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Corporate Entities for Foreign Corporations
Foreign companies must first register with the Securities and Exchange Commission (SEC) and choose from the following corporate entities.
Branch Office
In the Philippines, a branch office is an extension of the main office of a foreign company. It’s allowed to engage in income-generating activities in the country but is subject to the laws of the origin country. A resident agent must be appointed to act as the company’s legal representative in the Philippines.
Flexibility
A partnership business structure allows each partner to assume responsibility for areas of the company where they excel. With expertise wisely utilized, business operations can run smoothly.
Representative Office
In the Philippines, a representative office is not allowed to do income-generating activities. Due to this limitation, a representative office is limited to activities that fall under the categories of marketing, quality assurance, and customer support.
Regional Headquarters (RHQ)
Another type of business entity that is prohibited from generating revenue is an RHQ. Administrative tasks, product research and development, and staff training are among the permitted activities for this type of corporate entity.
Regional Operating Headquarters (ROHQ)
An ROHQ is revenue-generating and is allowed to expand business activities in the Philippines. This type of corporate entity is commonly established by multinational companies.
Domestic Corporation With Foreign Shareholdings (Subsidiary)
It is also possible for a foreign company to invest in a Philippine domestic company. Depending on the industry, the foreign equity mix may be 40–100% foreign or 60% Filipino and 40% foreign, subject to certain limitations.
Choose the Right Business Structure in the Philippines
How you go about setting up your business in the Philippines will depend on the type
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What are the types of foreign companies in the Philippines?
What are the types of foreign corporations in the Philippines?
There are mainly two types: non-resident foreign corporations and resident foreign corporations
A company without a physical business address in the Philippines is known as a non-resident foreign corporation. It can generate revenue in several ways, such as, but not limited to investing in domestic equities, earning interest from loans, and leasing out real estate.
In contrast, a resident foreign corporation has a physical presence in the Philippines. Branch offices, representative offices, regional headquarters, and regional operating headquarters are types of resident foreign corporations.
Additionally, physical and legal presence can also be established through investment in a domestic corporation, which is subject to Philippine laws
Are there limits to foreign investment in a domestic corporation in the Philippines?
Yes. Specifically, there are quite a few conditions that must be met to allow for 100% foreign ownership in a domestic corporation.
- The paid-up capital is at least US$ 200,000 for a domestic market enterprise or ₱5,000 for an export-oriented enterprise.
- The domestic corporation’s business activities are not listed on the Foreign Investments Negative List (FINL).
In addition, there are some industries where 100% foreign stock is allowed, such as manufacturing, exporting, business process outsourcing, IT services, lending and investing, and wellness.
Call us at (63) 917 899 1111 or send us an email.
What Philippine industries are not allowed to receive foreign investment?
Due to limitations imposed by the Philippine Constitution, no degree of foreign ownership is allowed in the following industries:
– Ammunition, explosives, and firearms (production, storage, and maintenance)
– Small-scale mining operations
– Mass media, with the exception of recording and internet-based companies
– Cooperative organizations
– Professional practices (engineering, medical, law etc.)
– Retail trade (if it’s less than $US 2.5 million in paid-up capital)
– Production of pyrotechnics and firecrackers
– Cockpit ownership, management, and operation
– Utilization of marine resources in territorial seas, exclusive economic zones, and archipelagic waters
– Utilizing natural resources on a small scale in bays, lagoons, lakes, and rivers
However, there are some industries that have restrictions of up to 40% foreign ownership due to ethical and health reasons, as well as to safeguard small and medium-sized businesses.
– Networks for private radio communications
– Saunas, massage parlors, and steam rooms
– Gambling operations
– Network for private radio communications
– Condo ownership
– Public service operations, such as power generation
– Commercial deep-sea fishing
– Natural resource development and exploration
This list is not exhaustive. The FINL is updated every few years. Learn more from our team. (63) 917 899 1111
or send us an email.
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