Starting a business in the Philippines can be a fruitful experience. Located in the heart of Southeast Asia, the Philippines has a large potential of becoming a gateway for your company to penetrate the lucrative Asian market. 

With a simplified approach to company registration, we offer end-to-end assistance to foreign entities wishing to incorporate or expand into the Philippines. Our services range from company incorporation, corporate secretarial work and corporate housekeeping to application for secondary licenses or permits, corporate restructuring, and general compliance work.

Types of Business Entities in the Philippines For Foreign Investors

Before starting a business in the Philippines, it is important to acquaint yourself with different business entities. This will help you assess which business entity caters to your business needs. 

There are six different business entities that foreign investors can choose from:

Foreign entities are required to register with the Securities and Exchange Commission (SEC) to be legally allowed to operate in the Philippines. SEC is the government agency responsible for regulating new and existing corporations in the country. 

Domestic Corporation

A domestic corporation is one of the most common business entity types that foreign investors register in the Philippines. Similar to a Limited Liability Company (LLC), a domestic corporation incurs its own liabilities and is legally responsible for the payment of its obligations. This limits the liability of shareholders only to their capital contribution.

Foreign-owned corporations are allowed in the Philippines. However, they are subject to restrictions depending on the type of industry listed in the government’s Foreign Investments Negative List (FINL). 

When setting up a domestic corporation in the Philippines, investors are required to accomplish and submit the following documents to the SEC:

• Certificate of Registration (obtainable from the SEC)
• Articles of Incorporation and By-laws
• Treasurer’s Affidavit
• Bank Certificate showing the paid-up capital
• Registration Data Sheet
• Endorsements / Clearances from other government agencies (if applicable)

Additionally, the SEC requires a minimum of two incorporators for domestic corporations, each of whom must be actual persons and must hold at least a single share in the company.

The minimum capital requirement will depend on its source of revenue, which can be any of the following:

• Export-Market Enterprise – if at least 60% of the company’s revenues are generated from overseas, the minimum paid-up capital is US$100.
• Domestic-Market Enterprise – if more than 40% of the company’s revenues are generated within the Philippines, the minimum paid-up capital is US$200,000.

One Person Corporation

Upon revising the Philippine Corporation Code in February 2019, the government introduced the One Person Corporation (OPC) business structure, a new entity made to support the growing sector of micro, small, and medium enterprises (MSMEs) in the Philippines. 

An OPC is a type of corporation with a single stockholder who shall also be the sole director and president. It offers the full authority and control of a sole proprietorship. This type of business entity is ideal for aspiring entrepreneurs planning to run a corporation on their own without the associated risks of incurring personal liabilities and having business partners.

The single stockholder can be a natural person of legal age, a trust, or an estate. A foreign natural person can also set up an OPC, provided they engage in areas of investment not restricted from foreign participation. 

Similar to a domestic corporation, an OPC is also required to obtain a Certificate of Registration from the SEC. Moreover, foreign investors are required to accomplish the following documents to be able to register as an OPC:

• Articles of Incorporation, including:
  • Names and details of the single stockholder
  • Primary purpose
  • Term of existence
  • Principal office address
  • Nominee and alternate nominee
  • The authorized, subscribed, and paid-up capital
  • Other matters that are consistent with the law and may be necessary and convenient
• Consent in writing from the Nominee and Alternate Nominee
• Other requirements (if applicable by case)
  • Foreign Investments Act (FIA) Application Form (for use by foreign natural persons)
  • Passport Number or Tax Identification Number (TIN) for a foreign director

Unlike other corporations, OPCs offer numerous advantages for businesses, such as the omission of a minimum authorized capital stock, except as otherwise provided by law. Further, unless stated by applicable laws or regulations, no portion of the authorized capital is required to be paid up at the time of incorporation.

Branch Office 

A Branch Office is a revenue-generating entity that carries out the business activities of its foreign parent company into the Philippines. It does not have a separate legal entity from its parent company, and the head office incurs its liabilities from abroad.

The minimum paid-up capital of a branch office is US$200,000.00, but can be reduced to the following:

• US$100,000.00 (if it will engage in business activities involving technology or employ at least fifty [50] direct employees)
• US$100.00 (if it seeks to be an Export-Market Enterprise that generates income overseas)

Representative Office

A Representative Office is a non-income generating entity that a foreign company can set up in the form of a back office or contact center where they can delegate their administrative and technical operations, such as:

• promote company services/products
• facilitate client orders from abroad
• perform quality control of products for export

It does not have a separate legal entity from its foreign parent company, and the head office incurs its liabilities from abroad. As a non-income generating entity, it is not allowed to offer services to clients or third parties in the Philippines.

The minimum capital requirements of a representative office are US$30,000.00, which shall be annually remitted by the parent company to support operating expenses.

Regional Headquarters (RHQ)

A Regional Headquarters (RHQ) is a non-income generating entity that can only be set up by foreign corporations with subsidiaries, branches, and/or affiliates worldwide. It can be established as a contact center or back office to supervise, inspect, or coordinate the administrative functions of the aforementioned entities.

An RHQ undertakes activities that shall be limited to acting as a supervisory, communication, and coordinating center for its subsidiaries, affiliates, and other branches. Under conditions allowed by law, it may source raw materials, market products, train employees, and/or conduct research and development in the Philippines.

Under Philippine laws, an RHQ is prohibited from performing the following:

• ❌ generate income or offer services to third parties in the Philippines
• ❌ manage the operations of its subsidiaries, branches, and/or affiliates
• ❌ deal directly or do business with its clients in the Philippines

Additionally, its parent company is prohibited from selling or marketing products through the RHQ office. The minimum capital requirement for setting up an RHQ is US$50,000.00, which shall be annually remitted by the parent company to support operating expenses.

Regional Operating Headquarters (ROHQ)

A Regional Operating Headquarters (ROHQ) is a revenue-generating entity that carries out the business activities of its foreign parent company into the Philippines. Foreign corporations can only set it up with affiliates, subsidiaries, and/or branches worldwide in the form of a service center for the entities owned by the parent company.

Under Philippine laws, it is not allowed to directly or indirectly solicit or market goods or services on behalf of its parent company, subsidiaries, branches, or affiliates. It is also prohibited from offering qualifying services to third-party enterprises other than its associated entities.

To support its annual operations, the parent company is required to remit at least US$200,000 to the ROHQ every year.

How can WeCorporate help?

The Philippines is an ideal investment destination for many foreign entities. Its strategic location, the large pool of educated workers, and tax and investment-friendly regulations offer foreign entities numerous advantages. 

Incorporating or expanding your business in the Philippines can be a challenging process. If you find such procedures exhaustive, you can contact business consulting firms to help you register a company in the Philippines properly.