Registered under Philippine laws, a domestic corporation is the ideal business ownership structure for small- to medium-sized companies. As a domestic corporation, the company becomes its own legal entity. It will be responsible for its own debts and liabilities.
If you’re planning to start a domestic corporation, here’s what you need to know about company formation in the Philippines:
A domestic corporation can be classified as any of the following depending on its ownership as per the Foreign Investment Act of 1991:
Read more about the Philippine Negative Investment List here.
Before you can start a domestic corporation, you must have a certain amount of paid-up capital. This minimum capital requirement refers to the money received from shareholders in return for shares of your company’s stock. The amount of paid-up capital depends on the level of foreign ownership:
Domestic corporations that have at least 50 Filipino citizens, are considered pioneers in their fields, or use advanced technology only need a minimum capital requirement of $100,000. This is regardless of the level of foreign ownership.
One of the most essential requirements to establish a domestic corporation is the number of incorporators. According to the Revised Corporation Code of the Philippines (Republic Act No. 11232), a domestic corporation must have at least two incorporators and a maximum of 15. The old Corporation Code stated that there needed to be at least 5 individual directors.
Each incorporator must have at least a share of the corporation’s capital stock. And while they don’t have to be Philippine citizens, the majority of the incorporators must be local residents.
The following positions need to be filled: President, Corporate Secretary, Treasurer, and Compliance Officer. Each position, except the Compliance Officer, has its own set of requirements:
Unlike a sole proprietorship, which must be registered with the Department of Trade and industry), a domestic corporation must be registered with the Securities and Exchange Commission (SEC). The process can take around two to three months due to the required documents and forms.
The first step to establishing your domestic corporation is to register your business name with the SEC. You can even check the SEC website if your proposed business name is available.
Once approved, you’ll be given a Registration Certificate and a name verification slip. After your registration, obtain barangay clearance from the barangay of your business’ location and a business permit from the Mayor’s office.
The documents required are the following:
For more information about how to register your corporation in the Philippines, click here.
The corporate income tax for domestic corporations amounts to 30% if the worldwide net taxable income.
Domestic corporations are also taxed differently, paying monthly or quarterly value-added tax (VAT). They can also pay monthly other-percentage tax (OPT or non-VAT).