Overview
The Philippine economy has been experiencing monumental growth ever since the revision of its Corporation code. Its GDP is expected to clock at 5.6% by 2023. The revised code seeks to expedite and simplify the incorporation process by overcoming complex steps and hefty paperwork.
These attempts are also expected to further the nation’s growth in the future. Now is the best time to fast-track your global reach and set up an entity in the Philippines. Securing the company registration in the Philippines is your first stride into the corporate realm. Let’s break down the legalities for the same.
Why is the Philippines the best bet for foreign entrepreneurs?
- The Philippines' economy is thriving, and its current GDP rate stands at 5.6%. Presently, the nation adheres to immense business potential- something that suits investors and aspiring entrepreneurs.
- It shares its boundaries with several Asian countries, making it a prime export hub.
- The country has a world-class educational hub produces a high-skilled workforce that zeroed in on productivity and performance.
- The government renders a variety of schemes, ensuring lower taxes and various leverages for local and foreign businesses.
- The nation fosters a thriving tourism sector, offering enormous growth opportunities for industries alike.
- Philippines garners a tech-savvy environment, advocating digital innovation and tech-driven businesses.
Business Structures for Foreign Investors seeking Company registration in the Philippines
The following business structures are available to foreign investors seeking company registration in the Philippines.
Branch Office (BO)
A branch office helps its parent company scale its operations in other parts of the world. It has no distinctive legal identity since it is merely a parent company’s extension. However, it could help its controlling entity achieve sales objectives and fulfill other chores.
Regional Operating Headquarters (ROHQ)
A regional operating headquarters provides services to a foreign parent entity but is not eligible to perform business chores.
Regional Area Headquarters (RHQ)
Regional area headquarters overseas parent entity’s branches, affiliates, and subsidiaries. RHQs cannot engage in any commercial activities leading to profit generation. The parent company can leverage inward remittance to subsidize RHQs’ operational expenses.
Representative Office (RO)
A representative office helps augment the corporate presence of its parent entity through marketing, promotion, and communication. Its debts and liabilities are handed by its controlling firm since it lacks a separate legal identity.
Compliances for Securing Company Registration in the Philippines
Some legal grounds for setting up an entity in the Philippines are listed below. These are the pre-establishment compliances mandatory for securing company registration in the Philippines.
Executive Breakdown
The appointment of at least two directors or incorporators is mandatory. The upper limit has been set up to 15. The majority of them should be from the local territory.
Presence of At least four officers:
- President cum company’s signatory, no matter the nationality
- Corporate Secretary from the local territory
- Treasurer in charge, handling fiscal affairs ( from the local territory)
- Compliance Officer
Foreign Equity
A local entity may have foreign equity fitting to one of the following brackets:
- >40.01% Foreign Equity
- <40% Foreign Equity
- 0% Foreign Equity (100 percent locally-owned)
Capital Requirements
Capital requirements correlate to the aforementioned foreign equity bracket. Here’s what it looks like.
- 0% Foreign Equity → US$100, equivalent to ₱5,000
- <40% Foreign Equity → US$100, equivalent to ₱5,000
- >40.01% Foreign Equity → US$200,000, equivalent to ₱4,800,000
Additional Capital can be added after opening the account in the designated bank.
Lower Capital can be attained only when the following conditions are met.
- Employing 50 local citizens → capital requirement comes down to US$100,000, which is equivalent to ₱2,400,000
- Inculcation of cutting-edge technology → minimum capital requirement same as the above.
- Exporting a product worth 70% of the overall production minimum capital requirement equivalent to US$100
Company Registration in the Philippines: Required Paperwork
- Charter documents
- By-laws
- The company’s Treasurer’s Affidavit
- Joint Affidavit of two incorporators
- Premies documents, no matter the ownership status
- Details concerning the employees
- Detail relating to the core business chores
What Are the Steps for Incorporating a Company in the Philippines?
Below is the step-by-step guide elaborating the process of securing the company registration in the Philippines:
Step 1: File name application with SEC
Head to the Philippine Securities and Exchange Commission (SEC) online portal to file name applications. If you are new, the portal shall prompt you to create an account via a verification process. Once you get abroad, you can verify the proposed name against the portal’s database. Standard paperwork for name approval includes charter documents, by-laws, the company’s Treasurer’s Affidavit, and Joint Affidavit of two incorporators.
The registration certificate gets issued once the authority approves the request. Upon this, you can engage in proposed business chores.
Step 2. Secure Barangay Clearance
The Barangay is the legal jurisdiction where a governing authority regulates all the commercial establishments and industrial settings. You can approach the local government office to apply for Barangay clearance. Typical paperwork required here includes a registration certificate, identity evidence, and address proof.
Step 3. Obtain approval from the Local Mayor’s Office
Head to the respective municipal office and apply for a business permit is what you require doing in this step. The application must accompany paperwork such as SEC approval, Barangay Clearance, identity evidence, and address proof.
Step 4. Visit the Bureau of Internal Revenue to register your entity
Registering with the Bureau of Internal Revenue (BIR) is essential for incorporated entities. You must approach the local Regional District Office (RDO) and file form 1903 for registration, which should attached with the paperwork like SEC approval, Barangay Clearance, Mayor’s Office approval, Address evidence, valid ID, etc.
If required, submit the fee concerning BIR form 0605 and form 2000. Plus, legalize your fiscal documents, including invoices and account books.
Step 5. Register as an Employer
Finally, you must secure the employer’s status from the authority concerned. Some common examples include the Social Security System (SSS), the Home Development Mutual Fund, and the Philippine Health Insurance Corporation.
Corporate Tax Structure applies to the Registered Entities
- The two percent minimum corporate income tax (MCIT) applies to the overall income of the local and foreign entities yearly. New entities must start paying this tax from the fourth year.
- The MCIT comes into effect when the CIT estimation is lower than that of MCIT. The CIT is presently clocked at 20%.
- Any excess arising from MCIT imposition over normal tax shall be carried forward and thus credited accordingly.
- The withholding tax on the Dividend is posied at 25%. This rule applies to the resident entities. The dividend distributed among the non-residents attracts a tax rate of 15%, provided the foreign country has the arrangement of tax credit clocked at 15%.
- Interest paid to the non-native attracts a 20% withholding tax unless otherwise advised under the tax treaty.
Adviso: Let us make your global endeavors worthwhile
Getting started with a new venture on foreign soil is an uphill task. You may stumble upon endless regulatory concerns and policies, undermining your time and resources. That’s where our support can prove to be gaming-changing. Our in-depth expertise and a robust network spanning 95 countries can help set up a venture with minimal effort, no matter the compliances.
Here’s why you must choose us
- Unprecedented command over regulatory affairs concerning global incorporation
- Full-proof support for settling legal issues arising during the incorporation
- Professional support for handling pre or post-incorporation legalities
- Comprehensive bolsters for incorporation legalities and paperwork.
.png)
.png)
.png)
.png)
