Identifying the type of business that will fit the market is mostly the focus of a start-up entrepreneurs. Sometimes, identifying the type of the entity structure are not considered fully on the initial stage resulting to a more serious business issue in a long-run. Following are the options of legal entity that could be available for your intended Philippine operations:
I. Local corporation – limited liability corporation
II. Foreign corporation secure License to do Business in the Philippines
III. Sole proprietorship – single owner but not limited liability
Our team has worked with a number of clients both local and foreign in identifying the best entity structure with respect to such factors as capitalization, extent of foreign ownership, tax implications, and other related matters before registering their companies with the SEC.
A domestic corporation in the Philippines is a limited liability type of business entity that is organized and existing in the Philippine under the Revised Corporation Code or Republic Act No. 112321 (superseding Corporation Code of the Philippines (Batas Pambansa Bilang 68). This could operate any type of legitimate business declared in its purpose or purposes of registration such as but not limited to the following areas:
It is a limited liability company and its stockholders could only be held liable to the extent of its contribution. It can be registered by at least two (2) to fifteen (15) incorporators who could be a natural or juridical person and not necessarily citizen or resident of the Philippines to the extent allowed by law, and a reasonable capitalization, unless required by special law based on intended operations in Philippines.
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One Person Corporation (OPC) in Philippines
One Person Corporation in Philippines under the Revised Corporation Code or Republic Act No. 112321 (superseding Corporation Code of the Philippines (Batas Pambansa Bilang 68) is a limited liability corporation the same as regular corporation established by a single stockholder (citizen or non-citizen) a single stockholder for any lawful business in the Philippines. The single stockholder acts as a Director and President, and could even act as Treasurer, through he would need to put-up a bond.
Foreign Corporations are allowed to establish Philippine subsidiaries for the sale of their goods and services in the Philippines. A Philippine Subsidiary is actually a domestic corporation in the Philippines that is organized and existing in the Philippine under the Revised Corporation Code or Republic Act No. 112321 (superseding Corporation Code of the Philippines (Batas Pambansa Bilang 68) but is owned or controlled by a foreign corporation or multinational company abroad. This could operate any type of legitimate business declared in its purpose or purposes of registration to the extend allowed by Philippine foreign investment laws, rules and regulations.
Philippine Branch Office
A Philippine Branch is a legal entity abroad that is provided by the Securities and Exchange Commission (SEC) by a License To Do Business in the Philippines on areas similar to the operations abroad that is allowed for 100% foreign investments in the Philippines.
Regional Operating Headquarters (ROHQ)
Regional operating headquarters (ROHQ) in the Philippines is a legal entity abroad that is provided by the SEC a License To Do Business in the Philippines to render specific services to subsidiaries, branches, and affiliates within Asia Pacific Region and abroad. With the limited operations, it is provided with tax and other incentives such as 10% income tax on taxable net income instead of the regular 30%.
Regional Area Headquarters (RAHQ)
Regional Area Headquarters (RAHQ) a legal entity abroad that is provided by the SEC a License To Do Business in the Philippines as an administrative office and coordination center in the Philippines of its subsidiaries, branches, and affiliates in the Asia Pacific Region and abroad. It a cost center and is not allowed to earn income so not subject to income tax and value added tax, but a withholding agent in its income payments subject to withholding tax.
Philippine Representative Office
A Philippine Representative Office a legal entity abroad that is provided by the SEC a License To Do Business in the Philippines as its representative in the Philippines in dealing with the local clients of its head office with regards to client orders, information dissemination and promotional activities, quality control, and other administrative works for its head office. This is also a cost center and not allowed to earn income so not subject to income tax and value added tax, but a withholding agent in its income payments subject to withholding tax.
Foundations and Non-stock Non-Profit Company Philippines
A foundation or a non-stock non-profit entity to engage in charitable, religious, scientific, or cultural activities could be of local origin or that of foreign. In either case, it is required to register with the Securities and Exchange Commision (SEC) and other government agencies. By the nature of its operations and upon qualifications with the established rules, they are exempted from payment of income tax and other taxes.
Tax Authority Registration and Renewal
The SEC would assign a tax identification number (TIN) from the Bureau of Internal Revenue (BIR or Tax Authority) that the Philippine Subsidiary should formalize its registration upon payment of annual registration fees (BIR Form No. 0605), documentary stamp tax (DST) for the shares subscribed, and other documentations. The Tax Authority will register the company, its books of accounts – manual books/ loose-leaf books of accounts/ accounting software/ computerized accounting system, and its official receipts or commercial invoices.
Annual payment of BIR registration must be complied with not later than every 31st of January of the year following.
Business Permits and Licenses Registration and Renewal
The Philippine Subsidiary is likewise required to secure business permits and licenses from the city or municipality covering the place of its business address. Government and permits fees are normally imposed on business permits, community tax certificates, barangay clearance, fire permit, occupancy permit, and the likes.
Annual renewal of Business Permits should not be later than every 20th of January of the year following.
Employee Welfare Registrations
The Philippine entity as an employer will likewise be required to register with the following government agencies:
Application forms containing employer and employee details along with some documentations will be required for the registration.
Registration with Bangko Sentral ng Pilipinas (Central Bank of the Philippines)
Foreign direct investments are normally encouraged to be registered with the Central Bank of the Philippines for monitoring purposes and for purposes of securing foreign currencies from financial institutions to be used for repatriation of capitalization and earnings. Registration of foreign loans is likewise encouraged for almost the same purpose.
Tax incentives in the Philippines could come in various ways and could be by virtue of varying special laws passed by Congress from time to time. As a special consideration to specific industries or businesses, grant or availment of these tax incentives in the Philippines are based on certain qualifications and criteria. Common forms of tax incentives are as follows (non-all inclusive):
Your intended operations could be entitled to some incentives in the Philippines such as income tax holiday (ITH) for six (6) years under pioneer status or four (4) years for non-pioneer status based on the Investments Priorities Plan (IPP), 5% gross income tax under Philippine Economic Zone Authority (PEZA), and other related government incentives applicable, including non-fiscal incentives.
Our team can provide professional assistance in determining qualification of such tax incentives, preparation of related documentary requirements, and securing related registrations with such government agencies for the tax incentives.
Under the Revised Corporation Code (RCC) or Republic Act No. 112321, a Corporate Secretary of a domestic company in the Philippines must be a Filipino Citizen and a resident of the Philippines. A Corporate Secretary is a mandatory officer in the Philippines and does not need to be a stockholder or a director, but cannot be held by one acting as President at the same time.
A Corporate Secretary in Philippines normally performs the following functions:
Our para-legal team and legal consultants can provide professional assistance on matters related to Corporate Secretarial works.
We can likewise assist in processing other corporate changes such as transferring shares of stock, change of directors, and other material corporate changes.
Registering a local corporation in the Philippines or using your foreign corporation and registering with Securities and Exchange Commission (SEC) in Philippines to secure License to do Business in the Philippines (e.g. doing business as Philippine branch, Philippine representative office, regional or area headquarters (RAHQ), regional operating headquarters (ROHQ)) may take sometime to complete documentation, secure SEC approval, open bank account, secure permits and licenses, and other related processess.
One option to fast track setting-up your intended Philippine operations is buy-out of shelf company in the Philippines. This are local corporations that are already registered with SEC Philippines, with regular bank accounts, and other government agency registrations that you can immediately operate. With this Philippine shelf company, you can right away contract for office space, hire employees, enter other required contracts, and commence your operations.
We do have a list of these Philippine shelf companies available for buy-out. Upon buy-out, our team will prepare documents of transfer ownership and update General Information Sheet (GIS) to reflect new ownership with SEC public records, and process other related changes with the government agencies such as corporate name, address, capitalization, and etc.
Under the Revised Corporation Code or Republic Act No. 112321, foreign corporations applying for license to do business in the Philippines (e.g. doing business as Philippine branch, Philippine representative office, regional or area headquarters (RAHQ), regional operating headquarters (ROHQ)), are required by the Securities and Exchange Commission (SEC) to appoint a resident agent in the Philippines. A resident agent could either be a resident individual in the Philippines (who must be of good moral character and of sound financial standing) , or domestic corporation lawfully transacting business in the Philippines (of sound financial standing and of good standing with the SEC in Philippines). It is upon the Resident Agent of a foreign corporation doing business in the Philippines upon whom summons and other legal processes may be served in all actions or other legal proceedings against such foreign corporation doing business in the Philippines, for and in behalf of the foreign corporation doing business in the Philippines. Failure to appoint or maintain a Resident Agent is a ground for revocation of license to do business in the Philippines by the SEC.
Our team could act as professional Resident Agent in the Philippines of your foreign corporation doing business in the Philippines or registering with the SEC to secure license to do business in the Philippines (e.g. doing business as Philippine branch, Philippine representative office, regional or area headquarters (RAHQ), regional operating headquarters (ROHQ)) and act as such accordingly, such as the following:
In case you need to change Resident Agent in the Philippines from your current one to a new one, our team could provide professional assistance in securing approval of the Securities and Exchange Commission of such change of resident agent in the Philippines.
For foreign investors and other freelances registering in the Philippines, we could provide a virtual office for purposes of registrations with related government agencies. The service would normally entail managing mails and timely forwarding them to authorized company representatives.
Registering a local domestic company or subsidiary under the Revised Corporation Code or Republic Act No. 112321 under would require at least two (2) incorporators (previously, five (5) incorporators who are natural persons, majority of whom are residents of the Philippines under the Corporation Code or B.P. Bilang 68) and normally acts as directors who shall exercise of corporate powers, conduct all business, and control all properties of the corporation in the Philippines. As a member of the Board of Directors, a nominee director in the Philippines could be held personally liable for such deeds and acts as a member of the Board of DIrectors.
Our team can provide such nominee directors in the Philippines in compliance with applicable rules under the Revised Corporation Code of the Philippines and in accordance with the provisions of Anti-Dummy Law. As nominee directors in the Philippines, we shall act as follows:
Further, under the rules on One Person Corporation (OPC) in the Philippines under the Revised Corporation Code, the single stockholder shall designate a nominee and and alternate nominee who shall take the place of single stockholder in case of its death or incapacity and manage corporate affairs for the time being.
We can also act as nominee or alternate nominee stockholder for your One Person Corporation in the Philippines and act accordingly in accordance with the provisions of the Revised Corporation Code of the Philippines.
We understand the ups and downs of setting-up a new legal entity in the Philippines and have our team willing and ready to provide professional assistance on such other matters related to the setting-up of the business in the Philippines until such time that full operations are achieved.
Our team along with our network of other professionals could provide professional assistance on other areas of necessity to business operations.
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