The Philippines is a hotspot for foreign investors. With its strategic location and the abundance of people fluent in English, the country offers plenty of enticing opportunities for offshore businesses. The government also provides a wide range of incentives for foreign investments.
EO 226, The Omnibus Investment Code of 1987, offers incentives to foreign investment in the following industries:
Agribusiness and fishery
Economic and low-cost housing
These incentives include:
Additional deductions from taxable income
Zero-rated value-added tax
Other non-fiscal incentives such as being able to have a manufacturing warehouse.
Options for office models
If you prefer a hands-off approach in managing your business in the Philippines, the simplest way to go is hire a Business Process Outsourcing (BPO) company. A BPO can setup your offshore office and handle its day-to-day operations. Instead of setting up a physical office, you can opt to pay for seats in co-working spaces and handle payroll elsewhere.
Types of offshore offices
If you choose to be personally involved in managing your business, you have to oversee your business’s registration, get the needed paperwork done, and be on top of daily operations.
The first step is to determine the type of business to set up. Registration fees will depend on the business type. Your options include:
Branch– An extension of a foreign company; it does not have a legal identity outside of the parent company.
Subsidiary – While it may be 100% owned by the parent company, a subsidiary has its own juridical identity.
Representative office – This is similar to a branch as it has no separate personality of its own; however, it is fully subsidized by the foreign company and does not derive income from the Philippines. SEC.OGC No. 16-20 makes it clear that a Representative Office’s role is to support the business activities of a parent company.This includes information dissemination, promotion and quality control.
Regional area headquarters (RHQ) of a multinational company– The function of an RHQ is limited to supervising, superintending, inspecting and coordinating subsidiaries in the Asia-Pacific region. RHQs are merely administrative and, like a representative office, they must be subsidized by the parent company. RHQs require recommendation from the Bureau of Internal Revenue (BIR) before the Security and Exchange Commission (SEC)can grant a license.
Regional operating headquarters(ROHQ) of a multinational company – RQHQs are allowed to earn an income from its services; however, these services are strictly limited to subsidiaries and branches in the region. Banking companies must get approval from the BIR or the Bangko Sentral ng Pilipinas before they can get a license from the SEC.
Procedures in setting up a physical offshore office
Obtain a license for your business from the SEC. The license requires two fees: the basic filing fee and the Legal Research Fee, the prices depending on the type of offshore office that you are setting up.
Get a Business Tax Identification Number (TIN) from the BIR.
Get help from the experts
Before working on establishing a business in the Philippines, it would be helpful to strategize and learn more about the legal system and the current state of the economy or industry that you are a part of. Call an expert today at +1.806.553.6552 in the US and +63.917.8922337 in the Philippines.