The Republic of the Philippines is located in Southeast Asia, making it a convenient strategic springboard for international trade and commerce. Its stable economy, sizable domestic market, and loyal policies to attract foreign investment make it a natural magnet for global capital. Non-residents can take advantage of these advantages by setting up a company in Manila or any other city in the Philippines. The English-speaking language environment and the high level of literacy of the local population make it easy to do business. Registering a company in the Philippines is a promising prospect and greatly enhances business opportunities.
Advantages of registering a company
- favorable tax and investment rules;
- convenient geographic location;
- low labor costs;
- well-developed infrastructure;
- large domestic market.
Main forms of legal presence and doing business
- Domestic Corporation (DP);
- One Person Corporation (OPC);
- Philippine Branch Office (PBO);
- Philippine Representative Office (PRO);
- Regional Headquarters (RHQ);
- Regional Operating Headquarters (ROHQ).
A local corporation is one of the most common forms of business among foreigners. Establishing a company in the Philippines as a DP gives entrepreneurs similar advantages as an LLC or PLC. However, not all such firms are allowed full foreign ownership. In addition, there are different requirements for the minimum amount of share capital.
Foreigners who own an existing foreign enterprise may open a business in the Philippines as a subsidiary or a branch. In this case, the company will be considered local. If the income from export operations exceeds 60% of gross sales, such an entity may be called an Export Enterprise under the Foreign Investments Act.
Registration procedure
- reserve a unique name with the Securities and Exchange Commission (SEC);
- register a business in the Philippines with the SEC;
- obtain a barangay admission (the smallest administrative unit in the country) and a business permit from the Local Government Unit (LGU);
- receive a certificate of incorporation from the Bureau of Internal Revenue (BIR);
- to open a bank account;
- obtain the necessary licenses and permits to run a business.
Legislation and regulatory environment
The main legal act regulating the activity of entrepreneurs in the country is the Foreign Investment Law. In addition, before establishing a company in the Philippines, an entrepreneur should read the Foreign Investment Negative List (FINL), which imposes restrictions on the participation of foreigners in certain areas.
The Corporate Code includes information on the regulatory mechanisms for companies and the distinguishing features of various company types.
The Intellectual Property Code of the Philippines defines the registration of patents, trademarks, and copyrights.
The National Internal Revenue Code (NIRC) contains essential information on the payment of taxes. The Local Government Code of the Philippines governs local taxation.
The state protects resident businesses from unfair foreign competition and trade practices, as the Philippine Constitution states.
Tax system
- corporate tax - 25%;
- PIT - 35%;
- VAT - 12%;
- tax on dividends - 0% (for residents), 15%, or 25% (for non-residents).
To set up a company in the Philippines, it is crucial to have a deep understanding of the local taxation system. This is because certain exemptions and incentives can significantly reduce the tax burden on your business. For instance, export-oriented companies or involved in strategic activities under the Strategic Investment Priorities Plan (SIPP) can benefit from preferential treatment. Specifically, they can receive corporate tax exemptions for a duration of 4 to 7 years, followed by special tax conditions in the form of:
- reduced duties on capital equipment, spare parts, and accessories;
- exemptions from port fees, export taxes, and charges;
- deductions from taxable income;
- zero rates of VAT.
Buying a company in the Philippines is much more profitable if it is located in one of the special economic zones, of which there are several in the country (PEZA, SBMA&CDC, ZEZA, PIA, ASEZA). The tax preferences applicable in these territories differ depending on the nature of activities and the place of commercial registration.
Open a business in the Philippines: how Aotopay lawyers can assist
The Republic of the Philippines has created an attractive environment for foreign investors to conduct successful business there. However, to take advantage of all the available benefits, it is necessary to study the specifics of local organizational forms and learn about their opportunities. Besides, the business owner has to understand existing restrictions on types of activities and specifics of taxation.
Aotopay lawyers will support you to buy a business in the Philippines or create a new company per your interests. We provide client-oriented solutions, assist with the paperwork and organization of the start-up. In addition, our specialists can be entrusted with annual company maintenance and accounting.