Corporations are required to file quarterly income tax returns (and pay the corresponding tax) together with an accompanying financial statements including an Income Statement. Monthly VAT returns will require a supporting schedule of income and expenses.
The Philippines is a country situated in the southeast of Asia and known for its sun, sand, and beaches. It is comparatively new as against to other industrialized nations. Starting a business in the Philippines is one of the most aspiring careers for Filipinos. The country is still largely depended on agriculture, however in the recent few years services have dominated the economy. Agriculture employs 32% of the workforce (according to World Bank statistics, 2015) and the country is one of the largest producers of coconut in the world. As the business opportunities are expanding in this island nation, giving a push to the small businesses, the following are some of the encouraging features of the country:
- Ranked as the 34th largest economy, it is one of the prospective emerging markets in the world.
- The GDP of Philippines has been increasing steadily, and the country has trumped India as the leading destination for call centers.
- Unlike residents of many other emerging markets, Filipinos speak English fluently, and the country supplies low-wage workers that appeal to large companies growing their operations overseas.
- The Philippines is considered a newly industrialized country, which has an economy transitioning from agriculture to services and manufacturing. In 2016, GDP by Purchasing power parity was estimated to be at $811.726 billion.
Types of Business in the Philippines
Starting a business in the Philippines for foreigners has become a lucrative proposition over the years. Between 2006-2012 (based on a census) a total of 13311 companies began their operations and the primary growth derived was from the services industry. This expansion is attracting foreign business owners to invest and start their business in the Philippines. Here are the three main types of corporate entities primarily used for starting a business in the Philippines: sole proprietorships, partnerships, and corporations.
1. Sole Proprietorship
A Sole Proprietorship in the Philippines is the most basic type of business organization. It can be established by just one person, referred to as a sole proprietor. Mostly, a business in a sole proprietorship is an extension of the business owner himself/herself, so the assets and liabilities of your company are also your assets and liabilities. As an owner, the profits are solely for the entrepreneur running the business.
A Partnership in the Philippines requires two or more people who agree to contribute assets, with the intent of dividing profits among all parties involved. A structure can be chosen as in the case with limited or unlimited liabilities. For partnerships, registration is required with the Securities and Exchange Commission.
A Corporation in the Philippines is comprised of many individuals who act as a single entity to advance the interest of the company as a whole. For a corporation minimum, 5 shareholders are required, and the profits are distributed based on the amount of share capital brought in by the shareholders.
4. Branch Office
A Branch Office in the Philippines is an extension of a foreign company carrying out an undertaking in the Philippines. The reasons behind opening a branch office could be for including serving a single client, penetrating a new market, or to make a wider outreach for a company.
5. Representative Office
A Representative Office in the Philippines can be set up to promote its parent company or for conducting market research. It acts as a local liaison office for a foreign corporation that seeks to establish a corporate presence in the country without engaging in income-generating activities.
How to start a business in the Philippines?
Here are some of the leading steps required to comply with when starting a business in the Philippines.
Doing business in the Philippines-Business Registration procedure-
- Register your business name.
- For sole proprietorship registration, the entrepreneur needs to register through the Department of Trade and Industry (DTI). Interested parties can also do their DTI business registration online.
- For corporations and partnerships, registration needed with the Securities and Exchange Commission (SEC) i-Register Facility.
After obtaining several business permits from local government for company incorporation in the Philippines:
- For Sole proprietorship registration a DTI Business Name Certificate is required. Corporations and partnerships need to secure an SEC Certificate of Incorporation/Partnership.
- For businesses who rent commercial space, a Contract of Lease is required. For companies that operate on private lands, you need to secure a Land Title. For businesses which function in a subdivision, condominium complex or village, you need to obtain a Homeowner’s Association Certificate.
- 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.
- Secure a Certificate of Registration (COR) from the Bureau of Internal Revenue (BIR).
Once the business has been registered, employee requirements are the next important. Registration of Social Security System (SSS), PhilHealth, Home Development Mutual Fund (HMDF)/PAG-IBIG, and BIR are some of the critical items to be ensured in place.
The process to register your business in the Philippines could take some time. Although all of the individual steps can be done fairly quickly, there are several stages to pass through before you can trade. It's important to understand the requirements for the chosen type of business. Business Setup Management services provide the exact need and local guidance to remove the ambiguity from starting the business procedures to getting your business license and starting the operations. To know more about our services or to contact our consultants, kindly write to us at [email protected]