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A Guide on Starting a Business in the Philippines

The country of the Philippines is represented by one of the most beautiful sets of islands in the world which is attractive not only to tourists but also to investors interested in doing business here. With friendly legislation towards foreign investments, the Philippines government allows for the establishment of companies here under very advantageous conditions.

If you want to open a company in the Philippines, the guide below will take you through a tour of the company registration procedure in this country.  Our specialists in company formation in the Philippines offer tailored services to foreign investors seeking to start their own businesses in this country.
 

Services offered by our Philippines company formation agents


If you are a foreign investor and want to set up a company in the Philippines, we can help you with the following services:
 

  1. assistance in selecting the business form for your own company in the Philippines;
  2. preparation (drafting and notarization) of the incorporation documents for a business;
  3. filing the documents required to register the Philippines company, in accordance with the type of structure selected;
  4. tax registration, GST number registration and social security and employment registration;
  5. tax advice and counseling, as well as tax minimization solutions in the Philippines;
  6. assistance in applying for business permits and clearances for doing business in the Philippines;


We can also assist foreign companies interested in operating in the Philippines through branches and subsidiaries. Those seeking to research the market can rely on us for opening a liaison office in the Philippines.

Our services are personalized to the clients’ needs and requirements. We also offer virtual office services to those who want to register their companies in the shortest time possible.
 

Types of companies available for registration in the Philippines


The first step related to company formation in the Philippines is to select a type of structure which will be registered with the Securities and Exchange Commission. From this point of view, the choice is quite easy as the government offers the following options: the sole proprietorship, the partnership, and the corporation. Foreign companies also have several types of business forms they can choose from. Among these are the representative office, the branch office, and the regional headquarters.
If in the case of sole proprietorships and partnerships there are no special requirements in relation with the company registration procedure in the Philippines, in the case of the other types of companies, available certain conditions apply.

The corporation which can be a stock or non-stock corporation. The stock corporation is the most popular business form in the Philippines among foreign investors and requires a minimum share capital of 5,000 PHP which is the equivalent of approximately 85 EUR or close to 100 USD. The stock corporation must have at least 5 shareholders and 15 at most.

With respect to the types of structures available for foreign companies, our company formation experts can offer detailed information.
 

Documents related to opening a company in the Philippines


The main set of documents required to start a company in the Philippines is the Memorandum and Articles of Association. These must be prepared in accordance with the requirements of the Corporation Code in the Philippines and must be notarized. The other documents related to the company registration process are:
 

  •           the documents stating the approval of the company’s name which must be approved by the Trade Register;
  •           a notarized affidavit related to the decision of forming the company from the treasurer’s office;
  •           a declaration with all the assets and liabilities of the shareholders;
  •           a document with personal information on the directors, managers and directors of the company;
  •           a notarized written statement in which the officers of the company acknowledge the reporting requirements imposed by the Commission.



You can rely on our local company registration agents for assistance in drafting the incorporation documents for any type of company. Moreover, if you are interested in expanding your business in another country, for example in Singapore, our Singapore partners who are specialists in company formation matters can help you.
 

The company formation procedure in the Philippines


The first step related to starting a company in the Philippines is to choose and reserve a company name with the Securities and Exchange Commission, followed by the opening of the corporate bank account where you'll have to deposit the share capital. Based on these, the company will receive the Barangay clearance. The last steps imply registering for tax purposes and applying for the business licenses required to start the activities.
 

Drafting the investment plan for starting a business in the Philippines


One of the most important requirements for setting up a company in the Philippines as a foreign investor refers to preparing an investment plan which must be submitted for approval with the Securities and Exchange Commission (SEC).

Based on the investment plan and the industry the foreign investor wants to operate in, the minimum share capital will be conveyed by the SEC after the analysis of the investment plan.

If you need more information on the procedure on how to open a company in the Philippines, our agents can offer such details.
 

Residency requirements for company officers in the Philippines


One of the most important aspects related to the Philippines company registration procedure refers to the residency requirements imposed by the Company Law. According to it, most of the shareholders and directors in the company must be Filipino residents.

For the most common type of company in the Philippines, which is the equivalent of the limited liability company in Western countries, the minimum number of shareholders allowed is 5 and all of them must be natural persons. The majority of the shareholders must be Philippines residents (however, they are not required to by citizens of this country) which is why foreign investors must first obtain residence permits.

With respect to the company directors, the minimum number of directors is 5, while the maximum number can reach 15. The majority of the directors must be Philippines residents.

For this purpose, our agents in the Philippines can provide nominee services. We offer both nominee shareholder and director services. Do not hesitate to get in touch with us and ask about these services.

It is also important to note that foreign investors are not allowed to set up companies in certain industries which are on the so-called Negative Investment List.

Our specialists in the Philippines can offer more information on the investment options available for foreign investors.
 

Business licensing when starting a business in the Philippines


One of the most important aspects of registering a company in the Philippines is related to the licensing requirements which one must comply with. From this point of view, the Philippines is very different from Western countries, as the number of compulsory licenses is larger. Here are the main licenses to be obtained when opening a company in the Philippines:
 

  • the mayor’s permit;
  • the sanitary permit;
  • the environmental permit;
  • the fire permit;
  • the Barangay Clearance.


Out of these, one of the most important is the Barangay Clearance. Once these are obtained, where the industry requires it, special licenses must be obtained with other relevant authorities.
You can obtain more information on the business permits and licenses required from our company registration agents in the Philippines.
 

Employment registration requirements in the Philippines


Philippines companies must also comply with a few requirements related to the registration as employers with the Social Security System. A company must also register with the Internal Revenue Bureau, as well as with the Health Insurance Authority.

It is possible for local companies to hire foreign workers for which they must apply for work permits. Our company formation agents in the Philippines can explain the requirements of the Employment Law in this sense.
 

Brief comparison between the main types of companies in the Philippines

 
 Type of Company   Number of shareholders  Minimum share capital 
 Corporation   5  200,000 USD
 Partnership   2  No mimum share capital required
 Sole proprietorship   No mimum share capital required


Taxation of companies in the Philippines


 Companies in the Philippines must pay specific taxes, however, tax benefits are also available for them: 
 
  • the corporate tax which can be reduced from the standard 30% to 2% of the gross income of the company starting with its 4th year of taxable activities;
  • the value added tax, also known as the sales tax, which has a standard rate of 12%;
  • trading companies can benefit from the income tax holiday for 4 to 6 years depending on the areas the companies operate;
  • IT companies can also benefit from tax deductions for up to 6 years, as long as they are registered in Philippines free zones;
  • companies registered in Philippines free zones are subject to a 5% tax on their gross income after the income tax holiday.

It should be noted that small and medium-sized enterprises (SMEs) can benefit from several tax incentives, such as deductions and exemptions from the corporate tax.

For assistance in starting a company in this country, please contact our Philippines company formation advisors.

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