Philippines Domestic Corporation
Remote Formation Service

• Growing Market – The Philippines has a constant growing market which means that it has a large demand for its domestic market.
• High Literacy Rate – The Philippines is known to have a highly educated and skilled labor force who speak English as their second language. Investors, local and foreign corporations have an easy access to pools of highly qualified and competent workforce. The labor cost is also very competitive as compared to other neighboring countries. Its low cost makes it more attractive for investors to consider. The competitive advantage is also evident at the professional level of the workforce.
• Strategic Location for Global Export – The Philippines is located in the heart of Asia connected to the four major capitals of the region which also connects millions of people from Asian countries. Also, it has an accessibility to international shipping and airplanes appropriate for European and American businesses as it is in the intersection of the eastern and western businesses.
• Expanding Infrastructure – The expenditure on infrastructure continuously increase from 15.4% in the previous year, and it is still growing. Several flagship projects are introduced and they are about to be completed by the year 2022. The projects include four water transport projects, six airports, along with coal-fired power plants and many others which are non-transport related. The investment in the public transport sector is profitable considering that there are more than 7000 islands making up the Philippines. Also, the Philippines continuously work in the strengthening of its information and communications technology systems.
• Low Cost of Living – Majority of the business district areas offer many first rate business establishments and residential communities and offer amenities at lower costs compared to other cities in the world.
• Taxation – The Philippines is a member of the Double Tax Agreement (DTA) or Tax Treaty between countries thereby avoiding or mitigating double taxation amongst non- resident workers. Also, the Philippines provides tax incentives to companies registered under various economic zones and under other investment laws and regulations. Recently, the Corporate Income Tax (CIT) has been lowered to 25% for large corporations and 20% for small businesses.
• Wholly owned foreign companies – The Philippines has expanded its Foreign Investment Act thereby allowing a hundred percent foreign ownership on majority lines of businesses thereby reducing the number of businesses falling under the foreign negative list.
• Low Start-up Costs – The operational cost of starting a business matters to investors and normally do not risk splashing a huge amount of funds without the assurance of getting a positive Return of Investment (ROI). The Philippines offers low cost of operating expenses such as office space leasing, supplies, third party services and utilities.

A corporation is a separate legal entity from its owners because it is a legal person. This means a corporation has the legal statute as an individual by the laws. For example, a corporation has a set of legal rights and obligations to perform activities on its name such as engaging into contracts, employing workers, obtaining loans from financial institutions, paying taxes, and owning assets.

The owners of a corporation are the shareholders or stockholders where each hold a portion of ownership to the corporation. The share or the stock of the corporation can be transferred to other individuals or corporations.

Pros:

• Owners of a corporation are not personally liable to the risk and liability of the corporation.
• Corporations can increase their authorized share capital after the approval of their stockholders.
• Corporations can exist perpetually as long as such provision is expressed in their Articles of Incorporation.
• People of different backgrounds and talents can use a corporation as a business vehicle to work together for common purposes such as making profits.

Cons:

Comparing with sole-proprietorship and partnership, corporation may become less favourable.

• Corporation must consist of at least two shareholders and some important officers, who are one president, one corporate secretary and one treasurer. The corporate secretary must always be a citizen and a resident of the Philippines; The president cannot act as the secretary nor the treasurer in the same corporation.
• Corporation has to maintain the minimum paid up capital requirement of at least 25% of the authorized capital of the company which must be paid to the Philippine bank through the Treasurer-In-Trust Fund (“TITF”).
• The maintenance of a corporation is more expensive. Extra mandatory works such as the accounting and book-keeping of a corporation are not straight-forward to handle by the owners. The corporation should pay for the professional services in order to run the business.

Tax Identification Number (“TIN”)

Being an foreign incorporators (you are not the Philippines residents or citizens), you need to apply for your Tax Identification Number (“TIN”) of the Philippines prior to the corporation formation procedures.

Document Authentication Service

With the help of AsiaBC in the Philippines, the complete company registration and the TIN application can be handled remotely – no travel to the Philippines.

• All incorporators have to engage into the Special Power of Attorney (“SPA”) with our local arm in order to complete TIN application on their behalf.
• All of the incorporator documents required by the Philippine government agencies must be authenticated by the Philippine Embassy or the Philippine Consulate General in the incorporator’s home country. After embassy authentication of the documents, every document is wrapped by red ribbon with gold color stamp seal. (The authenticated documents are nicknamed “red ribbon document”.)

The registration of a general corporation in the Philippines involves the following government agencies:

• Securities and Exchange Commission (“SEC”)
• Local government units
• Bureau of Internal Revenue (“BIR”)
• A local bank in the Philippines

The procedure of registration can be divided into five major steps.

The SEC offers an online service portal for checking the availability of the proposed name and  also to reserve the desired name once the name is available.

Once the SEC approves the name reservation, it is the stage of capital injection. The incorporators must open and maintain a minimal deposit in a local Philippines bank under the Treasurer-in-trust Fund (“TITF”) account of the corporation. The deposit amount must be equivalent to at least 25% of the paid-up share capital of the corporation.

TITF accounts are deposit-only in nature, withdrawal by the incorporators are restricted. The bank will issue a certificate of deposit and inward remittance as a proof of capitalization of the corporation.

After the formation process, the TITF account can be converted to the corporate bank account.

The SEC requires submission of the required documents to complete the registration:

• Articles of Incorporation
• By-Laws of the corporation
• Treasurer’s Affidavit of your corporation

Upon approval, SEC will issue the Certificate of Incorporation (“COI”), then the corporation can register its stock transfer book and issue its corporate stock.

The hierarchy of the administration of the Philippine is divided into four levels: Region, Province, City/Municipality, and Barangy. i.e. Barangay is the smallest subdivision of the City/Municipality; while Region is the largest division.

Barangay Clearance

To obtain the clearance form a Barangay where your business is located, the Barangay requires your COI and document proof of your business address. A virtual office can act as the registered business address of your corporation. The Barangay may require other documents such as the floor plan, location clearance, building permit and certificates.

Business Permit and Licensing Office (“BPLO”)

The business permit is the license to operate the business of the corporation. Your corporation needs the business permit from the Municipality through its BPLO. BPLO requires submission of the Barangay Clearance, the COI as well as the business-specific documents, so it is necessary to acquire those special documents which are required specifically for the type of business before the application of the Business Permit.

Immediately after the issuance of the COI, you have to apply for the Certificate of Registration from the BIR for your corporation. This application requires payment of various tax return forms as well as the registration of your corporation’s manual books of account, including a draft copy of the corporation’s Official Receipt.

Being an employer in the Philippines, the corporation needs to complete the registrations with the following statutory government agencies:

• Social Security System (“SSS”)
• Philippine Health Insurance Corporation (“PhilHealth”)
• Home Development Mutual Fund (“Pag-IBIG”)

• Market Entry Advisory and Understanding the Philippine Corporate Structures
• Company Incorporation and Business Registrations
• Corporate Bank Account Opening
• 24 hour local representative support