Before starting operations in the Philippines, a Branch Office must be registered with the Securities and Exchange Commission (SEC). To open a branch in the Philippines, the foreign company’s head office must provide proof of its legal existence, strong financial standing, and authorization to do so. 

To receive a summons and other legal procedures, the Branch shall designate a Resident Agent in the Philippines. Philippine agencies can only acquire jurisdiction over a branch office upon proper service of summons and notices with its duly appointed Resident Agent.

A Philippine branch office is ideal for foreign companies looking to expand their operations in the country. A branch is not a legal entity separate from its parent company. It is an extension of the foreign entity’s personality in the Philippines, and the parent company shall incur all its future liabilities.

We provide business registration services for foreign corporations looking to open a branch in the Philippines. 

As part of our Branch Office Registration Services, we will undertake the following tasks:

• Drafting of the Articles of Incorporation (AOI) and By-Laws;
• Determine the capital requirements for licensing;
• Register and reserve the company name; 
• Apply for business permits/licenses; 
• Act as the Resident Agent in the Philippines; and 
• Advise on applicable tax incentives.

With our experience and expertise, we offer complete services, which include:

• Figure out the best entity for obtaining a license
• Assess capital needs for licensing
• Process registration paperwork with the proper authorities
• Register and hold a business name
• Apply for business licenses and permits
• Register a Treasurer-in-Trust (TIT) account
• Appoint a resident agent and other corporate officers
• Establish a local bank account
• Draft Articles of Incorporation (AOI) and By-Laws
• Request taxpayer identification number (TIN) with the Bureau of Internal Revenue (BIR)
• Identify eligibility for tax credits

Registration Requirements for Branch Office

Foreign corporations wishing to establish a branch office in the Philippines must first get a License to Do Business in the Philippines from the Securities and Exchange Commission before commencing any business activities in the Philippines. 

To get a business license, a foreign firm must submit the following documentation requirements: 

• Form F-103 (Application for Establishment of a Branch Office)
• Name verification slip (may be secured online)
• Authenticated copy of the Board Resolution authorizing the establishment of a branch office in the Philippines, designating the Resident Agent to whom summons and other legal processes may be served to the foreign corporation, and stipulating that in the absence of such Resident Agent or upon cessation of operations in the Philippines, any summons or legal processes may be served to the SEC as if they were made upon the corporation at its home office.
• Financial statements as of a date no more than one year before the application, confirmed by an independent Certified Public Accountant (CPA) of the home country and certified with the Philippine Embassy or Consulate.
• Certified copy of the Articles of Incorporation
• Authenticated Proof of Inward Remittances, such as a bank certificate
• Acceptance of appointment by the Resident Agent

Reserve company name

To establish a Branch Office in the Philippines, foreign firms must reserve a company name with the SE’s Corporate Registry.

They may use their business name overseas if it has not already been registered. If the name is already registered in the Philippines, they must offer a new business name. 

The suggested name should not be derogatory, include any forbidden terms, or be too similar to an existing business name. I highly recommend that you prepare at least three other business names if the first option is already taken or rejected.

Appointing of Resident Agent

The parent company must also appoint a Resident Agent who will handle the legal proceedings related to the branch office. This person can be either an individual residing in the Philippines or a domestic corporation doing Business.

The appointment of a foreign corporation’s representative in the Philippines must be approved through a Board Resolution. The company’s resident agent must also sign the official document, which signifies their acceptance of the appointment.

Paid-up capital

The minimum paid-up capital required to establish a Branch Office is $200,000 but may be decreased to $100,000 if the Business will participate in technology-related operations or employ at least fifty (50) people. 

If it intends to become an export-oriented business that exports at least 60 percent of its total revenues, it may register with as little as Php5,000.

The parent company is expected to deposit Php500,000 yearly. If the Branch Office’s income surpasses Php10,000,000, the Php500,000 deposit will increase by 2% annually.

Board Resolution

Through a Board Resolution, the foreign parent company must authorize the establishment of the Branch Office.

Registered Office Address

Although not needed during the SEC registration procedure, the Branch Office must have a registered office address in the Philippines to complete registration. 

Registration with the Bureau of Internal Revenue (BIR) and local government unit (LGU) necessitates that new organizations produce the Contract of Lease (if leased) or Certificate of Land Title (if owned) for their company address.

File for registration with Local Government Units (LGUs):

• Mayor’s Permit from the Mayor’s Office
• Clearance from the Barangay Hall 
• Business Permit from the Municipal/City Hall’s Business Permit and Licensing Office (BPLO)

Otherwise, you might hire a virtual office to act as your registered company address. After relocating to a physical office, you may amend your incorporation paperwork.

Corporate Taxing

A Philippine branch office that generates income is liable to 25 percent income tax (2022) and 12 percent value-added tax (VAT) on its local sales. It is also required to make and remit withholding taxes on the wages it pays its workers in the Philippines. It may pass on a 12 percent VAT on its purchases from VAT-registered vendors.

Profits remitted by a branch office to the parent firm are subject to the 15 percent branch profit remittance tax (BPRT) unless this rate reduction is permitted under relevant tax treaties. 

Under Philippine tax treaties with specific countries like the Netherlands, Japan, Germany, and Austria, branch profit remittances are subject to a 10 percent preferential tax. 

However, suppose the branch office is situated in one of the Philippine Economic Zone Authority’s (PEZA) special economic zones. In that case, it is exempt from paying the tax on branch profit remittances.

Under certain situations, the overhead expenditures of the main office may be assigned to the Philippine branch office.

Takeaway

While opening a Branch Office in the Philippines is possible, consulting with a reputable local corporate solutions provider is highly recommended. 

Our team of experts may save you time, work, and aggravation if you delegate incorporation obligations to us.

Our staff’s legal, accounting, and incorporation professionals may help you establish a Philippine branch office for your business and ensure its long-term success.

Disclaimer: This article is for general guidance and is not a substitute for an expert opinion. Please consult your preferred tax and legal consultant for the specific details of your circumstances.