Setting Up a Business in the Philippines as a Foreigner

The Philippines continues to attract foreign entrepreneurs with its growing economy, strategic location, and welcoming business climate. For those looking to establish a company here, understanding the legal framework, local requirements, and administrative procedures is crucial.

At Pacific Cross, we not only care about your business success but also your health and security. If you're moving to or living in the Philippines to start your business, don’t overlook the importance of health insurance for the Philippines. We’ll share more about that shortly.

Foreign Investment and Business Opportunities

Foreign nationals are allowed to invest and start businesses in the Philippines, primarily through a 9(G) pre-arranged employment visa or investor visas. These are essential for legally managing or operating a business in the country. To proceed, it's important to ensure your paperwork complies with requirements from the Bureau of Immigration.

The Philippines offers numerous opportunities across sectors such as technology, tourism, education, services, and manufacturing. While processes can be complex, many foreign investors have successfully built businesses with the right preparation and understanding of local regulations.

Legal Business Structures for Foreigners

Choosing the right business structure is the first step in setting up your company. Here are the most common options available in the Philippines:

Corporation

• Requires 5 to 15 incorporators
• Regulated by the Securities and Exchange Commission (SEC)
• At least 60% of ownership must be Filipino to be considered a Filipino corporation
• Requires a minimum capital of PHP 5,000; 25% must be subscribed and 25% of that must be paid-up

Close Corporation

• Suitable for smaller businesses with up to 20 shareholders
• No minimum capital requirement, though partial subscription and payment still apply
• Limited liability for all partners

Partnership

• Can be either General (unlimited liability) or Limited (liability limited to contribution)
• Requires at least two partners
• Must register with the SEC if capital exceeds PHP 3,000

Sole Proprietorship

• Owned and operated by one individual
• Must register with the Department of Trade and Industry (DTI)
• Simpler setup, but the owner holds unlimited liability

Important Reminder

Foreigners are restricted from owning or operating certain business types, such as mass media, small-scale retail, and private security services. Always check updated regulations before choosing your industry.

Business Registration Process: A Step-by-Step Overview

The Ease of Doing Business and Efficient Government Service Delivery Act of 2018 has simplified business registration, reducing the average setup time from 28 to 16 days. Here’s how to register your company:

1. SEC Registration
   • Reserve your company name and submit documents (Articles of Incorporation, Treasurer’s Affidavit, etc.) online.
   • Notarize required documents.
   • Pay registration fees and obtain your SEC certificate.
2. Business Permit Application
   • Submit documents to your city or municipal government (e.g., Quezon City One-Stop Shop)
   • Pay necessary fees and claim your business permit
3. BIR Registration
   • Submit application and book of accounts
   • Pay for the Documentary Stamp Tax
   • Receive your Certificate of Registration, Taxpayer Identification Number (TIN), and authority to print receipts

Tax Considerations for Foreign-Owned Businesses

Resident foreign corporations and Philippine domestic corporations are taxed at 25 percent. For businesses with annual revenue under PHP 5 million and assets under PHP 100 million, the rate is 20 percent. Foreign sole proprietors are also subject to Philippine tax laws.

To register for tax, you must provide:

• Treasurer’s Affidavit
• Bank Certificate of inward capital remittance
• Notarized Articles of Incorporation and Bylaws
• SEC Form F-100 if foreign equity exceeds 40 percent

Hiring Employees: Regulatory Steps

Once your company is established, registering your employees with the following agencies is mandatory:

Social Security System (SSS)

Required documents:

• R-1 (Employer Registration)
• R-1A (Employee Report)
• List of employees and company registration details

PhilHealth

Required documents:

• ER1 (Employer Data Record)
• ER2 (Employee List)
• SEC and BIR registration proof

Pag-IBIG Fund

Required documents:

• Employer Data Form
• Specimen Signature Form
• SEC registration and board resolution

Each agency will issue a separate employer registration number for compliance.

Final Thoughts

While the business environment in the Philippines is becoming more streamlined, navigating it as a foreigner still requires diligence. With the right preparation and local knowledge, the Philippines can be an excellent place to grow a business.

And remember—as you focus on financial success, don’t forget your personal well-being. With Pacific Cross, securing health insurance for the Philippines is one less thing to worry about.

Let us help you build not just your business—but a healthy, secure future in the Philippines.

Frequently Asked Questions (FAQ)

1. Can foreigners own 100% of a business in the Philippines?
It depends on the industry. Some sectors allow 100% foreign ownership, while others are restricted or require majority Filipino ownership.

2. How long does it take to register a business in the Philippines?
With recent reforms, the process now takes approximately 16 working days, assuming all documents are in order.

3. Is health insurance required for foreigners in the Philippines?
While not legally required, having health insurance is strongly recommended to cover unexpected medical expenses.

4. What is the best business structure for a foreigner in the Philippines?
This depends on your goals, size, and ownership structure. Corporations are common for larger ventures, while sole proprietorships suit small businesses or freelancers.

5. Can Pacific Cross help with expat health insurance?
Yes, Pacific Cross offers health insurance for the Philippines, specifically designed for expats and foreign entrepreneurs.