What is a domestic corporation?
A domestic corporation is a corporation that is registered and existing under Philippine laws. A domestic corporation can be Filipino-owned or foreign-owned. A domestic corporation registered in the Philippines with more than 40% of its shareholders being foreigners is considered a foreign-owned corporation.
How long does the incorporation take?
The process of incorporation usually takes two weeks to one month from the time the incorporation documents are submitted to the Securities and Exchange Commission (SEC). We will be asking you to provide us with the information needed to prepare the documents for incorporation. Once complete, we will provide you with the documents for your signature. Additional time should be allotted for those who will be signing from outside of the Philippines since the documents for incorporation should be authenticated by a Philippine consular officer.
Who can incorporate a domestic corporation?
Any person or a group of persons not exceeding 15 members, whether Filipino or foreign, may form a domestic corporation. Juridical entities like partnerships, associations or corporations may also form a domestic corporation.
What do I need to start a business?
a. Identify the Incorporators
Incorporator is the term used to describe a person forming the corporation and refers to the first shareholder or group of shareholders of a corporation. Generally, there are no nationality and residency requirements for incorporators. However, a foreign national is not allowed to own one hundred percent (100%) of the corporation if such corporation engages in areas restricted by Section 8 of the Foreign Investment Act and special laws.
b. Pick a company name
Under Philippine laws, a corporate name must be distinguishable from and must not be similar to any other corporate or partnership names already registered. Further, the corporate name must bear the suffix Corporation, Incorporated or their abbreviations, or “OPC” in case of One Person Corporations.
c. Identify the purpose of the Corporation
It is important for you to identify the corporate purpose as it determines the scope of the powers that your corporation may exercise. In addition to the powers conferred by law to corporations and those incidental to its existence, a corporation may exercise the powers that are expressly stated or can be implied from its purpose/s as stated in its Articles of Incorporation.
d. Choose the business type
- One Person Corporation
A One Person Corporation or OPC is a corporation composed of a single stockholder who may be a natural person, whether a Filipino or a foreigner, a trust or an estate. - Stock Corporation
Stock corporations are the most common corporate vehicle for persons establishing their businesses for profit. A stock corporation’s capital is divided into shares of stock representing partial ownership of the corporation. Stock corporations may offer these shares of stock to the public and may distribute the surplus profits of the corporation to its shareholders. - Nonstock Corporation
Nonstock corporations are created primarily for public good and welfare such as for charitable, religious, educational and social civic purposes. It does not issue shares of stock to its members and cannot distribute any profits to its members.
e. Set the authorized capital stock
Authorized capital stock refers to the maximum amount of shares of stock that a corporation may issue to raise capital for the corporation. There is no required minimum authorized capital stock, except as otherwise provided by law. In setting the authorized capital stock, bear in mind that the registration fees for incorporation is 0.2% of the authorized capital stock.
Who are the Directors and Trustees?
Directors are the persons who are responsible for corporate policies and the general management of the business affairs of the corporation for a stock corporation while Trustees manage a nonstock corporation. There are no nationality and residency requirements for directors and trustees. However, Directors are required to own at least one share in the corporation. The directors may be the incorporators too, however, only natural persons, may qualify as directors. Partnerships, associations or corporations forming the corporation cannot be directors.
What are the qualifications for the corporate officers of a domestic corporation?
The President must be a director while the treasurer and the corporate secretary must be residents of the Philippines. In addition, the corporate secretary must be a Filipino. The same person may not act as both president and corporate secretary or both president and treasurer at the same time.
How to register a One Person Corporation in Philippines?
These are what you need to register as a One Person Corporation in the Philippines:
a. Proposed business name
b. Corporate Purpose
c. Local business address for the proposed business
d. Corporate term
e. Business Contact Details
f. Capital Structure
g. Name of Treasurer
h. Name of Nominee
i. Name of Alternate Nominee
How to register a Stock Corporation in Philippines?
These are what you need to register a stock corporation in the Philippines:
a. Proposed business name
b. Corporate Purpose
c. Local business address for the proposed business
d. Corporate term
e. Business Contact Details
f. Date of annual meeting
g. Amount of authorized capital stock and Capital Structure
h. Name of the Incorporators/directors and their personal details
i. Name of Treasurer
How to register a Nonstock corporation in Philippines?
These are what you need to register a nonstock corporation in the Philippines:
a. Proposed business name
b. Corporate Purpose
c. Local business address for the proposed business
d. Corporate term
e. Business Contact Details
f. Date of annual meeting
g. Amount of its capital and Capital Structure
h. Name of the Incorporators/trustees and their personal details
i. Name of Treasurer
How to open a corporate bank account in Philippines?
The process and requirements in opening banks vary depending on which bank you wish to open your corporate account in. The most common requirements include Articles of Incorporation and By-laws, Certificate of Registration with the Securities and Exchange Commission and Board Resolution duly notarized empowering the corporation to open a bank account.
What taxes will a corporation pay?
a. Corporate Income Tax
Under the present taxation laws, all domestic corporations in the Philippines are subject to the corporate income tax rate of twenty-five percent (25%) on all its income from all sources within and without the Philippines. A corporation whose net income do not exceed Five Million Pesos (PhP5,000,000.00) and its total assets do not exceed One Hundred Million Pesos (PhP100,000,000.00) may avail of a lower corporate income tax rate of twenty percent (20%).
b. Value Added Tax
Under Philippine laws, any person who sells barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) at a rate of twelve percent (12%) of the gross selling price of the goods or gross receipts on services.
c. Withholding Taxes
Once a corporation hires employees, the corporation, as an employer, is mandated by law to withhold a portion of the wage of its employee as part of the latter’s income tax. In addition to this, Revenue Regulation 11-2018 requires corporations to withhold one percent (1%) from the income of its local supplier of tangible goods and two percent (2%) from the income of its local supplier of services.
Are there any other registrations that I need to secure to operate a business in the Philippines?
To comply with the requirements for the legality of business operations, corporations are required to register with the Bureau of Internal Revenue and secure permits from the Local Government Unit having territorial jurisdiction over the its business such as Barangay Clearance and Mayor’s Permit among others. We can assist you in securing the required permits and registrations in addition to corporate registration.
What is a foreign corporation?
A foreign corporation is a corporation formed, organized or existing under laws other than those of the Philippines.
Can foreign corporations do business in the Philippines?
Yes, a foreign corporation may engage in business in the Philippines after registration or obtaining a license to do business from the Securities and Exchange Commission.
As a foreign corporation, what business structure options do I have to do business in the Philippines?
a. Incorporate a domestic corporation
A foreign corporation may opt to create a domestic corporation formed and organized under Philippine laws which has a separate legal identity from its parent company but is wholly or partly owned by said foreign corporation.
b. Register a Branch Office
A Branch office of a foreign company is considered an extension of the parent company and carries out the business activities of the latter to derive income from the Philippines.
c. Register a Representative Office
Representative or liaison office is considered as an extension of the foreign corporation and deals directly with the clients of the parent acting as an information dissemination center, promote the parent company’s products or to conduct quality control of products. This corporate vehicle cannot be used if the aim of a corporation is to derive income from its local operations in the Philippines.
d. Register a Regional/Area Headquarters (RHQ)
A Regional/Area Headquarters is an office in the Philippines whose purpose is to act as an administrative branch of a multinational company engaged in international trade. This cannot also be used to derive income from local operations within the Philippines. It principally serves as a supervision, communications and coordination center for its subsidiaries, branches or affiliates in the Asia-Pacific Region and other foreign markets.
e. Register a Regional Operating Headquarters (ROHQ)
A Regional Operating Headquarters is a foreign business entity which is allowed to derive income in the Philippines by performing qualifying services to its affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific Region and in other foreign markets.
How long does it take to obtain a License to do Business?
It usually takes one to two months to obtain a license to do business from the time the documents are submitted to the Securities and Exchange Commission (SEC). We will be asking you to provide us with the information needed to prepare the documents. Once complete, we will provide you with the documents for your signature.
Is there a minimum capital requirement?
| Domestic Corporation with more than 40% equity – Domestic market Enterprise | USD 200,000.00 |
| Domestic Corporation with more than 40% equity – Domestic market Enterprise that a.) involves advance technology or b.) employs at least 50 direct employees | USD 100,000.00 |
| Domestic Corporation with more than 40% equity – Export Market Enterprise | Php 5,000.00 |
| Foreign Branch Office- Domestic Market Enterprise | USD 200,000.00 |
| Foreign Branch Office- Export Market Enterprise Market Enterprise | Php 5,000.00 |
| Foreign Representative Office | USD 30,000.00 |
| Regional Headquarters (RHQ) | USD 50,000.00 |
| Regional Operating Headquarters (ROHQ) | USD 200,000.00 |
Some industries also prescribe its own minimum paid-up capital before one can engage therein. A full list may be viewed through this link: https://www.sec.gov.ph/wp-content/uploads/2019/12/2015PR_MinimumPaidUpCapital.pdf
How to register a Branch Office or a representative Office in Philippines?
The following are the documents needed to obtain a license to do business in the Philippines as a Branch Office or a Representative Office of a foreign corporation?
a. Cover Sheet
b. Application Form
c. Authenticated copy of Board Resolution authorizing the establishment of the Branch/ Representative Office and designation of a Resident Agent, among others
d. Authenticated copy of the Articles of Incorporation/Partnership with English translation, if applicable
e. Financial Statements
f. Compliance with Financial Ratios
g. Notarized proof of Inward Remittance such as bank certificate
h. Resident agent’s acceptance of appointment
Note that all documents executed outside the Philippines should be authenticated by the Philippine Embassy or Consular Office at or nearest the place of execution.
How to register a Regional/ Area Headquarters or Regional Operating Headquarters in Philippines?
The following are the documentary requirements to open a Regional or Regional Operating Headquarters in the Philippines:
a. Cover Sheet
b. Name Verification Slip
c. Application Form
d. Certification from Philippine Consulate/Embassy or from equivalent office of the Philippine Department of Trade and Industry that said foreign firm is an entity engaged in international trade with affiliates in the Asia Pacific Region and other foreign markets
e. Authenticated Certification reflecting foreign entity’s governing body’s authority to establish its RHQ/ROHQ
f. Endorsement of the Board of Investments
Note that all documents executed outside the Philippines should be authenticated by the Philippine Embassy or Consular Office at or nearest the place of execution.
What is a resident agent?
Before a foreign corporation can be issued a license to transact business, it needs to appoint a resident agent in the Philippines. A resident agent is mainly responsible to receive summons, notices and other legal processes on behalf of the foreign corporation.
What is a certificate of inward remittance?
Obtaining a license to do business in the Philippines by a foreign corporation requires a showing of the appropriate capital infusion into the Philippines. This is evidenced by a certificate of inward remittance issued by a local/Philippine bank. Generally, local banks will require the foreign corporation to open a Treasurer-in-Trust-For (TITF) account in order to issue a certificate of inward remittance pending registration with the SEC. One the license to do business is issued by the SEC in favor of the foreign corporation, the bank will convert the TITF account to a corporate deposit account.
The Opening a bank account for foreign nationals especially as a non-resident is a tedious process which we can help with. We can lend representation upon your authorization to process the opening of a corporate bank account corresponding to your chosen business structure.
How to open a corporate bank account in Philippines?
The process and requirements in opening banks vary depending on which bank you wish to open your corporate account in. The most common requirements include Articles of Incorporation and By-laws, License to do Business issued by the SEC, and a Board Resolution duly notarized empowering the corporation to open a bank account. Note that the opening of a TITF account, which will later on be converted to a corporate deposit account requires that the treasurer is a resident of the Philippines. We can act as treasurer and assist with the documentation procedures.
As a foreign corporation doing business in the Philippines, what taxes will I pay?
a. Corporate Income Tax
If you choose to incorporate a domestic corporations, all of its income, from all sources within and without the Philippines, shall be subject to a tax rate of twenty-five percent (25%). If its net income do not exceed Five Million Pesos (PhP5,000,000.00) and its total assets do not exceed One Hundred Million Pesos (PhP100,000,000.00) it may avail of a lower corporate income tax rate of twenty percent (20%).
Foreign corporations who have established a branch office in the Philippines are taxed the same manner as domestic corporations but the tax shall only be applied to its income sourced within the Philippines.
Regional Operating headquarters (ROHQs) earning income from the Philippines are taxed 10% while Regional/Area Headquarters of multinational corporations that do not earn or derive income from the Philippines, and that act as mere supervisory, communications, and coordinating centers for their affiliates are exempt from corporate income taxation.
b. Value Added Tax
Under Philippine laws, any person who sells barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) at a rate of twelve percent (12%) of the gross selling price of the goods or gross receipts on services.
However, if the corporate structure you established is a regional headquarters, it shall be exempt from VAT. In the case of a regional operating headquarters, it shall be subject to a ten percent (10%) VAT.
c. Withholding Taxes
Once a corporation hires employees, the corporation, as an employer, is mandated by law to withhold a portion of the wage of its employee as part of the latter’s income tax. In addition to this, Revenue Regulation 11-2018 requires corporations to withhold one percent (1%) from the income of its local supplier of tangible goods and two percent (2%) from the income of its local supplier of services.
Are there any other registrations that I need to secure to operate a business in the Philippines?
To comply with the requirements for the legality of business operations, business entities are required to register with the Bureau of Internal Revenue and secure permits from the Local Government Unit having territorial jurisdiction over the its business such as Barangay Clearance and Mayor’s Permit among others.