Register a Branch Office in the Philippines
A Branch Office is an extension of a foreign corporation that carries out the business activities of its head office from abroad into the Philippines.
It does not have a separate legal personality from its parent company and the laws governing its formation, existence, and dissolution are the laws of the country where its parent company was organized or established. Hence, any liabilities that it will incur are considered liabilities of the head office of its parent company.
It is allowed to derive income from its activities in the Philippines and conduct business in the same manner as its head office – under conditions prescribed by Philippine laws and regulations.
The minimum paid-up capital requirement of a Branch Office in the Philippines is US$200,000.00 but can be reduced to US$100,000.00 if it will engage in activities involving advanced technology or will employ at least fifty (50) direct employees. If it will engage as a Domestic Market Enterprise (DME) and intends only to sell goods and services to the Philippine market, it is required to inwardly remit the assigned capitalization of US$200,000.00.
On the other hand, if it seeks to be an export-oriented enterprise that exports goods and services amounting to 60% or more of its gross sales, it is exempted from paying the minimum paid-up capital requirement of US$200,000.00 and can be registered with as little as PHP5,000.00.
Registration Requirements for a Branch Office in the Philippines
Foreign corporations intending to set up a branch office in the Philippines are only allowed to commence their business operations after obtaining a License to Do Business in the Philippines from the Securities and Exchange Commission (SEC). To secure a License to Do Business, a foreign corporation needs to provide the following documentary requirements:
- SEC Application Form No. F-103 – Application of a Foreign Corporation to Establish a Branch Office in the Philippines;
- Name verification slip;
- Certified copy of the Board of Resolution of the parent company authorizing the establishment of the branch office and designating a Resident Agent to receive summons and legal proceedings (can be a Philippine resident or a domestic corporation); in the absence of such agent or upon cessation of its operations in the Philippines, any summons or legal proceedings may be served to the SEC as if the same is made upon the corporation at its head office;
- Latest audited financial statements of the parent company certified by an independent certified public accountant (CPA) and authenticated by the Philippine consulate/embassy;
- Certified copies of the Articles of Incorporation of the parent company;
- Certificate of Inward Remittance and Certificate of Bank Deposit of US$200,000.00 or US$100,000.00 as initial capitalization;
- Endorsement or clearance from appropriate government agencies (if applicable); and
- Resident Agent acceptance of appointment (if agent is not the signatory of the application form).
As an income-generating business entity, a Philippine branch office is subject to 30% income tax and 12% value-added tax (VAT) on its local sales. It is also subject to withholding taxes on the compensation it provides for its employees in the Philippines, and can be passed on 12% VAT on its purchases from VAT-registered suppliers.
Profits remitted by a branch office to the parent company – those that are directly connected with its business in the Philippines – are subject to the branch profit remittance tax of 15%, unless a reduction of this rate is provided in applicable tax treaties. Under Philippine tax treaties with certain countries such as the Netherlands, Japan, Germany, and Austria, a preferential tax of 10% on branch profit remittances is granted. However, if the branch office is located in one of the special economic zones of the Philippine Economic Zone Authority (PEZA), it is exempted from paying the tax on branch profit remittances.
Subject to certain conditions, overhead expenses of the head office may be allocated to the branch office in the Philippines.
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