Retail Trade Liberalization Act

The Retail Trade Liberalization Act (RA 8762) is a law that governs habitual selling of merchandise and consumer goods to the public for consumption purposes. Selling of goods to another person in order to be resold is not retail trade. This law therefore covers groceries, shopping malls and boutiques.

Retail Trade does not include the following:

1.) A manufacturer, laborer or processor whose capital is Php100,000 or less who is selling his products to the general public.

2.) A farmer or agriculturist selling his farm produce.

3.) Sales in a restaurant attached to a hotel regardless of capital (obviously!)

4.) Sales through a single outlet (take note!) limited only to products a manufacturer produces or assembles regardless of capital.

Foreign-owned businesses may participate in retail trade. Filipinos who change their citizenship are treated as Filipinos if they stay in the Philippines (one of the objectives of this law is to encourage Filipino expats and balikbayans to infuse their capital into the economy.) These are the following categories (both foreign and local) that are allowed to participate:

A.) Paid-up capital of less than US$2,500,000: Filipino-owned only.

B.) Paid-up capital of US$2,500,000 or more: both Filipino and foreign-owned; provided, that for putting up a store a minimum of US$830,000 is invested. At least 30% of the aggregate stock inventory must be made in the Philippines.

C.) Paid-up capital of US$7,500,000 or more: both Filipino and foreign-owned; provided they have same US$830,000 minimum investment and 30% stock inventory requirement. in category B.

D.) Business specializing in high-end or luxury goods, with paid-up capital of US$250,000 per store: both Filipino and foreign-owned. At least 10% of the aggregate stock inventory must be made in the Philippines.

Corporations under categories B and C whose shares of stock are 80% foreign-owned must offer at least 30% of their shares of stock at the stock exchange within eight (8) years from beginning of operations. Foreigners can invest in local retailers.

Foreign retailers must comply with the following qualifications:

1.) The parent corporation must have a minimum net worth of US$200,000,000 (or US$50,000,000 in case of those who specialize in luxury goods or high-end products.)

2.) At least five (5) branches operating anywhere around the world or at least one (1) store with a capital of US$25,000,000.

3.) Track record of at least five (5) years in the retail business.

4.) Only countries that allow Filipinos to go into retail trade in their territories are allowed to do retail trade here.

Remember the following: foreign retailers can't sell their products outside their stores and can't use sales reps or even rolling stores. Retail trade doesn't include selling products to local manufacturers or to other businesses who use the products in their operations. The penalties for violations are imprisonment for six (6) years and one (1) day to eight (8) years and a fine of Php1,000,000 to 20,000,000.