How to Set Up a Branch Office in the Philippines
When looking to expand a business into the Philippines, there are available options that allow for the minimisation of tax responsibilities, labor, and other operational concerns. One such option that stands outside of the traditional company is the Philippine branch office.
In this article, we’ll go over what a branch office is, the benefits of a branch office, and how you can set up your own branch office in the Philippines.
What is a Branch Office in the Philippines?
Put simply, a branch office is a local entity of your company that operates in a country other than your head office’s country of operations, in this case, the Philippines. Whereas a traditional Philippine company is a company in and of itself within the Philippines, a Philippine branch office is an extension of your main office.
It does not have a separate legal entity from its parent company, and so any liabilities incurred by the branch office are the responsibility of the head office. While the daily operations of a branch office in the Philippines is still run by the head office, it must still operate under the laws and regulations of the Philippines.
What Are the Advantages of a Branch Office in the Philippines?
Firstly, a branch office generally offers a greater level of control for the head office or parent company. Because the parent company and the branch office are the same legal entity, the parent company has full control over the operations of the branch office.
Secondly, unlike a traditional Philippine company, a Philippine branch office does not need a board of directors, only a resident agent who is either a Filipino citizen or resident. The agent shall act as a point of contact for any local government or signatory needs.
Depending on your specific circumstances, a branch office in the Philippines may also be cheaper to set up compared to a traditional corporation or have fewer tax responsibilities for the parent company.
What Are the Requirements for a Branch Office in the Philippines?
As mentioned above, a Philippine branch office does not require a board of directors — instead, it must have a Filipino citizen or resident as a registered agent. This resident agent serves as a special point of contact for the branch office, such as for government summons or as a signatory for the lease agreement.
If the resident agent is a foreign national, they must have a current Philippine visa that was valid at the time of issuance.
Capital Requirements for a Philippine Branch Office
A branch office’s minimum paid-up capital requirement in the Philippines is US$200,000, but can be reduced to US$100,000 if it will engage in advanced technology or employ at least fifty local workers. If it intends to operate as a Domestic Market Enterprise (DME) with the sole purpose of selling products and services to the Philippine market, it must register a capitalization of US$200,000.
However, if it plans to be an export-oriented business that exports 60% or more of its total revenue, it is excluded from the US$200,000 minimum paid-up capital threshold and can file for as little as PHP5,000 or US$100.
Tax Responsibilities for a Philippine Branch Office
Profits earned from a Philippine branch office are subject to 30% payroll tax and 12% value-added tax, as well as possible dividend tax if profits are remitted to the parent company. The salaries paid to Filipino employees would also be subject to a withholding tax.
Documents Required to Register a Philippine Branch Office
- Authenticated copy of the parent company’s Board of Resolution approving the branch office’s creation and designating a Resident Agent to accept summons and legal proceedings (can be a domestic corporation or a local Filipino citizen or resident)
- The parent company’s Audited Financial Statements (AFS)
- Authenticated copies of the parent company’s Articles of Incorporation
- Capitalization of US$200,000 or US$100,000 in the form of a Certificate of Inward Remittance and a Certificate of Bank Deposit
- Affidavit of solvency signed by the President or Resident Agent attesting to the international corporation’s financial solvency and soundness
- Acceptance of nomination by the Resident Agent (if the agent is not the signatory of the application form)
Steps for Registering a Branch Office in the Philippines
- Open a savings account with a central bank as a “non-resident”
- Secure Corporate Taxation Registration by filing a registration with the Bureau of Internal Revenue (BIR).
- File for registration with Local Government Units (LGUs):
- Clearance from the Barangay Hall
- Mayor’s Permit from the Mayor’s Office
- Business Permit from the Municipal/City Hall’s Business Permit and Licensing Office (BPLO)
Conclusion — What’s Next for Setting Up Your Philippine Branch Office?
While it is possible to establish your own branch office in the Philippines, we strongly advise you to take advice from a reputable local corporate solutions provider. Delegating incorporation responsibilities to our team of professionals will almost always save you time, effort, and stress.
If you need assistance in setting up your own branch office in the Philippines, we have an experienced team of lawyers, accountants, and incorporation consultants who will assist you in your thriving expansion in the Philippines.
Frequently Asked Questions
What is a foreign branch office?
A foreign branch office is a company’s extension in a foreign country that is usually allowed to carry out the business activities of its parent company into the foreign country. Depending on the country’s laws, the branch office may or should be a limited corporation, with the parent company overseas holding the shares.
What is the difference between a branch office and a subsidiary?
A branch office is not a distinct legal body from the parent company. Although held by the parent company, a subsidiary is a separate legal body from the parent company. Typically, the parent company owns the subsidiary entirely.
Is a branch office a separate legal entity?
A branch office is not a separate legal entity from the head office/parent company, and so any liabilities incurred by the branch office are the responsibilities of the head office/parent company.
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