Deciding on whether to establish a company in a foreign country is not an easy decision. Among the key factors to be considered are the risks, costs and requirements involved. In the Philippines foreign companies looking to register a business are faced with similar questions.
Here are some of the options foreign companies may consider when seeking to register a business in the Philippines:
Domestic Corporation is the country’s version of a subsidiary and it can be either Filipino or foreign-owned. Depending on the target market and ownership structure, the capitalization may vary starting from a minimum of Php 100,000.00 to a maximum of USD 200,000.00. A domestic corporation is authorized to earn income and is currently subject to 30% corporate income tax on the net income. It may seem complex to establish because it has to maintain a minimum of 5 to 15 directors and a few mandatory officers like Corporate Secretary and Corporate Treasurer but once you have these in place, you’ll have a very good jumping start.
An investor who wants to branch out his foreign operations in the Philippines may opt to register for a Branch Office and have it 100% foreign owned as long as it can provide the required operating capital of USD 200,000.00. This can be lowered to USD 100,000.00 by meeting one of SEC’s conditions when it comes to activities and target market. Unlike a Domestic Corporation, a branch office does not need to main a board of directors but instead, assign a resident agent who should be a Filipino or a Philippine resident. This resident agent will act as the branch office’s special point of contact say, for summons from government offices or as signatory for lease agreement. As with a domestic corporation, it is authorized to earn income and is currently subject to 30% corporate income tax.
From the word ‘representative’ itself, this type of structure is being established to merely ‘represent’ a parent company from abroad. A representative usually hires local employees to assist the parent company’s clients in the Philippines, to disseminate information and to establish a local presence for the parent company. The parent company should prepare USD 30,000.00 operating capital for the representative office to be registered. Like a branch office, a rep office only needs to maintain a resident agent who must be a Filipino or a Philippine resident to transact on behalf of the company. While it is not authorized to earn any income and is therefore not subject to any income tax, a representative office will still be required to submit mandatory periodic reports to the Bureau of Internal Revenue (BIR).
Do you want to know more about these major business structures? Feel free to contact Triple with the form below.
May 29, 2020 at 5:56 am
Hi , my boss has a company in California and he wants to have his branch in the Philippines. What is the procedure to lessen cost in putting up a foreign branch in the Philippines.
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