HOW TO: Setting up a business in the Philippines

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David-Elefant-vine
By David Elefant*

Foreign businesses that are looking at opening a business in the Philippines must do their homework carefully and find a reliable source of information. Many government websites are not updated regularly or have partial information. Browsing the internet is not best way to discover what is needed to start a business in the Philippines.

The kind of business to be established will dictate the correct legal entity to be registered with the Philippines Securities and Exchange Commission (SEC).  There are many restrictions regarding the foreign ownership of business in the Philippines. Restrictions can be the percentage of foreign ownership and/or the amount of paid-in capital depending on the nature of the business and whether the company will sell to the domestic Philippines market or not. The details of the restrictions can be found in the latest version of the Foreign Investment Negative List.

Condensed steps to register a business in the Philippines

  1. Reserve company name with the SEC and pay the appropriate fees.
  2. Prepare the required documents for submission to SEC
  3. Once the SEC issues the certificate of incorporation or license to transact business the company can proceed with obtaining the Local Government Permits (barangay clearance and mayor’s permit), registering with the Bureau of Internal Revenue and the government agencies which provide employee benefits, Social Security System, PhilHealth and the Home Development Mutual Fund.

Tax Incentives

The Philippine Economic Zone Authority (PEZA) with locations nationwide and the Board of Investments (BOI) are the government agencies where businesses can apply for tax incentives. There are a few Freeport Zones, the most popular being Subic Bay and Clark. These agencies should be contacted before registering a business with the SEC.

Check if you can avail of tax treaties. Before you can benefit from an international tax treaty an application for a tax treaty relief with the BIR International Tax Affairs Division must be filed at least 15 days before the transaction.

The most common legal entities used by foreign businesses are Corporation, Branch Office, Representative Office, Regional Operating Headquarters and Regional Headquarters. Each one of these entities will have advantages or disadvantages depending on the type of business and the tax treaties that may be available depending on your home country.

Do it the right way

Things do not move forward in the Philippines as fast as in other countries so don’t be tempted to take shortcuts. Always follow the local regulations, if it can not be done legally don’t do it. Often there are people haunting the corridors of government offices offering to facilitate procedures, best to ignore them and transact only with identifiable government officials.

Since the election of President Aquino major improvements can be seen in many government agencies.

There are many business opportunities to be found in the Philippines. Major growth industries are Business Process Outsourcing, Health and Wellness, Tourism, Agribusiness, Infrastructure and Mining.

Now is the time to explore investment opportunities in the Philippines.

* David Elefant is consultant with Dayanan Business Consultancy which assists individuals and foreign companies of all sizes in setting up their business operations in the Philippines. He an 18-year Philippines business veteran. David’s experience ranges from telecommunications to construction supplies.

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Reading Time: 2 minutes

By David Elefant*

Foreign businesses that are looking at opening a business in the Philippines must do their homework carefully and find a reliable source of information. Many government websites are not updated regularly or have partial information. Browsing the internet is not best way to discover what is needed to start a business in the Philippines.

Reading Time: 2 minutes

David-Elefant-vine
By David Elefant*

Foreign businesses that are looking at opening a business in the Philippines must do their homework carefully and find a reliable source of information. Many government websites are not updated regularly or have partial information. Browsing the internet is not best way to discover what is needed to start a business in the Philippines.

The kind of business to be established will dictate the correct legal entity to be registered with the Philippines Securities and Exchange Commission (SEC).  There are many restrictions regarding the foreign ownership of business in the Philippines. Restrictions can be the percentage of foreign ownership and/or the amount of paid-in capital depending on the nature of the business and whether the company will sell to the domestic Philippines market or not. The details of the restrictions can be found in the latest version of the Foreign Investment Negative List.

Condensed steps to register a business in the Philippines

  1. Reserve company name with the SEC and pay the appropriate fees.
  2. Prepare the required documents for submission to SEC
  3. Once the SEC issues the certificate of incorporation or license to transact business the company can proceed with obtaining the Local Government Permits (barangay clearance and mayor’s permit), registering with the Bureau of Internal Revenue and the government agencies which provide employee benefits, Social Security System, PhilHealth and the Home Development Mutual Fund.

Tax Incentives

The Philippine Economic Zone Authority (PEZA) with locations nationwide and the Board of Investments (BOI) are the government agencies where businesses can apply for tax incentives. There are a few Freeport Zones, the most popular being Subic Bay and Clark. These agencies should be contacted before registering a business with the SEC.

Check if you can avail of tax treaties. Before you can benefit from an international tax treaty an application for a tax treaty relief with the BIR International Tax Affairs Division must be filed at least 15 days before the transaction.

The most common legal entities used by foreign businesses are Corporation, Branch Office, Representative Office, Regional Operating Headquarters and Regional Headquarters. Each one of these entities will have advantages or disadvantages depending on the type of business and the tax treaties that may be available depending on your home country.

Do it the right way

Things do not move forward in the Philippines as fast as in other countries so don’t be tempted to take shortcuts. Always follow the local regulations, if it can not be done legally don’t do it. Often there are people haunting the corridors of government offices offering to facilitate procedures, best to ignore them and transact only with identifiable government officials.

Since the election of President Aquino major improvements can be seen in many government agencies.

There are many business opportunities to be found in the Philippines. Major growth industries are Business Process Outsourcing, Health and Wellness, Tourism, Agribusiness, Infrastructure and Mining.

Now is the time to explore investment opportunities in the Philippines.

* David Elefant is consultant with Dayanan Business Consultancy which assists individuals and foreign companies of all sizes in setting up their business operations in the Philippines. He an 18-year Philippines business veteran. David’s experience ranges from telecommunications to construction supplies.

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