Doing Business in the Philippines: Establishing a Representative Office

Foreign investors have several options when starting a business in the Philippines, but this article will focus more on the representative office.

A representative office is considered a foreign-owned corporation. Republic Act 7042, as amended, otherwise known as the Foreign Investments Act, defines a representative or liaison office as one that “deals directly with the clients of the parent company but does not derive any income from the host country and is fully subsidized by its head office.”

Salient Features of Representative Offices

Below are the salient features of a Representative Office as one of the vehicles to start a business in the Philippines for foreigners:
Legal Personality

Since a representative office is an extension of the head office (HO), it does not have a separate legal personality from that of it’s HO.

Liabilities

Any liabilities incurred by the representative office are considered liabilities of the HO.

Activities Allowed

A representative office is limited in the activities it can engage in. By law, it can only engage in the following activities: disseminate information, function as a communication center, promote company products, and perform quality control of products for export. It cannot earn revenue.

Rendering of Third-party Services

A representative office is not permitted to offer services to other enterprises.

Selling of Goods and Services

It’s not possible for a representative office to directly sell its goods or services since it is not meant to gain any income from its host country.

Required Capital

The initial foreign inward remittance must be at least US$30,000, with the operations of the representative office fully subsidized by the HO.

Income Tax Rate

No income tax will be collected since the office is not generating revenue from its business in the country.

Dividend or Profit Remittance

Dividend or profit remittance tax is not applicable for collection from a representative office.

Resident Agent/s

A representative office may be set up with only one person, also acting as its resident agent.

Registering with the Board of Investment

A representative office is not qualified to register with the BOI, and thus, cannot avail of fiscal or non-fiscal benefits.

Registering with the Philippine Economic Zone Authority (PEZA)

Although it may choose to be located in a PEZA zone, the representative office is not eligible for PEZA registration and its corresponding tax incentives.
Some examples of foreign companies who have established their representative offices in the Philippines:

1. Jumbo Representative Office is a solutions provider for heavy lift shipping in the offshore industry, with its head office based in Schiedam, Netherlands.
2. Moylan’s Representative Office represents Guam-based Moylan’s Insurance Underwriter’s Inc. by providing insurance services for clients in various industries in Guam, Federated States of Micronesia (FSM), Marshall Islands, Palau, and Saipan.
3. Obetech Pacific Sdn Bhd Philippines Representative Office is a trading company that engages in the chemical manufacturing business. The parent company’s headquarters is in Kuala Lumpur, Malaysia.

Foreign banks that have representative offices in the Philippines include:

1. Bank of Singapore Limited Representative Office
2. Barclays Bank PLC Representative Office
3. DBS Bank, Ltd. Representative Office
4. Japan Bank for International Cooperation Representative Office
5. Rothschild (Singapore) Limited Representative Office
6. The Bank of New York Mellon Representative Office
7. The Export-Import Bank of Korea (Korea Eximbank) Representative Office
8. UBS AG Representative Office
9. Wells Fargo Bank, NA Representative Office
10. Korea Development Bank Representative Office

EnterPH can provide you further information regarding the complete procedure and documentation requirements in registering your representative offices in the Philippines.