DOING BUSINESS IN PHILIPPINES IN 2023
Since 2003, Healy Consultants Group has assisted our Clients with business registration in the Philippines. Our services include i) Philippines company formation services ii) government license registration iii) corporate bank account opening services in the Philippines and abroad iv) employee recruitment v) visa strategies and vi) office rental solutions.
|Compare different Philippines entities||JSC||One Person Corporation||Nominee Fast Solution||Free Zone LLC||Regional or Area HQ||Regional Operating HQ||Representative Office|
|Also known as||JSC||OPC||JSC||FZ||RHQ||ROHQ||RO|
|Best use of company?||All products and services||Activities excluded from the negative list||Close a customer deal now||Manufacturing and trading||Supervision & Coordination||Operating Company||Marketing & research|
|How soon can you invoice Clients / sign sales contracts?||3 months||3 months||6 weeks||3 months||Cannot||3 months||Cannot|
|How soon can you hire staff?||3 months||3 months||6 weeks||3 months||3 months||3 months||3 months|
|How soon can you sign a lease agreement?||immediate||immediate||immediate||immediate||immediate||immediate||immediate|
|How long to supply corporate bank account numbers?||4 months||4 months||2 months||4 months||4 months||4 months||4 months|
|How long to supply company registration / tax numbers?||3 months||3 months||6 weeks||3 months||3 months||3 months||3 months|
|Corporate tax rate on annual net profits?||25%||25%||25%||0%||0%||10%||0%|
|Limited liability entity?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Government grants available?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Resident treasurer required?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Minimum paid up share capital?||US$200,000||US$200,000||US$200,000||US$200,000||US$50,000||US$200,000||US$30,000|
|Can bid for Government contracts?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Corporate bank account location?||Citibank||Union bank||Citibank||HSBC||SCB||ANZ||BDO|
|Can secure trade finance?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|VAT payable on sales to local customers?||12%||12%||12%||12%||0%||12%||12%|
|Average total business set up engagement costs?||US$21,850||US$24,473||US$26,310||US$17,750||US$22,850||US$20,510||US$20,900|
|Average total engagement period?||4 months||4 months||3 months||4 months||4 months||4 months||4 months|
|Accounting and tax considerations||JSC||OPC||Nominee Fast Solution||Free Zone LLC||Regional or Area HQ||Regional Operating HQ||Representative Office|
|Statutory corporate tax payable?||25%||25%||25%||0%||0%||10%||0%|
|Legally tax exempt if properly structured?||No||No||No||No||Yes||No||Yes|
|Group HQ tax incentives?||Yes||Yes||No||Yes||No||Yes||No|
|Must file an annual tax return?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Must file annual financial statements?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Must appoint an auditor?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Access to double taxation treaties?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Withholding tax on payments to foreign shareholders?||15%||15%||15%||15%||15%||15%||15%|
|Company Registration||JSC||OPC||Nominee Fast Solution||Free Zone LLC||Regional or Area HQ||Regional Operating HQ||Representative Office|
|Resident treasurer required?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Minimum number of shareholders/partners?||2||1||2||2||2||2||Parent Company|
|Maximum shareholding for foreigners?||100%||100%||100%||100%||100%||100%||100%|
|Minimum statutory paid up share capital?||US$200,000||US$200,000||US$200,000||US$250,00||US$50,000||US$200,00||US$30,000|
|Security deposit to be kept with Government?||No||No||No||No||Yes||Yes||No|
|Shelf companies available?||Yes||Yes||Yes||No||No||No||No|
|Time to incorporate a new entity?||8 weeks||8 weeks||8 weeks||8 weeks||6 weeks||6 weeks||6 weeks|
|Can easily convert to a PLC?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Public register of shareholders and directors?||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Can have preference shareholders?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Business Considerations||JSC||OPC||Nominee Fast Solution||Free Zone LLC||Regional or Area HQ||Regional Operating HQ||Representative Office|
|Good entity for trademark registration?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Can secure an import and export license?||Yes||Yes||Yes||Yes||No||Yes||No|
|Minimum number of directors/managers?||2||2||2||2||2||2||Parent Company|
|Can be wholly foreign owned?||Yes||Yes||No||Yes||Yes||Yes||Yes|
|Sponsorship by a local citizen required?||No|
|Our Client needs to travel to Philippines for business set up?||No|
|Temporary physical office solutions available?||Yes|
|You need a local resident as bank signatory?||No|
|The entity will likely be regulated by?||SEC|
|Monthly VAT reporting to the Government?||Yes|
|Must sign an office lease agreement during incorporation?||Yes|
|Shareholders & directors documents to be attested/translated?||Yes|
|Each foreign director needs a personal income tax number?||Yes|
|Foreign director needs a residence visa?||No|
|Maximum number of staff allowed?||Unlimited|
|Expatriate to local staff ratio?||Yes|
|Can secure residence visa for business owner?||Yes|
|Other useful information|
|What will be included in my customer sales invoice?||Click link|
|This country has signed free trade agreements?||Yes|
|This country is a member of WIPO/TRIPS?||Yes|
|This country is a member of the ICSID?||Yes|
|Average custom duties suffered?||6.70%|
|Government foreign investment approval required?||Yes|
|Average monthly office rental? (US$ per sq m)||US$15-35|
|Minimum statutory monthly salary?||US$9.79|
|Average monthly US$ salary for local skilled employees?||US$905|
|US$ deposit interest rate? (1 year average)||1.75%|
|Overseas remittance currency controls?||None|
|Multi-currency bank accounts available?||Yes|
|Corporate visa debit cards available?||No|
|Quality of e-banking platform?||Good|
|Crowd funding available in this country?||Yes|
Philippines business setup summary
- Philippines is the 5th largest ASEAN economy by GDP. Incorporating a Philippines company is recommended for Clients looking to extend their market footprint in the country and wider ASEAN region;
- A joint stock corporation is a common option for company formation in Philippines for foreign investors. Since 2019, there is no need for a foreign company to appoint a board of directors;
- Other business entities are available in the Philippines;
- The minimum paid up capital for a foreign company in the Philippines is US$200,000, though it can increase up to US$2.5 million for certain industries and activities. The paid up share capital of a BPO or a company exporting 60% or more of its products or services are only required to deposit US$2,500. It is therefore necessary to open a Philippines corporate bank account before registering a joint stock company;
- English is the language of business in the Philippines, so recruiting English-speaking staff is straightforward. The average salary in the Philippines is US$3,294, one of the lowest in ASEAN. Our team can assist our Client with local staff recruitment in Philippines.
Click the subheading links below to read other information on Philippines company formation.
Benefits and problems
Benefits of Philippines company registration
- Foreigners can register a company in the Philippines without travelling to the country;
- Philippines is a promising frontier market for worldwide entrepreneurs because:
- The Philippines is forecast to have South East Asia’s fastest-growing economy in 2022. This will translate into numerous potential investment opportunities for entrepreneurs setting up Philippines companies.
- Ratings agencies including Moody’s Investor Service, Fitch and Standard & Poors currently view the Philippines favourably for investment, with a number of ratings upgrades since 2015;
- The Philippines has a vibrant start-up culture, supported by legislation such as the Philippines Innovation Act and the Innovative Startup Act, which was signed into law in 2019;
- The Philippine Economic Zone Authority (PEZA) offers a range of e-services for entrepreneurs investing in the Philippines.
- The Philippines is a great place to form an export-orientated service company because:
- Office space and utilities and infrastructure costs are low. Furthermore, Philippines average salaries are some of the lowest in ASEAN. Foreign companies can typically recruit qualified, English-speaking Filipino employees for less than US$5,000 per year;
- A local company can attract foreign talent, since the country has a thriving expat community, ranks well on quality of life indices, and presents few obstacles to recruitment;
- The Philippines government offers tax incentives and other support for foreign investment projects including i) corporate tax holidays and ii) reduced/waived custom duties on imported equipment and raw materials. Eligible projects include i) medical tourism centers ii) hospitality projects for the retirement tourism industry and iii) IT businesses;
- The Philippines Information and Communications Technology (ICT) service sector is evolving rapidly. The country is an established global Business Process Outsourcing (BPO) hub, as well as an attractive base for IT and Global in-house Center (GIC) services sectors. Note also the following:
- The Philippines is ranked eighth globally as a BPO destination, its competitive edge sharpened with a wide talent pool of tertiary graduates, especially in areas such as finance, accounting and business IT;
- The Philippines Cyber services Corridor (PCC) accommodates numerous call centres and BPO companies served by a high-bandwidth fibre backbone and digital network;
- The Philippines is a signatory to the ASEAN Trade in Goods Agreement (ATIGA), offering a range of market-access advantages when registering a business in the Philippines. These include:
- Closer economic ties between the Philippines and other ASEAN states, so a Philippines company can benefit from economies of scale;
- A larger market for companies in the Philippines to access;
- Removal of some trade barriers and tariffs.
- Philippines company registration is easy because:
- A Philippines company can be registered with a single shareholder and director, who can be a foreigner living outside the Philippines;
- it takes the Philippines corporate registrar only three weeks to process most company registration applications, because registration procedures are digitalised. Unfortunately, this is not yet the case for tax registration, which can take up to six weeks.
Problems with Philippines company registration
- A Philippines foreign-invested company requires a paid-up capital of US$200,000, unless i) the company recruits more than 50 employees, in which case the paid-up capital requirement is US$100,000 or ii) the company exports a minimum of 60% of its products or services or BPOs in which case the paid up share capital is US$2,500 only. Unfortunately, industries subject to foreign investment restrictions including i) retail ii) agriculture and iii) advertising have a paid-up capital require up to US$2.5 million;
- Philippines law makes no provision for a limited liability company. Foreigners willing to set up a business in the Philippines must either i) register a Philippines branch, whereby the overseas business has unlimited liability against operations in the Philippines ii) a Philippines One Person Corporation or iii) a joint stock corporation;
- Our Clients are required to open a temporary bank account before a joint stock company can be registered;
- Registering and maintaining a company in the Philippines is time consuming, with licence approval via several different government departments as well as the municipality of the place where the company will operate. Unfortunately, maintaining a Philippines company in good standing is also challenging as there are multiple payroll accounting and tax requirements to do monthly, quarterly and annually;
- The Philippines publishes a list of business areas which require a 100% Filipino shareholding;
- Property registration is expensive, and can take more than a month to complete;
- The Philippines ranks poorly in terms of ease of obtaining credit and investor protection;
- Because of the above points, the Philippines is ranked only the world’s 95th easiest place to start a business by the World Bank.
- Doing business in the Philippines is also challenging because:
- The Philippines has an annual per capita income of just over US$3,000. One quarter of the population lives below the poverty line;
- Inter-island transport infrastructure needs to be modernised to facilitate domestic trade and movement of goods and people;
- The southernmost island of Mindanao remains vulnerable to political violence and terrorism.
- Philippines company registration requires the appointment of a resident treasurer. The treasurer’s role is similar to that of a company secretary, but also includes the review and quality control of the financial statements of the Philippines business. Healy Consultants Group will supply our Clients with resident treasurer services.
- The Philippines government requires all local entities to file multiple accounting and tax-related returns, including:
- quarterly provisional corporate income tax return (1702Q), due within 60 days of the end of each quarter;
- monthly VAT return (2550M), due 20 days from the end of each month;
- quarterly VAT return (2250Q), due within 25 days of the end of each quarter;
- monthly withholding tax returns (1601C and 0619E), due within 10 days of the end of each month and;
- quarterly expanded withholding tax return (1601EQ), due within 30 days of the end of each quarter.
Healy Consultants Group will complete the preparation and filing of these returns. See this page to view our fee for these services.
- While a Philippines corporation can have a single shareholder and director, this person must be an individual. For entities with corporate shareholder(s), a minimum of two shareholders is required.
Best uses for a Philippines company
- The Philippines is popular for the formation of export-oriented service businesses, including call centres and BPOs. The availability of trained, English-speaking workers, along with a robust ICT infrastructure, supports this type of activity;
- The Philippines is also a good place for the formation of an agroforestry business, thanks to the country’s natural resources and the availability of a low-cost workforce.
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Useful links for Philippines