A corporation is one of the most common types of business infrastructure, which can be a good option for investors with intentions of starting a business in the Philippines.
A Closer Look at Corporations
A domestic corporation may either be wholly or majority owned by a foreign parent company subject only to limits placed by the Foreign Investment Negative List and it’s allied laws.
As a domestic entity, a corporation is incorporated under Philippine laws.
If the domestic corporation is owned in part or wholly by a foreign corporation, it is likewise referred to as a subsidiary corporation.
The following section breaks down essential information about business registration in the Philippines, requirements, and conditions regarding corporations:
Legal Personality and Liabilities
The subsidiary corporation is a separate and distinct entity from its parent company. Because of this nature, the liabilities of the subsidiary are not regarded as the liabilities of its foreign corporation.
Activities Undertaken
Subsidiaries may operate its business as declared in the principal purpose of its articles of incorporation. Most subsidiaries are involved in business process outsourcing (BPO), IT and web development services, and manufacturing for export.
Third-Party Services
Subsidiary corporations may render third-party services.
Selling of Goods and Services
A subsidiary is allowed to directly engage in selling and distributing goods and services for its parent company. Philippine Seven Corporation operates 7-Eleven stores in the Philippines on behalf of Southland Corporation (also known as Seven Eleven Inc.) of Dallas, TX.
Required Capital
- If the subsidiary has over 40% foreign capital and operates as a domestic market enterprise (its export sales revenue does not reach at least 60% of its total annual revenue), its minimum paid-up capital should be $200,000.
- If the subsidiary is engaged in advanced technology, with certification from the Department of Science and Technology, the paid-up capital requirement may be reduced to $100,000.
- If the subsidiary directly employs at least 50 Filipino staff, the reduced paid-up capital requirement of $100,000 may be applied.
- If the subsidiary falls under the export enterprise category, meaning its revenue from export sales is 60% or more of its total annual revenue, the minimum capital shall be PHP5,000.
Income Tax Rate
The worldwide income of a subsidiary is subject to a 30% corporate tax.
Dividend Remittance
Cash and/or property dividends paid by a Philippine subsidiary to non-resident shareholders shall be subject to a 30% withholding tax in general or 15% in certain tax treaty conditions.
Incorporators
A subsidiary needs to have at least five (5) but not more than 15 incorporators–either natural Filipino or foreign citizens–with the majority of them residing in the Philippines.
Registration with the Board of Investments (BOI)
If qualified for BOI registration, the subsidiary may become eligible for fiscal or non-fiscal benefits pertaining to income tax holiday, 5% special tax regime, and other benefits.
Registration with the Philippine Economic Zone Authority
If qualified for PEZA registration, the subsidiary may be entitled to tax incentives.
You can use this guide for basic information about having your subsidiary company in the Philippines. Our competent team of consultants can provide you all the professional advice and assistance you need to launch your business into the market.
Rocky Chan is a lawyer and business consultant who excels in corporate formation, immigration procedures, and client relations. In the last 7 years, he honed his craft in the field of foreign investment consultancy.
