Export Enterprise vs. Logistics and Services Enterprise in the Philippines: Incorporation Requirements and Key Considerations

In the Philippines, starting a business generally involves similar foundational steps across various industries—securing registrations with the Securities and Exchange Commission (SEC), obtaining local business permits, and registering with relevant national agencies like the Bureau of Internal Revenue (BIR) and social security agencies. However, certain types of business undertakings, such as export enterprises and logistics/services enterprises, come with unique requirements based on the nature of their operations and industry-specific regulations. Below is a comprehensive guide on what you need to know about incorporating these two types of enterprises in the Philippine context.

1. Definitions and Scope

1.1 Export Enterprise

An export enterprise is typically engaged in producing or manufacturing goods in the Philippines for export, or providing export-based services (e.g., business process outsourcing related to global trade). In many cases, these enterprises may also seek tax incentives and other benefits by registering with certain investment promotion agencies (IPAs) such as the Philippine Economic Zone Authority (PEZA), the Board of Investments (BOI), or the Subic Bay Metropolitan Authority (SBMA), among others.

Export-oriented goods: Products primarily destined for sale to foreign markets (more than 50% or 70%, depending on the specific requirement of the relevant IPA).
Export-oriented services: Services delivered to overseas clients or to companies operating outside of the Philippines.

1.2 Logistics and Services Enterprise

A logistics and services enterprise covers a range of business models, including but not limited to freight forwarding, cargo handling, warehousing, trucking, shipping, courier services, and other related activities. Depending on the exact type of logistics or service offered, certain government agencies or regulatory bodies—such as the Land Transportation Franchising and Regulatory Board (LTFRB), the Civil Aeronautics Board (CAB), the Maritime Industry Authority (MARINA), or even the National Telecommunications Commission (NTC)—may become involved in the licensing and permit process.

2. Governing Laws and Regulations

Revised Corporation Code of the Philippines (Republic Act No. 11232)
- Outlines the general requirements and procedures for incorporating corporations (stock and non-stock) in the Philippines.
- Provides for the concept of a One Person Corporation (OPC), which can be relevant if the investor prefers a single-stockholder setup.
Foreign Investments Act (FIA), as amended
- Governs the participation of foreign investors in Philippine businesses and imposes the Foreign Investment Negative List, which may limit or prohibit foreign equity in certain areas.
Export Development Act of 1994 (Republic Act No. 7844)
- Provides policies for the development of export-oriented businesses and may offer incentives or benefits to registered export producers.
Investment Promotion Agency Regulations
- PEZA (Philippine Economic Zone Authority)
- BOI (Board of Investments)
- SBMA (Subic Bay Metropolitan Authority), and similar authorities
  Each has specific rules, application procedures, and incentives that may apply to export enterprises, particularly when located in special economic zones or registered under incentive schemes.
Specific Agency Regulations (for Logistics and Services)
- LTFRB (for land transportation services, trucking, public utility vehicles)
- MARINA (for maritime transport services, shipping lines)
- CAB (for air freight or cargo services)
- Local government units (LGUs) for business permits specific to warehousing or distribution centers
Local Government Code (Republic Act No. 7160)
- Addresses requirements for local business permits, zoning regulations, and clearances from LGUs.
Bureau of Customs (BOC) Regulations
- Import and export clearances, accreditation requirements for freight forwarding, and other customs-related compliance.

3. Incorporation Requirements: Common Ground

Regardless of whether one sets up an export enterprise or a logistics/services enterprise, some general incorporation steps remain the same:

Name Reservation
- Use the SEC online portal or approach SEC directly to verify and reserve the proposed corporate name.
Drafting Incorporation Documents
- Articles of Incorporation (AOI) and By-Laws
  - Contains the primary purpose of the corporation, principal office address, corporate term, directors, and stock information.
- Treasurer’s Affidavit
  - States that the required capital has been received by the treasurer-in-trust for the corporation.
SEC Registration
- Submit all required documents (Articles of Incorporation, By-Laws, Treasurer’s Affidavit, etc.) to the SEC.
- Pay the filing and registration fees.
Post-SEC Registrations
- BIR Registration (obtain a Tax Identification Number, authority to print receipts, etc.)
- LGU Business Permit (city or municipality hall for mayor’s/business permit, barangay clearance)
- Social Agencies registration (SSS, PhilHealth, Pag-IBIG)
- Other licenses/permits depending on the nature of business (fire safety certificate, environmental compliance certificate if applicable, etc.)

4. Additional Requirements and Considerations for Each Enterprise Type

4.1 Export Enterprise

Minimum Export Thresholds
- Export enterprises often must export a specified percentage of their goods/services (e.g., 50% or 70% of production) to maintain certain incentives under IPAs like PEZA or BOI.
Registration with Investment Promotion Agencies
- PEZA Registration
  - If operating in a PEZA-registered ecozone, you may enjoy tax holidays, zero-rated VAT on local purchases, and other incentives.
  - Requires submission of a project brief, financial capacity documents, projected exports, and compliance with location and operational requirements.
- BOI Registration
  - Export-based enterprises (which typically export at least 70% of production) may register with the BOI to enjoy incentives like income tax holidays, tax and duty exemptions on imported capital equipment, etc.
- Other IPAs (SBMA, Clark Development Corporation, etc.)
  - Each IPA has its own special requirements and incentives.
Compliance with Export Regulations
- May require export licenses or export clearances for certain regulated products (e.g., agricultural commodities, electronics, chemicals).
- Adherence to the Customs Modernization and Tariff Act (CMTA), including proper export documentation and procedures with the Bureau of Customs.
Capital Requirements
- Depending on foreign equity participation, export enterprises might need to consider the minimum paid-up capital rules under the FIA.
- Generally, 100% foreign equity is allowed for export enterprises, provided that they export at least 70% of their output. When this condition is met, they typically fall under “Export enterprises,” which are not restricted by the Negative List.

4.2 Logistics and Services Enterprise

Scope of Services
- Logistics can include cargo handling, freight forwarding, trucking, warehousing, distribution, or a combination thereof. Each subset may require separate permits from specialized government agencies.
Regulatory Agency Permissions
- Land Transportation:
  - LTFRB accreditation or franchising requirement for trucking/transport services that are for hire or open to the public.
- Maritime Transportation:
  - MARINA accreditation for domestic shipping, crew manning services, maritime vessels, or ship management.
- Air Transportation:
  - CAB for airfreight forwarders and cargo consolidators.
- Courier Services:
  - If offering courier or express delivery services, accreditation with the Philippine Postal Corporation or the Department of Information and Communications Technology (DICT) may be required under certain circumstances.
Foreign Equity Restrictions
- Some logistics operations (e.g., domestic freight forwarding or domestic shipping) may be subject to certain foreign equity limits.
- Pursuant to the Foreign Investment Negative List, foreign equity can be restricted if the logistics enterprise is considered a “public utility” (though recent amendments to the Public Service Act have narrowed the definition of “public utility”). Always check if your particular service is covered by any limitations.
Capitalization Requirements
- Certain logistics segments (e.g., domestic shipping or public utility transport) may require a higher paid-up capital to obtain licenses or permits.
- If you offer multiple services (e.g., freight forwarding plus trucking), you may need to allocate capital to comply with each specific regulatory body’s requirement.
Additional Operating Permits
- Warehouse Permits from local government units or special economic zone authorities if operating inside a designated economic zone.
- Bond Requirements for freight forwarders or shipping lines to secure performance, cargo handling, or customs liabilities.

5. Foreign Ownership and the Negative List

5.1 General Rule

Under the Foreign Investments Act and the Philippine Constitution, certain business activities are restricted or limited regarding foreign equity ownership. Export-oriented manufacturing/service companies (that export at least 70% of their output) can generally be fully foreign-owned. However, logistics or services dealing with domestic transport may be considered partially covered by foreign ownership caps, depending on how they are classified under law (public utility, common carrier, etc.).

5.2 Anti-Dummy Law

Foreign investors must also be aware of the Anti-Dummy Law (Commonwealth Act No. 108, as amended), which punishes arrangements where a foreign national exercises control in an enterprise that is reserved (in full or in part) for Filipino citizens.

6. Steps to Incorporate and Operate: An Overview

Check Foreign Investment Negative List
- Ensure your planned enterprise does not fall under an area restricted or limited to foreign participation (or structure your capitalization to comply with allowable foreign ownership).
Draft and Execute Incorporation Documents
- Articles of Incorporation must reflect the correct primary purpose (export manufacturing, logistics services, etc.).
- Ensure compliance with naming conventions and other SEC guidelines.
Register with the SEC
- Secure your Certificate of Incorporation and other post-registration documents.
Obtain Local Permits and BIR Registration
- Get a Mayor’s Permit from the local city or municipality.
- Register books of accounts, official receipts, and invoices with the BIR.
Secure Additional Licenses (as applicable):
- PEZA/BOI Registration if seeking incentives as an export-oriented business.
- LTFRB, MARINA, CAB licenses for logistics enterprises depending on the mode of transport or service.
- Warehouse permits, if storing goods.
- Bond requirements for freight forwarding or customs brokerage activities.
Comply with Ongoing Reporting
- Annual filings with the SEC (General Information Sheet, Audited Financial Statements).
- Quarterly and annual tax filings with the BIR.
- Specific reporting to IPAs (e.g., BOI or PEZA) if enjoying incentives.

7. Common Pitfalls and Best Practices

Incorrect Primary Purpose: Failing to accurately state the business purpose in the Articles of Incorporation can lead to delays or rejections.
Ignoring Regulatory Agency Requirements: Overlooking the need for LTFRB or MARINA permits can result in administrative sanctions or stoppage orders.
Underestimating Capital Requirements: Some logistics segments require substantial capitalization for licensing; do not assume standard SEC minimum paid-up capital will suffice.
Improper Foreign Equity Structures: If your business model is partially covered by foreign ownership restrictions, ignoring these rules can lead to legal complications or invalidation of your license to operate.
Non-compliance with Export Obligations: If registering under PEZA or BOI, ensure that export quotas or performance undertakings are satisfied. Non-compliance can lead to the loss of incentives and, in some cases, penalties or cancellation of registration.

8. Conclusion

Incorporating an export enterprise or a logistics/services enterprise in the Philippines requires compliance with general corporate registration procedures, alongside navigating additional industry-specific and foreign equity regulations. For export enterprises, the key advantage often lies in access to fiscal and non-fiscal incentives granted by agencies like PEZA or BOI. Meanwhile, logistics and services enterprises have to be mindful of transport-focused regulatory agencies, potential foreign ownership restrictions, and capital requirements.

By thoroughly researching and understanding these rules before commencing operations, prospective investors and entrepreneurs can minimize legal and regulatory hurdles. As always, consulting with legal professionals or corporate service providers familiar with the Philippine regulatory framework is advisable to ensure compliance and optimize the setup of your enterprise.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. For specific concerns or intricate legal questions, always consult a qualified Philippine attorney or a specialized consultant.