Setting up Business in Philippines — Incorporation Process & Incentives for Foreign Investors

Why Philippines Is the Right Choice for Your Business

The Philippines has rapidly evolved into one of Southeast Asia’s most dynamic and attractive business destinations. The country has a huge population of young and English-speaking workforce at low costs providing strong support for investors.

Strategic Location and Market Access

Philippines provides direct access to over 680 million consumers within the region as it serves as the crossroad of major trade routes between the U.S., China, and ASEAN. Also being a member of the ASEAN Free Trade Area (AFTA) and multiple bilateral agreements, the country offers duty-free access to key Asian markets.

Attractive Tax Incentives and Economic Zones

The Philippine Economic Zone Authority and the Board of Investments do offer various fiscal incentives such as the income tax holidays and duty-free importation of capital equipment.

Growing Economy and Investor Confidence

With GDP growth averaging 6% over the past decade, the Philippines is one of the fastest-growing economies in Asia.

 

Step-by-Step Process of Setting Up a Company in Philippines

Setting up a business in Philippines requires following a structured process. The process is well structured involving both national and local authorities and can be completed in a few weeks.

1. Choose Legal Structure and Reserve the Business Name

• Determine the most appropriate legal form for your business, this decision directly affects capital requirements, management structure, liability, and tax treatment.
• Reserve the business name from your appropriate business agency, depending on the legal structure.

2. Prepare the Required Formation Documents

• Corporations must submit their Articles of Incorporation, By-laws, and Treasurer’s Affidavit. Partnerships must prepare an Articles of Partnership.
• Sole proprietorships require only the DTI certificate and valid identification

3. Depositing the Required Capital

• Through bank deposit reflect the proof for capital investment.
• Corporations and OPCs deposit their paid-in capital into a local bank, which issues a certificate confirming the deposit.
• Domestic corporations have a minimum capital of Philippine Pesos 5,000, but fully foreign-owned firms are often required to remit at least USD 200,000 unless exemption criteria is met.

4. Register with the Appropriate National Authority

• Once documents are complete, registration must be carried out with the relevant national agency.
• The company receives a Certificate of Incorporation upon approval, this grants company legal status to operate.

5. Secure Local Government Clearances

• After national registration, the company must obtain clearances and permits from local authorities.
• This includes a Barangay Clearance from the Barangay office and Business Permit from the city or municipality.

6. Registering with the Bureau of Internal Revenue

• The business must then register with the Bureau of Internal Revenue (BIR) to obtain a Tax Identification Number (TIN) and Certificate of Registration.
• VAT registration is compulsory for companies with annual sales more than Philippine Pesos 3 million.

7. Open Bank Accounts

• After completing all registrations and securing permits, the company must open a bank account under its official name.
• This account can replace the temporary capital deposit account accessed during the incorporation phase.

Business Structures in Philippines — Finding the Right Fit

Foreign investors can choose from several types of business entities in Philippines depending on the scale, ownership, and purpose of their operations. Each type has distinct requirements, ownership rules, and tax implications.

Business Structure	Minimum Capital	Liability	Governance	Suitability
Domestic Corporation	Philippine Pesos 5,000 domestic USD 200,000 for full foreign ownership	Limited to subscribed capital	At least 2 incorporators and directors Can include foreigners	For long-term operations and credibility with local investors
One Person Corporation (OPC)	None	Limited to capital contribution	Single shareholder acts as sole director	Best for solo entrepreneurs wanting limited liability
Partnership	None	General Partner unlimited   Limited Partner based on contribution	All partners manage or appoint managing partner	For SMEs and professional firms needing flexibility
Branch Office	USD 200,000 generally   USD 100,000 if tech-based or employs more than 50 Filipinos	Parent company fully liable	Managed by resident representative	For foreign firms expanding directly
Representative Office	USD 30,000 annual inward remittance	Parent company fully liable	Managed by resident representative	For liaison or marketing offices without sales activity
Regional Headquarters (RHQ)	USD 50,000 annual remittance	Parent company fully liable	Headed by regional manager	For MNCs managing regional coordination and supervision
Regional Operating Headquarters (ROHQ)	USD 200,000	Parent company fully liable	Headed by regional operating head	For MNCs offering shared services or regional operations
Sole Proprietorship	None	Unlimited personal liability	Owned and managed by individual	Best for freelancers and small-scale local businesses

 

Few Important Points to Consider

When setting up a business in Philippines, there are additional points which needs to be considered.

Economic Zones and Tax Incentives

The Philippines offers one of the most flexible tax incentive regimes through the Philippine Economic Zone Authority and the Board of Investments. Businesses registered under these programs can enjoy income tax holidays of 4 to 6 years.

Tax Treaties and Transfer Pricing Advantages

The Philippines has over 40 Double Taxation Agreements, with major economies such as the United States, Japan, and India. Foreign companies can structure transactions through these treaties to avoid double taxation on dividends, royalties, and technical fees.

Hiring Local Directors or Resident Agents Strategically

Philippine law requires that at least one of the director is a local resident. Many businesses strategically appoint local directors or agents through corporate service providers to fulfil this requirement.

How Our Firm Can Help You

With extensive experience in helping international businesses establish a presence in Asia, our firm is well-equipped to support your expansion plans in Philippines. Our expertise includes:

• Market Study & Feasibility: Assess opportunities and viability for your business in Philippines and build a tailored market entry roadmap.
• Partner & Investor Search: Identify local partners, distributors, or collaborators to accelerate growth.
• Incorporation & Compliance: Assistance with setting up a subsidiary or branch, opening bank accounts, providing registered office and resident director services, VAT registration, bookkeeping, and statutory filings.
• Tax & Regulatory Strategy: Choose the best canton, plan cross-border taxes efficiently, and obtain sector-specific regulatory approvals.
• Ongoing Legal Support: From corporate governance, contracts, and dispute resolution to intellectual property protection, employment law, and immigration support, we ensure your business operates smoothly.

Philippines offers a strategic location, favourable tax framework, and strong business ecosystem for international companies. Let’s explore how your company can succeed in Philippines!