The Expat Guide to Incorporating a New Business in the Philippines

The Philippines has proven itself to be among the top choices of expatriates, “expats” for short, when looking for employment opportunities. With the country’s thriving economy, there has been significant growth in consumer demand, exports, and investments—all of which contributed to the 6.6% GDP surge in the recent years.

These improvements made the Philippines a center for economic growth and foreign investments. In fact, according to the 2010 Census of Population and Housing (CPH), almost 200,000 foreigners are currently residing in different parts of the country, and this figure has increased as well since then.

Aside from expats testing the waters in the Philippines, more than a few have also considered incorporating and registering a new business in the country.

So, if you’re among them, here’s a quick guide to all the legal processes, costs, estimate period, and requirements needed such as proper business registration in the Philippines to successfully bring about your firm here.

 

The Expat Guide to Incorporating a New Business

1. Register with the Securities and Exchange Commission (SEC)

SEC, a national government regulatory agency, oversees every registered business entity in the Philippines. They control the approval of security registration statements, investigates on the violations against security laws, and imposes proper sanctions, as provided by the Securities Regulation Code, Presidential Decree No. 902-A.

Registering with the SEC is the primary step in the entire business venture so as to verify if your desired company name is available. Initially, you can perform a quick search through their online verification system, along with paying a reservation fee on site.

Upon approval, your reserved name is valid for 30 days with a corresponding fee of PHP 40. It only takes one day to complete this particular step. Further, renewing of the name should be done once its validity expires.

2. Pay the Paid-In Minimum Capital

As stated by the Corporation Code, Section 13, at least 25% of the capital stock indicated in the Articles of Incorporation by the Treasurer’s Affidavit should be paid at the period of incorporation. A proof of deposit is not necessary, but SEC entails a Treasurer’s Affidavit declaring that a deposit has been made.

If for same cases wherein the capital stock isn’t determined, the amount to be paid should not be less than PHP 5,000.

3. Notarize Necessary Documents

According to Sections 14 and 15 of the Corporation Code, proper notarization of the Articles of Incorporation, as well as the Treasurer’s Affidavit is necessary before proceeding to file with the SEC.

This may cost PHP 500 and would only take 1 day to accomplish.

4. Obtain Pre-Registered Taxpayer Identification Number (TIN)

Whereas you’ve already registered online with SEC, you should pay at the SEC to finalize your company registration in the Philippines and have the following documents to complete the process:

a.  Company name verification slip;
b.  Articles of incorporation (notarized) and by-laws;
c.  Treasurer’s affidavit (notarized);
d.  Statement of assets and liabilities;
e.  Registration data sheet with particulars on directors, officers, stockholders, and so forth;
f.  Written undertaking to comply with SEC reporting requirements (notarized);
g.  Written undertaking to change corporate name (notarized).

SEC usually takes an average of 2 business days to process all the documents before reaching a decision. Your TIN can automatically be obtained from the SEC Head Office from registration, but registering with the Bureau of Internal Revenue (BIR) is another step as well. This task is crucial in determining applicable taxes, paying your annual registration fee, and acquiring and stamping of sales invoices, receipts, and books of accounts.

Estimated cost for this task is the totality of 1% from authorized capital stock or subscription price of subscribed capital stock (the higher one but shouldn’t be less than PHP 1,000), legal research fee equal to 1% of filing fee that shouldn’t be less than PHP 10), By-laws of PHP 500, PHP 150 registration fee for stock and transfer book (STB), another PHP 320 for STB, and PHP 10 legal research fee for the By-laws.

5. Get a Barangay Clearance

Go to the Barangay Hall or Municipal Office where your business is situated, and bring your application form, SEC Certificate of Incorporation, approved Articles of Incorporation and By-laws, location plan, and contract of lease.

Corresponding fees differ for each barangay, but can range from PHP 300-PHP 1,000. It would only take one day to obtain the barangay clearance, given that the barangay captain is available for the day considering that he is one in authority.

6. Pay the Annual Community Tax

Go to the City Treasurer’s Office (CTO) and pay the basic and additional community tax. Your basic community tax would depend on your business type (association, partnership, or corporation), but should not be higher than PHP 500.

On the other hand, the additional community tax would be subject to the assessed value of the real property you own, along with dividends and earnings. The amount to be paid should not exceed PHP 10,000.

7. Get Business Permit to Operate from the Business Permits and Licensing Office (BPLO)

To be issued with a business permit, the barangay clearance is necessary, as it is considered a prerequisite.

Aside from the business permit, some companies (since they vary in nature) also need to secure other clearances or certificates such as a location clearance, fire safety and inspection certificate, mechanical permit, certificate of electrical inspection, and sanitary permit.

Obtaining a business permit takes an average of 6 days to process, and fees vary according to the LGU issuing it.

8. Have a Books of Account

BIR requires enterprises to register their books of accounts, which are sold in bookstores for around PHP 400. A set of journals usually consists of four books namely cash receipts account, disbursements account, ledger, and general journal.

For businesses with computerized accounting systems (CAS), it should also be registered according to the procedures set by the BIR Revenue Memorandum Order Nos 21-2000 and 29-2002. Within 30 days from receipt of application form (BIR Form No. 1990) and other necessary documents, the BIR Computerized System Evaluation Team would inspect and evaluate the CAS.

9. Application for Certificate of Registration (COR) and TIN at the BIR

From the fourth step of obtaining your TIN, an annual registration fee of PHP 500 should be paid at any accredited bank with payment form (BIR Form 0605). Your pre-generated TIN issued by the SEC-Head Office is indicated on the SEC Certificate of Registration, and must be registered and reported with the BIR for all internal revenue taxes it would be liable for.

Applying a COR with the BIR would require the following:

a. Duly accomplished and filled-out BIR Form No. 1903 (Application for Registration for Corporations);
b. Payment Form (BIR Form No. 0605);
c. SEC Certification of Incorporation;
d. Articles of Incorporation and By-laws;
e. Contract of Lease (with BIR Form No. 2000 and supporting BIR Payment Form as proof of payment of documentary stamp tax on the lease agreement);
f. Documentary Stamp Tax Return (BIR Form No. 2000) on the original issuance of shares and Payment Form (for the DST payment); and
g. Mayor’s Permit/Business Permit Application (duly stamped received by the Business Licensing Division of the local government of Quezon City).

Completing this step would only take one day, along with paying PHP 100 for the certification fee and PHP 15 for the documentary stamp tax—to be attached to Form 2303.

10. Pay the Documentary Stamp Tax (DST) at the BIR

A PHP 1 fee for every PHP 200 or fractional part of the par value of such shares of stock shall be paid for the documentary stamp tax on original issues of shares of stock. The DST return must be filed, while payment of tax shall be on or before the fifth day of the closing month of the SEC registration approval.

11. Obtain Authority to Print Receipts and Invoices from BIR

The Revenue Regulations No. 18-2013 issued by the BIR adopted an online system to authorize the printing of official receipts, sales invoices, and other commercial invoices. Securing this authority from the BIR is important before printing of such invoices.

The following documents should be submitted to the Revenue District Office (RDO):

a. Duly completed application for authority to print receipts and invoices (BIR Form No. 1906);
b. Job order;
c. Final and clear sample of receipts and invoices (machine-printed);
d. Application for registration (BIR Form No. 1903); and
e. Proof of payment of annual registration fee (BIR Form No. 0605).

12. Print Receipts and Invoices

All receipts and invoices must be printed in a ½ bond paper (8 ½ x 5 ½ cm) in duplicate, black print, and carbonless at a print shop. Usually, printing would take an average of 7 working days.

13. Have the BIR Stamp Your Books of Accounts and Printer’s Certificate of Delivery (PCD)

The print shop must issue a Printer’s Certificate of Delivery of Receipts and Invoices, which you need to submit to the BIR RDO with jurisdiction over the printer’s principal place of business for registration and stamping within 30 days. This step only takes a day to complete and doesn’t have any fees.

Aside from this, the following documents must also be submitted:

a. All required books of accounts;
b. VAT registration certificate;
c. SEC registration;
d. BIR Form W-5;
e. Certified photocopy of the ATP; and
f. Notarized taxpayer-user’s sworn statement enumerating the responsibilities and commitments of the taxpayer-user.

14. Social Security System (SSS) Registration

Registering with the Social Security System can take two days (without charges) and would require the following documents:

a. Employer registration form (Form R-1);
b. Employment report (Form R-1A);
c. List of employees, specifying their birth dates, positions, monthly salary and date of employment; and
d. Articles of incorporation, by-laws and SEC registration.

Once these have been submitted, they will release the SSS employer and employee numbers. An SSS training seminar might be required after registration for everyone to be aware of their rights and obligations.

15. Philippine Health Insurance Company (PhilHealth) Registration

The following documents are necessary when registering your company with PhilHealth:

a. Employer data record (Form ER1);
b. Report of employee-members (Form ER2);
c. SEC registration;
d. BIR registration; and
e. Copy of business permit.

A copy of all forms will be provided upon submission of documents, which will serve as proof until PhilHealth gives the employer and employee numbers. Completion of this step would only take a day without any charges.

16. Home Development Mutual Fund (Pag-ibig) Registration

Registering with Pag-ibig can be done simultaneously with PhilHealth, without any charges as well. The following documents must be submitted:

a. Employer’s Data Form (EDF [FPF040]);
b. Specimen Signature Form (SSF[FPF170]);
c. Copy of SEC Certificate of Incorporation;
d. Copy of Approved Articles of Incorporation and By-laws; and
e. Board Resolution or Secretary’s Certificate indicating the duly designated Authorized Representative.

Incorporating and registering a business in the Philippines may seem to be a difficult and demanding task, but can really be rewarding in the long haul.

Simply follow all the steps mentioned in this guide to not miss out on important requirements and ensure compliance with business laws and regulations.

 

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Business Partnership: Everything You Need to Know about Incorporation and Assigning Shares

When starting a business in the Philippines, whether for single proprietorship or business partnerships like corporations, there is work that needs to be done. Setting up the business with the required government agencies is on top of the list. In this post, we’ll give you the basics of incorporating a stock organization and assigning shares.

Business Partnership

The Basics of Incorporation

A stock corporation is an entity that is created for profit. The ownership is based on stocks and owners of stocks are called shareholders or stockholders. Proof of ownership comes in the form of stocks certificates. Stockholders may or may not be actively participating in business operations; it is the incorporators who take care of the management of the business. The Incorporators are the original shareholders of the corporation. After the incorporation, stockholders whether individuals or a business entity, may be added.

There must be at least five (5) but not more than fifteen (15) incorporators when registering a business. Majority of the incorporators, who are all of legal age, must be legal residents of the Philippines. All incorporators are required to subscribe at least one (1) share of stock. Upon registration, 25% of the authorized capital stock must be already subscribed and at least Php5,000.00 must be paid-up. Given the requirements on subscription and paid up capital, incorporators must subscribe to at least 25% of the authorized capital stock but paid-up capital must not be below Php5,000.00.

Process of Incorporation

1. Verify and Reserve the Company Name with the Securities and Exchange Commission (SEC)

The verification of the availability business name can be done online but the reservation fee must be paid directly to the SEC along EDSA near Ortigas Avenue. Pay Php40.00 to reserve the name for the first 30 days. It can be extended up to 90 days, just pay Php120 every time extension is requested. Here’s a comprehensive guide on registering with SEC.

2. Prepare the Articles of Incorporation, By-Laws, and Treasurer’s Affidavit. Have the Articles of Incorporation and Treasurer’s Affidavit Notarized

If you must, consult a lawyer about these documents. Make the incorporators sign on all pages and have a notary public sign the Articles and the Treasurer’s Affidavit.

3. Deposit the Minimum Paid-Up Capital at the Bank

The SEC would not check if the minimum paid up capital of Php5,000.00 is deposited in the bank or not but the law requires it. It is better to have the paid-up capital deposited.

4. Register with the SEC and receive a pre-assigned Tax Identification Number

Registration may be done online but payment must be made directly to the SEC.

5. Get Barangay Clearance

Pay from Php300.00 to Php1,000.00 to get this clearance from the Barangay covering your place of office. This is needed when applying for the business permit from the city hall. Here’s a guide on applying for a barangay cleareance.

6. Pay Annual Community Tax and Get Community Tax Certificate (CTC) from Your City or Municipal Treasurer

The community tax depends on the form of business, whether a corporation, single proprietorship, or an association.

7. Obtain Business Permit to Operate from Your City’s Business Permits and Licensing Office

Here’s a guide to registering for a business permit.

8. Buy Books of Accounts to Be Used in the Business

Blank books of accounts are available in local office stores or bookstores. Here’s an article on the 3 BIR-Approved Format for books of account that you can use.

9. Go to Bureau of Internal Revenue (BIR), Specifically the Revenue District Office (RDO) Where the Head Office of the Organization Is Located to Apply for Certificate of Registration and Register the Pre-Assigned TIN from the SEC

For tax concerns, registration with the BIR is necessary.

10. Pay Registration Fee and Documentary Stamps at an Authorized Agent Bank (AAB) Within the RDO

Payments are not accepted in the RDOs. Taxpayers are to pay fees and taxes through authorized banks.

11. Get Authority to Print Receipts and Invoices from the BIR

Printers will not print official receipts and invoices if there is not authority to print documents from the BIR.

12. Have Receipts and Invoices Printed

Find your local printer authorized by the BIR to print. Sometimes, it is the RDO that assigns the printers to certain taxpayers.

13. Bring Books of Accounts and Printer’s Certificate of Delivery to BIR and Have Them Stamped

The printer will provide you with a Certificate of Delivery and this must be presented to the RDO within 30 days of issuance together with the books of accounts.

14. Register with the Social Security System (SSS)

Fill in the forms and provide list of employees. The SSS will issue SS Numbers.

15. Register with Philippine Health Insurance Company (PhilHealth)

Submit documents and forms needed that include employee records, and copies of registrations and business permits. Philhealth numbers for both employer and employees shall be released within 3 months.

16. Register with Home Development Mutual Fund (Pag-Ibig)

Submit documents to the HMDF that include Data forms, signature forms, and copies of registrations and business permits. Pay the first contribution and HDMF will issue certificates afterwards.

The whole process may take about a month to finish.

Assignment of Shares

Shareholders may be increased after the company is incorporated. Likewise, shares are transferable. Here are the steps when re-assigning shares:

1. Assignor and Assignee execute a Deed of Assignment of Shares of Stocks and have it notarized.

2. Pay the corresponding Capital Gains Tax and documentary stamp.

3. BIR issues Certificate Authorizing Registration (CAR)

4. Present CAR to the Corporate Secretary.

5. Corporate Secretary records the transfer of shares in the company’s Stock and Transfer Book.

6. Corporate Secretary ensures the submission of revised General Information Sheet.

7. The old Certificate of Stock is canceled and a new one is issued in favour of the new shareholder.

 

 

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How to Amend Articles of Incorporation and By-Laws

I have been dealing with the Securities and Exchange Commission (SEC) for almost two years now.

One of the transactions I do frequently is amending the Articles of Incorporation (AOI) and By-laws of the company. Most of the time, it is just a minor change, like changes in address (Article III of the AOI).

The law requires that these changes are reflected in their records. Complying with them might be a hassle, but it is a requirement if you do not want any bad marks in your soon-to-be business enterprise. Here is a detailed list of requirements and procedure for the entire process. In addition, I added a bonus segment below!

5 Steps in Amending Articles of Incorporation and By-laws

Step 1. Prepare Amended Documents

Requirements

1. Amended Articles of Incorporation – Prepare four sets of Amended Articles of Incorporation or Amended By-laws.

2. Directors Certificate – a notarized document signed by majority of the directors and the corporate secretary, for example if there are five incorporators in your company you need at least four signatures including the corporate secretary certifying the following:

• The amendment of the Articles of Incorporation or By-Laws and indicating the amended provisions

• The majority vote for amendment of the directors and the stockholders or members

• The date and place of the stockholders or members meeting

• The tax identification number (TIN) of the signatories which shall be placed below their names

3. Secretarys Certificate – a notarized document signed by corporate secretary certifying that there is no intra-corporate dispute in the company.

Step 2. Submit Amended Documents

Submit Director’s Certificate and Amended Articles of Incorporation and Amended By Laws at the Corporate and Partnership Registration Division (CPRD), located at the 2nd floor, SEC Building for pre-processing.

The processor checks the documents if compliant with the provisions of the Corporate Code of the Philippines and other existing laws. If the documents are complete, processor advises applicant to pay filing fee, processor will give you an order of payment (proceed to step 3). If the documents are not complete, processor advises applicant to comply with the requirements first.

Step 3. Pay Filing Fee

Present the order of payment to the cashier, pay the necessary filing fees and cashier will issue an official receipt. The cashier is located at the ground floor, SEC Building.

The fee for amending either the Articles of Incorporation or the By-laws is PhP 510.

Step 4. Receiving of Application

File the application with the Receiving Unit of the Company Registration and Monitoring Division (CRMD) located at the 3rd floor, SEC Building.

After receipt of the application, it is forwarded to the Corporate Filing and Records Division (CFRD) for verification. The assistant director will review the application and forward it to the Director of the Company Registration and Monitoring Department (CRMD) for approval.

Certificates may be claimed after ten (10) working days from filing of application with the Receiving Unit of the CRMD; or you can contact this number for follow up +632 584 0763.

Step 5. Release of Amended Certificate

Present your official receipt to Central Receiving and Records Division (CRRD) located at the ground floor, SEC Building to get your amended certificate.

If the Amended Articles of Incorporation is Article III or the the address, be sure that you will also update your records with the Local Government Units (LGU) like your barangay permit and mayor’s permit and also with the Bureau of Internal Revenue (BIR) to prevent possible problems.

BONUS: Frequently Asked Questions:

1. Can I amend everything in the Articles of Incorporation?

• No. There are some things that you can amend and there are some things you cannot amend.

2. What items can be amended?

• Corporate Name

• Purpose (Primary / Secondary)

• Business Address

• Number of directors

• Authorized capital stock

3. What items cannot be amended?

•  Information about the original incorporators

¤ Names of incorporators listed in original Articles of Incorporation

¤ Citizenship and residences of the Incorporators

¤ Names, citizenship and original subscription of the incorporators

¤ Names and contribution of each member. If you want to change names and contribution of each member, you can update it in your General Information Sheet (GIS).

•  Name of the designated Treasurer. If you want to change your corporation’s treasurer, you can update it in the General Information Sheet (GIS).

 

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How to Register a Corporation with the Securities and Exchange Commission (SEC)

Registering a [stock] corporation with the Securities and Exchange Commission (SEC) is not that hard to do, as many of our young businessmen may think it to be. This has been my main role with Full Suite for more than a year now and I can say with certainty that it’s more fun in doing business in SEC. Now, if you’re on your way to registering your corporation with the Securities and Exchange Commission (SEC), here are some tips that will help you register your business.

This article is composed of 2 parts:

1. Requirements –> what they are, how to get them, and what to do with them

2. Tips and Reminders

Registering a Corporation with the SEC

Requirements

(as of March 31, 2013)

1. Name Reservation

•  Online name reservation

¤ Go to SEC website http://www.sec.gov.ph. Create an account first and sign up before you can reserved your desired name.

View from SEC i-Register | The Online Name Reservation System of the SEC
View from SEC i-Register | The Online Name Reservation System of the SEC

¤ Remember to buy SEC Docs Stamp before filing.

•  Manual name reservation

¤ Go to SEC office at the 2nd floor of the SEC Building along EDSA, Greenhills, Mandaluyong City, and look for the Name Verification Unit.

¤ Remember to buy SEC Docs Stamp before filing.

2. Articles of Incorporation (AOI) and By-Laws

•  AOI is the basic agreement of a corporation which consists of Corporations Name, your primary and secondary purposes, the incorporators, number of incorporators, amount and share of stocks.

•  The By-Laws are the written rules for conduct of corporation or partnership, it generally provide for meetings, elections of a board of directors and officers, types and duties of officers and others.

The template for the Articles of Incorporation (AOI) and By-Laws are available for download at the SEC website. or you can also buy the forms at SEC office for Php 500.00.

3. Treasurer’s Affidavit

•  It is the affidavit that sworn by the elected treasurer that he/she is the authorized person to act as such. Also, it is the affidavit that he/she certifies that 25% of the authorized capital stock has been subscribed and at least 25% of the subscription has been paid and received by him/her in cash for the benefit and credit of the corporation.

•  This authorizes the SEC and the Bangko Sentral ng Pilipinas (BSP) to examine and verify the desired amount in the bank, which is in the name of the treasurer-in-trust of the corporation.

There is no need to present Bank Certificate per new memo of the SEC RES NO. 0331 dated July 20, 2012.

 

4. Affidavit to undertake to change corporate name

•  Must be signed by president and corporate secretary of the corporation.

Things You Must Know | Tips and Reminders

1. Incorporators are required to be not less than five (5) but not more than (15) persons.

2. Elected Treasurer-in-trust must be a Filipino citizen.

3. All incorporators must be at least 18 years of age.

4. If there is a foreign incorporator/s, the share of stocks must 40% and 60%.

• For Foreigner(s) – 40%

• For Resident(s) – 60%

5. Normal processing of Certificate of Registration.

• New Businesses – 5 to 7 working days

• Amendments – 10 working days

6. If you need to secure Certificate of Registration as fast as one day processing, you may go to the Green Lane Office at the 3rd Floor of SEC Building.

• You can buy Green Lane forms from them for Php 800.00.

• Fill up the forms and file them on 2nd Floor of the SEC Building.

7. When you are filing the AOI and By-Laws, don’t forget to bring correction tape and stapler. This will be useful if the processor will ask you to remove or change something in your AOI specifically in Article II – the Corporation’s primary and secondary purposes.

8. Also bring something that will entertain you while waiting. A newspaper or magazine, headset or maybe your unfinished work will do. Normally it will take 30 minutes to 1 hour of waiting per transaction, depending on the quantity of application. In my experience, the longest time that I’ve been waiting at the SEC office is one whole day, believe or not. The upside is that there is a television set in every office that I’ve been dealing with that time.

9. Do not leave your application because once it has been called by the processor for a couple of times and there is no response from you, your application will proceed to the Corporation & Partnership Registration and Monitoring Division (CPRMD) Director. CPRMD Director will invite you to his office and will ask you for an explanation on why you were not there, and believe me it’s not that good. You must convince him that your absence is very reasonable before he will give you your application.

• The reason why I said mentioned this is because it happened to me before. It is better to wait than be called in by the Director.

10. Lastly bring lots of patience. Voilà, you’re ready to deal/transact with the SEC Office

Download the Ultimate Guide to Registering Your Business here.

 

 

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