The Philippines is one of the Asian countries that are comparatively small but provides good opportunities for doing business and its growth. In this jurisdiction, such industries as manufacturing, agriculture, and infrastructure sectors are developed very well. The country is also investment-friendly. And if you consider it as your destination, your business endeavors may be realized here in one of these forms.
Major Forms of Legal and Business Presence
Business registration in the Philippines can be made by a non-resident in the next forms:
- Corporation – this is the most common form of doing local business where stockholders (from 5 and up to 15) are separated from this corporation itself. They also don’t bear any risks in excess of the value of shares owned. The entity may involve financing subject to compliance with certain legal conditions. The company is managed by the Board of Directors. The standard amount of chartered capital may vary depending on (i) the share of a non-resident, and (ii) the types of operations that will be carried out.
- One Person Corporation – as its title suggests, the entity may be founded and operated by one person only and is legally separated from such a stockholder. The standard amount of its capital also varies depending on the types of operations that will be carried out. The percentage of income sourced from the Philippines also should be taken into account during the determination of the entity’s further amount of chartered capital.
- Branch Office – a form available for doing business for a foreign company provided that in the Philippines will be carried out the same types of business activities as abroad. A branch office doesn't have a separate legal personality and should be registered. A minimum capital of USD 200,000.00 is required in this case.
- Representative Office – this is an option that doesn't foresee any income-generation activities but may be suitable for a foreign company to carry out promotional activities and market research in the Philippines. It is required to transfer at least USD 30,000 per year to maintain the activities of the representative office in the Philippines.
Registration Requirements and Steps
Company formation in the Philippines requires passing these incorporation steps:
- Defining your business priorities.
- Choosing and reserving a business name for a future enterprise.
- Collecting details about the entity's shareholders and managers.
- Arranging the registered office.
- Opening a bank account for the initial capital deposit.
- Drafting constituent documents and registration forms for a future entity.
- Submitting the completed set of required documents for the registration.
- Registration for tax and social security purposes.
- Carrying out a clearance in the respective barangay (this is how districts in the Philippines are called) where your business will be operating.
- Obtaining licenses and permits that may be required for certain types of business activities.
Legal and Regulatory Framework
This jurisdiction offers lots of opportunities for doing business both locally and worldwide. The local government ensures a simple and straightforward process of company formation and lots of incentives for investors, including tax.
Principal legal acts in the area of doing business are the Corporation Code of the Philippines, the Foreign Investment Act, and the Securities Regulation Code. Major state authorities foreign investors may deal with while carrying out their activities in the Philippines are the Department of Trade and Industry, the Securities and Exchange Commission, the Bureau of Internal Revenue, and the Department of Labor and Employment.
Tax System of Philippines
Setting up a company in the Philippines and its further operation should be made taking into consideration the following tax highlights:
- Corporate income tax rate – 25%;
- Personal income tax rate – 35%;
- Value-added tax rate – 12%;
- Withholding tax rates (for non-residents) – (i) dividends – 15% or 25% (ii) interests –20% (iii) royalties – 25%;
- Capital gains tax rates – may vary depending on the type of transactions and their value.
Advantages of the Jurisdiction
Company formation in the Philippines may turn out to be a beneficial project taking into account the following advantages this jurisdiction offers:
- The state demonstrates stable economic growth.
- This jurisdiction is open to investors, startups, and innovations.
- Company registration in the Philippines may be carried out without visiting the country, online, through the Electronic Simplified Processing of Application for Registration of Company (eSPARC).
- Costs for the company’s further operation are comparatively low.
- Availability of tax incentives for investors (tax holidays, reduced customs duties) for certain businesses (IT, hospitality projects, medical tourism, etc.).