If you are looking for business opportunities in the Philippines, here are a few guidelines to help you determine which type of company best suits your needs.
The Philippines is very open towards foreign investment. In fact, the country has been able to come forward on the Asian economic landscape, offering various opportunities in several fields. Indeed, many foreign businessmen have successfully managed to set up a business in the country over the years. Procedures and conditions may be quite tedious. But you can definitely take this challenge if you have sufficient information, both on related formalities and on the local market's requirements.
Good to know:
Unemployment rate in 2014 stood at 6.9% while growth rate during the same year was at 6.2%.
Types of companies
Before starting, it is best to be aware of the different types of companies existing in the country and on the conditions regarding the setting up of a company by an expatriate. Here is an overview:
The Corporation is a shareholding company requiring 5 to 15 shareholders. Most of them must be Filipino nationals. Once the company has been set up, more shareholders can join in. As regards the minimum capital of 5,000 pesos, 25% of this amount has to be subscribed and another 25% must be released. Each partner's liability is limited to the amount contributed.
The Close Corporation
The Close Corporation is a closed joint-stock company requiring a maximum of 20 associates and partners. There is no minimum capital requirement, but 25% of the paid amount has to be subscribed and 25% of it must be released during the setting up. Each partner's liability is limited to the amount contributed.
The General Partnership
The General Partnership is a partnership company which requires a minimum of two partners. A minimum capital of 3,000 pesos is required. Each partner's liability is unlimited.
The Limited Partnership
The Limited Partnership is a sponsored company which requires a minimum of two partners. A minimum capital of 3,000 pesos is required. Each partner's liability is limited to the amount contributed.
The Sole Partnership
The Sole Partnership is an individual company which will rely on a single person. There is no limit regarding the number of shareholders whose liability is unlimited.
Once you have understood and decided which type of company will best suit your activities, you have to gather required documents to be produced to local authorities that responsible of the setting up of businesses in the Philippines.
First of all, you have to call at the Securities and Exchange Commission (SEC) to verify whether your company name is available and to make a booking if it is the case. You will pay 40 pesos for a 30 days duration booking and 120 pesos for a 90 days booking. Note that booking can also be renewed following the 90 days period. Once this step has been completed, you have to deposit the minimum capital into a bank account in the case of a corporation. A deposit certificate will then be issued. This certificate has to be produced to the SEC.
Thereafter, the articles of the company's affidavit have to be notarized. Fees of 500 pesos apply. You can then proceed with the company's registration at the SEC. The following documents have to be produced:
- proof of verification of the company name
- the company's articles along with a notarized affidavit
- the notarized Treasurer's affidavit
- the state of the company's liabilities and assets
- a registration form containing details on each shareholder or partner regarding their roles in the company
- a written commitment that the company has met the SEC's requirements
- a written commitment in the case of change of name (if any).
The company will then be eligible to a Taxpayer's Identification Number (TIN). Fees of 2,066 pesos apply.
Next, you have to call at the nearest Barangay office to the future company's premises with the following documents:
- an application form
- an incorporation certificate issued by the SEC containing the company's rules and regulations
- the company's location plan and lease document, if any
- fees of some 300 to 1,000 pesos.
The annual community fees then have to be settled at the City Treasurer's Office. A company's tax certificate (CTC) will then be issued. Note that the company shall pay an additional community tax along with the basic fees which generally depends on the type of company being set up. You can then apply for an operation permit at the Business Permits and Licensing Office. Fees of some 2,400 pesos apply. Other permits may also be issued against fees according to the type of company.
You also have to purchase a specific accounts book, which costs some 400 pesos, in a library. The accounts book consists of four books where you are required to record the company's accounts regarding collects and disbursements. Note that this book will be required upon the company's registration with the Bureau of Internal Revenue (BIR). In the case of computerized accounts, you can request for a Form No. 1900.
Once these steps have been completed, you can request for a Certificate of Registration (COR) and a Taxpayer Identification Number (TIN) from the Bureau of Internal Revenue (BIR). Once you have obtained the company's TIN, you are required to pay annual registration fees of 500 pesos in an accredited bank. A 0605 payment form will be provided by the BIR. To obtain the COR, the following documents are to be produced:
- a duly filled and signed BIR Form No. 1903
- a 0605 payment form
- the company's Certificate of Incorporation issued by the SEC
- the company's administrative rules and regulations
- the company's lease contract along with the BIR Form 2000, the original document indicating the number of shares and the Document Stamp Tax payment receipt
- the Mayor's approval or the request for approval which has to be stamped by the local Business Licensing Division in Quezon City. Fees of 115 pesos apply.
The Documentary Stamp Tax (DST), along with other fees, have to be paid in an authorized bank. This should be done within 5 days following the closing of the month during which you obtained the SEC registration approval. Fees of 500 pesos apply.
At the Revenue District Office (RDO) you will be able to print receipts and invoices issued by the BIR, provided the company has the BIR's authorization from the BIR. The following documents will be required:
- a duly filled BIR Form 1906
- a sample of invoices and receipts to be produced by the company
- a BIR 1903 application form
- the annual registration fees payment receipt (BIR Form 0605).
You will then be able to create and print at least 25 receipt and invoice booklets. These, as well as the printer's delivery receipt, have to be stamped by the BIR. This step should be completed within 30 days following the delivery date. The following documents are to be produced:
- all the delivered accounts books
- the VAT registration certificate
- the SEC registration certificate
- the BIR W-5 form
- a certified copy of the company's Application to Purchase (ATP)
- the notarized declaration made by the company's owner stating his responsibilities and commitments towards the company
- a copy of the Printer's Certificate of Delivery certified by the BIR's Revenue District Office.
Once you have successfully completed all these formalities, you are required to call at the Social Security Center with the following documents:
- the company registration form (R-1 Form)
- the employment report (R-1A form)
- a list of employees, specifying their birth dates, positions, salary and date of hire
- the company's statutes, regulations
- the SEC registration certificate.
A Social Security number will then be issued, both to employers and employees. Note that employees are entitled to information and training on their rights and obligations.
Finally, you are required to subscribe your company with the Philippine Health Insurance Company (PhilHealth) and obtain an affiliation number within three months. The following documents are to be produced:
- the ER1 form containing information on the employer
- the ER2 form containing the list of employees and their details
- proof of registration at the SEC
- proof of registration at BIR
- a copy of the company's operation permit.
A copy of all completed forms will be issued as proof.
The company has to be registered at the Home Development Mutual Fund (Pag-ibig) by producing the following documents:
- an EDF form [FPF040] containing the company's information
- a SSF form [FPF170] containing specimen signatures
- a copy of the company's incorporation certificate issued by the SEC
- a copy of the company's approved articles and regulations
- the Board Resolution or Secretary's Certificate indicating an authorized representative.
Once you have paid relativefees, a Home Development Mutual Fund number and registration certificate will be issued.
Securities and Exchange Commission www.sec.gov.ph
Department of Trades and Industries www.dti.gov.ph
Bureau of Internal Revenue (BIR) www.bir.gov.ph
Revenue District Office (RDO) www.bir.gov.ph/index.php
Republic of the Philippines Social Security System www.sss.gov.ph