Foreign‑Owned Company Incorporation Requirements in the Philippines
(updated April 2025)
A practical legal guide
This article is for general information only and is not a substitute for individual legal advice. Statutes change, administrative practice evolves, and incentive regimes are periodically over‑hauled. Always verify with the Securities and Exchange Commission (SEC) or a qualified Philippine lawyer before acting.
1. Governing Legal & Policy Framework
| Area | Key sources |
|---|---|
| General corporate law | Revised Corporation Code of 2019 (R.A. 11232) |
| Foreign investment policy | Foreign Investments Act (FIA) of 1991, as amended (R.A. 7042 & R.A. 8179) |
| Sectors with equity limits | Constitution, Art. XII + Foreign Investment Negative List (FINL, 12th Regular List, 2022; 13th List expected 2024/25) |
| Special vehicles | Retail Trade Liberalization Act (R.A. 11595, 2022); PSA amendments (R.A. 11659, 2022); R.A. 8756 (RHQ/ROHQ); CREATE Act (R.A. 11534, 2021) |
| Anti‑nominee rules | Anti‑Dummy Law (C.A. 108, as amended) |
| Tax | National Internal Revenue Code (as amended by TRAIN & CREATE) |
| AML/KYC | AMLA (R.A. 9160, as amended) + 2021 SEC Beneficial Ownership Guidelines |
| Data protection | Data Privacy Act of 2012 (R.A. 10173) |
2. Vehicles Open to Foreign Investors
| Vehicle | Separate PH legal personality? | Typical use | Minimum inward remittance |
|---|---|---|---|
| Domestic corporation (subsidiary) | Yes | Commercial operations when 0‑40 % Filipino equity is needed or full foreign ownership is allowed | If ≥60 % foreign‑owned: USD 200,000 paid‑in capital (PHP equivalent), waivable to USD 100k if (a) advanced tech or (b) direct employment ≥15 Filipinos; waived if export enterprise (≥60 % revenue from overseas) |
| One Person Corporation (OPC) | Yes | Sole shareholder structure (natural person or foreign corporation) | Same thresholds as a fully foreign‑owned domestic corporation |
| Branch office | No (extension of foreign parent) | Operating business; may earn income | USD 200,000 capital deposit (again, dispensable for export‑oriented branches) |
| Representative office | No | Liaison, quality control, promotion—no income in PH | USD 30,000 annual operating fund, remitted once, renewed if expenses rise |
| Regional Headquarters (RHQ) | No | Supervision, strategic planning, no revenue | USD 200,000 capitalization; exempt from income tax |
| Regional Operating HQ (ROHQ) | No | Shared‑services center; can bill affiliates | USD 200,000 capitalization; subject to 10 % CIT |
| Retail enterprise | Yes, as domestic corp/branch | Sale of goods direct to consumers | USD 2.5 million paid‑in (lowered from USD 7.5 m by R.A. 11595) plus USD 250k per store, unless wholly selling luxury goods |
Tip: A foreign investor can mix vehicles—e.g., an ROHQ for back‑office support and a domestic subsidiary for local sales.
3. Foreign Equity Limits & the FINL
- No‑go sectors (0 % foreign): Mass media (except recording); nuclear, biological or military arms; PCGG disposal of assets; marine natural resources (fishing beyond passive equity of 40 %); small‑scale mining; private security agencies; rural banking; etc.
- 40 % cap sectors: Public utilities (electricity distribution, water/power transmission, airports/seaports until R.A. 11659 liberalized telecoms and some transport); educational institutions; land ownership; condominium corporations; exploration, development & utilization of natural resources.
- Qualified 60‑40 exceptions: Telcos, domestic shipping, railways, airports, expressways, and tollways were opened to up to 100 % foreign equity by the 2022 PSA amendments, subject to reciprocity.
- Professional services: Generally require Filipino natural persons; practice of professions is constitutionally reserved unless covered by mutual recognition (e.g., ASEAN architects/engineers).
Anti‑Dummy Law criminalizes dummy arrangements to evade these caps; board seats & officers must reflect actual Filipino equity ratios, and major board positions must be held by Filipino citizens if the corporation is in a partial‑restriction industry.
4. Capitalization Rules in Detail
| Situation | Paid‑in requirement |
|---|---|
| Regular 100 %-foreign domestic corp. | USD 200,000 (≈ PHP 11.3 m) |
| “Export enterprise” (≥60 % sales abroad) | No minimum |
| Use of advanced technology or hiring ≥15 Filipinos | USD 100,000 |
| Retail trade | USD 2.5 m + USD 250k/store (luxury brands exempt) |
| OPC with foreign individual shareholder | Same as domestic corp. |
| Branch | USD 200,000 capital deposit; increased to USD 2.5 m if in retail |
| Rep office | USD 30,000 annual |
| RHQ / ROHQ | USD 200,000 |
Capital must be remitted in foreign currency via a Bangko Sentral‑registered inward remittance; evidence is presented to SEC/BSP.
5. Incorporation & Licensing Procedure (Domestic Corp.)
| Step & timeline* | Key filings / actions |
|---|---|
| Name Reservation (same day) | Verify via SEC Electronic Filing and Submission System (eFAST) |
| Draft Formation Docs (1‑3 days) | Articles of Incorporation, By‑laws, Treasurer‑in‑trust (TITF) affidavit, Beneficial Ownership Disclosure, GIS templates |
| Capital deposit (1‑2 days) | Open TITF with bank; remit required foreign capital |
| eFAST filing & payment (1‑2 days) | Upload notarized PDFs; pay filing fees (≈ 0.2 % of authorized capital + legal research, + doc stamps) |
| SEC approval (3‑7 business days) | SEC issues Certificate of Incorporation or License (branch) |
| Post‑SEC: BIR (1‑2 weeks) | Register books of accounts; secure ATP for receipts; pay Documentary Stamp Tax on shares; obtain TIN |
| Local Government Units (LGU) (1‑2 weeks) | Mayor’s/business permit; barangay clearance; fire safety |
| Social agencies (ongoing) | SSS, PhilHealth, Pag‑IBIG enrolment once hiring starts |
*Conservative: total four‑to‑six weeks if documents and remittances are timely.
Electronic filing is now mandatory; physical submissions are rare except for authenticated copies. E‑notarization is accepted under 2020 Supreme Court Interim Rules.
6. Tax Snapshot (Standard Rates, post‑CREATE)
| Tax | Domestic corp. | Branch | BOI/PEZA Export enterprise |
|---|---|---|---|
| Corporate Income Tax | 25 % of net taxable income (20 % if net taxable ≤ PHP 5 m and assets ≤ PHP 100 m) | Same 25 % | 4–5 % Gross Income Tax in lieu of all national & local taxes, or 0 % CIT during income tax holiday |
| Profit remittance | N/A (dividends) | Branch Profits Remittance Tax – 15 % on after‑tax profits actually remitted | |
| VAT | 12 % (0 % on exports & qualified transactions) | ||
| Dividends to non‑res. foreign corp./non‑res. alien | 25 % WHT generally; 10 % if tax‑treaty or listed; 0 % to ROHQ | — | |
| Misc. | Documentary Stamp, Withholding, Fringe‑Benefit, Local Taxes | Same | Incentive exemptions |
Transfer pricing documentation is required for related‑party cross‑border and domestic transactions; master/local files + CbCR thresholds updated 2023.
7. Incentive Zones & Registrations
| Zone / agency | Benefits | Notes |
|---|---|---|
| PEZA (Ecozones, IT parks) | 4‑7 yr Income Tax Holiday (ITH) → 5 % GIE or 25 % CIT with enhanced deductions; VAT zero‑rating | PEZA letter‑of‑authority required to sell to domestic market (×3 the duties/VAT) |
| Board of Investments (BOI) | ITH up to 6 yrs + 10 yrs enhanced deductions; priority under Strategic Investment Priority Plan (SIPP 2022) | No locational limits; suitable for manufacturing, green energy, digital infra |
| Clark, Subic, Aurora, John Hay, Freeport Area of Bataan | Similar to PEZA; customs‑bonded | Registered enterprise status required |
| BARMM RBOI | 6‑year ITH, reduced duties/ taxes | For projects in Mindanao autonomous region |
8. Employment & Immigration
| Purpose | Visa / Permit | Issuing body |
|---|---|---|
| Long‑term work | 9(g) Pre‑arranged Employment Visa | BI, with DOLE endorsement & AEP |
| Managerial/technical roles in BOI/PEZA/ROHQ | 47(a)(2) Special Visa | DOJ/PEZA depending |
| Short‑term ≤6 mo. | Special Work Permit (SWP) | BI |
| Intra‑corporate transferee | 9(d) Treaty Trader/Investor (for US/Japan/DE) | BI |
| Special visas | SVEG, SRRV, EO 226 investor visas | BI/PEZA |
Alien Employment Permit (AEP) from the Department of Labor and Employment is mandatory for foreign nationals issued a work visa (exemptions: ROHQ executives, reciprocal positions, treaty traders).
Under the Labor Code & DO 174‑17, contractors/sub‑contractors must register; security of tenure, 13th‑month pay, and SSS/PhilHealth/Pag‑IBIG coverage apply to all employees.
9. Real Estate & Land
- Land ownership by corporations is limited to 40 % foreign equity.
- 100 % foreign‑owned entities may lease private land for up to 25 years, renewable once for another 25 years (Investor’s Lease Act, R.A. 7652).
- Condominium units: foreigners (or 100 % foreign‑owned firms) may hold up to 40 % of total project floor area.
- PEZA ecozone locators operate on long‑term leasehold; duty‑free importation of equipment is allowed.
10. Ongoing Corporate Compliance
| Requirement | Frequency / due date |
|---|---|
| General Information Sheet (GIS) | Within 30 days of AGM or anniversary |
| Audited Financial Statements | Within 120 days of fiscal year‑end, plus upload to eFAST |
| Beneficial Ownership Declaration | Initial filing + update within 30 days of change |
| BIR Annual ITR & Audited FS | April 15 (calendar) or 15th day of the 4th month from FYE |
| Transfer‑pricing documentation | Keep contemporaneous files; file Form 1709 with ITR |
| Local business permit renewal | Every 20 January |
| Special zone reports (PEZA/BOI) | Monthly & annual production/exports, inventory |
Penalties range from administrative fines to revocation of license and criminal liability under the Anti‑Dummy Law or AMLA for willful violations.
11. Dissolution, De‑registration & Exit
- Voluntary dissolution → board & stockholder approval, SEC petition, creditor notice.
- Liquidation handled by a trustee or board of liquidators; assets distributed after settling liabilities.
- SEC suspension/revocation possible for non‑filing of reports for five consecutive years.
- Tax clearance from BIR and local clearances required before SEC issues a certificate of dissolution or withdrawal of branch license.
- Repatriation of remaining funds is subject to 15 % branch profits remittance tax (if branch) or 10 % dividend WHT (if subsidiary) unless treaty relief is obtained.
12. Common Pitfalls & Practical Tips
- Ignoring foreign equity caps—even indirect layers are scrutinized; the SEC now examines ultimate beneficial ownership.
- Delaying capital remittance: SEC won’t release certificates until proof of inward remittance is uploaded.
- Using nominee shareholders or directors in restricted industries—criminal liability attaches to both dummy and foreign investor.
- Assuming PEZA automatically confers tax holiday: only Board Resolution + Certificate of Registration triggers incentives.
- Overlooking LGU nuances: business permits in Metro Manila can take longer than SEC approval.
- Bank KYC: allow 2‑4 weeks to open PHP & USD accounts; some banks insist on completed SEC registration first.
- Misclassifying visas: a 9(a) tourist visa is not convertible to a work visa onshore—plan the entry classification ahead.
- Data privacy readiness: a foreign BPO or e‑commerce platform processing personal data must register its Data Protection Officer and submit a privacy impact assessment to the NPC.
- Transfer‑pricing risk: even start‑ups must justify management‑service fees charged by offshore affiliates.
13. Timelines & Indicative Costs (Metro Manila, 2025)
| Item | Working days | Govt. fees (PHP) | Notes |
|---|---|---|---|
| Name reservation | Same day | 120 / 30 days | |
| SEC filing (domestic corp., 5 m auth. cap.) | 3‑7 | ~16,000 | 0.2 % filing + LRF |
| Notarization & apostille | 1‑3 | 1,000–2,500 | Foreign docs need consularization or apostille |
| BIR registration | 3‑5 | 2,530 | Includes books & COR |
| LGU business permit | 5‑10 | Variable (2,000 – 60,000) | Based on capitalization & location |
| Corporate secretary / resident agent | Ongoing | 12,000 – 24,000 / yr | Outsourced service |
| Annual audit & tax filings | Annual | 30,000 – 60,000 | Scale‑dependent |
Total out‑of‑pocket (excluding paid‑in capital) for a basic foreign subsidiary usually ranges PHP 150,000–300,000.
14. Looking Ahead (2025‑2027)
- The 13th FINL is expected to remove or relax caps in renewable energy, internet platforms, and domestic shipping ancillaries.
- SEC will fully deploy Online One‑Day Submission and E‑Registration Portal (OneSEC) for routine incorporations, targeting 24‑hour turn‑around.
- The Corporate Recovery and Tax Incentives for Enterprises (CREATE‑MORE) Bill—pending in Congress—may extend ITH by two years for green projects.
- Digital banks (BSP Circular 1105) are now open to up to 100 % foreign equity, but capped at six licenses until 2028.
- E‑invoicing will become mandatory for all exporters and large taxpayers by July 1, 2026.
Conclusion
Incorporating a foreign‑owned company in the Philippines is straightforward when the right vehicle is matched to the intended activity and foreign‑equity limits are respected. The headline minimum capital—USD 200,000—often deters investors, yet multiple statutory carve‑outs (export enterprise, advanced tech, incentives zones) allow a capital‑light entry. The new digital SEC platform, looser sectoral restrictions, and competitive incentive packages under the CREATE Act combine to make the Philippines one of Southeast Asia’s more open destinations for foreign investment—provided that anti‑dummy, AML, and tax‑compliance rules are diligently followed.
For a tailored roadmap, secure up‑to‑date FINL guidance, verify treaty tax rates, and engage local counsel early—especially for land, labor, and zone‑registration questions.
—End of Article—