Branch Office Registration in Philippines

What does a Branch Office mean in the Philippines?

A branch office is generally a registered local business entity or a subsidiary company responsible for carrying out the extended business activities of the head office. A branch office is held to be an extension of the head or parent office registered and operating in another country. A branch office registration in Philippines must comply with the laws of the Philippines which provide to possess the following attributes:

• It is not a separate legal entity from its parent company;
• The liabilities and debts of the branch office are held by the parent company;
• The business activities of the branch office are regulated by the parent company;
• It is subject to withholding tax;
• It is accountable for accruing income from the conduct of business activities in Philippines;

The eligibility criteria for branch office registration in the Philippines attract the following companies to expand their business in the Philippines. Foreign or overseas companies are eligible for branch office registration in Philippines.

Benefits of Business Expansion through Branch Office Registration in Philippines

Business expansion undergoes many challenges and compliances in the Philippines. The success rate of a business expansion through branch office registration in Philippines majorly depends upon the health and financial status of the parent company. The branch office registration in Philippines leads to business expansion due to reasons attracting foreign investors to invest in their business entity for reducing tax liability, forced labor, and other operational issues. The following benefits of business expansion through branch office registration in Philippines are below provided:

• The growing business environment of the Philippines (including the consumer market);
• The cost of doing business in the Philippines is comparatively low;
• The sole control is in the hands of the parent company;
• No legal requirement for a Board of Directors;
• Possess lower tax responsibility than the parent company;
• It is considered an ideal hub for business expansion (due to its strategic location);
• The Philippines economy comprises a highly skilled workforce;
• It has a simple administrative structure;
• Taxed only upon the income sourced from Philippines;
• The liability exceeding the investment of a branch office is transferred to the foreign parent company.

Legal Requirements for Branch Office Registration in Philippines

The first and foremost legal requirement for business expansion through a branch office registration in the Philippines must be secured only after the approval of the Securities and Exchange Commission, i.e., SEC of the Philippines. The process for the establishment of a branch office in the Philippines must pass the following requirements laid out by the SEC.

Appointment of a Resident agent

A branch office in the Philippines is mandatorily required to appoint a registered agent acting as a point of contact or signatory authority dealing with the government summons and lease agreement. A resident agent must possess the following legal features:

• Be a resident or citizen of the Philippines;
• Be a foreign national (with a valid Visa);
• Be a domestic corporation or an individual residing in Philippines;

The appointment of a resident agent of the branch office in the Philippines must be in consonance with a board resolution or an agreement executed by the Board of Directors of the foreign parent company. The resident agents are held accountable for accepting legal notices and establishing a legal chain of communication on behalf of the branch office.

Minimum Capital Requirements

The capitalization of a branch office in the Philippines generally depends upon the engagement of the extended company in the business market. The Republic Act No. 8179 of the Philippines lays provision for the minimum capital requirement for the branch office registration in Philippines limited at $200,000. In case any advanced technology determined by the Philippine Department of Science and Technology is directly deployed in the business, it reduces the bar of total capital requirement to $100,000 for the branch office in the Philippines. The capitalization requirement for a branch office engaged in export-oriented activities is limited to $100, i.e., 5,000 Philippine pesos. Further, a branch office carrying the retail business possesses a capital requirement of $500,000.

Registration of an Office Address

Every parent company aiming at branch office registration in Philippine must mandatorily have a registered address for office purposes. Proof of possessing a registered address must be produced by the branch office in the form of a Certificate of land title (if owning the property) or a contract of lease (if a rented property). The proof of the registered office necessitates the branch office registration with the Bureau of Internal Revenue, i.e., BIR, and Local Government Unit, i.e., LGU.

Ensure Proper documentation

The following list of documents is required for securing a business license to carry out the operations of the branch office in the Philippines:

• The proof of the legal existence of the parent company;
• SEC application form no. F-103;
• The facsimile of the board resolution providing for the branch office registration in Philippines;
• The facsimile of the certified board resolution of the parent company directing the appointment of the resident agent;
• The facsimile of the latest audited financial statement of the parent company;
• The facsimile of the duly executed articles of association and the by-laws of the parent company;
• The facsimile of the poof of capitalization in the branch office issued through a certificate of inward remittance or bank deposit;
• The facsimile of the parent company’s solvency affidavit duly executed by the resident agent of the branch office;
• The facsimile of the appointment acceptance letter of the resident agent;
• The certified copy of the name verification slip of the branch office issued under the aegis of the Trade Registrar of the Philippines;
• The facsimile of the registration data sheet;
• The facsimile of the endorsement or clearance from an appropriate government agency (if any).

Know the tax liability.

Compliance with the tax liability for the branch office in the Philippines is an important consideration. It is mandatorily required to apply for Bureau of Internal Revenue registration to obtain a BIR number, which mandates the payment of the following taxes:

• 12% as the Value added tax on its local sales;
• 25- 30% as the corporate income tax or the payroll tax for the income sourced from Philippines;
• 0%- 35% as the withholding tax on its employees’ compensation (varies according to the income of the employees);
• 15% as the branch office remittance tax on the profits accrued while operating the business in the Philippines.

Compliance with the labour laws

Every parent company aiming at the branch office registration in Philippines is mandatorily required to comply with the labour code of the Philippines. The Department of Labor and Employment ensures provision for employee benefits, minimum wage compliance, protection of labourers, equal work opportunity, etc., under the labour code of the Philippines.

Step-by-step procedure for Branch office registration in Philippines

The branch office registration in Philippine must be ensured through the issuance of a license providing for the conduct of business in the Philippines. The Securities and Exchange Commission of the Philippines is the authority responsible for issuing a license to do business for the branch office. The Securities and Exchange Commission of the Philippines requires the manual completion of several forms for timely processing of the registration of branch offices in the Philippines. The guidelines of the step-by-step procedure for branch office registration in Philippines are provided below:

Step 1: Branch office name reservation with the SEC

The foreign parent corporations must ensure the branch office name is reserved within the corporate registry of the Securities and Exchange Commission of the Philippines. The name of the branch office must contain the following features:

• It must not be offensive or derogatory;
• It must not contain any offensive or forbidden words;
• It must not resemble the name of an existing company;
• The overseas business name may be used if not registered.

The name reservation must be accompanied by a name reservation slip after the conduct of a name search by the SEC. The fees for the branch office name reservation costs nearly 40 Philippine pesos for every 30 days.

Step 2: Filing application for registration

The SEC Form no. F-103 comprising an application for branch office registration in Philippines must be duly filled out and signed by the Board of Directors of the foreign parent corporation. The information required for the timely filing of the application form includes:

• The name of the foreign corporation;
• The reserved business name for the branch office;
• The complete address of the parent company;
• The area of business operation;
• The complete details of the resident agent;
• The complete registered address of the branch office;
• The nature and purpose of the foreign parent company;
• The complete details of the present directors and officers of the foreign parent corporations;
• The details regarding the capital structure of the parent company;
• The verification details of the corporation.

Step 3: Issuance of the Certificate of Registration

The next step necessitates the payment of the registration fees and submission of the concerned documents to the main or branch office of the Securities and Exchange Commission for the issuance of the Certificate of Registration. The branch office within 60 days of receiving the license for doing business in the Philippines must deposit the marketable securities to the SEC.

Step 4: Post-Registration Requirements

The parent corporations registered in a foreign country must mandatorily ensure the post-registration requirements for legally licensing the branch office registration in  Philippines. The post-registration requirements fulfil the following criteria: 

Obtaining a Barangay Clearance Certificate

The issue of a Barangay Clearance Certificate from the Barangay Hall is mandatory to certify the locational setup of the branch office in compliance with the local zoning requirements.

Obtaining a Mayor’s permit and other licenses

Regulatory compliance for doing business in the Philippines can only be ensured after obtaining relevant business permits and other business licenses from the Local Government Units (LGU). The permits offered by the LGUs include the mayor's permit and other business permits granted from the local Mayor's Office and the City Hall's Business Permit and Licensing Office (BPLO), respectively.

Registration of BIR Certificate

The next post-registration requirement aims to register with the Bureau of Internal Revenue to obtain a BIR certificate that is mandatory for complying with the corporate tax obligations of the branch office in the Philippines.

Compliance with the financial mandates

The branch office in the Philippines is advised to open a bank account and deposit the inward remittance with either the Central Bank or the Bangko Sentral Bank of the Philippines.

Filing annual reports

The branch office registration in Philippines mandates filing the annual reports of the subsidiary company. The Securities and Exchange Commission and the Bureau of Internal Revenue are the authorities responsible for accepting the annual reports filed by the branch office in the Philippines.

Hiring of the Employees

The post-registration requirements mandate that foreign parent companies smoothly tackle the challenges faced during hiring and managing employees for the branch office in the Philippines. The hiring of the employees ensures a strong and effective team for supporting the legal and other requirements for the branch office registration in Philippines. The important factors that must be considered for ensuring a smooth process of employee management in a branch office are:

• Ensure hiring potential candidates by using various recruitment channels and hiring local recruitment agencies;
• Ensure conducting a proper interview for a thorough evaluation of the professional and educational background of the employees;
• Ensure adherence to the onboarding guidelines;
• Ensure establishing a chain of communication for proper management of the employees;
• Ensure competitive compensation and other relevant benefits are provided to the employees, etc.

Right Location for Branch Office Registration in Philippines

Choosing a preferred location is a crucial decision for the foreign parent companies aiming at the branch office registration in Philippines. The right location for the branch office is mandatory for recording the success rate. The following factors are relevant and must be considered while deciding the right location for the branch office in the Philippines:

Infrastructure Development

The foreign parent companies must look after the quality of the infrastructural development relevant for the branch office registration in Philippines. The infrastructure development in the Philippines is checked by ensuring the quality of proper roads, availability of internet connectivity, and the facility for public transportation.

Cost of Business Registration

The cost of branch office registration in Philippines is comparatively lower than other forms of business establishments in the Philippines. The fees of business registration of a branch office in Philippines as imposed by the Securities and Exchange Commission of the Philippines cost approx. 1% of the inward remittance of the foreign company which should not be less than 2,000 Philippine pesos.

Availability of Skilled Labour

Checking the availability of skilled labourers is an important factor required for choosing the right location for branch office registration in the Philippines. The skilled labourers of the Philippines must possess the following attributes:

• Must be quality-oriented;
• Must possess work ethics;
• Must have enthusiasm for new skills;
• Must be productive;
• Must possess a reputed degree;
• Must be highly trainable;
• Must have a profession with various skills, etc.

Business Landscape of the Philippines

The ease of doing business in the Philippines must be judged in consonance with the business landscape of the nation. The business landscape of the Philippines aims to provide a better business environment having the most dynamic economy with increasing urbanization, import and export activities, availability of government incentives for the business establishments, etc.

Accessibility of your Target Market

Considering the target market is necessary for the branch office registration in Philippines. Proper assessment of the target market must be carried out by the foreign parent companies aiming to extend their business operations in the Philippines. The target market must be accessed using several parameters that provide for the assessment or evaluation of the nature of the foreign parent establishment.

Other factors

Choosing the right place for branch office registration is also governed by certain other factors providing for the following:

• The cultural practices of the market of Philippines;
• The linguistic instincts of the Philippines's people and
• The availability of security measures for the employees.

Timeline for Branch Office Registration in Philippines

The timeline for branch office registration in Philippines after duly compliance with the regulations laid by the Philippine government agencies i.e., the Securities and Exchange Commission nearly ends at 3 to 4 weeks after duly filing the SEC Form no. F-103 for the branch office in the Philippines.

What services does Enterslice offer?

Enterslice is an independent law firm providing sustainable solutions to many business problems throughout the world. The services offered by Enterslice extend to approx. 100 countries. The foreign parent companies aiming for seamless branch office registration in Philippines may opt for the services of Enterslice. We simplify the process of branch office registration through the appointment of a serviced tax professional and a team of corporate lawyers with relevant knowledge regarding the business compliance regulations of the Philippines. We at Enterslice are committed to providing the following services:

• Guides the functionality of the branch office in the Philippines;
• Provides in-depth insights into the business landscape of the Philippines;
• Ensures mandatory document compliance for the branch office registration in the Philippines;
• Provides expert guidance for branch office the registration and management of branch offices in the Philippines;
• Provides clarity in accessing the insights of the local market of the Philippines;
• Assures incorporation according to the SEC guidelines;
• Assists in filing the corporate income tax for the branch office in the Philippines;
• Consultation with the Company Secretary and the Corporate lawyers;
• Assistance in reserving the business name of the branch office with the Securities and Exchange Commission of the Philippines;
• Assures timely updates upon the branch office registration in Philippines;
• Helps in determining the capital requirements relevant to obtaining a business license;
• Ensures timely processing of the registration paperwork, etc.