Company Incorporation in the Philippines

Company Incorporation in the Philippines Overview

The Philippines is one of the fastest-growing economy in the world with a GDP (Gross Domestic Product) growth rate of 5.6% moving faster than China, Vietnam, and Malaysia. Entrepreneurs see this as an opportunity for a company incorporation in the Philippines as it offers a receptive, transparent, and open market for businesses.

The Philippines is one of the best locations to set up a company due to its fast-forward infrastructure growth, English-speaking, competent workforce, low-cost workers, and various other government supports and tax incentives. Thus, it is considered one of the global hubs for company setup.

With the advancement in technology and massive industrial growth, businesses in the Philippines have evolved drastically. The agriculture sector is the most dominant business in the Philippines; however, plenty of opportunities are available in other sectors for Filipinos and expats.

Why is Company Incorporation important?

Company Incorporation is one of the mandatory procedures that businesses must go through to establish a legal business in the respective country so that they can legally operate their businesses there. For company incorporation in the Philippines, the applicants have to submit the necessary documents to the SEC (Securities and Exchange Commission) or relevant authorities, depending upon the type of business structure.

This process not only grants a company a separate legal entity from its owners but also allows it to engage in various commercial or business activities, provide employment, access financial resources from banks, etc.

Benefits of Company Incorporation in the Philippines

Expanding a business to a foreign country is indeed complex and troublesome at the same time, but with careful planning and guidance, one can obtain the benefits attached to it. Given below are some of the lists of benefits of company incorporation in the Philippines:

1. Protection from personal liability

In the Philippines, a corporation is treated as a separate legal entity, where no person is held liable but the corporation itself. A shareholder is not personally held liable for the debts and obligations of the corporation; he is responsible for the corporation's debt only up to the limit of his assets.

2. Tax Benefits

Significant tax benefits that corporations enjoy in the Philippines include flexibility in deducting fringe benefits and other expenses. Corporations can deduct the cost of salaries, bonuses, education benefits, and dependent care assistance.

3. Access to Capital

Incorporating your business in the Philippines is majorly advantageous and can result in great flexibility in raising capital; instead of borrowing money and making interest payments, one can raise capital by selling stock and other equity interests.

Government offices involved in Company Incorporation in the Philippines

The list of government offices involved in company Incorporation in the Philippines is as follows:

• The Securities and Exchange Commission (SEC)
• The Bureau of Internal Revenue (BIR)
• Department of Trade and Industry (DTI)
• Local Government Unit (Mayor’s Office)
• Social Security System (SSS)
• PAG-IBIG
• PhilHealth

What are the Types of Business Structure in the Philippines?

Before setting up a company incorporation in the Philippines, the applicant must know the correct types of business structure aligning with his business goals and objectives. Given below are the most common types of business in the Philippines:

1. Sole Proprietorship

It is the most common type of business that can be established by just one person. It can be owned by either Filipinos or Foreigners. However, if it is owned by a foreigner, it must have a capital requirement of $200,000 USD, and its business should not come under the Foreign Investment Negative List.

2. Partnership

This type of business is established by two or more people who obtain a separate legal entity from their respective partners.

3. Cooperative

A cooperative type of business is also commonly known as an autonomous and duly registered association of persons having a common interest joined voluntarily to achieve their social, economic, and cultural goals and needs.

Additionally, the capital requirement is P15,000, whereas, for multi-purpose cooperatives, the capital requirement is P100,000.

4. Cooperation

This type of business has a maximum of 15 people acting as a single entity. It can be either stock or non-stock. The capital requirement for a 100% Filipino-owned company is $100 or P5,000. For a company owned by 60% Filipinos and 40 % foreigners, the capital requirement is $100 or P5,000, and for a 40.01% to 100% foreign-owned company, the capital requirement is $200,000.

5. One-Person Corporation

A very special type of corporation with only one stockholder. The capital requirement for Filipino stockholders is $100 or P5000; for foreign stockholders with more than 60 % of the revenue coming from foreign sources, it is $100 or P5000. On the other hand, if the foreign stockholder has 60 % of their revenue generated from the domestic market, it is $200,000.

Eligibility Criteria for Company Incorporation in the Philippines

Every applicant or entrepreneur seeking company incorporation in the Philippines has to meet the given below important criteria:

1. A registered local office (in case of a corporate business structure).
2. There must be a minimum of five incorporators, either individuals or corporations, and one resident Filipino director (in case of a corporate business structure).
3. A reserved name and Articles of Incorporation.
4. A minimum paid-up capital depending on the type of business structure.
5. Directors must be at least 18 years old.

Business Incorporation Requirements in the Philippines

For company incorporation in the Philippines, it is important to meet the pre-conditions or requirements given below such as:

1. Two to Fifteen Directors or incorporators (majority needs to reside in the Philippines)
2. A minimum of four officeholders

1. President acting as the company’s signatory (not necessary to be a resident of the Philippines)

2. The Corporate Secretary must be a resident of the Philippines.

3. Treasurer must be a resident of the Philippines

4. Compliance officer

3. A minimum capital requirement of $ 200,000 (in case of more than 40% ownership is foreigners)
4. Certificate of registration with other Government Agencies, such as the Social Security system, Philippine Health Insurance Corporation, and Home Development Mutual Fund (for employer registration if employing an individual).
5. Treasurer’s Affidavit (signed by the incorporators for notarization).
6. Articles of Incorporation and by-laws
7. BIR registration certificate
8. Mayor’s Business Permit
9. 100% Filipino ownership has a minimum capital requirement of Php5000 or$100
10. Registration certificate from SEC.
11. Barangay clearance
12. Address Proof of applicant’s company’s local address (Certificate of Land Title or Lease Contract)
13. Valid Ids if required.

List of Documents for Company Incorporation in the Philippines

The list of documents for the company incorporation in the Philippines is as follows:

1. Application for Registration.
2. Copy of the document such as board Resolution
3. Notarised Articles of Incorporation
4. Verification slips of the company’s name
5. Tax Identification Number (TIN) of the Filipino
6. Tax Identification Number (TIN)of the principal and signatory.
7. Passport IDs of the Foreign Investors.
8. Valid IDs of the Incorporators.
9. Proof of the registered official address.

Process of Company Incorporation in the Philippines

Given below is the step-by-step procedure for obtaining company incorporation in the Philippines:

• An applicant shall reserve the business name with the SEC (Securities and Exchange Commission). In the case of a sole proprietorship before the DTI (Department of Trade and Industry,), if cooperative, then before the CDA (Cooperative Development Authority).
• Submit necessary documents such as Articles of Incorporation and By-Laws, treasurer's Affidavit.
• Followed by the opening of the corporate bank account in order to deposit the share capital.
• After submitting the above documents, an applicant will be issued a certificate of incorporation from the SEC legitimizing the applicant’s company's certain corporate rights in the Philippines.
• Next, obtain a registration certificate from the local government units of the location where the applicant wants to establish its company.
• Obtain a registration certificate from the Bureau of Internal Revenue (BIR) for corporate taxation, a certificate of Registration of Books of account and Cash Register machine (CRM), Point of Sale (POS) Machine, or Authority to print Receipt/ Invoices (Manual Receipts)
• Lastly, obtain a registration certificate as an employer from other government agencies.

Tax Structure for Company Incorporation in the Philippines

Setting company incorporation in the Philippines has to go through certain taxation in order to stay relevant in the Philippines; given below are the list of tax structures based upon the company structures:

1. Domestic Corporations

A domestic company in the Philippines is subject to tax on its whole income, whether inside or outside the country. Generally, a corporate income tax of 25% is levied on net income from all sources of domestic companies.

2. Resident Foreign Corporations

Resident foreign corporations engaged in the trade or any business in the Philippines are taxed similarly to domestic companies but only on income from Philippine sources.

3. Non-Resident Foreign Corporations

A non-resident foreign company in the Philippines is subject to a corporate income rate of 25% concerning the gross income derived from sources within the Philippines.

4. Double Tax Treaties

The Philippines has a double taxation treaty with many countries, such as the USA, the UK, Singapore, and Canada. These treaties give tax relief on the income of foreign or Philippine residents from sources in each other countries.

Cost of Registering a Corporation in the Philippines

The cost of registering a corporation in the Philippines, excluding the professional charges, is as follows:

1. For Domestic (local Filipino)

• One Person Corporation- Php 20,000
• Domestic Corporation-Php 35,000
• Ole Trader or Proprietor- Php 12,000

2. For Foreigners

• One Person Corporation (OPC)-Php 20,000
• Foreign Corporation- Php 45,000

Timeline for Company Incorporation in the Philippines

The estimated time taken for obtaining company incorporation in the Philippines is 45 days to 60 days, depending upon the complexity of the documentation and the applicant's readiness with the mandatory documents.

Why Choose Enterslice?

We have 20+ years of experience assisting entrepreneurs in their company incorporation, licensing, company establishment, and other legal compliances. Our journey is full of success stories that we achieved through these years by making the right decisions for our clients, aligning with their business goals and objectives. We provide our clients with an environment that is convenient and consistent for them. We work without friction and with the ties of trust and credibility.

Our experts offer easy and hassle-free Paperwork assistance with checklists and updated formats occasionally. Incorporating a cross-border company involves multiple compliances, which, when not appropriately followed, cause delays in the licensing process. Our legal team will help you in systematic compliance formulation along with time-to-time compliance support per the regulation changes.