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Starting a Business in the Philippines as a Foreigner

The Philippines is often regarded as the place we go to when we want to escape work. But have you ever considered starting a business in the Philippines as a foreigner? Due to its rich natural and labor resources, talent pool filled with competent, bilingual, and resilient individuals, Philippines is and ideal location to start a business. And from the last few years, more and more entrepreneurs are heading to the Philippines to actually start their companies, with the obvious advantages of a large, English-speaking population with high mobile penetration outweighing the potential negatives.

How to Start a Business in the Philippines

Now, for a foreigner, it might be a challenging task to start a business in the Philippines as, legally, a foreigner cannot have a business license in their name. The total share of a foreigner in a firm can be 40%, while the remaining will be of a Filipino. But the process for the same is straightforward if one obliges with all the rules laid by the government. There are 3 different categories one can choose from to start a business in Philippines:

  1. Sole Proprietorship
  2. Partnership
  3. Corporation

First you need to decide which type of business you want to start. The procedure after that is explained below.

Procedure to Start a Business in the Philippines as a Foreigner

  1. For company registration in the Philippines, verify the availability of a company name with the relevant authorities and register for the same. The approximate cost to register online is around PHP 40 for the first month.
  2. For sole proprietorship registration, you need to approach Department of Trade and Industry (DTI), and for partnership and corporation, register your company name at the Securities and Exchange Commission (SEC) register facility.
  3. After the registration, you will get a pre-registered Taxpayer Identification Number (TIN) for your company when you get your SEC certificate.
  4. This TIN would need to be officially registered by you or any of your partners in another office – the Bureau of Internal Revenue (BIR). The BIR would then give you the Certificate of Registration (COR). It is valid for 5 years.
  5. Open a corporate bank account wherein the minimum capital to be deposited is PHP 5000.
  6. Also, don’t forget to prepare the Articles of Incorporation as many banks in the Philippines are meticulous and will ask for the document before opening an account.
  7. After you decide the location of your office in the Philippines, you will need to obtain a barangay clearance from the barangay where the business is located. The officials will then check your SEC papers. After this, you would have to pay the barangay a fee and then you can go ahead and apply for a business permit from the local government unit, i.e., the municipal or city office.                    [A barangay is the smallest administrative division in the Philippines.]
  8.  Businesses that rent commercial space need to secure a Contract of Lease. Businesses that operate on private lands need to secure a Land Title.
  9.  Get a Mayor’s permit. The requirements for the mayor’s permit vary per municipality, but mainly, the list includes a contract of lease, barangay clearance, occupancy permit, sanitary permit, fire permit, and a community tax certificate.
  10. Now that you’ve registered your business, you need to handle the requirements of your employees. Ensure that they are registered with the Social Security System (SSS), PhilHealth, Home Development Mutual Fund (HMDF)/Pag-IBIG, and the Bureau of Internal Revenue (BIR).
  11. You can register intellectual property rights services as well which will help you in safeguarding your intellectual property related to business.

Documents Required to Start a Business in Philippines as a Foreigner

To register a foreign-owned company, you'll need the name registration certificate and other documents, including:

  1. SEC registration – for registering as a partnership or corporation
  2. DTI registration – for registering your business trade name (BTR)
  3. Mayor’s business permit – for getting the license to operate in the city or municipality and payment of your local business taxes
  4. BIR registration – for getting TIN, official receipts and invoices, registering your books of accounts, and paying your national internal revenue taxes (income tax, VAT or percentage tax, withholding taxes, etc.)
  5. SSS, PhilHealth, and Pag-IBIG Fund registration – for registering yourself or company as an employer and for remitting your employees’ contribution together with your employer’s share
  6. Usually, the BIR and the City/Municipality Office require the certificates of registration with the SEC or DTI before a business can be registered with them. Thus, you need to register through those offices to start commencing your business.
  7. Articles of Incorporation
  8. Financial records (documents of assets and liabilities)
  9. Proof of minimum inward payment

Doing a business in the Philippines is a huge investment given the booming startup scene, despite all the restrictions. The procedures can be tedious and time consuming, but to make this process easier you can hire a firm that can help you navigate the legal challenges of starting your own company. More importantly, a partner with thorough knowledge of the legal and business environment in a foreign country can help you make the right steps to speed up the process. If you are looking to set up a business in the Philippines, do get in touch with us – we’ll be happy to help.