Types of Companies in the Philippines

Foreign investors interested in starting a business in the Philippines must comply with the regulations imposed by the Corporation Code, by the Civil Code and by the Foreign Laws Act. According to these laws, the following types of companies can be registered in the Philippines:

•           the sole proprietorship and the partnership which are regulated by the Civil Code;
•           the corporation which is regulated by the Corporation Act;
•           the branch office, the representative office and the regional headquarters which are provided for by the Foreign Laws Act.

Our Philippines company formation consultants explain below the requirements to open the type of companies mentioned above.

The sole trader and the partnership in the Philippines

The Philippines sole trader is a type of structure registered by a single person who wants to start a business in this country. It is the simplest form of doing business in the Philippines. However, it still requires registration with the Department of Trade and Industry and must obtain a tax identification number.

With respect to the partnership, this type of company can be categorized into general and limited partnerships and requires at least two individuals or companies in the Philippines. This type of company must also register with the Trade Register or the Securities and Exchange Commission, if its share capital exceeds 3,000 PHP.

The Philippines corporation

Foreign entrepreneurs interested in company registration in the Philippines must know that the corporation is the most popular type of company in this country. The corporation can be:

•           stock corporation in which the capital is divided into shares;
•           non-stock corporation which is used for charitable, cultural or educational purposes.

The corporation must have at least 15 shareholders, individuals or other companies, and a minimum share capital of 15,000 PHP. The Philippines corporation must be registered with the Securities and Exchange Commission.

The stock corporation is similar to a limited liability company or private limited company. The Philippines does not have a legal concept of a public limited company, so a domestic corporation is treated as the closest local equivalent.

The type of company in Philipines can vary based on the ownership structure, which can be 100% Filipino-owned, 60% Filipino-owned, 40% foreign-owned, or from 40.01% to 100% foreign-owned. Additionally, a foreign corporation conducting business in the Philippines must designate a resident agent. You can discuss this aspect with our specialists in company formation in Philippines. A stock corporation must also have at least four officers, including a president, a treasurer, a corporate secretary, and a compliance officer. The president does not have any residency requirements, but the rest of the officers need to comply with certain citizenship/ residency regulations.

Partnerships in the Philippines

Partnerships are another company type in the Philippines. In the country, two primary forms of partnerships exist:

• General Partnership: In a general partnership, two or more individuals, known as general partners, come together to share all assets, profits, and financial and legal liabilities of the business. General partners have the authority to participate in the daily management of the partnership, but they also have unlimited liability for the actions of the partnership, including those of other partners. Our specialists in company registration in Philippines can help you set up a general partnership;
• Limited Partnership: A limited partnership is a type of company in the Philippines where the partners, referred to as limited partners, are only held liable to the extent of their investment in the partnership. While general partners have a role in managing the company, limited partners do not participate in its day-to-day operations.

Partnerships need to register with either the SEC (Securities and Exchange Commission) or the Department of Trade and Industry (DTI), depending on the capital of the partnership. If the capital exceeds PHP 3,000.00, registration should be done with the SEC. If it does not exceed this amount, registration should be done with the DTI. More details regarding partnership registration can be explained by our Philippines company formation agents.

Types of structures available for foreign companies in the Philippines

The Foreign Laws Act provides for the business forms foreign companies can set up in the Philippines. These are:

• the representative office which can be created for marketing purposes and must have a minimum remittance of 30,000 USD which must cover its expenses;
• the branch office which is an extension of the parent company in the Philippines and requires a minimum share capital of 200,000 USD;
• the regional headquarters which requires a share capital of 50,000 USD and has the role to supervise and act as communication channel between the parent company and its satellite companies in the Philippines;
• the regional operating headquarters which requires a minimum capital of 200,000 USD has an administrative role.

Corporate income tax in Philippines

Philippine corporations are subject to taxation on their worldwide income. Non-resident corporations, on the other hand, are only taxed on the income generated within the country. We can provide you with an accountant in Philippines for tax-related issues.

As of 1 July 2020, the standard corporate income tax rate for Philippine corporations is 25%. Corporations with net taxable revenue of less than 5 million PHP and total assets of less than 100 million PHP are taxed at a reduced rate of 20%. Branches and subsidiaries are both subject to the same regulations.

There is an exception for some types of companies in Philippines, for an alternative minimum tax. However, the company must respect certain requirements.

We can help you with tax compliance when you open a company in Philippines.

Statistics about companies in Philippines

Investors looking to learn more about the company types in Philippines and other relevant factors about the country’s business environment can find these statistics useful, from the 2021 Annual Survey of Philippine Business and Industry (ASPBI):

• There were a total of 281,153 businesses or establishments in the country;
• Micro establishments were the most numerous, accounting for 197,952 establishments;
• There were 76,005 small establishments, making up about 27.0 percent of the total;
• There were a total of 25,279 businesses or establishments that were engaged in manufacturing activities.

If you are interested in company formation in the Philippines and need assistance in choosing the right type of company, please contact us.

If you are interested in other matters, such as the steps needed to move to Philippines, our team can answer your questions. foreign nationals need to follow a set of clear rules and comply with conditions that concern their minimum income and other criteria. Our team can detail the requirements for those who wish to acquire permanent residency in the country.