actual use in Philippineoperationoftheinwardlyremittedminimumcapitalrequirement.

Failure to maintain the full amount of the prescribed minimum capital prior tonotificationoftheSECandtheDTI,shallsubjecttheforeigninvestortopenaltiesorrestrictionsonanyfuturetradingactivities/businessinthePhilippines.

Sec.2.PublicOfferingofSharesofStock. –All registered retail enterprisesunderCategories B and C in which foreign ownership exceeds eighty percent (80%) ofequity shall offer aminimumof thirtypercent (30%)of their equity to thepublicthroughanystockexchangeinthePhilippineswithineight(8)yearsfromtheirstartofoperations.(Section7)

AffectedregisteredretailersshallthenberequiredtolisttheirsharesatanystockexchangedulyformedandorganizedunderPhilippinelaws.

CompliancewiththisrequirementshallbesupervisedandmonitoredbytheSEC.

Sec.3.‐PromotionofLocallyManufacturedProducts.–Forten(10)yearsaftertheeffectivity of this Act, at any given time, at least thirty percent (30%) of theaggregatecostofthestockinventorysituatedinthePhilippinesofforeignretailersfallingunderCategoriesBandCandtenpercent(10%)forCategoryDshallbemadeinthePhilippines.

All registered foreign retailers shall be required to maintain books of accountsshowing the inventory situated in the Philippines and its origin at all times andthesebooksmaybeexaminedatanytime,bythedulyauthorizedrepresentativeoftheDepartmentofTradeandIndustry.

Furthermore, these registered foreign retailers shall be required to submitquarterly statements under oath certifying the ratio of their local and importedinventory.

Sec.4.VisitorialPowers.–Inthepublicinterestand/orfortheenforcementofanyapplicable law, rules and regulations, the DTI/BOI, SEC or any government officehaving jurisdiction on the matter may, through any of its duly authorizedrepresentatives,conductnecessaryexaminationofrecords,inventoryandbooksofaccounts of the registered foreign retail enterprise in the Philippines, makepertinent inquiries from itsofficials and take suchactionasmaybenecessary fortheproperexerciseofitsauthority.

Sec. 5. Implementing Agency. – The monitoring and regulation of foreign soleproprietorships, partnerships, associations, or corporations allowed to engage inretail trade shall be the responsibility of the DTI. This shall include resolution ofconflicts,throughmediation.

Sec.6.Withdrawal/ClosureofRetailEstablishments.‐Applicationsforwithdrawalor closureof retail establishments shall be filedwith the Securities andExchangeCommission for corporations/partnerships/associations or the DTI, through itsRegionalorProvincialOfficeswithrespecttosoleproprietorships.

TheDTIshallbenotifiedbytheconcernedagencyofactionstakenonrequestsforwithdrawalorclosureofforeignretailestablishments.

Sec.7.Penalties.‐AnypersonwhoshallbefoundguiltyofviolationofanyprovisionofthisAct,oritsimplementingrulesandregulations,orothertermsandconditionsofitsregistration,shallbepunishedbyimprisonmentofnotlessthansix(6)yearsandone(1)daybutnotmore thateight (8)years,anda fineofnot less thanOnemillion pesos (P1,000,000.00) but not more than Twenty million pesos(P20,000,000.00).

In the case of associations, partnerships or corporations, the penalty shall beimposed upon its partners, president, directors, manager and other officersresponsible for the violation. If the offender is not a citizen of the Philippines, heshallbedeportedimmediatelyafterserviceofsentence.IftheFilipinooffenderisapublic officer of employee, he shall, in addition to the penalty prescribed herein,sufferdismissalandpermanentdisqualificationfrompublicoffice.

RULEX

REPEALINGANDEFFECTIVITYCLAUSES

Section 1. All other rules and regulations or parts thereof, inconsistent with theforegoingrulesandregulationsarerepealed,amendedormodifiedaccordingly.

Sec. 2. TheseRules shall take effect fifteen (15) days upon publication in two (2)newspapersofgeneralcirculation.