The Philippines a flourishing country and is one of the fastest growing economies in Asia. The country is moving forward with a highly educated population and a large deposit of natural resources. It belongs to the top ten producers of copper, chromites and gold in the world. The friendly business environment is attracting foreign investors to establish the Philippines as one of the prominent business centres in Asia. Thus, a plan of starting a business in the Philippines is fruitful and advantageous for any entrepreneur in the world. The country does not only provide you with the incentives and offers, but also a fertile infrastructure and friendly business milieu.
Advantages of Starting a Business in the Philippines
- The manpower in the Philippines is skilled and inexpensive
- The Philippines is located in the heart of Asia. It is also connected to the four major capitals of the region which connects a million people from Asian countries
- There is availability of Special Economic Zones, subject to only 5% overall tax rate
- The country has an open and friendly economy which allows 100% ownership in most of the sectors
- The Philippines provides well-developed communication, transportation, economic and business infrastructure
- A company in the Philippines has access to the wide ASEAN market and its vast trade opportunities
Types of Corporate Entities in the Philippines
There are many types of business entities in the Philippines. They are explained as under:
A sole proprietor in the Philippines is someone who is personally responsible for any liabilities incurred in the business. However, they also get full benefit of any profit incurred by the company. In effect, the business and personal interests are considered as one single entity.
This type of business entity is a separate legal entity. One can choose a structure with limited or unlimited liabilities. For having a larger partnership in the Philippines, you must register your interests with Securities and Exchange Commission.
A corporation in the Philippines must have at least five shareholders who stake a minimum amount of capital. However, the liability of shareholders is then capped at the total amount of their invested capital. The investor has to register his corporation to the Securities and Exchange Commission.
A branch in the Philippines can be called as an extension of a foreign company carrying the same activities as the parent company. Here, the only difference is, the business is carried out in a different country following the rules and regulations of that country.
A representative office in the Philippines can be only set up to promote their parent company. They can do market research, study the customers etc. but they cannot conduct buying and selling activities in the country.
How to Start a Business in the Philippines?
The Philippines is no more just a place for leisure; starting a business in the Philippines for foreigners has become simpler over the years. The government is offering incentives and supporting a Build-Operate-Transfer (BOT) investment scheme to attract businessmen to invest and start their business in the country. The Philippine government has simplified the incorporation process for all kinds of businesses to encourage investors and entrepreneurs. Here is the simple procedure for starting a business in the Philippines:
1.Choose a Business Structure
The first step while setting up your small business in the Philippines is choosing a corporate structure from the list mentioned above. Depending on the size and resources of your business, you’ll need to decide whether to set up as a sole-proprietorship, partnership, or corporation.
2.Register a Business Name
The next step in starting a business in the Philippines is to get registered the proposed business name with the following departments, according to the type of business:
- Sole proprietorship – The Department of Trade and Industry (DTI)
- Corporation/Partnership – Securities and Exchange Commission
- Cooperative – Cooperative Development Authority
The total fee for name registration varies between PHP 40- PHP 120
3.Pay the Minimum Deposit
Business owners who want to register their company in the Philippines need to deposit a minimum amount of capital in the bank account. The Philippines’ Corporation Code sets that minimum at PHP 5,000 but your bank will need additional materials, including articles of incorporation and identification documents.
4.Register with the Securities and Exchange Commission (SEC)
This is the most important step under the complete process. SEC that is the Securities and Exchange Commission of the Philippines, a national government regulatory agency, oversees every registered business entity in the Philippines. Applicant businesses must provide the SEC with a number of materials and documents, including:
- Approved company name
- Articles of incorporation
- Treasurer’s affidavit,
- Statement of assets and liabilities
- Company particulars including information on directors, officers, and stockholders
5.Notarize the documents
Before completing the step 4, remember that, according to the section 14 and 15 of the Corporation Code, proper notarization of all the documents as well as the Treasurer’s Affidavit is necessary before proceeding to file with the SEC. This may cost PHP 500 and would only take 1 day to accomplish.
6.Obtain the Tax Identification Number (TIN)
Now that you have registered your company with the SEC, you must now complete the following process:
- Company name verification slip
- Articles of incorporation (notarized) and by-laws
- Treasurer’s affidavit (notarized)
- Statement of assets and liabilities
- Registration data sheet with particulars on directors, officers, stockholders, and so forth
- Written undertaking to comply with SEC reporting requirements (notarized)
- Written undertaking to change corporate name (notarized).
Once you complete all these steps, SEC will automate your TIN. This step takes an average of 2 days to complete.
7.Register with BIR
Register the company with the Bureau of Internal Revenue (BIR) District office for authority to print invoice and book of journal. This task is crucial in determining applicable taxes, paying your annual registration fee, and acquiring and stamping of sales invoices, receipts, and books of accounts.
8.Get a Barangay Clearance
You need to visit the Barangay hall where your business is located and bring in the documents including your application form, SEC Certificate of Incorporation, approved AoA, lease contract, and business plan. The fee for Barangay Clearance ranges between PHP 300- PHP 1,000.
9.Pay the Annual Community Tax
The annual basic and additional community tax can be paid at the City Treasurer’s Office (CTO). The basic tax would depend on your business activity. It must not be higher than PHP 500. The additional tax on the other hand is subject to the assessed value of the real property you own, along with dividends and earnings.
10.Obtain the Business Permit
You can obtain a business permit in the Philippines from the Business Permits and Licensing Office (BPLO). Apart from this, there are a few companies who need to secure other clearances or certificates such as a location clearance, fire safety and inspection certificate, mechanical permit, certificate of electrical inspection, and sanitary permit.
11. Register with the Social Security System (SSS)
Businesses with any number of employees must register to the Philippines Social Security System. The following documents are required:
- Employer registration form (Form R-1)
- Employment report (Form R-1A)
- List of employees, specifying their birth dates, positions, monthly salary and date of employment; and
- Articles of incorporation, by-laws and SEC registration.
It is mandatory to register your business with the following offices to be in line with the government regulations:
- Department of Labor and Employment (DOLE) – For occupational safety and Health standards
- PhilHealth – For availing Medicare benefits
- PAG-IBIG fund – Mandatory for employees covered by the Social Security System (SSS)
- Department of Environment and Natural Resources (DENR) – For availing an Environmental Compliance Certificate
Requirements for Doing Business in the Philippines
For Sole Proprietor Registration
For Corporate Registration
So, if you are planning to start a business in the Philippines, go for it! The business-friendly Philippine government provides opportunities for entrepreneurs to start a small business and reap all the advantage. Business Setup Worldwide is a management consultancy which helps to establish your business in the international market. We help our clients in understanding the procedures to start a business in the Philippines. Our experts can assist you in the incorporation process, taxation, legal procedures, accounting and financial management. For further details on how to start a business in Philippines, contact us – we’d be glad to assist.