Setting up a representative office in the Philippines is an ideal method for international companies to build a base before commencing full-scale business. This legal structure serves mainly as a communication hub, allowing a head office to manage promotional activities and quality control across the country.
The Nature of the Entity
A Philippines representative office is considered an branch of a foreign corporation. In contrast to a branch office, it cannot derive income from Philippine sources. Instead, all operating expenses must be completely subsidized by the parent company abroad. Because it does not function as a profit-making entity, it is typically free from local income taxes, making it a budget-friendly entry point for foreign firms.
Key Requirements and Capitalization
To incorporate a Philippines representative office, the SEC mandates a initial inward remittance of thirty thousand US dollars. This capital is used to pay for the entity's initial expenses. In addition, the parent firm must appoint a local representative who lives in the country to accept official notices on the company's behalf.
Scope of Operations
While the range of operations is limited, it delivers significant opportunities:
Market Research: Performing market analysis to gauge the Philippine market philippines representative office landscape.
Marketing: Providing information about the head office's products.
Inspection: Verifying that locally sourced goods meet the global standards.
Client Support: Serving as a point of contact between customers and the main headquarters.
Steps to Incorporate
The path to opening your representative office requires several essential phases:
Name Verification: Securing the business philippines representative office name with the Securities and Exchange Commission.
Document Preparation: Compiling legalized copies of the Articles of Incorporation and financial statements from the home country.
Capital Remittance: Remitting philippines representative office the mandatory USD 30,000 into a local philippines representative office bank account.
Filing: Presenting the application form philippines representative office and supporting documents for license issuance.
Licensing: Obtaining Barangay clearance and registering with the BIR.
Final Thoughts
Opting for a Philippines representative office is a prudent decision for enterprises aiming to explore the waters before taking on heavy financial obligations. It allows seamless back-office outsourcing and creates visibility in one of the region's thriving economies. Once the market potential is proven, the office can be considered for conversion into a full corporation for commercial activities.