Starting a business in the Philippines can be an exciting venture, especially for foreign entrepreneurs. This guide will walk you through the steps required to register your company and comply with local regulations.
1. Understanding Domestic Corporations in the Philippines
A domestic corporation is an entity incorporated under Philippine laws, operating within the country, and subject to local regulations and taxation. Foreign investors can own shares in these corporations, with ownership structures varying based on the percentage of foreign equity.
2. Foreign Ownership Regulations
The Philippine Foreign Investments Act of 1991 outlines the permissible foreign ownership in domestic corporations:
• Up to 40% Foreign Equity: Foreigners can own up to 40% of a domestic corporation without significant restrictions.
• More than 40% Foreign Equity: Ownership exceeding 40% is allowed but may be subject to limitations or prohibitions, especially in industries listed in the Foreign Investments Negative List (FINL).
3. Minimum Capital Requirements
The required minimum capital varies based on the level of foreign ownership:
• Up to 40% Foreign Equity: Approximately PHP 5,000 (USD 100).
• More than 40% Foreign Equity: Approximately PHP 4,800,000 (USD 200,000)
4. Steps to Register a Domestic Corporation
a. Verify Business Name Availability
• Securities and Exchange Commission (SEC): Ensure your proposed business name is unique and complies with SEC guidelines.
b. Prepare Incorporation Documents
• Articles of Incorporation and By-Laws: Detailing the corporation’s structure, purpose, and operational guidelines.
• Treasurer’s Affidavit: Certifying the capital has been duly subscribed and paid.
c. Register with the SEC
• Submission: File the incorporation documents with the SEC.
• Processing: The SEC has implemented the Electronic Simplified Processing of Application for Registration of Company (ESPARC) to expedite the registration process.
d. Obtain a Tax Identification Number (TIN)
• Bureau of Internal Revenue (BIR): Register to secure a TIN and comply with tax obligations. e. Secure Local Business Permits
• Mayor’s Permit: Obtain from the local government unit (LGU) where the business will operate.
• Barangay Clearance: Acquire from the barangay (village) office.
5. Additional Requirements for Foreign Investors
• Foreign Investment Application: Submit to the SEC if foreign equity exceeds 40%.
• Proof of Inward Remittance: Demonstrate that the foreign capital has been remitted to the Philippines.
• Resident Agent Appointment: Designate a Philippine resident to act on behalf of the corporation.
6. Recent Reforms and Simplifications
The Philippine government has introduced measures to simplify business registration:
• Philippine Business Hub (PBH): A one-stop online platform reducing the registration process to a single step, completed within seven days.
• Ease of Doing Business Act: Legislation aimed at reducing bureaucratic red tape and expediting government transactions.
7. Tax Incentives and Benefits
Foreign investors may be eligible for tax incentives, especially if investing in priority sectors or regions. Consulting with local investment promotion agencies can provide insights into available benefits.
Conclusion
Establishing a domestic corporation in the Philippines as a foreign investor is now more accessible due to recent reforms. By adhering to the outlined steps and staying informed about regulatory changes, you can successfully set up and operate your business in the Philippines.
For personalized assistance and to navigate the registration process seamlessly, contact PSO Makati Accounting Firm today. Or call at +63 9275080210.
