Starting A Business In The Philippines

Business Opportunities in the Philippines

The Philippines is located in the center of Asia, making it a strategic country for international trade and commerce. The country’s economic vitality is anchored on solid consumer demand, backed by improved earnings and a solid financial background. This has been possible owing to increased urbanization and a growing middle-income class and young population.

With advancements in information technology and industrial growth, businesses in the Philippines have evolved drastically. Though the agricultural sector dominates its economy, there are plenty of opportunities in other sectors for both Filipinos and expats. 

One of the most significant advantages the Philippines has over any other Asian country is a skilled workforce because of its high literacy rate. Furthermore, liberalization has made inter-island shipping and domestic aviation highly accessible. The government has made numerous efforts to boost the Internet network, making eCommerce viable throughout the country.

Overall, the Philippines offers excellent opportunities for innovative business ideas. Thus, starting a business in the Philippines is a promising prospect for anyone looking to establish a strong network in the APAC region.

Benefits of Starting a Business in the Philippines

Starting a business in the Philippines offers profitable avenues for business expansion, thanks to its diversified industrial infrastructure, fast-growing service sector, vibrant culture, and conducive business environment.

The following points further highlight the benefits of conducting business in the Philippines:

  • ~Increased foreign investment over the last few years and a massive consumer market with a population of over 100 million, the Philippines attracts foreign investment since it is a massive market with a population of over 100 million
  • ~A cost-friendly labor market abundant in skilled and qualified professionals
  • ~Access to a larger global market and excellent connectivity with the neighboring nations
  • ~Foreign companies and business owners receive multiple incentives from the government for starting a business in the Philippines

Requirements for Starting a Business in the Philippines

Company incorporation in the Philippines becomes easier for business owners if they know the following registration requirements:

Deciding the business structure:

The first step is deciding which business structure would be perfect for your expansion plan in the Philippines. Thus, you must learn about the different business entities and their pros and cons to make an informed decision. 

Tax obligations: 

Business owners must know the tax obligations that apply to the various business entities.

Registering the business name: 

Registering a business name is essential for setting up a company in the Philippines.

Selecting an office address:

The company's registration requires a business address for conducting operations. 

Opening a bank account with a minimum deposit:

Business owners must open a bank account with a minimum of PHP 5,000 by providing proof of identification and business incorporation.

Obtaining EIN:

Before you start hiring employees, it is vital to get an Employer Identification Number (EIN) for tax filing purposes

Business permits and licenses:

Based on the company’s industry of operation, it is essential to get the business permits and licenses to ensure compliance with the government regulations. 

Compliance laws:

Before starting your business operations in the Philippines, you must be aware of the industry-specific and general rules to avoid legal complications. Failure to comply with the laws will result in hefty fines or penalties.

Types of Business Structures in the Philippines

When starting a business in the Philippines, expats must consider multiple factors; the most crucial among those is determining the business structure. 

Selecting the proper business structure for your company is essential since it will determine the enterprise's tax, ownership, and jurisdiction needs.

Type Definition
Sole Proprietorship
  • Formed by a single individual
  • The owner owns the assets and liabilities of the business.
  • The owner has full authority and control over the company.
Partnership
  • Formed with the partnership of two or more individuals.
  • Partners have unlimited liability in general Partnership and limited liability in case of a limited partnership.
Corporation
  • It is a business entity considered different from its owners.
  • It requires a minimum of five and a maximum of fifteen shareholders.

In the Philippines, foreign companies or foreign investors can form the following business entities:

Business Entities Definition
Branch Office The branch office is the office that performs activities on behalf of the head office in the Philippines. An office requires permits and licenses for operating in the country. It is subject to income tax, local tax, and tax withholding. The branch office must be registered with the Securities and Exchange Commission (SEC).
Representative Office Registering the Representative Office with the SEC is mandatory. This office serves as a link between the country and the home office. It is not liable to pay or withhold the taxes because the business activities do not generate income. Instead, they are used for promotional services or information sharing about the parent company’s products/services.
Regional Operating Headquarters This office acts as the administrative branch of the parent company. It is principally incorporated to supervise, communicate, and coordinate the components in the Asia-Pacific Region and other markets. Business owners must register their regional operating headquarters with the SEC.

Company Registration Process

Starting a business in the Philippines is a multi-layered and time-consuming procedure. Here are the key steps of the registration process:

Name registration

You must choose a business name, check for its availability, and get it registered. After the name approval and payment of the required fees, you’ll get a certificate valid for five years.

Notarization of documents

The company's official documents must be notarized, including the articles of incorporation and the treasurer's affidavit. 

Application for company incorporation

You must submit the necessary forms and documents to the Securities and Exchange Commission (SEC). The pre-approval of the submitted application is given after reviewing the documents and obtaining the proof of payment. The incorporation certificate and other supporting documents are prepared during the waiting period. SEC provides the Taxpayer Identification Number.

Fees payment

The SEC issues the payment fee proof after the company is incorporated. You should pay the bank's name registration costs and submit the payment proof online. 

Business permit and licenses

You should obtain the permits and licenses from the local municipality based on your company’s nature of business. 

Barangay clearance

The local Barangay provides clearance after you’ve submitted the application form, SEC certificate of incorporation, site map, office lease documents, and proof of payment for annual community tax.

Registration of social security system

Registration with the social security system is essential for receiving employee and employer numbers. To register your company with the social security system, you must submit the registration form, list of employees, notarized article of incorporation, bylaws, and SEC registration.

Registration with the Philippines health insurance

You should submit the employer and employee member forms to register your company under the Philippines health insurance. Also, you must submit a certificate of incorporation, a copy of the articles of incorporation and bylaws, and a copy of the business permit. After reviewing these documents, the insurance company will provide proof of membership to ensure employees' health coverage.  

Submission of receipts and invoices to the Bureau of Internal Revenue

You should submit the printed receipts, invoices, books of accounts, registration certificate for value-added tax, registration proof with SEC, and a notarized sworn statement to the Bureau of Internal Revenue as the final step of the registration process.

How Much Does it Cost to Incorporate a Company in the Philippines?

The average cost of incorporating a business in the Philippines is USD 17,920. This cost includes -

  • ~The cost of incorporation and registration 
  • ~Fee for the company secretary
  • ~Fee for opening a corporate bank account

Are Foreigners in the Philippines on Certain Passes Allowed to Start a Business?

Yes, foreigners possessing the 9G visa can start a business in the Philippines. Furthermore, foreign-owned enterprises can invest a small amount for conducting operations in the Philippines. If you’re not willing to invest in wholly foreign-owned enterprises, partnering with Filipino residents is another affordable option to start a business in the Philippines - you can get local consultation without investing a lot of money.

The government allows a maximum of 40% equity to foreigners in a Filipino business. It implies forming a partnership with Filipino residents they can trust to control the remaining 60% of the company's stock.

Government Assistance for Foreign-owned Business in the Philippines

The Philippine government encourages foreign investors to invest in businesses, create jobs, and increase resource productivity, volume, and value of exports.

To align with its vision, the government offers ex-pats the following grants for setting up a company in the Philippines:

  • ~For companies registered as foreign business entities, incentives in tax credits, deductible from their taxable income for paying employees, and covering infrastructural expenses.
  • ~Non-fiscal incentives for employing foreigners and importing advanced equipment.
  • ~Companies registered within ecozones are exempted from various taxes and given other benefits like duty exemption on imported raw materials, equipment, etc.

How Can Multiplier Help?

Starting a business in the Philippines requires much consideration and planning. However, with the global EOR service providers like Multiplier, you can assemble a global team without setting up a subsidiary in the Philippines.

Multiplier will take care of all your HR requirements, from onboarding employees to managing payroll. With our expert help, you can easily navigate through the intricacies of the Philippine market and labor laws. Further, as an EOR firm, Multiplier can handle all employment-related services for international companies.

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Frequently Asked Questions

What should be the first step of setting up a business in the Philippines?

The first step of setting up a business in the Philippines is deciding the type of business activity and accordingly selecting the business structure.

Do small businesses also require registration?

Yes, small businesses also require registration because of tax compliance.

Why is it important to choose the structure of the business?

It is essential to choose a business structure because it will impact its operations. Risk on personal assets is also dependent on the business entity. Most importantly, it will help the business owners obtain appropriate legal protection.

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