Being successful in expanding your business is crucial to the overall health of a company. Firms open a branch office for many reasons, including serving a single client, penetrate a new market, and making a wider outreach of the company.
In the Philippines, while the corporation is the most suitable form of business entity preferred by foreign investors, overseas companies have several other types of structures available.
Among these, the Branch and the Representative offices are the most common in the Philippines.
What is a Branch Office?
A branch is an extension of a foreign company carrying out an undertaking in a different country following all the rules and regulations of that country, and in this case, the Philippines.
A Branch Office of a Foreign Corporation operating in the Philippines must obtain a license to do business from the SEC.
The Branch will need to appoint a Resident Agent in the Philippines who will be in charge of receiving the summons and legal processes in starting a business in the Philippines as a foreigner.
Features of Setting Up a Branch in the Philippines
- A branch in the Philippines is 100% foreign-owned
- The minimum capital requirement to open a branch office is PHP 200,000
- A branch can be set up by just one person who will act as a resident agent
- A branch office must pay 30% income tax and 12% value-added tax
- It will also be subject to a withholding tax related to the compensation paid to the Filipino employee
How to Open a Branch Office in the Philippines?
The requirement to open a foreign branch office in the Philippines depends on the business activities of the parent company.
A branch office is allowed to commence its business operations only after obtaining a license to incorporate a business in the Philippines from the Securities and Exchange Commission (SEC).
They have to complete certain requirements, which are stated below:
- Fill the complete application form of SEC (Form No. 103). This form must be signed by any person officially authorised by the applicant’s Board of Directors. If this is signed outside of the Philippines, it must be authenticated by the nearest Philippine Embassy or Consulate.
- Pay the SEC filing and legal research fee. Next, an assigned capital of US$ 200,000 along with the SEC registration fees shall be calculated on the basis of its converted equivalent in Philippine pesos.
- The capital amount must be remitted directly to the Treasurer-in-Trust account opened for and on behalf of the branch office.
- The next step is to submit the latest audited financial statements. Such statements must be authenticated by the Philippine Embassy or Consulate of the place of execution thereof.
- Within 60 days after obtaining the license to operate the business, the Branch office must deposit marketable securities worth at least P100,000 with the SEC. These securities may be withdrawn upon cessation of the Philippine Branch’s operations.
Documents Required to Set Up a Branch Office in the Philippines
- Form F-103 (Application for Establishment of a Branch Office)
- Name verification slip
- Authenticated copy of the Board Resolution authorising the establishment of a Branch Office in the Philippines; designating the resident agent to whom summons and other legal processes may be served to the foreign corporation
- Financial statements as of a date not exceeding one year immediately prior to the application. Audit services of an independent Certified Public Accountant (CPA) of the home country must be availed and authenticated before the Philippine Consulate/Embassy.
- Authenticated copies of the Articles of Incorporation
- Proof of inward remittance such as a bank certificate
- Registration Data Sheet
- Resident agent’s acceptance of appointment.
Taxation of Branch Offices in the Philippines
Branch offices of foreign companies are subject to the following taxation services and accounting requirements,
- The branch office must pay the 30% income tax and 12% value-added tax;
- It will also be subject to a withholding tax related to the compensation paid to the Filipino employees;
- A branch remittance tax of 15% is applicable on the profits made by the branch in the Philippines;
- A reduced branch remittance tax is available under the Philippines’ double tax treaties.
How Can We Help?
Due to a variety of factors, many firms have pursued the strategy of opening a branch office in the Philippines. The country’s ever-growing economy and an increase in the flow of foreign investments are a few of the reasons why investors choose to register their company in the Philippines over other countries.
If you are one of those and looking for an advisor who will guide you through this process, then we at Business Setup Worldwide are at your service.
Our advisors in the Philippines have years of experience in this field and will help you with branch office registration in the Philippines as soon as possible.
For more information contact us – we’d be glad to assist.