How to Register Philippine Business Entity?

I. Using foreign corporation abroad, where legal entity of foreign corporation is brought to the Philippines and used to secure a license to do business in Philippines and operate as a:

• Philippine branch office that is commonly used for business process outsourcing (BPO) in Philippines with reasonable amount of capitalization;
• Philippine representative office, a non-income generating administrative office that could interact with local clients and US$30,000.00 initial capitalization or Philippine peso equivalent;
• Regional operating headquarters, a special service operating entity catering to related parties, taxed at 10%, and with initial capitalization of US$200,000.00 or Philippine peso equivalent; or
• Regional or area headquarters, a non-income generating administrative office in Philippines with initial capitalization of US$50,000.00 or Philippine peso equivalent.

Using a foreign corporation and securing license to do business in Philippines would require a board resolution to establish such legal business entity in the Philippines, audited financial statements of foreign entity, appointment of a Resident Agent, inward remittance of required capitalization to a temporary trust account for the purpose, and that corporate documents abroad will have to consularized or apostilled for use in Philippine registration of legal business entity. Tax implications could vary on the above operations and interactions with parent company abroad.

• Regular domestic corporation of natural persons – 2 – 15 persons for stock or nonstock corporations;
• Philippine subsidiary, if majority of voting shares of stock are owned by a foreign company abroad to the extend allowed; or,
• One person corporation (OPC), a single stockholder corporation with limited liability features.

Related documentary requirements executed in the Philippines normally requires notarization while if executed while signatories are abroad, then consularization or apostillement applies. III. Registering a partnership, a non-limited liability Philippine legal business entity of at least two (2) persons as partners for a particular trade or business and dividing profits among themselves IV. Registering a sole proprietorship with the Department of Trade and Industry, a solely owned business but without separate legal entity from the owner.

• Availing of Tax Incentives in Philippines. Normally, export oriented companies exporting at least 70% of output and located in an economic zone under Philippine Economic Zone Authority (PEZA) could avail for tax incentives – income tax holiday of up to eight (8) years and/or 5% gross income taxation. Application could be made simultaneously with SEC registrations.
• Securing Secondary License, if necessary. This applies to industries or businesses that are regulated under special laws like lending companies, banks, insurance companies, etc.
• Securing Import-Export Accreditation with Bureau of Customs for import/export business related to bringing into Philippines of goods for domestic trade.
• Registering Foreign Direct Investments with Central Bank of the Philippines is undertaken for government monitoring and servicing of foreign investments with foreign currencies for future repatriation of profits and capital.
• Securing alien employment permits (AEP), alien certificate of registration identification card (ACR i-Card), and immigration visas for expatriate employees working on your Philippine business entity.

Operational compliance – tax, accounting, corporate, reporting, etc. Registration with the above agencies comes with compliance with reporting, remittance, filings and renewals. You can have your own team deal with these or you can source out professional service providers for the purpose. About the author:

Garry is a Certified Public Accountant (CPA) and a law degree holder in tax practice for two (2) decades helping further taxpayers on securing BIR Rulings, appeal of BIR Ruling denials, company registrations in Philippines, tax compliance, tax savings, tax assessments, tax refunds, and other related professional tax services. He has likewise been helping out local and foreign investors/clients determine the most appropriate legal entity to register in the Philippines based on intended operations, the eventual registration of such legal business entity and other related professional services such as securing Ph Visa, payroll, and business consultancy. He was formerly with the academe and is presently a frequent speaker of Tax and Accounting Center, Inc. and other seminar entities.

Disclaimer: This is for purposes of academic discussions only as personally summarized by the author, not of Tax and Accounting Center, Inc. and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may also please send mail at info(@)taxacctgcenter.ph, or you may post a question at Tax and Accounting Center Forum and participate therein.