The Philippines is one of the most sought-after investment locations among the Association of Southeast Asian Nations (ASEAN). During this period of intense and renewed business confidence, the country has experienced a significant increase in its global competitiveness. And it has led to more foreign businesses doing business in the country.
There are several ways for foreign companies to enter the Philippine market. One of these ways is for multinational corporations to set up a Representative Office.
Before a company decides to make a significant investment in the Philippines, it may establish a Representative Office. It is the type of business entity that supports the parent company’s operations by providing various services such as marketing and contact centers.
What is a Representative Office?
A Representative Office is a legal structure allowing a foreign corporation to have a presence in the Philippines. Having a Representative Office provides a foreign corporation with the needed corporate presence in the Philippines without engaging in revenue-generating activities.
Like a Branch Office, a Representative Office does not have a legal entity separate from its parent company. Any liabilities that it might incur are considered the head office’s responsibility.
As discussed above, it does not derive any income from the host nation. Thus, the head office of the foreign corporation provides financial support for the company’s operations in the Philippines. In fact, the parent company is required to provide at least $30,000 as a capital requirement to support its Representative Office operations.
Established laws and laws prohibit Representative Offices from generating revenue or providing services to third parties. It is also not eligible to qualify for government tax incentives.
Under prevalent law and rules, a Representative Office may only participate in the following:
- Facilitate orders of consumers or clients from its head office;
- Conduct quality control of items from its head office;
- Perform other administrative tasks for its head office; and
- Disseminate information and perform promotional activities regarding its head office’s goods.
Setup Requirements for Representative Office
Foreign corporations wanting to set up a Representative Office in the Philippines must accomplish the following:
Proof of official business address
Before starting a company’s registration process, you must have a registered address. Foreign companies can acquire a registered address through a lease contract with an office facility.
If the number of estimated staff of the Representative Office is minimal, another option is to lease a virtual office. The second option has become the go-to choice of eCommerce businesses and internet companies with work-from-home schemes.
Whether a full-blown one or a virtual office, the idea is for the foreign company to acquire a valid and existing address that regulatory bodies can verify.
Appointment of a Resident Agent
The foreign parent company must designate a Resident Agent who shall accept the summons and other legal actions to be served to the Representative Office in the Philippines.
The Resident Agent may be a person living in the Philippines or a domestic firm legitimately doing business in the country.
The following are the documents needed to establish a Representative Office in the Philippines:
- Form F-104
- Name verification slip
- Declaration of solvency
- Evidence of inbound remittance
- Registration Data Sheet
- Authenticated articles of incorporation
- Copy of the board resolution authorizing the establishment of the office, naming the resident agent, and providing that summons may be issued to the SEC in the agent’s absence
- Financial Statements from no more than one year before the application, certified by an independent CPA from the applicant’s home country
Steps on how to register a Representative Office in the Philippines
One of the essential requirements a company must meet to get a license to operate as a Representative Office in the Philippines is the proof of its initial inward remittances.
This amount must be in the form of a US$30,000.00 deposit. Every year after that, the head office must also send the same amount to cover the operating expenses of the Representative Office.
Here are the simple steps to follow in registering for a Representative Office in the Philippines:
- Register a company name at the Securities and Exchange Commission.
- Provide the SEC with all documentation required for the name registration procedure.
- Present local bank verification of the minimum paid-up capital in a non-resident account. As noted before, an upfront payment of US $30,000 is required.
- Complete the application form (SEC Form F-104) and submit payment.
- Register with the Record Division after acquiring a Certificate of Registration from the SEC.
- Submit the registration to the Bureau of Internal Revenue (BIR) and obtain a corporate tax number.
- Register with the relevant government offices. If you employ local employees, register their Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (PAG-IBIG Fund)
- Obtain from the city of operations a business and Mayor’s permit
Registering and securing a license in the Philippines can take up to 45 working days. If you plan to establish an office in the Philippines but are privy to the nitty-gritty and other legal requirements, we can assist you.
Our Representative Office Registration Services in the Philippines
Before a company can establish a Representative Office in the Philippines, it must first secure a license from the Securities and Exchange Commission (SEC). This business entity allows the foreign parent company the legal right to establish its operations in the country.
As part of our Representative Office Registration Services, we prepare the legal documents needed, apply for business permits and licenses, and act as the Resident Agent.
Below is the complete list of services we offer as part of the establishment of the Representative Office in the Philippines:
- Register and reserve the company name
- Appoint a resident agent or corporate officers
- Identify a well-suited entity to secure a license for
- Evaluate capital requirements for licensing
- Draft Articles of Incorporation (AOI) and By-Laws
- Secure a local bank account
- Open a Treasurer-in-Trust (TIT) account
- Apply for business permits and licenses
- Process registration documents with the appropriate government agencies
If you have any questions or concerns, please don’t hesitate to get in touch with us.