How to Set Up an Offshore Company in the Philippines?

---

The Philippines is becoming a preferred destination for foreign investors and multinational corporations seeking to establish offshore companies in Asia. Its strategic location, English-speaking workforce, competitive operational costs, and favorable investment policies make it an ideal choice for offshore business setup. This article provides a step-by-step guide on how to set up an offshore company in the Philippines, outlining the legal requirements, structure options, and compliance processes.

What is an Offshore Company?

An offshore company is a business entity registered in a foreign country but primarily conducts its operations outside the country of registration. In the Philippine context, an offshore company is typically a foreign-owned corporation that provides services to clients abroad or manages international operations while benefiting from the country’s skilled labor and cost advantages.

Advantages of Setting Up an Offshore Company in the Philippines

• Cost Efficiency: Lower labor and operational costs compared to Western countries.

• Skilled Workforce: Access to English-proficient professionals in accounting, IT, customer support, and finance.

• Strategic Location: Proximity to major Asian markets such as Japan, Singapore, and Hong Kong.

• Favorable Tax Incentives: Opportunities for tax holidays and income tax reductions through the Philippine Economic Zone Authority (PEZA) or Board of Investments (BOI).

• Ease of Doing Business: Streamlined company registration under the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR).

Common Structures for Offshore Companies

Foreign investors can choose from several legal structures depending on business goals and ownership preference:

• Domestic Corporation: May be 100% foreign-owned if the business activity is not restricted by the Foreign Investments Negative List (FINL).

• Branch Office: A direct extension of the parent company abroad that can earn income in the Philippines.

• Representative Office: Cannot earn income locally; used for liaison or marketing purposes only.

• Regional Headquarters (RHQ): Handles administrative and coordination functions for foreign affiliates in the region.

• Regional Operating Headquarters (ROHQ): May provide qualifying services and earn income from affiliates.

  
  

Step-by-Step Process for Setting Up an Offshore Company

Here is a simplified process for setting up an offshore company in the Philippines:

1. Determine the Legal Structure: Choose between corporation, branch, or representative office.

2. Reserve a Business Name: Use the SEC Company Registration System (CRS) to check availability.

3. Prepare Documentary Requirements: Articles of Incorporation, By-Laws, bank certificates, and parent company documentation (if applicable).

4. Submit Application to SEC: Secure the Certificate of Registration or License to Do Business.

5. Register with BIR: Obtain a Tax Identification Number (TIN), BIR Form 2303 (Certificate of Registration), and Authority to Print invoices and receipts.

6. Apply for Local Permits: Secure Barangay Clearance, Mayor’s Permit, and Business Permit from the Local Government Unit (LGU).

7. Register with Other Agencies: Enroll with the Social Security System (SSS), PhilHealth, and Pag-IBIG Fund if hiring local employees.

8. Open a Corporate Bank Account: Required for capital investment and operational transactions.

   
   

Capital Requirements for Offshore Companies

Capital requirements vary depending on the structure and ownership percentage:

• 100% Filipino-owned corporation: Minimum paid-up capital of ₱5,000.

• Foreign-owned corporation (less than 40% foreign ownership): Minimum ₱5,000.

• Foreign-owned corporation (more than 40% foreign ownership): Minimum US$200,000, which may be reduced to US$100,000 if the business employs at least 50 Filipinos or uses advanced technology.

• Branch Office: Minimum remittance of US$200,000.

• Representative Office: Minimum remittance of US$30,000.

  
  

Taxation and Incentives

Offshore companies operating in the Philippines are subject to varying tax obligations depending on their structure:

• Domestic Corporation: 25% corporate income tax on worldwide income.

• Branch Office: 25% income tax on income derived within the Philippines.

• Representative Office: Exempt from income tax as it cannot earn locally.

• PEZA/BOI-Registered Entities: May enjoy income tax holidays or 5% Gross Income Tax incentive.

  Companies engaged in export, IT services, or business process outsourcing (BPO) often qualify for incentives under PEZA or the Fiscal Incentives Review Board (FIRB).

Compliance and Ongoing Requirements

After registration, offshore companies must comply with annual reporting and tax filing requirements, including:

• Filing of Audited Financial Statements (AFS) with SEC.

• Submission of Annual Income Tax Return (BIR Form 1702).

• Filing of monthly and quarterly tax returns (VAT, withholding tax, etc.).

• Renewal of business permits and licenses every year.

How DV Consulting Inc. Can Help

DV Consulting Inc. offers comprehensive assistance to foreign investors looking to establish offshore companies in the Philippines. Our services include SEC and BIR registration, business permit processing, tax compliance setup, and advisory on corporate structuring and incentives. We help ensure your offshore company is registered efficiently and operates in full compliance with Philippine laws.

Setting up an offshore company in the Philippines offers numerous strategic and financial advantages for global businesses. With a supportive legal framework, competitive costs, and a skilled workforce, the country continues to attract international investors. By working with professional consultants like DV Consulting Inc., foreign businesses can establish a compliant and successful offshore presence with ease.

Article created by:

Danhilson Vivo, CPA, REB, REA

President & CEO

DV Consulting