Corporate Dissolution and Alternatives to Closing Up Shop

The Corporation Code of the Philippines provides various methods for corporations to close up shop if they feel the need to start anew.

1. Voluntary Dissolution

   • Where no creditors will be affected – The ideal option for shutting down operations, provided that the corporation’s dissolution will not prejudice any creditors who may have claims against it

   • Where creditors will be affected – The standard option for dissolution, where the corporation still has to settle its outstanding debts, and any other liabilities it may have incurred

2. Involuntary Dissolution – Where the corporation is insolvent, its creditors may file a petition before the Securities and Exchange Commission for dissolution and liquidation of the corporation, in accordance with the Financial Rehabilitation and Insolvency Act. There are, however, methods for the corporation to protect its assets and/or continue its existence

3. Quietly Going Away

4. Dissolution via Shortening the Term of Existence

Respicio & Co. Law Firm can help you settle your affairs, and determine the best method for you to dissolve and liquidate your corporation, or, if insolvency proceedings have been initiated against you, we can also help you protect and rehabilitate your corporation.

If you are a creditor with outstanding and demandable claims against an insolvent corporation, Respicio & Co. Law Firm can help you pursue and protect your claims.
 

Foreigners Doing Business in the Philippines: Part Two

Aside from doing business as a licensed foreign corporate entity, foreigners may establish their businesses in the Philippines under different organizational structures, as may suit their needs:

Organised under Philippine Laws

Sole Proprietorship

Owned by an individual who exercises full control and direction over the business, owns all of its assets and exclusively enjoys profits, while personally answers for all of the business’ liabilities.

Partnership

Either a general professional partnership or a limited liability partnership, depending on the agreement between the partners as to contributions of assets and answering of the partnership’s liabilities. Treated as a separate juridical person from the partners themselves.
 
Stock and Non-Stock Corporation (may be established as a subsidiary of a foreign parent corporation)

Stock corporations own capital stock divided into shares of stock held by its shareholders. They are authorized to declare and distribute dividends when the corporation has unrestricted retained earnings. Different classes of shares may grant the shareholder different rights as to ownership and control of the corporation, or preference in distribution of dividends or liquidation of the corporation. 

Non-Stock corporations are organized for public welfare, such as for charity, education, culture, science, sports, civic service, religion, or other similar purposes. In lieu of shareholders and shares, they have members and membership dues, and are not authorized to distribute income as dividends to such members.

Organized under Foreign Laws

Branch Office

Foreign corporations may establish branch offices in the Philippines. The branch office carries out business activities of the head office and derives income within the Philippines. Profits made are remitted to the head office.
 
Representative Office

Unlike a branch office, a representative office does not derive income within the Philippines. It is fully financed by the head office, and its sole purpose is to directly deal with the clients of the foreign corporation, such as customer service, information dissemination, setting up communication enters, and marketing company products.

Regional or Area Headquarters (RHQs)

An RHQ is limited to purely administrative functions, such as supervisory, communication, and coordination activities for the subsidiaries, affiliates, branches, and customers of the foreign corporation in the Asia Pacific Region. Since it does not directly manage the subsidiary/branch offices in the Philippines, it does not derive income therein.
 
Regional Operating Headquarters (ROHQs)

ROHQs have a wider scope of services, beyond acting as the administrative arm of the foreign corporation in the region. It may engage other businesses and corporations to source raw materials, conduct research and development, marketing control, and sales promotion.

******

Each organisational structure has varying requirements before and after setting up, and differ based on income, startup costs/initial investments, ownership, and tax treatments under Philippine Law.

Respicio & Co. Law Firm can help you determine which structure best suits your needs, assist you in procuring all the necessary requirements, and process your registration in the Philippines.

PEZA Guidelines of Registration – Part 3 of PEZA Series: Perks of Being a PEZA-Registered Business

All persons, firms, associations, partnerships, corporations, or any other business organization, regardless of nationality, control and/or ownership of the working capital, may apply for registration as an Export or Free Trade Enterprise upon compliance with the following procedure.

Documents required:

1. Three duly accomplished application forms

2. Project brief – the completion of the project brief entails the submission of additional documents relating to the statements made therein

3. Anti-graft certificate

4. Board Resolution authorizing the filing and designation of a representative

5. SEC Certificate of Registration, Articles of Incorporation and By-Laws (if not yet available, submit draft of Articles of Incorporation)

6. Project Feasibility Study – information and documents necessary in the preparation of the project feasibility study

7. Supporting Technical Data and Documents such as equipment inventory, organizational chart, and others

8. Financial Data and Documents such as number of employees, employee positions and salary rates, audited financial statements, and others

9. Other documents specifically required according to the enterprise to be registered

10. PEZA Reports (pre-registration, post-registration)

Respicio & Co. Law Firm can help you process all your documentary requirements, and register your business with PEZA.

Previous: PEZA Economic Incentives – Part 2 of PEZA Series: Perks of Being a PEZA-Registered Business

PEZA Economic Incentives – Part 2 of PEZA Series: Perks of Being a PEZA-Registered Business

All PEZA-registered Economic Enterprises are granted the following Non-Fiscal Incentives:

1. Simplified Import-Export Procedures via Electronic Import Permit System and Automated Export Documentation System;

2. Non-resident foreign nationals may be employed in supervisory, technical, or advisory positions;

3. 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 21 years of age

The following are the Tax and other Fiscal Incentives provided to PEZA-registered businesses:

1. Economic Zone Export Manufacturing Enterprise

   • Income Tax Holiday (ITH) – 100% exemption from Corporate Income Tax up to a period of:

     • 4 years for Non-pioneer Project

     • 6 years for Pioneer Project
       (ITH Extensions may be granted, subject to compliance with certain criteria, and not in excess of 8 years)

     • 3 years for Expansion Project

   • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH 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 all local government imposts, fees, licenses or taxes, except real estate tax while still under ITH;

   • Machineries installed and operated within the zone for manufacturing, processing or for industrial purposes are exempt from real estate taxes for the first (3) years of operation of such machineries. Production equipment not attached to real estate are exempt from real property taxes;

   • Exemption from expanded withholding tax.

2. Information Technology Enterprise

   • Income Tax Holiday (ITH) – 100% exemption from Corporate Income Tax up to a period of:

     • 4 years for Non-pioneer Project

     • 6 years for Pioneer Project
       (ITH Extensions may be granted, subject to compliance with certain criteria, and not in excess of 8 years)

     • 3 years for Expansion Project

   • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH period;

   • Tax and duty-free importation of equipment and parts;

   • Exemption from wharfage dues and export tax, impost or fees;

   • VAT zero-rating of local purchases, including land-based telecommunications, electrical power, water bills, and lease on the building, subject to compliance with BIR and PEZA requirements;

   • Exemption from all local government imposts, fees, licenses or taxes, except real estate tax while still under ITH;

   • Machineries installed and operated within the zone for manufacturing, processing or for industrial purposes are exempt from real estate taxes for the first (3) years of operation of such machineries. Production equipment not attached to real estate are exempt from real property taxes;

   • Exemption from expanded withholding tax.

3. Tourism Economic Zone Locator Enterprise

   • 4 years of Income Tax Holiday (ITH);

   • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH period;

   • Tax and duty-free importation of capital equipment;

   • VAT zero-rating on local purchases of goods and services, including land-based telecommunications, electric power, and water bills;

   • E xemption from expanded withholding tax.

4. Medical tourism Enterprise

   • 4 years of Income Tax Holiday (ITH);

   • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH period;

   • Tax and duty-free importation of medical equipment, including spare parts and equipment supplies, required for the technical viability and operation of the registered activities of the enterprise;

   • VAT zero-rating on local purchases of goods and services, including land-based telecommunications, electric power, and water bills;

   • Exemption from expanded withholding tax.

5. Agro-Industrial Economic Zone Enterprise

   • 4 years of Income Tax Holiday (ITH);

   • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH period;

   • Tax and duty-free importation of production equipment and machineries, breeding stocks, farm implements including spare parts and supplies of the equipment and machineries;

   • Exempti on from export taxes, wharfage dues, impost and fees;

   • VAT zero-rating on local purchases of goods and services, including land-based telecommunications, electric power, and water bills;

   • Exemption from payment of local government fees such as Mayor’s Permit, Business Permit, Permit on the Exercise of Profession/Occupation/Calling, Health Certificate Fee, Sanitary Inspection Fee, and Garbage Fee.

6. Economic Zone Logistics Enterprise

   • Exemption from duties and taxes on raw materials, semi-finished goods for re-sale to, or for packing/covering, cutting, altering for subsequent sale to PEZA-registered Export Manufacturing Enterprises, for direct export or for consignment to PEZA-registered export enterprise;

   • VAT zero-rating on raw materials for checking, packing, visual inspection, storage, and shipping to be sourced locally.

7. Economic Zone Developer/Operator

   • 5% Special Tax on Gross Income and exemption from all national and local taxes, except real property tax on land owned by the Economic Zone Developer;

   • VAT zero-rating of local purchases;

   • Exemption from expanded withholding tax.

8. Facilities Enterprises

   • 5% Special Tax on Gross Income and exemption from all national and local taxes, except real property tax on land owned by developers;

   • VAT zero-rating of local purchases;

   • Exemption from expanded withholding tax.

9. Economic Zone Utilities Enterprise

   • 5% Special Tax on Gross Income and exemption from all national and local taxes, except real property tax on land owned by developers;

   • VAT zero-rating of local purchases;

   • Exemption from expanded withholding tax.

Respicio & Co. Law Firm can help you evaluate your investment, locate your operation in an ideal zone, building or park, and fully maximise your PEZA incentives.

Previous: PEZA Areas of Investment – Part 1 of PEZA Series: Perks of Being a PEZA-Registered Business

Next: PEZA Guidelines of Registration – Part 3 of PEZA Series: Perks of Being a PEZA-Registered Business

PEZA Areas of Investment – Part 1 of PEZA Series: Perks of Being a PEZA-Registered Business

The Philippine Economic Zone Authority, created by R.A. 7915, “The Special Economic Zone Act of 1995”, is the government agency tasked with the promotion and regulation of foreign investments on Philippine soil, in Special Economic Zones.

These zones provide tax incentives and other economic benefits to foreign investors setting up certain types of businesses within these areas:

1. Export Manufacturing – Economic Zone Export Manufacturing Enterprise engaged in processing, assembly, and manufacturing of goods where 70% of the production is to be exported.

2. Information Technology Service Export – Economic Zone IT Enterprise or IT Parks and Buildings of which 70% of IT service activities are rendered to clients abroad, such as: BPOs, call centers, data encoding, software development and application, content development for multi-media or internet purposes; and others.

3. Tourism – Tourism Economic Zone Developers or Operators and Locators establishing and operating sports and recreation centers, accommodation, convention, and cultural facilities and their special interest attraction activities/establishments, with foreign tourists as primary clientele.

4. Medical Tourism – Medical Tourism Enterprise providing medical health services, duly endorsed by the Department of Health, primarily rendering services to foreign patients.

5. Agro-industrial Export Manufacturing – Agro-industrial Economic Zone Developers or Operators and Locators, engaged in the processing and/or manufacturing of agricultural products resulting in the exportation of its production.

6. Agro-industrial Bio-Fuel Manufacturing – Enterprise engaged in specialized manufacturing of agricultural crops and eventual commercial processing which shall result in the production of clean energy such as bio-fuels and the like.

7. Logistics and Warehousing Services – Enterprise engaged in:

   • Warehousing for storage, deposit, and safekeeping of goods for PEZA-registered Economic Zone Export Manufacturing Enterprises; and/or

   • Importation or local sourcing of raw materials, semi-finished goods for resale to, or for packing, covering (marking/labeling), cutting, or altering to customer specification, mounting and/or packaging into kits or marketable lots for subsequent sale to PEZA-registered Export Manufacturing Enterprises for use in their export activities, or for direct export, or for consignment to PEZA-registered Export Manufacturing Enterprises and eventual export.

8. Economic Zone Development and Operation – Enterprise engaged in the development, operation and maintenance of:

   • Manufacturing Economic Zone Development/Operation – infrastructure, facilities and utilites as light and power system, water supply and distribution system, sewerage and drainage system, pollution control devices, communication facilities, paved road network, administration building.

   • IT Park Development/Operation – infrastructures and other support facilities required by IT Enterprises, as well as amenities or easy access thereto, required by IT professionals and workers.

   • Tourism Economic Zone Development/Operation – integrated resort complex, with prescribed carrying capacities of tourist facilities and activities.

   • Medical Tourism Economic Zone Development/Operation – Medical Tourism Park or Medical Tourism Center, planned and designed in accordance with the standards of the Department of Health and the Department of Tourism to have support facilities and services required for health and wellness, and provided with required infrastructure facilities and utilities.

   • Agro-industrial Economic Zone Development/Operation – Agro-industrial economic zone planned and designed to have support facilities and services required for processing and agro-based manufacturing facilities, and provided with the required infrastructure facilities and utilities.

   • Retirement Economic Zone Development/Operation – Retirement Economic Zone Park or Center, planned and designed in accor dance with the accreditation standards of the Philippine Retirement Authority, and provided with the required infrastructure facilities and utilities.

9. Facilities Providers – Enterprise engaged in:

   • Facilities for Manufacturing Enterprises – construction as owner/operator of factory buildings inside special economic zone, for lease to PEZA-registered Export Manufacturing Enterprises.

   • Facilities for IT Enterprises – construction as owner/operator of buildings and other facilities inside IT Parks which are leased to PEZA-registered IT Enterprises.

   • Retirement Facilities – establishment, operation and management of retirement facilities and other related activities, with foreign retirees as primary clientele, duly endorsed by the Philippine Retirement Authority, and located in a Retirement Economic Zone.

10. Utilities – Enterprise engaged in the establishment, operation and maintenance of light and power systems, water supply and distribution systems inside Special Economic Zones.

Respicio & Co. Law Firm can help you determine your eligibility for PEZA-registration, and process the registration.

Next: PEZA Economic Incentives – Part 2 of PEZA Series: Perks of Being a PEZA-Registered Business