Business Registration for Foreigners in the Philippines

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The Philippines has become an increasingly attractive destination for foreign investors due to its strategic location, growing consumer market, and English-speaking workforce. However, before a foreign national or foreign company can start operating a business in the country, they must first understand the legal framework and registration process required by Philippine laws. This article provides a comprehensive overview of business registration options for foreigners and the requirements imposed by the Securities and Exchange Commission (SEC), the Department of Trade and Industry (DTI), and other government agencies.

Legal Framework for Foreign Investment

Foreign participation in Philippine businesses is governed primarily by the Foreign Investments Act of 1991 (Republic Act No. 7042, as amended). This law allows foreigners to invest and participate in any business activity, except those restricted by the Foreign Investment Negative List (FINL). The FINL identifies industries where foreign ownership is limited or prohibited due to national security, public interest, or protection of small enterprises.

Business Structures Available to Foreign Investors

Foreigners may choose from several business entities depending on their investment goals, operational scale, and ownership preferences.

Below are the most common options:

• Domestic Corporation – A corporation organized under Philippine law that may have up to 100% foreign ownership, provided the business activity is not restricted by the FINL. The minimum paid-up capital is generally US$200,000, but this may be reduced to US$100,000 if the company employs at least 50 Filipino workers or uses advanced technology.

• Foreign-Owned Branch Office – A branch of a foreign corporation that can engage in business activities similar to its parent company. It must remit US$200,000 as minimum inward remittance.

• Representative Office – Cannot engage in profit-generating activities. It is limited to market research and liaison work for its parent company. Requires US$30,000 inward remittance.

• Regional Headquarters (RHQ) – Performs supervision, coordination, and communication functions for affiliates in the Asia-Pacific region. It is not allowed to generate income locally. Requires US$50,000 capitalization.

• Regional Operating Headquarters (ROHQ) – May provide qualifying services to affiliates and can earn income in the Philippines. Requires US$200,000 capitalization.

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Registration Process for Foreign Businesses

Depending on the chosen entity type, registration may be done with either the SEC (for corporations and partnerships) or the DTI (for sole proprietorships). Here are the general steps for registering a foreign-owned corporation or branch:

1. Name Verification and Reservation – Check availability and reserve the company name through the SEC’s Company Registration System (CRS).

2. Submission of Documentary Requirements – Prepare Articles of Incorporation, By-Laws, proof of remittance, and authenticated documents from the parent company (if applicable).

3. Payment of Filing Fees – Fees depend on capitalization and company structure.

4. Issuance of Certificate of Registration – Once approved, the SEC issues the Certificate of Incorporation or License to Do Business.

5. BIR Registration – Secure a Tax Identification Number (TIN), Certificate of Registration (BIR Form 2303), and Authority to Print invoices/receipts.

6. Local Government Permits – Apply for a Barangay Clearance, Mayor’s Permit, and Business Permit.

7. Other Registrations – Register with SSS, PhilHealth, and Pag-IBIG Fund if hiring employees.

Taxation Rules for Foreign Entities

Foreign corporations doing business in the Philippines are subject to taxation depending on their structure:

• Domestic Corporation – Taxed on income from all sources at 25% corporate income tax.

• Resident Foreign Corporation (Branch) – Taxed only on income derived from Philippine sources at 25% corporate income tax.

• Representative Office / RHQ – Exempt from income tax since they do not earn locally.

• ROHQ – Subject to a preferential tax rate of 10% on taxable income.

Industries Restricted to Foreign Ownership

Foreign investors should review the Foreign Investment Negative List (FINL) to determine whether full ownership is allowed.

Examples of restricted sectors include:

• Mass media (100% Filipino-owned)

• Retail trade enterprises with paid-up capital below US$2.5 million

• Small-scale mining and cooperatives• Private security agencies

• Land ownership (foreigners may only lease land for up to 50 years, renewable for another 25 years)

Advantages of Doing Business in the Philippines

The Philippines continues to attract foreign investors because of its strong economic fundamentals and supportive policies.

Key advantages include:

• Strategic geographic location in Southeast Asia

• Highly skilled and English-speaking workforce

• Competitive labor and operational costs

• Expanding domestic consumer market

• Government incentives through PEZA and BOI for qualified enterprises

How DV Consulting Inc. Can Help

DV Consulting Inc. specializes in assisting foreign investors with end-to-end business registration in the Philippines. Our services cover SEC and BIR registration, capital structuring, tax compliance, and post-incorporation support. We also provide strategic guidance on ownership structures, visa applications, and local market compliance.

With our expertise, foreign entrepreneurs can navigate Philippine regulations smoothly and start their business operations confidently and legally.

Setting up a business in the Philippines as a foreign investor offers numerous opportunities for growth, provided that all legal and regulatory requirements are properly met. By understanding the available business structures, capital requirements, and registration procedures, foreigners can ensure compliance and maximize their investment potential.

With professional guidance from DV Consulting Inc., foreign investors can establish a strong and compliant business presence in the Philippines with confidence and ease.

Article created by:

Danhilson Vivo, CPA, REB, REA

President & CEO

DV Consulting