By: Tax and Accounting Center Philippines
A Philippine representative office is form of a resident foreign corporation in the Philippines where the legal entity of a foreign corporation is being brought into the Philippines to engage in some activities allowed by law. For the purpose, a foreign corporation is required to secure a License to do Business in the Philippines for its representative office in the country and is allowed to deal directly with the clients of its parent company abroad based on the following limited activities:
A Philippine representative office is a cost center and is not allowed to earn income in the Philippines, thus, exempted from 30% income tax and 12% value added tax. It is however subject to withholding taxes on its income payments and compensation, and could be passed on 12% value added tax on its purchases from VAT-registered suppliers.
To support its operations in the Philippines, it is required an initial capitalization of US$30,000.00 to be inwardly remitted to the Philippines. It is likewise required to appoint a resident agent on whom summons and other legal processes against the same may be served in all actions or other legal proceedings against the Company.
Requirements for License to Do Business in Philippines
To secure Securities and Exchange Commission (SEC) approval of the License to do Business in the Philippines of a representative office of foreign corporation, you need to have the following documentary requirements:
Basic SEC Requirements
SEC in the Philippines has a set of prescribed forms for some of the above documentary requirements that you may either do it yourself or secure the assistance of experienced professionals
SEC application and approval of License to do Business in the Philippines
Initial registration papers carefully prepared for the purpose will undergo initial evaluation of the SEC, and finding the same in order will be assessed filing and other fees based on the proposed capitalization. Payment of the filing and other fees marks the formal filing of the application and normal approval procedures would immediately follow. Approval normally comes in a couple of days to about ten (10) days.
Tax Authority Registration
SEC will assign a tax identification number (TIN) upon release of the License to do Business in the Philippines and such TIN shall be formally registered with the Bureau of Internal Revenue (BIR). Certain registration fees and taxes will be paid and other registrations for books of accounts, and official receipts or invoices will follow. For tax exemptions of non-stock non-profit corporation in the Philippines, you need to secure BIR ruling with the tax authority with the Revenue District Office (RDO) of registration.
Business Permits & Licenses
For the legality of its local operations, business permit has to be secured with the local government unit of business location. Certain fees and other registrations are likewise required such as community tax certificate, barangay clearance, fire permit, occupancy permit, and the likes.
Employee safeguards registrations
Employer registration with the Social Security System (SSS), Philippine health Insurance Corporation (Philhealth), and Home Development Mutual Fund (HDMF) is likewise mandatory and will proceed independent of the above.
Complete Processing Timetable
With the improved processing system of the government agencies, complete processing of the above will take three (3) to four (4) weeks from filing with the Securities and Exchange Commission. We suggest you secure the services of professionals to assist you in the complete registration of your Philippine Company that you may be able to simply concentrate on operational matters.
Processing fees for securing license to do business
Should intend to engage the services of a professional for the assistance in securing License to Do Business in the Philippines, professional fees could vary and the range could start from US$1,000.00.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at email@example.com.)
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