Global businesses are increasingly setting up a Philippine company not to sell locally, but to support operations in their home country.

Whether you run a US accounting firm, a UK e-commerce brand, or an Australian SaaS startup, incorporating in the Philippines allows you to:

• Hire Filipino employees directly
• Centralize back-office support
• Maintain legal control over your team
• Reduce labor costs significantly
• Ensure full compliance with Philippine laws

This 2026 guide explains how to properly set up a Philippine company to support your overseas business operations — legally, strategically, and efficiently.

Why Set Up a Philippine Company for Support Operations?

The Philippines remains one of the most attractive outsourcing destinations due to:

• Strong English proficiency
• Western-aligned business culture
• Competitive salary structures
• Established BPO ecosystem
• Familiarity with the US, UK, AU, and SG markets

But instead of relying solely on freelancers or third-party outsourcing firms, many foreign businesses are now choosing to establish their own Philippine subsidiary or domestic corporation.

This provides:

✔️ Direct control over staff
✔️ Stronger confidentiality and IP protection
✔️ Brand consistency
✔️ Long-term scalability
✔️ Lower long-term cost vs agency markups

Step 1: Choose the Proper Legal Structure

Foreign businesses typically choose among:

1️⃣ Domestic Corporation (100% Foreign-Owned)

This is the most common structure for support activities. Regulated by the Securities and Exchange Commission under the Revised Corporation Code. The domestic corporation is ideal if:

• You want a separate Philippine legal entity
• You plan to hire 5+ employees
• You want long-term operations

2️⃣ One Person Corporation (OPC)

This is suitable if there is a single foreign shareholder. OPCs are also registered with the Securities and Exchange Commission. This type of entity is best for:

• Smaller initial teams
• Owner-managed operations
• Lower internal corporate complexity

3️⃣ Branch Office

Registered with the Securities and Exchange Commission but considered an extension of the foreign parent company. Registering a branch office requires inward remittance of capital. Setting this type of entity is best when:

• The Philippine office directly represents the foreign company
• No separate local ownership is desired

For most support hubs, a domestic corporation is the most flexible and scalable structure.

Step 2: Understand Foreign Ownership Rules (2026)

Under the Foreign Investments Act:

• 100% foreign ownership is generally allowed for export-oriented or service companies
• Domestic market enterprises may require minimum paid-up capital
• Certain industries remain restricted under the Foreign Investment Negative List

If your Philippine company is providing services to your foreign parent company, it is typically treated as an export service enterprise, which allows full foreign ownership.

This structure is common for:

• Accounting support
• IT development
• Customer service
• Digital marketing
• Administrative processing
• Payroll & bookkeeping support

Step 3: SEC Registration Process

Company formation begins with the Securities and Exchange Commission.

Key Steps:

1. Name reservation
2. Drafting Articles of Incorporation
3. Appointment of directors/officers
4. Capital structuring
5. Submission via eSPARC
6. Issuance of Certificate of Incorporation

Typical timeline: 2–4 weeks (assuming complete documents).

If you need assistance with documentation and filings, our company formation services in the Philippines can handle the entire SEC and BIR registration process.

Step 4: BIR Registration and Local Permits

After SEC approval, registration continues with:

• Bureau of Internal Revenue
• Local Government Unit (business permit)
• Barangay clearance
• Books of accounts registration
• Authority to Print invoices

You must secure:

• Tax Identification Number (TIN)
• VAT or Non-VAT registration
• Official receipts/invoices

This step ensures your company can legally invoice your foreign parent company for services rendered.

Step 5: Hiring Employees Legally in the Philippines

Once incorporated, your Philippine company becomes the legal employer.

You must register with:

• Social Security System
• PhilHealth
• Home Development Mutual Fund

Compliance includes:

• Employment contracts
• Payroll processing
• Withholding taxes
• 13th-month pay
• Statutory contributions
• Leave benefits

This eliminates misclassification risks associated with independent contractors.

Step 6: Structuring Intercompany Service Agreements

Your Philippine entity typically enters into a Service Agreement with the foreign parent company.

This agreement defines:

• Scope of services
• Cost structure (cost-plus model common)
• Transfer pricing considerations
• Payment terms
• Intellectual property ownership

Proper structuring avoids tax risks and ensures compliance with Philippine transfer pricing rules.

Step 7: Accounting and Tax Compliance

Your Philippine corporation must:

• File monthly/quarterly tax returns
• Submit Annual Income Tax Return
• Maintain bookkeeping records
• File Audited Financial Statements (if required)
• Submit SEC General Information Sheet (GIS)

Failure to comply results in penalties and possible SEC suspension.

A professional accounting firm ensures smooth compliance and clean records.

Ongoing compliance can be outsourced through professional bookkeeping and tax compliance services to ensure timely BIR and SEC filings.

Cost Advantages of a Philippine Support Hub

While exact costs vary, here is a general comparison:

Role	US Salary	Philippines Salary (Avg)
Accountant	$60,000	$10,000–15,000
Virtual Assistant	$40,000	$6,000–9,000
IT Developer	$90,000	$18,000–25,000

Savings can exceed 60–75% while maintaining quality.

Davao City in particular offers:

• Lower office rental cost vs Manila
• Lower salary bands
• High-quality talent pool
• Less congestion

Subsidiary vs Employer of Record (EOR)

Some businesses start with an Employer of Record before incorporating.

Incorporation is better when:

✔️ You plan to hire 5+ employees
✔️ You want full management control
✔️ You want to build long-term infrastructure
✔️ You want a stronger brand presence

EOR is better when:

✔️ Testing the market
✔️ Hiring 1–2 employees
✔️ Short-term engagement

Many companies transition from EOR to full incorporation after year one.

Common Mistakes to Avoid

❌ Underestimating tax compliance
❌ Ignoring transfer pricing rules
❌ Hiring contractors instead of employees for core roles
❌ Failing to file SEC reports annually
❌ Not appointing a competent Corporate Secretary

Proper planning prevents costly penalties later.

Why Davao Is a Strategic Choice

While Manila remains the traditional business center, Davao offers:

• Lower operational overhead
• Strong IT and accounting talent
• Stable infrastructure
• Business-friendly environment

For foreign companies building a cost-efficient support arm, Davao City is increasingly attractive.

Is Setting Up a Philippine Company Right for You?

Incorporation is ideal if:

• You have recurring support needs
• You want long-term cost reduction
• You value legal compliance
• You want stronger operational control

If structured correctly, a Philippine support company becomes a strategic asset, not just a cost center.

Final Thoughts

Setting up a Philippine company to support your overseas business operations is not merely about lowering costs — it is about building a compliant, scalable, and strategic offshore extension of your enterprise.

With proper SEC registration, BIR compliance, payroll systems, and intercompany structuring, your Philippine entity can become a high-performing operational hub serving your global business for years to come.