If you’ve decided to expand your business to the Philippines, you’ll need to learn and understand the country’s subsidiary laws to stay compliant. The process can take months before you can begin to hire employees in the Philippines.

How to establish a Philippines subsidiary

Before you start the Philippines subsidiary setup process, you need to consider certain factors that could impact where you base your business and what type of entity you choose to incorporate.

First, think about the type of business you operate. Then, consider local practices that could make a difference in how your company operates. Analyze everything from language prevalence to cultural nuances before making a decision on where to incorporate.

Philippine company law recognizes a one person corporation (OPC) as a corporation formed by a single stockholder. OPCs are subject to statutory requirements and restrictions under the Revised Corporation Code. The setup process will vary depending on what type of structure you choose. To incorporate as a subsidiary in the Philippines, you should follow these steps:

  • Verify and reserve or secure SEC approval for your proposed company name before submitting incorporation documents.
  • Deposit paid-in capital at the bank only if required for the corporation type, foreign ownership structure, regulated activity, or SEC requirement.
  • Notarize your treasurer’s affidavit and articles of incorporation.
  • Get or activate a Taxpayer Identification Number (TIN) by registering with the Bureau of Internal Revenue after SEC registration.
  • Obtain a barangay clearance for the business location, usually before or alongside the Mayor’s Permit / Business Permit.
  • Go to the city or municipal treasurer where the principal office is located to get a community tax certificate (CTC). Confirm the requirement with the relevant LGU, as local business permit checklists can vary.
  • Obtain a local business permit, often called a Mayor’s Permit or BPLO permit, from the city or municipality where the business operates.
  • Buy special books of account at a bookstore in the Philippines.

The entire process typically takes weeks or up to several months and involves additional costs. If you choose to set up a subsidiary, you should budget the time and money necessary to complete the process.

Philippines subsidiary laws

Subsidiary laws tend to be complex and vary based on what type of entity you choose. For a subsidiary, there is no universal limit on non-national incorporators. Foreign ownership depends on the business activity and may be prohibited, capped, or fully allowed under the Foreign Investment Negative List, the Philippine Constitution, the FIA, and other sector-specific laws. Nationality requirements for shareholders depend on the specific business activity and the maximum foreign ownership allowed. Some activities are reserved for Philippine nationals, while others allow partial or full foreign ownership. The current Negative List and sector-specific laws should be checked before structuring an investment.

If you choose to set up a subsidiary alone instead of opting for a subsidiary alternative like G-P, you may consider hiring a lawyer or consultant who understands the country’s laws.

Benefits of establishing a Philippines subsidiary

The biggest benefit of establishing a Philippines subsidiary is that companies can begin legally hiring within the country. Once the incorporation process is complete, companies can hire employees, start conducting business, and run payroll. However, this process is lengthy and can take even longer if you’re not familiar with the local subsidiary laws.

Other important considerations

You’ll need to budget a significant amount of time and money to fully complete the subsidiary setup process. Try to set aside the time to file paperwork, potentially travel to the Philippines, sign documents, and hire employees.

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