Philippines Two Person Corporation (TPC) in 2023
Since 2019, foreign entrepreneurs have been able to register a company in the Philippines with just two shareholders. The Philippines TPC is an excellent vehicle for entry into the Philippines market, with simple legal and regulatory considerations, and is ideal for start-ups and SMEs. Healy Consultants Group assists our Clients with i) incorporating an TPC ii) opening a Philippines corporate bank account iii) employee recruitment iv) visa strategies v) office rental solutions in the Philippines and vi) ongoing accounting and tax services.
Advantages of a TPC
- A TPC requires just two shareholders. The two shareholders are also the directors and presidents of the TPC.
- The two shareholders can be foreign and do not need be local residents. However, foreign entrepreneurs should note the government’s Foreign Investment Negative List which identifies industries which forbid foreign ownership.
- A TPC carries less risk than a Philippines sole proprietorship, as with a TPC, the foreign investors can claim limited liability.
- A TPC is an excellent entry point into the Philippines’ vibrant start-up ecosystem. The country’s entrepreneurial revolution is supported by legislation such as the Philippines Innovation Act and the Innovative Startup Act, which was signed into law in 2019.
- A TPC also offers the ease of creating a company as there is a considerable reduction of i) documentation that’s needed to incorporate a business ii) signing conditions and iii) regulatory confirmation.
Disadvantages of a TPC
- The minimum capitalisation of a foreign-owned TPC varies depending on the type of business activity. In general, a paid-up share capital of PHP 10.35 million (US$200,000) is required and must be deposited to a Philippines corporate bank account before the TPC incorporation is complete.
- A TPC must appoint a company secretary (who must be a Philippines citizen), a treasurer (any nationality but must be resident in the Philippines) and other officers. Officers must be appointed within 15 days establishing the TPC, and the Securities and Exchange Commission (SEC) must also be notified within five days of their appointment.
- A self-appointed treasurer must submit a bond, the amount of which is calculated based on the authorised share capital of the TPC. For an authorised share capital of between one and one million pesos, the bond is one million pesos (US$19,765). The bond must be renewed every two years.
- A TPC must submit an annual audited financial statement (see here for more information on Philippines Accounting and Tax considerations).
- The Philippines keeps a public record of shareholders and directors.
- The conversion of a TPC to an ordinary joint stock corporation is a lengthy process which takes approximately two months.
Accounting & tax obligations
- Philippines has signed double taxation avoidance treaties with 43 countries including Australia, Canada, China, Singapore, the United Kingdom and the United States to reduce withholding tax on payments abroad.
- Manufacturing companies with bonded warehouses enjoy complete exemption from customs duty on importation of required goods and spare parts.
- Employing entities are eligible for a 50% deduction for the labour expenses for up to five years for new projects exceeding a certain ratio of capital equipment to their employees.
- Pioneer and non-pioneer companies are eligible for income tax holidays from three to eight years for new and expansion projects and projects in remote regions.
- Philippine’s businesses are permitted to carry forward their losses for up to three years. Carry back is however not allowed.
- Late payment of income tax will be subject to a penalty of 25% of the total amount due in taxes.
- Generally, an unpaid tax will incur a 20% annual interest rate until the tax is fully paid.
- For tax purposes, only interest penalties are deductible. However, it is not deductible for surcharge and compromise penalties that are imposed for non-payments or late payments.
- For IAET, the benchmark of the liability is that of the purpose behind the accumulation of the income and not the consequences of the accumulation. Thus, if a corporation fails to pay its dividends due to some other causes, such as the use of undistributed earnings and profits for the reasonable needs of the business, under such circumstances the company would not generally be subjected to pay tax for its accumulated or undistributed earnings.
Best uses of a TPC
- A TPC is ideal for foreign investors/entrepreneurs who wish to set up a small and medium-sized enterprise (SME) together.
- The Philippines has a vibrant and growing entrepreneurial culture.
Setting up a Philippines TPCHealy Consultants Group will assist our Client to register the TPC with the Philippines SEC. Our service includes:
- Securing the company name.
- Submitting OPC registration documents (including arranging for notarisation, if applicable).
- Settling filing fees.
- Obtaining a certificate of registration.
Please visit this page for more information on the Philippines company incorporation process.
Healy Consultants Group’s fee for TPC is US$21,850.
Refer to embedded PDF file to view an example of a Philippines TPC invoice.