The Philippines is a top destination for foreign company expansion, as it offers several advantages:
- Young and well-educated workforce: the median age of workers in the Philippines is 26 and the population is almost 114 Million people
- Strong English language skills: recent studies show that 47% of the Filipino population has full language proficiency (reading, writing and speaking)
- Growing economy: The forecasted annual growth rate is at 4% or more, meaning a chronic increase in the value of goods and services
In this article, we’ll review the different steps for foreign-owned company registration in the Philippines. We’ll also demonstrate how the Employer Of Record service provides a fast and efficient alternative to setting up a standalone company in the Philippines.
How to register a foreign company in the Philippines
Setting up business in the Philippines
Registering a foreign company in the Philippines allows you to have a physical presence in the country. It is important to remember, however, that it is a lengthy bureaucratic process that can take from 2 to 4 months. Here are some of the main steps that you must follow:
- Company name: Reserve a business name that is unique and complies with the Securities and Exchange Commission’s (SEC) regulations
- Determine a business structure (Sole proprietorship, corporation, representative office, branch office)
- Identify and comply with industry-specific foreign ownership restrictions
- Prepare incorporation documents based on your chosen business structure
- Research fees and required documents to submit for SEC registration
These steps are resource-intensive. It is important to exercise due diligence to ensure proper registration of a foreign company in the Philippines. Mistakes in registration can extend the process or incur additional costs.
Obtaining the necessary permits and licenses for registration of your company in the Philippines
Company registration in the Philippines requires procuring many permits and licenses from the Local Government Unit (LGU). These will vary depending on the city, as well as on factors such as business entity, size, and industry.
You will also need to apply for all the necessary permits and licenses relevant to your business and per local laws and regulations before being able to register a foreign business in the Philippines. These can include (but are not limited to):
- Fire Safety Inspection Certificate
- Business Permit
- Sanitary Permit
- Building Permit
- Electrical Inspection Certificate.
Keep in mind that even after acquiring these permits and licenses, they will also need to be renewed and follow-up inspections will have to be scheduled at the necessary intervals. You will have to stay up to date on the status of your business permits at all times, as any delays or missed renewals can result in hefty fines and penalties.
Taxation in the Philippines for foreign companies
As a foreign company operating in the Philippines, you will have to register with the Bureau of Internal Revenue (BIR), which entails filling out the necessary forms and paying the registration fees. Once your registration is processed you will have to obtain a Tax Identification Number (TIN) and a Certificate of Registration.
As with every country, the Philippines has its own rules and regulations for filing and paying your business taxes. When registering a foreign-owned company, you will need to understand the different tax types (VAT, income tax, etc.) and the related deadlines for each.
You should consider consulting with or hiring an accountant who is familiar with the Philippines and international tax laws as it applies to foreign-owned companies. Whether you hire an accountant or handle it yourself, you will need to be diligent to avoid any issues that could further complicate the process.
Ensuring that the registration of your company complies with Philippine law
Labor law in the Philippines
This is a very important topic, as the Philippines has many specific labor laws with which you must ensure full compliance and understanding if you intend to register a foreign-owned company. Some of the main ones that must be considered are minimum wage, work hours, and social security contributions.
To complicate matters further, some of the labor laws regarding wages and taxes differ depending on the region in which your company operates. Read more about labor laws and wage taxes in the Philippines here.
Knowledge of these labor laws will not only be necessary for compliance purposes but may also be necessary for liability purposes. It is common for employees to sue employers for unlawful termination, even if the reason is employee underperformance, therefore you must understand the laws to protect yourself.
Recordkeeping
You will need to establish thorough and trustworthy recordkeeping of your legal and financial documents when registering your foreign-owned business. This will ensure that you are financially accountable and will help you stay up to date with upcoming legal requirements.
Don’t forget that as a foreign-owned company, there are specific reporting requirements that will apply to you based on the type of entity you have registered. Failure to meet these or insufficient recordkeeping could result in audits and costly penalties.
Recordkeeping of employee contracts and disciplinary history will also be of utmost importance in the event of liability issues, such as unlawful termination lawsuits.
Professional services costs
Considering the complexity and intricacies of Filipino law and work culture, consider seeking professional advice when proceeding with foreign-owned company registration in the Philippines. Consulting and hiring skilled lawyers, accountants, and record-keepers with knowledge of this bureaucratic undertaking can be beneficial to avoid potential mistakes.
Maintaining a foreign-owned company is costly: you will need to consider monthly compliances such as taxation, bookkeeping, payroll, and the risk of employing employees, as well as annual compliances, for example, renewals, audits, officers, etc. You will therefore also have to keep in mind the added costs of soliciting the right professionals with the right experience.
All the different costs associated with registering a foreign-owned company in the Philippines, seeking the right professional advice, and maintaining the business add up. It’s valuable to weigh the lengthy process versus the benefits of partnering with an Employer of Record instead.
Advantages of using an Employer Of Record service
What is an Employer Of Record and how is it different than registering my own company?
An Employer Of Record service handles the administrative necessities of hiring employees in a foreign country. By partnering with one, you can directly hire employees in the Philippines without the necessity of having a physical presence in the country.
There are some situations where foreign-owned company registration in the Philippines can be advantageous. If you intend to establish your brand in the country over a longer period, it can be more effective with a physical presence. It can also help if you want complete control over your workforce and company culture.
If your ultimate goal is to start operations quickly and you want to avoid the legal complexities and resource-intensive processes, then consider partnering with an Employer Of Record who can act as your foothold in the Philippines.
An Employer of Record offers quick and cost-effective results for your operations in the Philippines
Foreign-owned company registration in the Philippines is a resource-intensive and time-consuming endeavor. RecruitGo’s Employer Of Record service offers an efficient alternative to get into the market quickly without having to worry about the complexities and costs of registration of a standalone company.
Here are some of the benefits of partnering with an Employer Of Record:
- Quicker start of operations: Onboarding takes 2-3 working days from signing the service agreement compared to 5-8 months for self-registration of your company
- Focus on what you do best: Administrative tasks (HR and Payroll) are handled by RecruitGo so that you can dedicate your resources to operations
- Cost-effective: Avoid the extra costs associated with registration, and potential fines or expensive legal costs that can arise from compliance issues
- Access top talent: Leverage our network and expertise to recruit and onboard qualified Filipino employees quickly and efficiently.
- Flexibility: You can scale up and down without having to think about company formations and dissolutions
Request a customized quote and see how much you can save by using our Employer Of Record service!
