Doing Business in the Philippines: Registering a Branch

There’s no better time for starting a business in the Philippines for foreigners than now. In the latest World Investment Report 2016 of the United Nations Conference on Trade and Development, the Philippines is projected to be among the world’s most promising destinations for foreign investments for 2016 to 2018.

According to the report, the Philippines has made “noteworthy measures” in liberalizing its policies on foreign investments, placing it on the eighth spot along with three others, namely Australia, France, and Malaysia.

Among the investment vehicles available to foreign investors as an entry point into the Philippines are branch offices. You may use this guide to help you get started.

What’s the Nature of a Branch Office?

A branch office is, quite simply, registering a foreign company to do business here in the Philippines. for the most part, branches operating in the Philippines perform their head office’s business activities in the country so that they can generate income.

Being a mere extension of its parent company, ownership of the branch office belongs to said parent company and not to any domestic entity.

A branch office has the following characteristics:

Legal Personality

• As an extension of the head office (HO), a branch office has no separate legal representative other than from the parent company.

Liabilities

• Any liabilities are considered to be those of the HO.

Activities to be Undertaken

• Unless otherwise restricted by Philippine law, branch offices are generally authorized to perform the same business activities of its HO. See the Foreign Investment Negative List for activities/industries that are restricted to entities with Filipino equity..

Capitalization Requirement

• A branch office must have an inward remittance of at least $200,000, if it is operating as a domestic market enterprise, meaning it has export sales revenue less than 60% of its total annual revenue.
• The inward remittance requirement may be reduced to $100,000 if the branch is certified by the Department of Science and Technology to engage in advanced technologies. Another condition is the employment of at least 50 direct Filipino employees in the branch office.

Income Tax Rates

• The branch office’s income derived from the Philippines is subject to 30% corporate income tax.

Branch Profit Remittance

• Unless the branch has a business registration in the Philippines with the Philippine Economic Zone Authority (PEZA), it is required to pay 15% branch profit remittance tax from the total profit remitted to the HO.

Resident Agent

• A branch may be set up with only one individual acting as its resident agent, whose sole function is to receive summons (or other official government correspondence) for and behalf of the HO.

Registration with the BOI

• A branch office is not eligible to register with the Board of Investments, and thus, unable to avail of incentives.

Registration with PEZA

• If the branch office meets PEZA qualifications such as having its operations set up in an economic zone, it may be registered with PEZA.

Once you’re all set to put up a branch of your company in the Philippines, you’ll need these vital pieces of information. Feel free to sort out any questions or clarifications with our consulting team, and we assure you we’ll be helping you every step of the way.