The Philippines is one of the famous tourist destinations in south-east Asia. If you want to unwind in a beautiful landscape full of beaches and hills, then the Philippines is just the right place to go on a vacation. So, ideally, if you want to escape work, take a trip to the Philippines. But, have you ever thought of starting a new company in Philippines as a foreigner? The Philippines is a land of rich, natural, and labour resources, as well as a talented hub of capable, bilingual, and resilient individuals. That is the reason why foreigners are interested in setting up a new business in the Philippines. We can see a strike in the graph because, from the past few years, more and more people are heading to the Philippines to start their business and gain huge profits.
Can foreigners Open Business in Philippines?
The big question is that Can foreigners Open Business in Philippines? Now, for a foreigner, it might be a challenging task to commence a business in the Philippines as, legally, a foreigner cannot have a business license in their name. The total share of a foreigner in a firm can be 40%, while the rest will be of a Filipino. But the process for the same is lengthy yet systematic if one obliges with all the rules laid by the government. There are 3 different categories one can choose from to start a business in the Philippines- (i) Sole Proprietorship, (ii) Partnership, and (iii) Corporation. You are advised to conduct an in-depth study before getting on the final ground.
The Philippines is a newly industrialised country, but the majority of its economy is still a part of the agricultural sector. Much of the industrial sector is grounded in processing and assembly operations in the manufacturing of electronics and other high-tech components, usually from foreign multinational corporations like Toyota, Forever 21, etc. According to the World Bank, Agriculture employs 32% of the Filipino workforce. The type of activity ranges from small subsistence farming and fishing to large commercial ventures with a major focus on export. The Philippines was accounted as the world’s largest producer of coconuts producing 19,500,000 tons in 2009.
|S.No||Minimum Capital Requirement||Applicable to|
|1||US$ 200,000||The general requirement for majority foreign owned businesses|
|2||US$ 100,000||Businesses that are considered pioneers in the Philippines; employ at least 50 Filipinos, or use progressive technology|
|3||PHP 5000||Businesses that export at least 60% of their products or have at least 60% of local ownership|
Procedure to Start a New Business in the Philippines as a Foreigner
- Verify the availability of a company name with the relevant authorities for the company registration in the Philippines. The estimated cost to register online is around PHP 40 for the first month.
- You need to approach the Department of Trade and Industry (DTI) for sole proprietorship registration, whereas for partnership and corporation, register your company name at the Securities and Exchange Commission (SEC) register facility.
- After the registration, you will receive a pre-registered Taxpayer Identification Number (TIN) for your company when you get your SEC certificate.
- This TIN would require to be officially registered by you or any of your partners in another office, the Bureau of Internal Revenue (BIR). The BIR would then give you the Certificate of Registration (COR) which is valid for 5 years.
- Open a corporate bank account where the minimum capital to be deposited in PHP 5000.
- Also, don’t forget to prepare the Articles of Incorporation because many banks in the Philippines are meticulous and will ask for the document before opening an account.
- After you choose the location of your office in the Philippines, you will need to acquire a barangay clearance from the barangay (A barangay is the smallest administrative division in the Philippines) where the business is located. The officials will then check your SEC papers. After this, you would have to pay the barangay a fee and then you can go ahead and apply for a business permit from the local government unit, i.e., the municipal or city office.
- Businesses that rent commercial space need to secure a Contract of Lease, while businesses that operate on private lands need to secure a Land Title.
- A Mayor’s permit would be needed. The requirement of the Mayor’s permit may vary from one municipality to another. The list includes a contact of the lease, occupancy permit, barangay clearance, fire permit, sanitary permit and community tax certificate.
- Now that you’ve registered your business, you need to manage the requirements of your employees. Make sure that they are registered with the Social Security System (SSS), PhilHealth, Home Development Mutual Fund (HMDF)/Pag-IBIG, and the Bureau of Internal Revenue (BIR).
- You can register intellectual property rights services which will help you in safeguarding your intellectual property related to business.
Documents Required Starting a Business in the Philippines as a Foreigner
To register a foreign-owned company in the Philippines, you’ll need the name registration certificate and other documents, including:
- SEC registration is required for registering as a partnership or corporation
- DTI registration is required for registering your business trade name (BTR)
- Mayor’s business permit is required for getting the license to operate in the city or municipality and payment of your local business taxes
- BIR registration is required for getting TIN, official receipts and invoices, registering your books of accounts, and paying your national internal revenue taxes (income tax, VAT or percentage tax, withholding taxes, etc.)
- SSS, Pag-IBIG Fund registration, and PhilHealth are required for registering yourself or company as an employer and for remitting your employees’ contribution together with your employer’s share
- Usually, the BIR and the City/Municipality Office need the certificates of registration with the SEC or DTI before a business can be registered with them. Thus, you need to register through those offices to start your business.
- Articles of Incorporation document is required.
- Financial records (documents of assets and liabilities)
- Proof of minimum inward payment
Best Cities to Start a Business in Philippines
The idea of starting a business in the Philippines is quite exciting until you have to decide a suitable place for your business. You have to keep in mind the cost of processing, availability of resources and other such factors while choosing the right city for your business. Here is a list of top 10 cities in Philippine which are considered great for starting a business:
- General Santos City
- Davao City
- Taguig City
- Valenzuela City
- Lapu Lapu City
- Zamboanga City
- Cebu City
- Marikina City
- Mandaluyong City
- Pasay City
Possible Challenges of starting a business in Philippines
Despite a vast spectrum of growth and development in the country, the World Bank and International Finance Corporation (IFC) have ranked the Philippines in 138th place for ease of doing business. Few possible challenges of starting a business in the Philippines are:
- Making decisions
- Personal relationship
Starting a business in the Philippines is a huge investment given the booming startup culture, despite all the restrictions. The procedures can be lengthy and time-consuming, but to make this process easier, we would suggest you hire a firm that can help you get through the legal challenges of starting your own company. A person with thorough knowledge of the legal and business environment in a foreign country can help you make the right steps to speed up the process. The Philippines is a beautiful place to enjoy and work. So, grab the best out of it contributes to its development while flourishing your business.