[LETTER TO THE LAWYER]

Dear Attorney,

I hope this message finds you in good health and high spirits. I am writing to seek your professional guidance on the process of establishing a Philippine corporation. I am a dual citizen, holding both Canadian and Filipino citizenship. My intention is to purchase land in the Philippines under the most favorable legal structure, with the long-term goal of forming a business entity that fully complies with all relevant laws and regulations.

Kindly advise me on the procedures, requirements, and best practices to ensure my corporation is validly organized and remains in good standing under Philippine law. I would be most grateful for any information regarding land ownership rules, shareholding restrictions, tax implications, and any other compliance considerations I should be aware of. If possible, I would also appreciate setting up a video conference for a more detailed discussion at your earliest convenience.

Thank you for your time and expertise. I look forward to your counsel on this matter.

Sincerely,
A Concerned Entrepreneur

[LEGAL ARTICLE ON PHILIPPINE CORPORATE LAW FOR DUAL CITIZENS SEEKING TO PURCHASE LAND AND FORM A CORPORATION]

Introduction
The Philippines offers various business opportunities for citizens, dual citizens, and foreign investors alike. Its legal framework, primarily governed by the Revised Corporation Code of the Philippines (Republic Act No. 11232), sets forth comprehensive rules on how to establish and maintain corporate entities. This article will examine the specific considerations involved when a dual Canadian-Filipino citizen seeks to form a corporation in the Philippines and purchase real property. It aims to provide a meticulous overview of legal requirements, ownership structures, regulatory steps, and compliance obligations.
Overview of the Legal Framework
- Revised Corporation Code of the Philippines (R.A. 11232): This law, which replaced the old Corporation Code (B.P. Blg. 68), provides the contemporary rules for incorporation, corporate governance, capital structure, and compliance.
- Foreign Investments Act (R.A. 7042, as amended by R.A. 8179 and subsequent laws): Establishes the Foreign Investment Negative List (FINL) outlining sectors with foreign equity caps.
- Anti-Dummy Law (Commonwealth Act No. 108, as amended): Prohibits circumvention of constitutional or statutory foreign equity restrictions by using nominal Filipino shareholders.
- Philippine Constitution (1987): Imposes limitations on land ownership for foreign nationals; however, Filipinos and dual citizens have broader rights to own real property.
- Other Relevant Regulations: Bureau of Internal Revenue (BIR) issuances for taxation, Securities and Exchange Commission (SEC) circulars for registration and reporting, and local government units (LGUs) for business permits.
Dual Citizenship and Its Benefits
Under the Philippine Dual Citizenship Law (R.A. 9225), former Filipino citizens who have acquired citizenship in another country can reacquire or retain their Filipino citizenship. Having dual citizenship confers nearly identical rights as natural-born Filipinos in terms of land ownership and business. As a dual citizen:
- You are treated as a Filipino citizen for purposes of owning land, subject to certain quantitative limitations and conditions.
- You do not face the same foreign equity restrictions that apply to purely foreign investors, so long as you register the property in your name or a legal entity compliant with the Constitution.
- You may own up to 100% of a Philippine domestic corporation, provided no industry-specific foreign equity limitation applies.
Land Ownership for Dual Citizens
- Constitutional Basis: Under the 1987 Constitution, only Filipino citizens and entities at least 60% Filipino-owned may acquire private lands. Since you hold dual citizenship, you generally fall under the category of a Filipino citizen.
- Residential and Agricultural Lands: Dual citizens can purchase residential or agricultural lands subject to some limitations (e.g., size restrictions for residential and agricultural lands).
- Commercial Lands: Dual citizens may own commercial lands in the same manner as Filipino citizens. Nonetheless, where real estate is to be utilized in commercial activities (such as being held in the name of a corporation), compliance with other regulations is essential.
Choosing the Right Corporate Vehicle
The Revised Corporation Code provides for several types of corporations. The most common for business and investment purposes include:
1. Stock Corporation: Has authorized capital stock divided into shares, which can be subscribed and paid up by shareholders.
2. One Person Corporation (OPC): Permits a single stockholder to form a corporation, simplifying governance. Ideal for entrepreneurs who prefer not to involve additional shareholders for compliance purposes.
3. Close Corporation: Offers restrictions on share transfer and typically consists of fewer shareholders, allowing for more personal control.
4. Regular Corporation with Multiple Shareholders: A traditional structure that may suit ventures requiring multiple investors or wide share distribution.
Capitalization Requirements
- Minimum Capitalization: Philippine law does not prescribe a general minimum authorized capital stock for most domestic corporations. However, certain industries and special licenses (e.g., financing companies, educational institutions, banking) impose specific capitalization thresholds.
- Paid-Up Capital: At least 25% of the authorized capital stock must be subscribed upon incorporation. Of the subscribed shares, at least 25% must be paid up, as long as the total paid-up capital does not fall below PHP 5,000.
Foreign Equity Restrictions
While dual citizens are effectively considered Filipinos, you must be mindful that if you decide to admit foreign investors or if you hold yourself out as a foreign investor in the future, the corporation could become subject to foreign ownership limits. Under the Foreign Investment Negative List, certain industries (e.g., mass media, retail trade with paid-up capital below a certain threshold, and land ownership) have caps on foreign equity. Since your situation involves the acquisition of land, be aware of:
- Maximum of 40% Foreign Ownership in Land-Holding Corporations: If a corporation, partnership, or association owns private land, at least 60% of its capital must be held by Filipino citizens. As a dual citizen, your ownership is deemed Filipino, but if you bring in other foreign nationals as shareholders, ensure that the 60% Filipino equity threshold remains intact.
- Potential Violations of the Anti-Dummy Law: If nominal Filipino shareholders are used solely to satisfy the 60/40 rule while actual control is lodged in foreign hands, this may constitute a violation.
Steps in Incorporating a Philippine Corporation
1. Name Verification:
  - Conduct a search through the SEC’s name verification portal to ensure that the proposed corporate name is distinct and not deceptively similar to any existing entity.
2. Drafting and Execution of Incorporation Documents:
  - Articles of Incorporation: Must include the corporate name, principal office address, specific purpose or primary purpose, term of existence (which may be perpetual), names of incorporators (or the single stockholder in an OPC), amount of authorized capital stock, and share subscription details.
  - By-Laws: Outline the rules of governance, meetings, elections, and internal procedures. Under the Revised Corporation Code, by-laws can now be adopted after incorporation if desired.
  - Treasurer’s Affidavit: A document attesting to the veracity of the paid-up capital.
3. Filing with the SEC:
  - Submit the Articles of Incorporation, By-Laws (if applicable), Treasurer’s Affidavit, and other required documents.
  - Pay the necessary filing fees based on the corporation’s authorized capital stock.
4. Issuance of Certificate of Incorporation:
  - Once approved, the SEC will issue a Certificate of Incorporation, granting the corporation its juridical personality.
5. Post-Incorporation Registrations:
  - BIR Registration: Obtain a Tax Identification Number (TIN), register the corporation’s books of account, and secure official receipts/invoices.
  - Local Government Unit (LGU) Registration: Secure a business permit from the city or municipality where the principal office is located.
  - SSS, PhilHealth, and Pag-IBIG: If the corporation will hire employees, registration with these social welfare agencies is mandatory.
Special Requirements and Considerations
- Involvement of Foreign Investors: If you bring foreign co-investors onboard, be mindful of the foreign ownership restrictions in landholding corporations or industries restricted by the FINL.
- One Person Corporation (OPC) Perks: You can be the sole shareholder if you wish to streamline governance. However, if you intend to involve other partners later, a stock corporation with multiple incorporators may offer more flexibility.
- Resident Agent (for Foreign Corporations): Not applicable if you register the corporation in your capacity as a dual citizen. But if you represent a foreign parent company, a resident agent must be appointed.
Acquisition of Land by the Corporation

As a Dual Citizen: You have the privilege of owning land directly in your personal capacity or through a corporation where you hold at least 60% of the capital stock (if you also have Filipino partners or co-shareholders who are Filipino citizens).
Due Diligence: Before purchasing land, conduct thorough checks, including verifying the authenticity of land titles with the Registry of Deeds, confirming the tax declarations, securing a land survey if necessary, and ensuring no outstanding liens or encumbrances.
Land Use Restrictions: Zoning laws, local ordinances, and environmental regulations may affect the use of the property. Comply with local government directives and secure necessary permits.

Tax Implications

Corporate Income Tax: Domestic corporations are taxed on worldwide income but may claim foreign tax credits if certain criteria are met. Current tax rates and specific allowances have undergone changes under the CREATE Law (Corporate Recovery and Tax Incentives for Enterprises Act).
Value-Added Tax (VAT): If your corporation’s sales or receipts exceed the threshold (currently PHP 3 million annually for most businesses), you must register as a VAT entity and file monthly and quarterly VAT returns.
Real Property Tax: If the corporation owns real property, it must pay annual real property taxes to the LGU. Rates vary depending on local ordinances and classification of the property (residential, commercial, or agricultural).
Withholding Taxes: The corporation must withhold taxes on compensation, professional fees, rent, and other transactions.
Documentary Stamp Tax (DST): Generally due on the original issuance of shares and on certain documents like deeds of sale or mortgages.

Corporate Governance and Compliance

Board of Directors: In a regular stock corporation, the board must have at least five but not more than fifteen directors, each of whom must hold at least one share. For an OPC, only one individual is both the single stockholder and the sole director.
Corporate Officers: Corporations are required to have a President (who must be a director), Treasurer (who may or may not be a director), and Corporate Secretary (who must be a resident and citizen of the Philippines). An OPC must appoint a treasurer, corporate secretary, and other officers as may be required by law or SEC regulations.
Annual Reportorial Requirements:
- General Information Sheet (GIS): Must be filed within 30 days after the annual stockholders’ meeting or anniversary of incorporation, containing updated information on shareholders, officers, and other corporate data.
- Audited Financial Statements (AFS): Must be submitted to the SEC within 120 days from the end of the fiscal year.
- Other SEC Requirements: Certain corporations may have additional reporting obligations depending on the nature of their business.
Books and Records: Corporations must keep books of accounts, stock and transfer books, and minutes of meetings of stockholders and directors.

Potential Pitfalls and How to Avoid Them
Failing to Comply with Equity Restrictions: Even if you are a dual citizen, if your corporation has purely foreign shareholders beyond the allowable limit, it may face penalties or revocation of its certificate of incorporation.
Violating the Anti-Dummy Law: Avoid nominal Filipino ownership. Ensure actual shareholding structures and board compositions reflect genuine control in line with the Constitution.
Under-Capitalization: Having an inadequately capitalized corporation may hamper future operations and create difficulties in raising additional capital.
Lack of Proper Documentation: Incomplete or erroneous filings with the SEC, BIR, or LGUs can delay issuance of permits and interrupt business operations.
Non-Compliance with Tax Laws: Failure to register as a taxpayer, withhold taxes, or issue receipts can lead to significant penalties.
Practical Tips for a Smooth Incorporation

Professional Assistance: Engage a reputable lawyer or corporate secretary experienced in Philippine business law. Consider consulting an accountant or tax advisor for the BIR processes.
Transparency in Shareholding: Particularly important if foreign investors are involved. Outline clear rights, duties, and obligations among shareholders.
Proper Corporate Governance: Establish clear internal rules and adhere to ethical and legal standards to avoid administrative sanctions.
Maintain Good Standing: File GIS and AFS on time, update the SEC when there are changes in the articles, by-laws, principal office address, or corporate officers.
Long-Term Strategy: Plan for expansion, capitalization, and possible joint ventures from the outset, structuring your business to accommodate future developments.

Role of Government Agencies

Securities and Exchange Commission (SEC): Main regulator for corporate registration, governance, and reportorial requirements.
Bureau of Internal Revenue (BIR): Oversees tax compliance, issuance of receipts, withholding taxes, and corporate income tax returns.
Local Government Units (LGUs): Handle business permits, location clearances, zoning regulations, real property taxes, and other local fees.
Department of Trade and Industry (DTI): Handles business name registration for sole proprietorships, but for corporations, the corporate name is governed by the SEC.
Philippine Economic Zone Authority (PEZA): Issues registrations for businesses located in economic zones, providing incentives such as income tax holidays and special tax rates, if applicable to your venture.

Acquisition of Real Property through a Corporation

Filipino Majority Ownership: If the corporation will hold the land title, it must be at least 60% Filipino-owned. As a dual citizen, your shares are counted toward the Filipino percentage.
Title Registration: Once the purchase is complete, the corporation should register the title with the Registry of Deeds. Ensure documentary stamp tax (DST), transfer tax, and registration fees are duly paid.
Property Management: The corporation should maintain documentation for the property, including tax declarations, tax receipts for real property taxes, and relevant environmental compliance certificates if required.

Potential Advantages of Incorporation for Land Ownership

Risk Mitigation: Holding land under a corporation can shield individual shareholders from personal liability arising from debts or claims against the property.
Ease of Transfer: Shares in a corporation can be sold or transferred to other parties without executing a new deed of sale for the land itself, subject to compliance with corporate and tax regulations.
Estate Planning: A corporate structure can simplify succession planning, as heirs can inherit shares rather than physically partitioning real property.

Important Reminders and Disclaimers
This guide provides general information based on current laws and regulations. Laws, implementing rules, and administrative issuances may change, and individual circumstances can vastly alter legal outcomes. For personalized guidance, it is best to consult with a Philippine attorney or a qualified consultant who can review your specific facts and plans.
Conclusion
Establishing a Philippine corporation as a dual citizen while aiming to purchase real property involves several legal, regulatory, and practical considerations. Your status as a dual citizen confers significant advantages over purely foreign investors, including the right to acquire and own land. However, you must remain vigilant about compliance with corporate registration protocols, foreign ownership caps where relevant, taxation rules, and the ongoing responsibilities of maintaining a duly registered business in the Philippines.

By carefully choosing the right corporate vehicle, ensuring adherence to the Revised Corporation Code and other pertinent statutes, and seeking professional counsel, you can enjoy a seamless incorporation process and confidently proceed with your property acquisition. Whether you opt for a standard stock corporation, a one-person corporation, or another structure, the Philippines offers ample opportunities for business growth and real estate investment—provided you operate within the boundaries of the law.

Should any questions arise regarding specific provisions, procedures, or compliance measures, consulting with legal experts, accountants, and relevant government agencies is strongly encouraged. Remember that a proactive approach to legal requirements is the best way to protect your interests, secure your investment, and lay the groundwork for a successful enterprise in the Philippines.

This legal article is intended solely for informational purposes and does not constitute legal advice or create an attorney-client relationship. Always consult a qualified Philippine attorney for personalized guidance on your unique circumstances.