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.