Philippines’ quickly developing economy and administrative changes attract foreign investors from everywhere throughout the world. In February 2019, Rodrigo Duterte, the President of the Philippines, signed the Republic Act No. 11232 that simplified foreign company registration.
This article will guide you with the top things you need to know if you’re looking into company registration in the Philippines.
How to set up a local company in the Philippines with foreign shareholdings?
The most well-known legitimate company type for foreign nationals is a local company with foreign shareholdings.
Before the amendments, foreign company registration needed to be comprised of at least five incorporators. However, the New Corporation Code eliminated the minimum number of incorporators and now permits to build up partnerships in the Philippines even with one investor.
This investor can either be a:
A domestic corporation with one investor is a One Person Corporation. There is no minimum capital for One Person Corporations. In any case, corporations with one shareholder/investor are still subject to the minimum capital requirement and the Foreign Investment Negative List (FINL).
Every company, specifically corporations, requires at least three officers such as a president, secretary, or a treasurer.
Out of these three, only the Corporate Secretary must be a Filipino citizen. The Treasurer must be living in the country. A foreign national who doesn’t reside in the Philippines can be a president; however, the President must hold at least one share.
The base capital requirement in the Philippines
The base capital prerequisite for setting up company in the Philippines relies upon your business activities and the level of foreign proprietorship. At least 25% of the contributed capital should be paid-up capital.
The general base capital requirement in the Philippines for domestic corporations with more than 40% of foreign shareholding is USD 200,000.
As for local corporations with less than 40% of foreign ownership, it can start at PHP 5,000 (~US$100).
What are the types of business for foreign companies in the Philippines?
Most business lines in the Philippines are available to foreign ownership as long as the relevant base capital requirement is fulfilled.
However, for certain business lines, the percentage of the permitted foreign ownership is regulated by the Foreign Investment Negative List (FINL). Additionally, remember that joint endeavors with local partners are still subject to the negative list.
The current, 11th Foreign Investment Negative List is less prohibitive than the past one. Among these, the 11th FINL now permits full foreign ownership in these five business classifications:
- Internet business
- Wellness centers
- Teaching in higher education
- Training centers outside the formal education system
- Adjustment companies, lending companies, financing companies, and investment houses
What are the steps for foreign company registration in the Philippines?
- Securities and Exchange Commission
- Company name verification
- Preparation and registration of incorporation documents
- Acquisition of Community Tax Certificate
- Business permit and employment registration
- Barangay or District clearance
- Issuance of the business permit
- Registration of your employees with the social security system, health insurance, and Home Development Fund
- Bureau of Internal Revenue
- Tax registration
- Purchase of accounting books
- Printing of receipts and invoices
- Stamping of papers and receipts
Processing time for a foreign company registration usually lasts for 2-3 months.
What are the other options for foreign company registration in the Philippines?
Another approach to foreign company registration in the Philippines is to open a branch. Branches can work together and generate income in the Philippines. However, it can’t take part in any activities included on the Foreign Investment Negative List.
The base capital requirements for branch offices are equivalent to foreign companies– US$ 200,000.
As a branch office is viewed as an expansion of the parent company, it doesn’t need separate executives or corporate officials. It does, in any case, require a resident agent. If the individual is a foreign national, he/she must have a work permit in the Philippines.
Representative offices in the Philippines can’t participate in any business activities nor earn any revenue. However, they can provide client service, conduct market research, and promote their company’s products.
Representative offices are also ideal for foreign companies who would like to register their products in the Philippines but do not want to deal with the distributors yet.
Ready to start with your foreign company registration in the Philippines?
Starting right means setting a foundation for your business growth. If you have more questions, contact us at Yap, Kung, Ching & Associates as you are always assured of receiving expert and top-notch legal service every step of the way.
Yap and Associates is a complete service law office in Makati City, near BGC, Taguig. Our lawyers in the Philippines are adept in handling business registration, corporate, tax, labor, and civil cases for your foreign company registration in the Philippines.