Business Registration: FAQ

Business RegistrationI’ve been receiving quite a lot of queries on business registration abroad.  Thus, this topic is for those living abroad either Filipino citizen, resident or foreigner who wanted to put up business in the Philippines.

Anyhow, our company helps locals, Filipinos abroad and foreigners to start their business in the Philippines. We take note of your requirements and recommend the best corporate structure to utilize and give you insights on the advantages and disadvantages of the various entities available.

Having problem? Talk to us.  We can help and assist you, please don’t hesitate to contact us. We will be more than glad to hear from you and we will respond to your request as soon as we can.

OUR ADDRESS

University Tower 1
831 Moret Street
1008 Sampaloc
Manila Philippines

Email:  info@bongcorpuz.com

Telephone: +632 618 3144


I am a Filipino living abroad and I would like to setup a company in the Philippines. I intend to sell imported goods to local people. What sort of company structure would suit us best?

Generally, Filipino living abroad or a permanent resident of a foreign land cannot put up a single proprietorship business sanctioned by Department of Trade and Industry (DTI).  Your option is to put-up a domestic corporation and register the business with Securities & Exchange Commission (SEC).


Do I need a Philippine office for my company/business ?

Yes, it’s a requirement for business registration and incorporation.


Can we use virtual office as our registered address for our company incorporation?

Yes, virtual office is acceptable for this purpose.  A virtual office is an office located in the Philippines.


I am a foreigner and I would like to setup a company in the Philippines. Our intention is to sell technology services to local people. What sort of company structure would suit us best?

If more than 30% of your sale/service is derived from Philippine market, then your company is considered a domestic market enterprise. As such, generally, foreigners may own only up to 40% of the company.


How long does it take to incorporate a company in the Philippines?

Normally, it takes at least 45 days, if all documents needed are forwarded as early as needed. This is on the assumption that no government delays will occur in the process such as system downtime and the like.


I am a foreigner. Do I really need to put in US$200,000 to incorporate a company in the Philippines?

Yes, Under usual circumstances, you really need to remit USD200,000 into a Philippines bank account as part of the process to incorporate your company in the Philippines. The money can be withdrawn after the release of the SEC certificate.

If your company is considered as an export market enterprise (i.e. more than 60% of your revenue or output is exported from the Philippines), then you are not required to put up $200,000.00 as paid up capital. The minimum paid up capital for an export market enterprise is only Php5,000.00. However, if your company is considered as a domestic market enterprise, and subject to the foreign investment negative list, then you are required to invest US$200,000 for you to be able to set up a 100% foreign owned company. Please take note though that foreigners are generally not allowed to engage in retail business (as this is reserved for Filipinos), unless they are investing $2.5 million.


What is the estimate cost to maintain a company here in the Philippine?

The cost really depends on the nature of business, please consider as well the minimum wage, taxes and other government compliance for your additional operational expenses.


What is the corporate tax rate in the Philippines?

Domestic corporations (as well as partnership other than a general professional partnership) are taxed on their income from all sources (whether within or without the Philippines. Resident Foreign Corporations are taxed on their income from sources within the Philippines. Both are taxed at 30% on taxable income (revenue less allowable deductions).

Non-resident foreign corporations are taxed at 30% at source (final withholding tax). The tax rate may be reduced if there is a tax treaty between the Philippines and the country where the NRFC is registered.


Are there any tax when we repatriate our investment out of Philippines?

Yes, there will only be a 10% tax on the fund you declared to repatriate out of the country.


Are there any foreign currency exchange control when we repatriate our profit?

No, but there will be a 10% withholding tax for all outgoing funds declared as repatriation.


How do I determine the actual amount of money I need to remit to start a company?

It depends on your business need. Of course, take note of the 25%-25% rule which states that at least 25% of the authorized capital stock must be subscribed and 25% of the subscribed capital stock must be paid up. There are areas of investments, though, that the law provides for a minimum paid up capital (e.g. recruitment agencies, schools).


How long does it take to incorporate a company in the Philippines?

In the Philippines, most people usually break the entire process into 2 parts. Part 1 is to get your company name approved and registered with SEC. This process can be completed within 10 working days. The 2nd part is to get your company registered with the local government unit having and Bureau of Internal Revenue exercising jurisdiction over the place of business. This process will take about 3 – 5 weeks.


What is PEZA?

The Philippine Economic Zone Authority (PEZA) is attached to the Department of Trade and Industry and is tasked to promote investments, extend assistance, register, grant incentives to and facilitate the business operations of investors in export-oriented manufacturing and service facilities inside selected areas throughout the country proclaimed by the President of the Philippines as PEZA Special Economic Zones.


What are the benefits of getting a PEZA status?

FISCAL INCENTIVES

Income Tax Holiday (ITH) – 100% exemption from corporate income tax.

Upon expiry of the Income Tax Holiday – 5% Special Tax on Gross Income and excemption from all national and local taxes (“Gross Income” refers to gross sales or gross revenues derived from the registered activity , net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a given taxable period).

Tax and duty free importation of raw materials, capital equipment, machineries and spare parts.

Exemption from wharfage dues and export tax, impost or fees.

VAT zero-rating of local purchases subject to compliance with BIR and PEZA requirements.

Exemption from payment of any and all local government imposts, fees, licenses or taxes. However, while under Income Tax Holiday, no exemption from real estate tax, but machineries installed and operated in the economic zone for manufacturing, processing or for industrial purposes shall be exempt from real estate taxes for the first three (3) years of operation of such machineries. Production equipment not attached to real estate shall be exempt from real property taxes.

NON-FISCAL INCENTIVES

Simplified Import – Export Procedures (Electronic Import Permit System and Automated Export Documentation System).

Non-resident Foreign Nationals may be employed by PEZA-registered Economic Zone Enterprises in supervisory, technical or advisory positions.

Special Non-Immigrant Visa with Multiple Entry Privileges for the following non-resident Foreign Nationals in a PEZA-registered Economic Zone Enterprise : Investor/s, officers, and employees in supervisory, technical or advisory position, and their spouses and unmarried children under twenty-one years of age. PEZA extends Visa Facilitation Assistance to foreign nationals their spouses and dependents.


What are the criteria to become a PEZA company?

One of the main criteria is that your company needs to be an export based company and to be considered that, 60% or more of your company revenue must be derived from overseas. PEZA requires eligible company to submit monthly reports to verify this and secondly your company needs to be located in a PEZA designated building or area.


How often does a Corporation needs to submit their income statement to the government for compliance reason?

Corporations are required to file quarterly income tax returns (and pay the corresponding tax therefor) together with an accompanying financial statements including an Income Statement. Monthly VAT returns will require a supporting schedule of income and expenses.


Can I incorporate a Philippines corporation without stopping foot in the Philippines?

Yes, this is possible with our service. We will be couriering you some documents for you to sign and you will need to get it notarized in your country and notarized by the Philippine Embassy nearest to you, and send it back to us. The process is pretty straight forward but it may just cost a bit more for the courier fee and notarization.


Do I need to be present in the Bank to open a bank account?

Yes, you need to be present in front of the bank manager to open your bank account. However, the incorporators may appoint a treasurer-in-trust, who must be resident, to open up a bank account in trust for the company that is in the process of incorporation.


How can I be sure that my remittance of US$200,000 will be safe?

We can arrange to open an account in a minimum amount in the name of the company then the remittance will be sent to the name of the company being registered. No one can withdraw the funds without the written permission of the board of the company.


Should the company incorporation process fail or be denied for any reason after I deposit the US200,000, how certain am I to be able to withdraw the money with any hindrance and also to repatriate the money without any unnecessary fees or taxes?

It will not happen because we pre-process all application for incorporation and check for legal implications to make sure the company being set up is allowable. If its not allowable we will not advise you to remit funds.


I understand that there must be a minimum of 5 shareholders in a Corporation. How many of them must be a Filipino citizen? And can this person be living abroad?

To set up a corporation, you will need to have at least 5 incorporators majority of them must be resident. If setting up a 100% foreign corporation majority can be foreigners and at least one (1) local Filipino resident.


How many types of withholding taxes are there?

There is (1) Withholding tax on Compensation, (2) Expanded Withholding Tax, (3) Final Tax, and (4) Fringe Benefit Tax.


Is there any implications if most of my shareholders or incorporators reside outside the Philippines?

No implications at all.


Can a President of a corporation be the treasurer at the same time?

No, this is an express prohibition under the Philippine Corporation Code. The obvious reason is conflict of interest.


What is the role of Corporate Secretary?

The corporate secretary by law is the keeper of the company records. He/She certifies all documents being issued and released by the company.


How often there will Board Resolution?

As long as there is a board meeting and a resolution.


Do we need to conduct monthly Board Meeting? What if we are all abroad or outside the Philippines?

No, you don’t need to. Meeting can be conducted off site and resolution could be achieve by a Circular Resolution.


If I send document to one of the directors residing outside Philippines for signature, how is the process?

It needs to be stamped and authenticated by the Philippine Embassy of his/her country residing at present.


How can you categorize if a corporation is a local or foreign corporation? Is there any differences with government fees need to pay?

The only difference is as Foreign Corporation, you need to have a much higher Paid Up capital which will result higher Document Stamped Tax and a higher Filing Fee for Article of Incorporation.


I am not in the Philippines, but I would like to start my company registration, can you help me to have an office in the Philippines?

Certainly, we can assist you for a suitable office in the Philippines depending on your choice of location.  We can also provide you a virtual office packages based on your needs, so that you can use prestigious business address right away for your company registration as well as communication line.


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Non-Profit (NPO) Idea ala community outreach

This idea is for NPO people visiting this BLOG.  This is ain’t new but I am posting it anyway. The idea is to help and improve the lives of the less privileged. The poorest communities who don’t have resources and access to computer assisted academic apps and progs.

First, collect old unwanted PCs, laptops, and desktops.

This is simple. Make a list of businesses around the area.  Choose those businesses that are better off.  Get permit from the local authority to solicit. Then prepare a letter of solicitation.

Second, repair and rebuild. Train volunteers perhaps out-of-school youth coming from your beneficiary community. Prepare training modules like the techniques on how to repair, rebuild, reformat, and software installation.  Availability of a person with enough skills-knowledge to troubleshoot hardware issues during consolidation and repair of computers. In this phase you are already organizing a pool of technical people.

Third, install free software and open source programs.  Here is a suggested list.

(1) Alice  is an innovative 3D programming environment that makes it easy to  create an animation for telling a story, playing an interactive game or a  video to share on the web.

(2) Audacity is a free, easy-to-use audio editor and recorder for Windows, Mac OS X, GNU/Linux, and other operating systems.

(3) Celestia, a real-time 3D space simulation featuring a database of over 100,000 stars, nearly a hundred solar system, objects, and a complete catalog of extrasolar planets.

(4) Cinelerra is the most advanced non-linear video editor and compositor for Linux.  But then again this is for Libux OS.

(5) Childsplay is a suite of educational games for young children, like gcompris.

(6) GeoGebra is interactive geometry software for educational purposes.

(7) GCompris is an educational software suite comprising of numerous activities for children aged 2 to 10.

(8) GIMP is the GNU Image Manipulation Program.

(9) GnuCash is personal and small-business financial-accounting software.

(10) Hydrogen is an advanced drum machine for GNU/Linux.

(11) KalGebra. Mathh Expression Solver and Plotter.

(12) KGeography, a Geography Learning Program.

(13) KompoZer, web authoring system and WYSIWYG web page editor.

(14) KWordQuiz. A flashcard and vocabulary learning program.

(15) LibreOffice is a multiplatform and multilingual office suite and an open-source project.

(16) Little Wizard. Computer Programming Development environment for children.

(17) Mathomatic. Portable computer algebra system.

(18) MathWar. Game for improving speed at solving math problems.

(19) NUT Nutrition Software is nutrional analysis software.

(20) OpenTeacher is an open source vocabulary training application that helps you learn a foreign language.

(21) StarDict.  Dictionary, encyclopedia, word translation and thesaurus lookup.

(22) Stellarium is a free open source planetarium for your computer.

(23) Tux Typing is an educational typing tutor for children.

(24) TuxMath is an arcade game that helps kids practice their math facts. The main goal is to make it effective and fun.

Fourth, organize a pool of teacher-leader. Compile a list of beneficiaries. Prepare batch and classes. Monitor and assess.

Lastly, look for donors and donation to sustain the project.

Happy reading.

Why Corporation is a must!

Starting a business means choosing the correct form of organization. Of all the forms, you know what, corporation has the advantage over the rest. Perhaps you would probably ask “why incorporate and go through the hassles of extra paperwork and tax returns?”

Why incorporate? Ladies and gentlemen, incorporation is just another form of insurance. How? You may pay, what, monies at a range of Php10-Php100K depending on the size of your capitalization. Another Php10k-50K for the permits and BIR registration. But those modest premiums isolate and protect all the personal assets you have worked so hard over the years to accumulate.

Every business book seems to dwell on the relative advantages and disadvantages of a corporation over other forms of organization. From my viewpoint, however, it’s no contest. The limited liability benefits of the corporation overshadow other considerations.

Aside from the personal protection of a corporation, there are other advantages. These are —

1) tax deductible like for example fringes, including sick pay, medical and dental insurance, life insurance, and even travel and educational expenses.
2) workmen’s compensation is another big benefit.
3) unlike a partnership or proprietorship, a corporation continues after the death of its owner.
4) in case of death, no liquidation of the business is necessary.
5) do you want to bring in partners? selling corporate stock is the cleanest way to divide ownership.
6) expansion? only the corporation offers the flexibility to attract diverse types of financing.

So, the only way to obtain personal protection is by incorporating. It’s a MUST!

The BIG Idea – Part II

Unless you are planning to do business under your name, you will need to file a business name. This filing entitles you to do business under that name. However, make sure that your business name is unique and it doesn’t violate any intellectual property laws (e.g. trademarks). Check out Department of Trade and Industry (DTI) and the Securities Exchange Commission (SEC) for more details.

Regulations, Permits and Licenses 

Regulations that may affect your business vary by municipality, by locality, and by the type of business that you have. Meanwhile, the kind of licenses and permits required for your business will depend on your business type and its location. At the very least, look into building codes, zoning laws and other pertinent regulations that might affect your business. However, businesses that have the capacity to do more harm than others face more regulations. Some of these businesses are regulated by the government, some by the government agencies, and some by both. The following are just some of these heavily regulated businesses: health care providers, anything involving food preparation, construction, banks and pawnshops, anything to do with alcohol, anything to do with dangerous materials, chemicals, and the like, transportation and anything to do with firearms. If you plan to engage in any of these businesses, better consult first with an expert, trade association that is involved with them, they can tell you what regulations may apply to your business.  Or do a research; internet is always a safe place to start. 

Tax Requirements 

Tax laws are very complicated. Unless you are a tax expert, it is best if you obtain the services of an experienced lawyer and accountant to help you evaluate the tax implications of all of your business decisions. Nonetheless, the government provides certain benefits to promote small businesses, such as tax credits to offset your tax liabilities. Again, you can check the Basic Steps in Business registration. Tax laws may seem daunting to first-time entrepreneurs, but there are a lot of available materials that will guide you through it all. But still the best thing is to know your rights as a tax payer. It helps to be informed.