What are the registrable companies in Phils.?

Philippines has lot to offer. Aside from the lovable tropical climate, many multinational companies have proven that Philippines is a quite considerable location for expansion and good business endeavors. For the purpose of doing business in the Philippines, a selection of the appropriate entity that will engage such endeavors seems to be great importancefor its success. Each of the following types of entities has a corresponding distinct tax implications:

a. Philippine corporation

b.Philippine branch

c.Philippine Regional Headquarters

d. Philippine Regional Operating Headquarters

e. Philippine Representative office

A CORPORATION is a separate legal entity distinct from the owners thereof. This can engage in any desired economic activity upon registration with the Securities and Exchange Commission (SEC) and securing the necessary permits and licenses with other government agencies. It is similar to a limited liability company as owner’s or stockholders are generally liable only to the extent of their investments. Foreign companies may become stockholders subject to the applicable limits of the law such as equity participation and capitalization.For tax purposes, a corporation is generally subject to 30% income tax, 12% value added tax or 3% other percentage tax, and other taxes. Dividends remitted to its parent company abroad is normally subject to 15% income tax while royalties and other income payments are taxed at 30%, except under tax treaties with reduced rates of say, 15%.

A BRANCH is a local operation in the Philippines of the foreign parent. It is a mere extension of the parent’s legal entity. By SEC license to do business in the Philippines it is authorized to conduct business similar to a corporation and with such powers and attributes. Being an extension of the parent, liabilities in the Philippines incurred by the branch accrues to the parent. Tax implications are similar to that of the corporation.

A REGIONAL HEADQUARTER (RHQ) of a multinational company is an administrative office for supervision, communication and coordination center of its subsidiaries, affiliates, and branches in the Asia-Pacific region. As as administrative agency, it is not allowed to earn income in the Philippines, thus, it is exempt from 30% income tax, and the 12% VAT. Employees are only taxed at 15% based on gross compensation instead of the graduated 5-32% tax on compensation.

A REGIONAL OPERATING HEADQUARTER (ROHQ) of a multinational company is an operating company with respect to its affiliates, branches or subsidiaries in accordance with its SEC registration. It shall not, however, solicit or market goods or services or distribute goods and services of its mother company, branch, affiliate or other company. For such dealings, it is subject to 10% income tax, 12% VAT and 15% branch profit remittance tax.

A REPRESENTATIVE OFFICE is a support entity of its head office’s business in the Philippines. It can do marketing, information dissemination, post sales services, and other administrative activities for its head office but is not allowed to intervene in the pricing policies of its head office. It is likewise not allowed to derive income, thus, not subject to income taxes.

Each of the above entities require SEC registration for regulation and monitoring purposes. Other entities may include partnerships, whether, a business partnership or general professional partnerships under certain conditions. Likewise, it is required to be registered with the BIR, and other government agencies. For further details, you may browse the relater SEC and BIR links or you comment on the author.

Tags: business entities, doemstic company, Doing business, incorporation, overview, Philippine branch, Regional headquarters, Regional operating headquarters, representative office, RHQ, ROHQ, SEC registrations