Foreign Corporations are allowed to establish Philippine subsidiaries for the sale of their goods and services in the Philippines. A Philippine Subsidiary is actually a domestic corporation in the Philippines that is organized and existing in the Philippine under the Corporation Code of the Philippines (Batas Pambansa Bilang 68) but is owned or controlled by a foreign corporation or multinational company abroad. This could operate any type of legitimate business declared in its purpose or purposes of registration to the extend allowed by Philippine foreign investment laws, rules and regulations, such as but not limited to the following areas:
- Rendering services such as business process outsourcing;
- Manufacturing for export; and,
- Other allowed operations.
It is a limited liability company and its parent stockholder could only be held liable to the extent of its capital contribution. It requires at least five (5) to fifteen (15) incorporators (Filipino citizen or foreigner), of which, majority residents of the Philippines. Its capitalization would depend upon its target market – domestic sale or export sales, extent of foreign ownership, and other factors.
Tax Incentives and Benefits
A Philippine Subsidiary could be entitled for fiscal and non-fiscal incentives based on its intended operations such as tax incentives with the Philippine Economic Zone Authority (PEZA) or Board of Investments (BOI) for income tax holiday, 5% special tax regime, and other benefits.
Philippine Subsidiary Name Registration
The Philippine Subsidiary will register its proposed subsidiary name in the Philippines with the Securities and Exchange Commission’s (SEC) name reservation system with a minimal payment based on the number of days under reservation.
Requirements for Registration of Domestic Corporation
Based on the intended company name, the SEC in the Philippines would require the following documentary requirements for the registration of domestic corporation:
- Articles of Incorporation based on the technical wordings of the Corporation Code of the Philippines;
- By-laws with the internal rules;
- Treasurer’s Affidavit on the capitalization;
- Joint Undertaking to Change Name signed by at least two (2) incorporators;
Applicants could use SEC express forms or customize documents based on the applicable laws, rules, and regulations. Based on the said documentations, SEC will evaluate completeness and upon finding the in order, will issue assessment for the payment of the filing fee. Approval process after payment of filing fee would take three (3) to ten (10) working days.
Stock and Transfer Book Registration
Upon release of SEC approval of the Certificate of Registration of the Philippine Subsidiary, the company shall register a stock and transfer books with minimal cost of around PhP500.00.
Tax Authority Registration
The SEC would assign a tax identification number (TIN) from the Bureau of Internal Revenue (BIR or Tax Authority) that the Philippine Subsidiary should formalize its registration upon payment of annual registration fees (BIR Form No. 0605), documentary stamp tax (DST) for the shares subscribed, and other documentations. The Tax Authority will register the company, its books of accounts, and its official receipts or commercial invoices.
Business Permits and Licenses
The Philippine Subsidiary is likewise required to secure business permits and licenses from the city or municipality covering the place of its business address. Government and permits fees are normally imposed on business permits, community tax certificates, barangay clearance, fire permit, occupancy permit, and the likes.
For Philippine Subsidiary engaged in regulated activities such as banks, financing companies, lending companies, manpower agencies and the likes will be required to secure secondary license prior to formal operations. Another set of documentation and fees will be required based on the nature of application with the applicable government agency.
Employee Welfare Registrations
The Philippine Subsidiary as an employer will likewise be required to register with the following government agencies:
- Social Security System (SSS) for employee’s social security;
- Philippine Health Insurance Corporation (PHIC) for employee’s health insurance benefits; and.
- Home Development Mutual Fund (HDMF or Pag-ibig) for employee’s housing benefits.
Application forms containing employer and employee details along with some documentations will be required for the registration.
Our company registration team is technically well-equipped in handling complete registration of Philippine Subsidiaries of foreign corporations in the Philippines. The entire process of domestic corporation registration would take thirty (30) days on the average and we would be happy to be of professional assistance in setting up your foreign corporation’s subsidiary in the Philippines.