Countries
Foreign investors seeking to set up a company in the Philippines can choose among six types of corporations, namely:
- Domestic Corporation
- One Person Corporation
- Foreign Corporation
- Branch Office
- Representative Office
- Regional Headquarters (RHQ)
- Regional Operating Headquarters (ROHQ)
Corporations in the Philippines are primarily characterized by the nationality of their stockholders. Domestic Corporations are locally-incorporated entities with 100% or more than 50% Filipino ownership. One Person Corporations are also locally-incorporated but can only be either 100% Filipino-owned or 100% foreign-owned. Foreign Corporations are entities incorporated in other countries with the intent of carrying out their business activities to the Philippines or setting up a liaison office/headquarters for their subsidiaries or affiliate companies abroad.
Domestic Corporation
The most common type of corporation in the Philippines, a domestic corporation is a business entity incorporated, registered, and operating in the Philippines. Its legal personality is separate from its stockholders and/or its associated corporations.
The Philippines does not adopt the legal concept of Private Limited Company (PLC) or Limited Liability Company (LLC), but a Domestic Corporation is its local equivalent. Similar to PLCs/LLCs, a Domestic Corporation incurs its own liabilities. Its stockholders are only held liable to the extent of their contribution to the capital.
To set up a domestic corporation, at least two and a maximum of fifteen stockholders (also known as incorporators) are required. Each stockholder must subscribe to at least one share of the capital stock.
Corporate Officers
Domestic Corporations in the Philippines are required to have at least three officers:
- President
- Corporate Secretary
- Treasurer
The President can be a foreign national not residing in the Philippines. But s/he must be a director holding at least one share of the capital stock. The corporate secretary must be a Filipino citizen. The Treasurer can be a foreign national but must reside in the Philippines.
Minimum Capital Requirements
Wholly Filipino-owned Domestic Corporations have a minimum capital requirement of ₱5,000 or US$100. Domestic Corporations with 60% Filipino-40% foreign ownership also have the same capital requirement.
Those with more than 40% foreign ownership are required to have a minimum paid-up capital of US$200,000. This amount can be reduced to US$100,000 if the corporation will engage in activities involving advanced technology or employ at least 50 direct employees.
Restrictions
Domestic corporations with foreign ownership are restricted to participate in areas of investment included in the Foreign Investments Negative List (FINL) — a list of economic sectors where foreign ownership and participation are prohibited or limited.
One Person Corporation
A One Person Corporation (OPC) is a corporation with a single stockholder. The single stockholder shall serve as the incorporator, sole director, and president. Their liability to the OPC is limited to the extent of their assets.
Only the following are allowed to set up an OPC:
- Natural person of legal age (local or foreign)
- Trust*
- Estate
A foreign natural person can set up an OPC in the Philippines, but they are subject to restrictions in areas of investment partially or wholly reserved to Filipino citizens under the FINL.
*The trust does not refer to a trust entity, but to the subject being managed by a trustee.
Corporate Officers
The single stockholder must appoint a Corporate Secretary, Treasurer, and other officers within 15 days from the date of incorporation. The role of the Corporate Secretary cannot be taken by the single stockholder, but they can assume the role of the Treasurer provided that they submit a surety bond to the Securities and Exchange Commission (SEC).
The Corporate Secretary must be a Filipino citizen while the Treasurer must be a resident of the Philippines.
Minimum Capital Requirements
There is no minimum capital requirement for setting up an OPC in the Philippines.
Restrictions
The following are not allowed to incorporate an OPC:
- Natural persons licensed to exercise a profession**
- Banks, non-bank financial institutions, and quasi-banks
- Pre-need, trust, and insurance companies
- Non-chartered Government-Owned and/or Controlled Corporations (GOCCs)
- Public and publicly-listed companies
**If the purpose of setting up an OPC is to exercise their profession.
Foreign Corporation
Foreign corporations can do business in the Philippines through any of the following entities:
- Branch Office
- Representative Office
- Regional Headquarters (RHQ)
- Regional Operating Headquarters (ROHQ)
Branch Office
Foreign corporations seeking to generate income in the Philippines by carrying out their business activities into the country can set up a branch office. It does not have a separate legal personality from its parent company and the laws governing its formation, existence, and dissolution are the laws of the country where its parent company was incorporated. With no separate legal personality, the parent company will incur all its liabilities.
Corporate Officers
The foreign parent company is required to appoint a resident agent who shall receive a summons and other legal proceedings served to or against the Branch Office in the Philippines.
The resident agent can be an individual residing in the Philippines or a domestic corporation lawfully doing business in the country. If an individual, s/he must be of good moral character and sound financial standing. If a corporation, it must be fully compliant with SEC and have sound financial standing.
Minimum Capital Requirements
The minimum paid-up capital for setting up a branch office is US$200,000 but can be reduced to US$100,000 if it will engage in activities involving technology or employ at least fifty (50) employees. If it seeks to be an export-oriented enterprise that exports 60% or more of its gross sales, it can be registered with as little as ₱5,000.
Restrictions
A Branch Office can only be set up by a corporation that exists and operates in a country other than the Philippines.
Representative Office
Foreign corporations seeking to test their potential in the Philippine market before making any significant investments can establish a representative office. Similar to a Branch Office, it has no separate legal personality from its parent company, hence all its liabilities will be incurred by the latter. But unlike a Branch Office, it is not allowed to generate income within and outside the Philippines.
As a non-profit generating entity, it is only permitted by law to act as a liaison office, provide marketing/sales support to the parent company overseas, perform quality control of products for export, and/or conduct market research related to the parent company’s industry.
Corporate Officers
The foreign parent company is required to appoint a Resident Agent who shall receive a summons and other legal proceedings served to or against the Representative Office in the Philippines.
The resident agent can be an individual residing in the Philippines or a domestic corporation lawfully doing business in the country. If an individual, s/he must be of good moral character and sound financial standing. If a corporation, it must be fully compliant with SEC and have sound financial standing.
Minimum Capital Requirements
The minimum paid-up capital for setting up a representative office is US$30,000.
Restrictions
A Representative Office is not allowed to derive income and offer services to third parties. It is also not qualified to apply for tax incentives from the government.
Regional Headquarters
A Regional Headquarters (RHQ) is an administrative branch of a foreign corporation allowed to supervise, inspect or coordinate its subsidiaries, branches, and affiliates around the world. It is also allowed to act as a communications center for all associated entities. It is not allowed to derive income and has no separate legal personality from its parent company.
Under legal conditions, it may source raw materials, market products, train employees or conduct research and development projects in the Philippines.
Corporate Officers
The foreign parent company is required to appoint a Resident Agent who shall receive summons and other legal proceedings served to or against the RHQ in the Philippines.
The resident agent can be an individual residing in the Philippines or a domestic corporation lawfully doing business in the country. If an individual, s/he must be of good moral character and sound financial standing. If a corporation, it must be fully compliant with SEC and have sound financial standing.
Minimum Capital Requirements
The minimum paid-up capital for setting up a RHQ in the Philippines is US$50,000.
Restrictions
An RHQ is not allowed to manage the operations of its parent company’s subsidiaries, branches, and/or affiliates. It is also not allowed to derive income and offer services to third parties. Additionally, it is prohibited from dealing directly or doing business with its parent company’s clients in the Philippines.
Its parent company is not permitted to sell or market products through the Philippine RHQ.
Regional Operating Headquarters
A Regional Operating Headquarters (ROHQ) is an extension of a foreign corporation allowed to derive income in the Philippines by performing qualifying services to its head office, affiliates, subsidiaries, and/or branches around the world. Similar to an RHQ, it does not have a separate legal personality from its parent company.
Corporate Officers
The foreign parent company is required to appoint a Resident Agent who shall receive a summons and other legal proceedings served to or against the ROHQ in the Philippines.
The resident agent can be an individual residing in the Philippines or a domestic corporation lawfully doing business in the country. If an individual, s/he must be of good moral character and sound financial standing. If a corporation, it must be fully compliant with SEC and have sound financial standing.
Minimum Capital Requirements
The minimum paid-up capital for establishing a ROHQ in the Philippines is US$200,000.
Restrictions
An ROHQ is not allowed to offer qualifying services to entities other than its parent company’s affiliates, branches, and/or subsidiaries. It is also not allowed to directly or indirectly solicit or market goods and services on behalf of its parent company, branches, affiliates, subsidiaries, and/or any other associated entity.
