« | BC Philippine Lawyer | »

Doing Business in the Philippines

Posted by Dave on Thursday, July 16th, 2009

Foreign companies doing business in the Philippines by opening an office whether it is a domestic subsidiary, a foreign branch office or a foreign representative office have the requirement to be licensed to do business in the Philippines. This includes registering the business with different government agencies after issuance of the Certificate of Incorporation.

Requirements for incorporating a company in the Philippines:

A corporation in the Philippines requires at least 5 incorporators and 5 directors. 3 of the directors must be residents of the Philippines. The corporate secretary must be a Filipino citizen and resident of the Philippines.

Philippine law restricts the operations of certain kinds of business by foreigners or the percentage of ownership by foreigners. Foreign Negative List A & List B.

1 - Verification and reservation of the corporate name: the SEC will check if the name is not already taken or too similar to the name of an existing business. If the name is available the SEC will issue a Name Verification Slip reserving the name for 30 days. The verification slip may be renewed for additional 30 day periods.

2 - Registration Data Sheet: This form contains information of the Capital Structure of the company, names, nationalities and other details of the: incorporators, stockholders, directors, officers.

3 - Written Undertaking to Change Corporate Name: In the case an opposition to the use of the name happens the incorporators agree to change the name.

4 - Deed of Assignment: In the case where property is contributed to the capital a deed of assignment is required from the stockholder who is the owner in favor of the corporation. If the contribution consists of a parcel of land or a building the must be submitted to the Registrar of Deeds for registration along with the OCT/TCT numbers, registered owner, , lot and block number, area, location and encumbrances, if any

5 - Treasurer's Affidavit: This is an affidavit executed by the Treasurer In Trust attesting that the capital has been received by him and allowing the SEC and the Bangko Sentral to examine and verify the deposit of capital. , lot and block number, area, location and encumbrances, if any

6 – Bank Certificate of Deposit: Attestation by the bank that the capital was deposited. Banks require a board resolution allowing the Treasurer In Trust to open the account.

7 - Articles of Incorporation and Bylaws: The drafting of the Articles of Incorporation and the By-laws, should be done with the help of your lawyer to ensure the best corporate structure.

Certain kinds of corporations will need the endorsement of other government agencies.

Companies may also register with PEZA and BOI to take advantage of tax incentives offerd by the Philippines.

Comments

By valter lucacchioni on July 22nd, 2009 at 12:56 am

Dear sir,
I’m a european citizen and i want to invest in the philippines i found a filippino citizen as a socio 60%-40% share respectively,with a capital of more than 50,000 US dollars,the investment consists of buying land to construct an ecotourism spot and for animal raising to attract local and foreign tourists we have already prospect parcel of land at about 4 has. I would like to know how can i transact business and to have an indeterminate visa to stay there.
thank you!

Valter, you may enter the Philippines as a tourist to invest in your business and as long as you regularly renew your visa you may stay up to one year without leaving the country. Once your company is registered with the SEC you may either apply for a work permit, investors visa or quota visa. Your investment should be at least USD 40,000.00.

If my company holds 39% of a corporation in Philippine with paid-in equity capital less than US$200,000, does it falls under item 6 of Negative List B?

Thanks

Evelyn, what kind of business does the company operate.

Trading on PC games. What will be minmum paid-up share capital?

Thanks

dear sir
i am 56 years old and will be retired at 2010 so how can i live in philippine for 3 years.my sons study in silliman university in dumaguete now.
thanks

chehrazi, you may stay as a tourist or apply for permanent residency depending on your nationality or apply for a retirement visa.

how can we apply for a retirement visa? how much is it gonna cost? how long is the visa going to last?

thank you very much!

I have tentatively agreed with a reputable Philippine firm to provide specialized training services, about once a month for a week each. Being paid by an American (or Singaporean) company – what would be the immigration and work permit requirements?

Bert, there are temporary work permits available.

Good Day
I would like to ask in incorporating a company is it possible is our investor will have the biggest share in the company is there a way that the percentage for investment will be higher to the foreign than the local investors? and is there a minimum capital for company investment to run? thank you

Maria, the answer to your question depend on what kind of business you intend to operate. You may use the email form to send the details.

Dear Sir,

We are currently running a building design consultancy and are in the process of opening a branch office in Philippines. We are currently based in UAE and would like to know if there are any agency who can do all the registration process on our behalf and what would be the expenses like since we do not have any local resources for the same.

Thank you.

Mariya, we can assist you in the registration of a branch office. I tried to email you but it bounced. Please call our office to set a meeting or give me another email address.

I have shareholding in a Philippine Corporation and I hold a permanent residency under section 13A. I have been told that I can hold my shareholding as part of the 60% Philippine Portion of the Foreign/Filipino share split.

John, foreigners can only own the portion of a business which the law allows them to own. If the law states 40% then you may own 40% of the business not more.

Greeting Sir,

I would like to ask how long does it usually take for SEC to approve the incorporation. Also, the bank is asking me for a paper stating that the business is “in process of incorporation” before they issue me the bank certificate. Can I file the SEC registration even without the bank certificate? Thank you very much.

Eve, the SEC takes around 3 to 4 weeks to issue the certificate of incorporation once all required documents are submitted. One of the required documents is a bank certificate showing that you have deposited the subscribed capital.

Good morning! I am a broker who has a foreign client, a corporation and would want to purchase the land for their use of building their business. The thing is foreign corporations are not allowed to buy or are they? what can be the remedy for this? thanks.

Lai, foreign corporations can not own land in the Philippines. They can however lease land for 25 years renewable.

I hold a permanent residency under section 13A. What rights does a permanent residence
Have?
Can I start a business?
get a TIN?
I am a resident and should not be treated as a foreigner as long as I am married and following the Philippine laws. Until I meet the citizenship 5 year requirement?

Tim, as long as you are not a Filipino citizen you are obliged to follow the laws regarding foreign ownership of business. You can start a business and get a TIN even if you don’t have a 13A.

My husband and I are both dual citizens and are planning to buy 2 parcel of lands – one 4 hectares and one 2 hectares.

Is there a limit on the size of land that we can purchase?

Also, if we decide to buy, what will our lawyer’s role be? Will the lawyer help us with the Deed of Sale, Capital Gain Tax, Doc Stamp, Title Transfer, etc?

Thanks

Anne, you are a Filipino citizen therefore you may purchase any amount of land you wish.

By Bobby Nixon on May 26th, 2010 at 12:28 pm

At the top of this page it stated

A corporation in the Philippines requires at least 5 incorporators and 5 directors. 3 of the directors must be residents of the Philippines. The corporate secretary must be a Filipino citizen and resident of the Philippines.

This says that a foreigner with permanent residency can be 1 or of the 3 resident directors. However in another reply it was stated:

By John on February 15th, 2010 at 3:54 am
I have shareholding in a Philippine Corporation and I hold a permanent residency under section 13A. I have been told that I can hold my shareholding as part of the 60% Philippine Portion of the Foreign/Filipino share split.

John, foreigners can only own the portion of a business which the law allows them to own. If the law states 40% then you may own 40% of the business not more.

Please would you clarify – if a foreigner has permanent residency can he be classed as one of the 3 Filipino directors? or is a citizenship required to become one of the three Filipino directors of a corporation?

Bobby, Filipino citizenship is required to become one of the three Filipino directors of a corporation.

Greetings!

I would like to inquire if a shareholding of the following is allowed?:

Shareholder 1 – owns 96%
Shareholder 1 – owns 1%
Shareholder 1 – owns 1%
Shareholder 1 – owns 1%
Shareholder 1 – owns 1%

Do the aforesaid percentage of shareholdings are allowed by SEC. If not allowed, may we know the allowable percentage distribution of shareholdings?

Thank you very much!

Respectfully,

Anna Ceñidoza

Anna, a corporation requires at least 5 directors each director must own at least one share, this can be even less than 1%.

Dear Sir,

Are there any different incorporation rules concerning businesses being located in the Clark or Subic Free Zones.

Your advice would be much appreciated.

Trevor Hughes

Trevor, the laws for incorporation are the same no matter where a corporation is located in the Philippines.

Dear sir,

Can a US citizen purchase a land and use it for farming or residential business?

How about purchasing houses or condominiums for renting,will these need permits as well?

Foreigners may not own land in the Philippines. 40% of a condominium project may be foreign owned. Yes, you will need to register with the Bureau of Internal Revenue.

Dear Sir,

Im Malaysian citizen and would like to set up JV company with my filipino friend’s company in Manila. Business nature will be trading.
1. What is the shareholding each of us in JV company?
2. Is possibble foreigner citizen hold share up to 75% or more in JV company?
3. What is the minimum start up capital for JV company?
4. How many foreigners & filipino shareholders require to set up JV company?
5. Roughly what is the cost to register JV company between 2 different country based company?

Please advice. Thank you so much.
Henry

Henry, it all depends on what kind of business you intend to operate. Send us an email with the details.

good day,
i have a foreign friend and want to put up a business here in the Philippines..is a retirement visa enough so he can open a business here in our country?thanks

Jana, no visa is necessary for a foreigner to put a business in the Philippines.

I’m currently a foreigner (based overseas, who has the option to be a dual citizen). If I had rental income for a condo unit located in the Philippines, is it recommended to file a business entity to protect income and avail of business deductions? If so, sole propietor, corportation or others? Would it help to be a dual citizen?

Thanks for your help.

Joe, any business entity you register will have to file monthly, quarterly and annual tax reports, get business permits etc.. etc… Being a dual citizen does not help.

I am Filipino and presently having a small trading and hardware store business.I have a foreigner friend and he wants to be my partner in this business. I agreed with him because i also want to make my business improve and stable. Could you give me an idea how can my friend apply for business visa? If he is going to do business here how much capital does he need?
I appreciate so much if you could give me some infos. thanks

Victoria, a hardware store is a retail business. Foreigners may not own or be a partner legally in a small retail business.

By Ivan De araujo on November 9th, 2010 at 8:15 am

Dear sir I’m a Brazilian citizen and i am a Filipino permanent resident i have a Filipino company fully register with all the license completed and in good standers and i do work for another Filipino company as a consultant and other financial services,and the company that I’m selling my services to want to withhold 10% of the money owed to me and telling me that this is the law for taxes purposes in the Philippines is that truth?

Ivan, yes that is correct there is a 10% withholding tax on payments to consultants.

Im an american citizen and i would like to know if i can buy an exisiting corporation and be a part owner????
It entails a Direct Sales Company

Jed, yes you can be a part owner in a direct sales corporation as the corporation is operating a wholesale business.

I have an American friend who wants to purchase two hectares of land and do farming crops here in the Philippines. But there are US Regulations regarding foreign investors in our country. Hoping yo can give us some pointers regarding this…

Julie, foreigners can not buy land in the Philippines. They may own up to 40% of a corporation which owns land.

Hi! I would like to confirm if the corporate secretary should be a stockholder? Or is the corporation required to give CS a share even if its a close/family corp and CS is not a family member or a relative, even by law?
Thanks!
Joan Isidra

Joan, the corporate secretary does not need to be a shareholder but must be a citizen and resident of the Philippines.

I’m a Filipino citizen and currently a permanent resident in a foreign country, I still working here in abroad and twice to three times a year I go back to Philippines. Can I appoint as Corporate Secretary?

Second question is, for example I’m a shareholder and on the same time appointed as the corporate secretary. But I became director by virtue of Deed of Assignment which means that the foreign director have entrusted to me some his of shares thru deed of assignment and he still holding shares in the company after some of shares had been transferred. Is there is violation in that corporation structure? Did I commit violation to the Philippines law being Trustee?

Enrique, the corporate secretary must be a Filipino citizen who is a resident of the Philippines. The corporate code of the Philippines requires that at least 3 of the directors be resident of the Philippines. Each director must own at least one share in the corporation. The corporate secretary does not need to be a shareholder.

Dear Sir,

I have a foreign friend who has just registered a company in China. It is going to be an online school with foreign students and Filipino tutors. My questions are:

1. What would be better, establish a branch office, representative office or a domestic subsidiary corporation?
2. Tax-wise which business entity would be more beneficial?

I hope you can help me with this.

Thanks!

Frances, it depends on size and if you apply for PEZA or BOI incentives etc…

Frances

By roni garciR on October 5th, 2011 at 10:26 am

Sir,

I would like to get a franchise for a restaurant/fast food business. Can I invite a foreigner friend to invest? If so, How many percent can the foreigner own?

Roni, foreigners may not own any percentage of a small retail business such as a restaurant.

Dear Sir,

I want to invest in a Filipino trading company (33.3%). Can I do this using my overseas company as the shareholder?

Thanks.

Bob, yes you may invest in the a Filipino trading company as long as they do not sell retail. An overseas company may be a shareholder of a Philippines company,

I am a Filipino with US citizenship,is it possible to start a business in the Philipppines sewing clothings and sell it to the US?

Mely, yes, you can. Export companies can be 100% foreign owned.

By Beng P. Pizarro on September 9th, 2014 at 7:39 am

Dear Sir,
I owned a single proprietorship trading company but I was thinking if I could convert it to a corporation with the same name. My would-be Incorporators are all Filipino citizens, my husband, my children, my friends. Is it possible?
Thanks,
Beng

A sole proprietorship can not be converted into a corporation. You will have to first incorporate then sell the assets of the sole proprietorship to the corporation. Then you can close the sole proprietorship.

 

Leave a Comment