The Philippines has become an increasingly attractive destination in Southeast Asia to invest your valuable capital. With an emerging market of young English-speaking consumers, strong domestic demand, and ongoing infrastructure developments, registering your business within the Philippines will be the first key step to creating a compliant and successful business. To ensure that you meet the foreign investor requirements in the Philippines, the National Government has put several key pieces of legislation in place to allow certain sectors to be opened up. However, there are still strict regulations in place to ensure that Foreign Investors meet the foreign investor requirements in the Philippines, such as maximum foreign equity, minimum capital, and several licenses from various agencies. Understanding the correct process of how to register a business in the Philippines will save you time and money, while using a trusted service like BusinessRegistrationPhilippines.com will ensure that your business is set up for long-term success.
Choosing the Right Business Structure
The first thing that needs to be decided is what type of business structure you wish to register as a foreign-owned company in the Philippines. There are several different options to choose from, and each has its own rules regarding liability, taxation, and foreign equity.
Domestic Corporation (Subsidiary)
This type of business is a completely separate legal entity and will be governed by Philippine Law. This means that any financial or legal liabilities will not affect the overseas parent company. Under the amended Foreign Investments Act, a domestic corporation can be 100% foreign-owned; however, it cannot operate in certain sectors listed on the Foreign Investment Negative List (FINL). The business will be governed by a Board of Directors and provides the most flexibility to grow your business locally, work with local businesses, and own assets.
Branch Office
A branch office is a direct extension of your overseas parent company. This means you can conduct business and earn revenue in the Philippines. However, the foreign parent will be fully liable for any obligations, debt, and lawsuits that arise from the branch office in the Philippines. As it isn’t a separate subsidiary, you will also generally pay Branch Profit Remittance Tax on any profits sent back to your head office unless you have a tax treaty.
Representative Office
This type of business cannot earn revenue and will only be used by foreign parent companies to conduct non-commercial activity such as information, promotion, liaison, and quality control. As they cannot earn any income or issue any sales invoices in the country, all expenses must be covered by remittances from your overseas head office. This is a great option if you’re looking to test the market.
Regional Operating Headquarters (ROHQ)
An ROHQ is a special type of business that can earn revenue in the Philippines. They can only provide shared services such as administration, planning, sourcing, data processing, and technical support to affiliates, subsidiaries, and branches in the Asia Pacific region. They cannot provide services to third parties outside of your group. This is great if you’re looking to centralize your back office in the region.
Partnership
A partnership is when two or more people or companies agree to contribute money, property, or industry towards a common fund and share the profits. Like corporations, partnerships with foreign partners must adhere to the maximum foreign equity and minimum capital requirements set out within the FINL and Civil Code of the Philippines. General partnerships will have unlimited liability; however, limited partnerships will only have limited liability for limited partners.
Minimum Capital and Foreign Equity
Under the Foreign Investments Act (Republic Act No. 7042) and other sector-specific legislation, there are minimum capital requirements that must be remitted to the Philippines. These have been set to ensure that we protect our micro, small and medium businesses, whilst attracting high-value international investment and specialist technical knowledge.
Standard Domestic Business
If you’re looking to sell products or provide services to the domestic market (anything above 40% foreign equity), you will generally need to have a minimum paid-up capital of USD 200,000. This must be remitted into a local bank account in the Philippines. Once the bank has confirmed this via documentation, you’ll be issued a Certificate of Incorporation from the SEC.
High Tech Business
If your business falls under high tech, you can reduce your minimum paid-up capital to USD 100,000. You’ll need to obtain a certification from the Department of Science and Technology (DOST) stating that your business uses innovative/proprietary technology that will benefit the country.
Exporting Business
If you’re exporting 60% or more of your total gross sales/output, you won’t have to pay the USD 200,000 minimum capital. You can be 100% foreign-owned and pay a nominal amount of paid-up capital. However, you must meet the SEC guidelines, have the ability to export, and provide regular export reports.
Retail Business
Under the amended Retail Trade Liberalization Act (Republic Act No. 11595), foreign retailers wishing to sell products directly to consumers must have a minimum paid-up capital of PHP 25 million (Approx USD 500,000). If you’re running a retail business with multiple stores, you’ll need to have a minimum investment of PHP 10 Million per store. This helps attract international retail brands by reducing the previous barriers.
Branch Office
If your branch office wishes to operate in the domestic market, you’ll need to remit an initial capital of USD 200,000 (or USD 100,000 if you have a certification of high technology use). You’ll also need to deposit proper collateral such as government bonds or shares in registered domestic corporations with the SEC within 60 days of receiving your license to transact.
Representative Office
As this business does not earn revenue in the country, you won’t need to pay the USD 200,000. However, your parent company must show that they’ve remitted a minimum of USD 30,000 initially. They’ll also have to continue to remit funds if they need to cover their costs.
Required Documentation
When applying to any government agencies, there are several documents that you’ll need to prepare. If you do not meet the business registration requirements in the Philippines (especially the strict document verification requirements), this is one of the most common reasons for your application to be rejected.
Company Name
You’ll need to check that your desired company name is available. You can do this through the eSPARC system on the SEC website. Your company name cannot be the same or misleadingly similar to an existing company and must follow the naming conventions. All domestic corporations must end with ‘Inc.’ or ‘Corporation’.
Articles of Incorporation & By-Laws
Your Articles of Incorporation and By-Laws must state your main and secondary business objectives, registered office address, duration, authorized capital, and board of directors. Each objective should be written carefully to ensure that it meets the foreign equity requirements.
Parent Company Documents (Branch Office, Representative Office & Domestic with Foreign Corporate Shareholders)
For Branch Offices, Representative Offices and Domestic Corporations with foreign corporate shareholders, you’ll need to have your Parent Company’s Board Resolution, Articles of Incorporation and latest Audited Financial Statements apostilled by your relevant authority. If your country is not part of the Hague Apostille Convention, then they should be consularised by the Philippine Embassy or Consulate.
Treasurer’s Affidavit & Bank Certificate
A sworn statement from your company Treasurer must be provided showing that 25% of your authorized capital has been subscribed and 25% has been paid. This must be backed up by a Certificate of Inward Remittance (CIR) from your local bank showing that the foreign currency has been received.
Resident Agent
All foreign corporations wishing to set up a branch or representative office must appoint a Resident Agent. This can be an individual who resides in the Philippines or a domestic corporation. They will be able to accept legal notices, court notices, and government correspondence.
Registered Office Address
You’ll need to have a physical address in the Philippines. This can be proven through a notarised Contract of Lease or Land Title. This is required for your registration with the SEC and local government. Virtual offices are generally not allowed and will often be denied during your Business Permit inspection. You’ll need a physical lease.
Government Applications & Local Licenses
Once you’ve had your documents verified and your capital remitted to a local bank account, you’ll need to apply for your approvals with the government agencies. Knowing how to register a business in the Philippines means you’ll need to apply in the correct order.
Securities and Exchange Commission (SEC)
You’ll need to submit your full documentation through the eSPARC system. Once you’ve paid your fees, you’ll be issued a Certificate of Incorporation (Domestic Corporation) or License to Transact Business in the Philippines (Branch Office & Representative Office).
Bureau of Internal Revenue (BIR)
Within 30 days of registering with the SEC, you’ll need to register with the Revenue District Office (RDO). This will provide you with your Tax Identification Number (TIN), Certificate of Registration (BIR Form 2303), Authority to Print (ATP) official receipts and sales invoices, and registration of your books of accounts (manual or computerized).
Barangay Clearance
Before applying for your city permit, you’ll need to obtain a Barangay Clearance from your local barangay (smallest division). You’ll need to show your Certificate of Incorporation from the SEC, notarised lease contract, and pay a small local fee.
Mayor’s Permit / Business Permit (LGU)
You’ll need to apply for your Mayor’s Permit with your Local Government Unit (LGU). This can be Makati, Taguig, Pasig, or Cebu City. This will involve mandatory fire inspections from the Bureau of Fire Protection, sanitary permits, environmental permits, and zoning to ensure your business fits the type of business the building is.
Secondary Licenses & Incentives
Depending on your business, you may need a specific license from another government body. This can include the Bangko Sentral ng Pilipinas (BSP) for financial businesses, the Food and Drug Administration (FDA) for pharmaceutical & cosmetics businesses, or the Department of Trade and Industry (DTI). If you qualify, you can register with the Board of Investments (BOI) or Philippine Economic Zone Authority (PEZA) to gain incentives.
Overcoming Bureaucracy
Whilst everything seems straightforward on paper, setting up your foreign-owned company in the Philippines involves many steps with various government bodies. Each body has different requirements for your documentation, unspoken rules, and varying processing times. As the process can be complex, it’s best to seek help from BusinessRegistrationPhilippines.com.
Avoid Multiple Delays
We will liaise directly with the SEC, BIR, and local government to avoid any common delays. We’ll ensure that your application isn’t rejected due to small clerical errors, incorrect business objectives, or formatting.
Correct Taxation & Capital
If you incorrectly identify your main business objective or calculate your Inward Remittance incorrectly, you could incur penalties. Our experienced corporate consultants will ensure that your company is set up correctly from day one to ensure that you’re fully compliant with the Philippine Taxation Laws.
Local Government Inspections
To obtain your Mayor’s Permit, you’ll need physical inspections. This will vary depending on your location (Makati, Bonifacio Global City & Ortigas). Local specialists will manage these efficiently on your behalf.
Receive Incentives
We’ll identify if your project qualifies for registration with the BOI or PEZA. If you qualify as a foreign investor, we’ll guide you through the process to gain income tax holidays, favorable tax rates, and duty-free imports.
Ongoing Reporting
Once you’ve received your initial certificates and permits, you’ll now have ongoing requirements to keep your company in good standing with the Philippine Government.
General Information Sheet (GIS)
Domestic Corporations must submit an updated GIS to the SEC within 30 days of their annual shareholder meeting. This will include details of your current Directors, Officers & Shareholders. Branch Offices & Representative Offices must also submit an annual GIS. This will include details of your Resident Agent, Parent Company, and Beneficial Ownership.
Audited Financial Statements (AFS)
If your business meets the asset/liability requirements, you’ll need to submit your Audited Financial Statements. These must be completed by an Independent CPA who is recognized by both the SEC and BIR. This must be submitted by strict deadlines based on the last digit of your SEC number. If you fail to submit on time, you’ll incur penalties.
BIR Tax Returns
You’ll need to submit monthly & quarterly VAT/Percentage tax, Withholding Tax, and quarterly & annual Corporate Income Tax. This can be done through the BIR. Ensuring that you’re regularly submitting your returns accurately will prevent you from incurring large penalties.
Business Permit
Every January, you’ll need to renew your Barangay Clearance & Mayor’s Permit with your Local Government Unit. You’ll also need to pay local business tax based on your gross income from the previous year. You’ll also need to have updated fire & sanitary permits.
Key Takeaways
The Philippines is a fantastic long-term opportunity for international businesses. By meeting all the business registration requirements, including choosing the correct business structure, meeting capital requirements, and obtaining your approvals from the SEC, BIR & LGU, you’ll create a strong foundation for your business. By taking a systematic approach and working with a trusted service like BusinessRegistrationPhilippines.com, you’ll be confident that you’ve met all the business registration requirements in the Philippines.
Is Assistance Available?
Yes! We can help you set up your company in the country to ensure that it’s compliant. Our experienced corporate specialists will manage all of your business registration requirements from the SEC to the local government. Contact us today to book your initial consultation.
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