Foreign exchange transactions by financial institutions domiciled in the Philippines (including subsidiaries, affiliates, branches and offshore banking units of foreign corporations) are regulated by the BSP. Some transactions require prior BSP approval, while other transactions need no approval but are subject to reporting requirements. The following are regulated and/or closely monitored by the BSP: (i) sales of foreign exchange; (ii) cross-border transfers of local and foreign currencies; (iii) buying and selling of gold; (iv) import trade transactions with banking transactions; (v) foreign and foreign currency loans; (vi) foreign investments; (vii) activities of offshore banking units (such as a foreign banking corporation that is duly authorized by the BSP to engage in banking transactions in foreign currencies involving the receipt of funds principally from external sources), representative offices and foreign currency deposit units (unit of a local bank or of a local branch of a foreign bank authorized by the BSP to engage in foreign-currency-denominated transactions) of foreign banks; and (viii) forwards, swaps and open foreign exchange positions of banks. The MORB and the Manual of Regulations on Foreign Exchange Transactions contain a complete general framework regarding the licensing requirements for these transactions.

Pursuant to its commitment and support of the global fight against money laundering, the BSP closely monitors cross-border transfers of local and foreign currencies. All commercial, universal and thrift banks are required to submit a quarterly report on their cross-border financial positions. These reports will need to include claims from and financial liabilities to non-residents and multilateral agencies, according to the sector of their non-resident counterparty (the other party that participates in a financial transaction) within a country.¹ Late and/or erroneous reporting is subject to penalties prescribed in the MORB.

Further, the Revised Corporation Code of the Philippines also requires all foreign corporations “doing business” in the Philippines to register and obtain the appropriate license from the SEC. To comply with the SEC licensing requirement and depending on the intended activities of the corporation, the foreign corporation may establish, among others, a branch office or a representative office. The foreign corporation may also set up a subsidiary and conduct its activities in the Philippines through the subsidiary. To apply for an SEC license, the foreign corporation must indicate in its application the place in the Philippines where the foreign corporation intends to operate. Thus, the foreign corporation will need to identify the address of its office in the Philippines.

The Supreme Court has consistently ruled that the true test for “doing business” is whether the foreign corporation is '”continuing the body of the business or enterprise for which it was organized and whether there exists a continuity of commercial dealings and arrangements which include acts that are normally incident to, and in the progressive prosecution of, the purpose and object of its organization.”

In 2017, the SEC rendered an opinion that a foreign corporation that operates an “active website” to offer for sale and sell content and services to customers in the Philippines will be considered to be doing business in the Philippines and will be subject to the SEC licensing requirement.