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The Ultimate Guide To
Employment in Philippines

Philippines Facts

Population size: 102,250,133
Currency: The national currency is the Philippine Peso (PHP) and it is equal to approximately 0.02 USD.
Capital city: Manila
Languages spoken: Filipino, Cebuano
Ease of Doing Business: 99

Employing in Philippines: What You Need to Know

The Labour Code of the Philippines (Labour Code) represents the comprehensive legislation, regulating employment relationships in the Philippines and applies to foreign nationals as well as locals, working in the country.

Applicable labour standards are deemed to be included into all employment contracts, without provisions to fall below the applicable articles of the Labour Code. Accordingly, any contractual term and condition against the labour laws will be considered null and void. Jurisdiction in matters related to modification of the terms and conditions of employment is attributed to Philippine labour arbiters, tribunals and courts.

For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in the Philippines.

Key Factors to Consider When Employing in Philippines

There are several key areas to be aware of within the Philippines’ employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department.  These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

  1. Contract

    Under Article 294 of the Labour Code, there are four possible types of employment arrangement:

    • Regular employment.
    • Project employment.
    • Seasonal employment.
    • Casual employment.

Employee Entitlements

Information Explanation
Working on Sundays ?

No.

Time Off Work ?
Annual vacation is dependent on an employee’s years of service with the company.
 
• 1 year to less than 3 years-10 working days
• 3 years to less than 5 years-12 working days
• 5 years up-15 working days
 
An approval from the superior must be obtained at least one day in advance.
This reserves the right to call an employee back to work in an emergency case.
Medical Leave ?
The employee is permitted to take sick leave with pay of no more than 30 days per year and can use this right since starting work with the company.
 
If taking 3 or more consecutive day’s sick leave, the medical certificate and a sick leave form must be submitted to his/her superior as soon as he/she returns to the office.
 
The employee is permitted to take sick leave with pay of no more than 60 days per year, if the employee gets an illness or has an accident arising from work.
 
 
Female employees are allowed to take 90 days maternity leave (holidays are counted) excluding normal sick leave, but will receive normal salary and/or wages for only 45 days.
Annual Leave Accrual Entitlement ?

Except some cases, every employee who has worked at least one year is entitled to an annual leave of five days with pay. As a general rule, an employer can regulate the schedule of the annual leave of its employees.

Philippine laws do not automatically grant employees sick leave, although there is nothing that prohibits the employer and employee from agreeing on the grant of sick leave through voluntary employer policy or collective bargaining agreements.

Maternity Leave in Philippines ?

Every female member of the Social Security System (SSS) who has paid at least three monthly contributions in the 12-month period immediately preceding her childbirth or miscarriage will be paid a daily maternity leave benefit equivalent to 100% of her average salary credit for 60 or 78 days, depending whether is a normal or Cesarean delivery.

  • Paternity Leave: Every married male employee, regardless of employment status, is entitled to a paternity leave of seven days with full pay for the first four deliveries of his legitimate spouse with whom he is cohabiting.
  • Parental Leave: In addition to leave privileges under existing laws, parental leave of not more than seven working days every year shall be granted to any solo parent employee as defined in the law who has rendered service of at least one year.

Employment Termination in Philippines

Information Explanation
Termination of Employment ?

Under Article 282, Title I, Book VI, an employer may terminate an employment for any of the following causes:

  • Serious misconduct or wilful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
  • Gross and habitual neglect by the employee of his duties;
  • Fraud or wilful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
  • Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives;
  • Other causes analogous to the foregoing.

It is possible to terminate the employment agreement also for “authorised causes”, according to Art. 283 and 284.

Under Art. 285, termination from employees can occur when:

  • An employee may terminate without just cause the employee-employer relationship by serving a written notice on the employer at least one month in advance. The employer upon whom no such notice was served may hold the employee liable for damages;
  • An employee may put an end to the relationship without serving any notice on the employer for any of the following just causes;
  • Serious insult by the employer or his representative on the honor and person of the employee;
  • Inhuman and unbearable treatment accorded the employee by the employer or his representative;
  • Commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of his family;
  • Other causes analogous to any of the foregoing.

Probation

Information Explanation
Probation Period ?

Before becoming a regular employee, every worker may be required to undergo a probationary period of up to six months, unless it is covered by an apprenticeship agreement, stipulated for a longer period. Whenever the new employee is allowed to work after the lapse of the probationary period, he must be employed with a regular employment contract by law. In case the employer does not notify the employee of the standards that he must satisfy at the beginning of the probationary period, the employment will be deemed a regular employment agreement from the time the employee started working.

Pension

Information Explanation
Pension Requirements ?

For Health, Safety and Social Welfare, please consult Book IV of the Labour Code.

Using Shield GEO EOR Services: How We Can Help You

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in the Philippines. For companies, which intend to employ their staff directly through their incorporated Philippine entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in the Philippines.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into the Philippines.

The Shield GEO solution is an attractive alternative where:

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in the Philippines

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in the Philippines

– the company needs help with tax, employment, immigration and payroll compliance in the Philippines

Shield GEO can contract directly with the company to employ and payroll their staff in the Philippines. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits.  Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.

A GEO EOR Solution vs DIY Employment in Philippines

Companies entering the Philippines must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. A GEO or Philippines Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a local entity established that can run payroll.

A DIY approach will typically take 2-3 months until there is a properly incorporated entity ready to run payroll and cost. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Philippines

Payroll

Payroll Philippines
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote.

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Currency ?

The national currency is the Philippine Peso (PHP) and it is equal to approximately 0.02 USD.

Tax Amount
Grossed income Tax Rate (%)
Php 0 – 10,000 5%
Php 10,000 – 30,000 10%
Php 30,000 – 70,000 15%
Php 70,000 – 140,000 20%
Php140,000 – 250,000 25%
Php 250,000 – 500,000 30%
Php 500,000 and above 32%
Tax Returns Supplied

Yes.

Employers Social Security and statutory contributions

The employer Social Security contribution is PHP 1,208.7 per employee per month, calculated on gross salary.

Employees Social Security and statutory contributions

The employee Social Security contribution is 1.33% to 2.98%, calculated on gross salary (withheld).

Insurance requirements

Depending on the insurance premium, PHP 0.5 every PHP 4.

Work Permits

Work Permits
Work Permit cost

Alien Employment Permit : PHP 8,000;

Provisional Work Permit : PHP 4,000.

Work Permit processing time

Alien Employment Permit : 2-3 weeks;

Provisional Work Permit : 2-3 weeks.

Work Permit process

Alien Employment Permit (AEP) – The following documents must be filed at the DOLE Regional Office or Field Office:

– Duly accomplished Application Form;

– Photocopy of Passport, with visa or Certificate of Recognition for refugees;

– Contract of Employment/ Appointment or Board Secretary’s Certificate of Election;

– Photocopy of Mayor’s Permit to operate business or in case of locators in economic zones, Certification from the PEZA or the Ecozone Authority that the company is located and operating within the ecozone; and

– Photocopy of current AEP (if for renewal).

Provisional work Permit:

– Secure the CGAF from either at the Public Information and Assistance Unit (PIAU) at BI G/F Main Office or from the official BI Website;

– Submit the documents for pre-screening to the Central Receiving Unit (CRU) or to the frontline officer or staff of other Immigration Offices able to process this transaction;

– Get the Order of Payment Slip (OPS);

– Pay the required fees;

– Submit copy of Official Receipt;

– Get the approved PWP.

Payroll and Tax in Philippines

There are specific rules that apply to payroll and taxation in the Philippines. In 2014, the national government made paying taxes easier for companies by introducing an electronic filing and payment system for social security contributions.

Your Payroll Options in Philippines

Information Explanation
Remote Payroll ?

A remote payroll system is where a foreign company, i.e. a non-resident company, payrolls a resident employee in the Philippines. Under Philippine law, companies registered in other countries are allowed to obtain a license to do business and have employees in the Philippines. One option for a non-resident company to payroll its employees (local and foreign) in the Philippines is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration ?

In some cases, a company will register their business in the Philippines under one of the forms available: branch office, representative office, regional headquarters (RHQ) or regional operating headquarters (ROHQ), but prefer to have another company administering its payroll.  This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll ?

Larger companies with a commitment to the Philippines may wish to run their own local payroll for all employees, foreign and local.  In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Philippine payroll, and can fulfil all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations.  The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Filipino employment laws.

Fully Outsourced Payroll & Employment ?

Companies can outsource the employment and payroll of their staff in the Philippines to a GEO, like Shield GEO. This is possible for both foreign workers and Filipino nationals. This is the easiest, fastest and safest way to payroll staff in the Philippines.

Shield GEO manages all aspects of payroll for workers in the Philippines, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Philippines

Information Explanation
National Currency ?

The national currency is the Philippine Peso (PHP) and it is equal to approximately 0.02 USD.

Social Security Registration ?
The SSS (Social Security System) contribution rate is equivalent to 10.4% of a worker’s monthly salary credit, which shared by;
• Employer contribution is 7.07%
• Employee contribution is 3.33%

Tax Figures

Information Explanation
Corporate Income Tax ?

30%, calculated on taxable profit.

Income Tax Rate ?
Grossed income Tax Rate (%)
Php 0 – 10,000 5%
Php 10,000 – 30,000 10%
Php 30,000 – 70,000 15%
Php 70,000 – 140,000 20%
Php140,000 – 250,000 25%
Php 250,000 – 500,000 30%
Php 500,000 and above 32%
Payroll Tax ?

1.16%-1.19% (per employee per month). The Payroll Tax is separated from employer social security. For more info please consult the Employment Section.

Sales Tax ?

VAT is equal to 12%.

Withholding Tax ?

Tax on Interest is equal to 20%.

Other Tax ?

Local Business Tax: 0.5%, calculated on the previous year turnover;

Real Property Tax: 2%, calculated on the assessed property value;

Community Tax Certificate: PHP 10,500 (Fixed Fee);

Environmental Tax: PHP 10,000 (Fixed Fee);

Tax on check transactions: PHP 1.15 per check.

Time to prepare and Pay Taxes ?

185.6000061 hours

Time required to start a Business ?

28 days

Payments

Information Explanation
Invoice / Payslips required ?

Monthly available on web-site, pdf or paper

Philippines Immigration and Work Permits

Foreign workers are required to have the proper visas and work permits in the Philippines, as established by immigration laws. Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Philippines’ market. If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.

Your Options

Have Your Own Company?

Depending on the nature of the business entity, Non-Philippine nationals must apply through different agencies. All documents executed abroad must be notarised by a public official and authenticated by the Ministry of Foreign Affairs and the Philippines Embassy / Consulate of the country where the documents were issued.

Approval or denial of the application should be made within 15 working days. If no official acceptance is received within the said period, the application is considered as automatically approved.

Companies willing to sponsor foreign nationals in the Philippines to engage in any lawful occupation must file a Pre-Arranged Employment 9 (g) Visa, undertaking the following steps:

Documents Required:

Application Procedure:

  • Secure the CGAF from either the Public Information and Assistance Unit (PIAU) at BI G/F Main Office or from the official BI Website;
  • Submit the pre-screening documents to the Central Receiving Unit (CRU) or to the frontline officer or staff of other Immigration Offices able to process this transaction;
  • Pay the required fees;
  • Submit copy of the Official Receipt;
  • Attend hearing;
  • Proceed to Image and Fingerprint Capturing Counter of the Alien Registration Division (ARD) and submit requirements for ACR I-Card application;
  • Check website if visa application is already approved;
  • If approved, submit passport for visa implementation;
  • If ACR I-Card is approved, claim ACR I-Card.

Duration: It takes approximately two to four months to process this visa.

It is possible to have an initial period of one, two or three years validity on a 9(g) Pre-Arranged Employees – Commercial visa. Extensions are possible for one, two or three year years depending on the Employer-Employee Contract.

A 9(g) visa may be renewed annually for a total period not exceeding five years.

Cost:

  • 1 Year – Between 155 and 215 USD
  • 2 Years – Between 280 and 365 USD
  • 3 Years – Between 400 and 515 USD

In case foreign nationals fall under section 47(a)(2), they must be directly issued by the Department of Justice (DOJ) with 47(a)(2) visas upon the submission of an application and supporting documents required under section 4, with a copy of their passport, duly-authenticated by the Philippine Embassy/Consulate abroad, which passport should be valid for a period of at least six months at the time of the application filing.

Applications for issuance of 47(a)(2) visas to foreign nationals abroad shall be filed at least two months prior to the estimated date of arrival in the Philippines of such foreign nationals.

Duration: The overall process takes approximately six weeks.

Cost: Around 46 USD per single entrance.

Use the Shield GEO Employer of Record Solution?

Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.

Types of visas in Philippines

Category Description of Visa
Temporary Visitor’s Visa for Business Purposes - 9 (a)

Temporary Visitor’s Visas are available to individuals coming to the Philippines for business, pleasure or health reasons.

The processing time of this Visas takes, on average, five working days and allows an initial authorised stay of up to 59 days.

It is possible to extend the visa every two months for a total of 16 months. Extensions beyond 16 months and up to 24 months need the approval of the Chief of the Immigration Regulation Division (IRD) of the Bureau of Immigration (BI).

Extensions of stay beyond 24 months need the approval of the Commissioner of the BI.

Fees:
– Single entry valid for 3 months – Approximately 40 USD;

– Multiple entry valid for six 6 months – Approximately 80 USD;

– Multiple entry valid for six months – Approximately 115 USD.

International Treaty Trader/Investor - 9 (d)

A Treaty Trader/Investor Visa is granted to a foreign national coming to the Philippines solely to carry on substantial trade between the Philippines and his or her home country, or developing and directing the operations of an enterprise in the Philippines in which he or she has invested a substantial amount of capital (at least USD 30,000 for individuals and USD 120,000 for corporations).

Treaty Trader Visas are currently granted only to nationals of Germany, Japan and the United States.

The registration process takes four – six weeks and the Visa is released after 10 -15 working days.

The validity of this visa can be one or two years and it can be extended for one or two years.

Fees: Between 200 and 290 USD.

Special Non-Immigrant Visa Under E.O. 226

An EO 226 visa is granted to foreign personnel of regional or area headquarters or regional operating headquarters of multinational companies.

Processing time can range between three and four weeks for filing and submitting all documents.

The visa is valid for three years and may be extended for additional three years.

Fees: Approximately 115 USD.

Alien Employment Permit (AEP)

Under Art 40 of the Labour Code, all foreign nationals, except specific categories, who intend to work in the Philippines must apply for an Alien Employment Permit (AEP) at the DOLE Regional Office or Field Office, responsible for the place of work. An approved AEP is required before a foreign national can file an application for a section 9(g) work visa.

Cost: PHP 8,000.
Time: 2-3 weeks.

In case foreign nationals have commenced working while their applications for an AEP or a section 9(g) visa are still pending, they must secure a Provisional Work Permit (PWP). The PWP will be valid for a period of three months or until a section 9(g) visa has been issued in favour of the applicant.

Cost: PHP 4,000.
Time: 2-3 weeks.

Setting up a company in Philippines

When setting up a company you may want to consider these factors:

  1. Business Factors

    The Philippines eased business startup by setting up a one-stop shop at the municipal level and made starting a business easier by streamlining communications between the Securities and Exchange Commission and the Social Security System and thereby expediting the process of issuing an employer registration number. One type of factors to consider when setting up businesses refers to business factors such as:

    • The industry and type of business
    • Nationality of the headquarters/individual(s) and
    • Presence of existing trade agreements or relationships
  2. Local Practices

    Local Practices may be an influence. Although Filipinos are known to have a good English level and being open to western influences, local businesses rely on large power distance, weak uncertainty avoidance and collectivistic practices. Accordingly, attentions must be posed on building hierarchical models, without excluding the importance given to group membership and harmonious relationships within the company. Also there might be the tendency, among business partners, to convey information using body languages, rather than using explicit channels.

Your Options

There are five types of business forms available to foreign companies in the Philippines.  Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements.  As a general rule, applications must be filed at the Security and Exchange Commission.

Corporation

A foreign investor may set up a wholly owned domestic corporation in the Philippines. If the activity is subject to foreign equity limitations, a foreign investor will have to set up a domestic corporation with a qualified Philippine partner as joint venture partner.

Establishing a corporation in the Philippines can take approximately 29 days for a total cost of PHP 7,630.

Following are listed the steps required to set up the corporate vehicle:

Verify and reserve the company name with the Securities and Exchange Commission (SEC)

The name search can be done electronically via the SEC’s online verification system, but applicants must pay for the reservation fee on site at the SEC. Once the reserved name is approved by the SEC, a fee of PHP 40 will be required for the first 30 days. The company name can then be reserved for a maximum of 90 days at a cost of PHP 120, which is renewable upon expiration of the period. The reservation certificate is obtained directly at the Security and Exchange Commission.

Deposit the paid-in minimum capital at the bank

Under Section 13 of the Corporation Code, the paid-in minimum capital is PHP 5,000. Even though a certificate of deposit is not a requirement by the Securities and Exchange Commission for company registration, this procedure must be completed in order to abide by the applicable law.

Notarize articles of incorporation and treasurer’s affidavit at the notary

Articles of incorporation should be notarized before filing with the SEC. Under Section 15 of the Corporation Code, the Treasurer’s Affidavit should also be notarized. The 2004 Rules on Notarial Practice require the presence of the person(s) who executed the document (Articles of Incorporation and Treasurer’s Affidavit) before the notary public.

Register the company with the SEC and receive pre-registered Taxpayer Identification Number (TIN)

The company can register online through SEC i-Register. The following documents are required for SEC registration:

  • Company name verification slip;
  • Articles of incorporation (notarized) and by-laws;
  • Treasurer’s affidavit (notarized);
  • Statement of assets and liabilities;
  • Registration data sheet with particulars on directors, officers, stockholders, and so forth;
  • Written undertaking to comply with SEC reporting requirements (notarized);
  • Written undertaking to change corporate name (notarized).

Starting from August 15, 2011, the Security and Exchange Commission launched the Green Lane Unit that provides 1-day registration of applications for stock corporations and partnership. In practice, it takes 1-3 business days to process incorporation papers and obtain SEC approval.

The pre-registered Taxpayer Identification Number is automatically obtained from the SEC Head Office upon registration. However, the company must still register with the Bureau of Internal Revenue in order to identify applicable tax types, pay an annual registration fee, obtain and stamp sales invoices, receipts and the books of accounts.

Cost: 1/5 of 1% of the authorized capital stock or the subscription price of the subscribed capital stock (whichever is higher but not less than PHP 1,000) + legal research fee (LRF) equivalent to 1% of filing fee but not less than PHP 10 + PHP 500 By-laws + PHP 150 for registration of stock and transfer book (STB) required for new corporations + PHP 320 STB + PHP 10 legal research fee for the By-laws.

Obtain barangay clearance

The barangay clearance is a prerequisite for the issuance of business permit to operate.

To get the barangay clearance, it is necessary to submit the following documentary requirements to the Barangay: Application form, SEC Certificate of Incorporation and approved articles of incorporation and bylaws, location plan/site map and the contract of lease over the corporation’s office.

This clearance is obtained from the Barangay where the business is located. Barangay fees vary in each Barangay since they have the discretion to impose their own fees and charges as long as these fees are reasonable and within the limits set by the Local Government Code and city ordinances. In Quezon City, the fees range from PHP 300 to PHP 1,000.

The clearance is obtained in one day, provided that the barangay captain is in the office as the captain is the only official authorized to sign.

Pay the annual community tax and obtain the community tax certificate (CTC) from the City Treasurer’s Office (CTO)

The company is assessed a basic and an additional community tax. The basic community tax rate depends on whether the company legal form is a corporation, partnership, or association (PHP 500 or lower). The additional community tax (not to exceed PHP 10,000) depends on the assessed value of real property the company owns in the Philippines at the rate of PHP 2.00 for every PHP 5,000 and on its gross receipts, including dividends or earnings, derived from business activities in the Philippines during the preceding year, at the rate of PHP 2.00 for every PHP 5,000.

Obtain the business permit to operate from the BPLO

The fees vary depending on the LGU issuing the permit. The rate of license fee imposed in Quezon City is 25% of 1% of the authorized capital stock. Other permits, such as location clearance, fire safety and inspection certificate, sanitary permit, certificate of electrical inspection, mechanical permit, and other clearances or certificates required depending on the nature of business, are also imposable. The rate of these fees depends on the nature of business and land area occupied by the proposed corporation.

Executive Order No. 17, series of 2011 created the Business-One-Stop- Shop to obtain a business permit. The entire procedure including getting approval for the business permit takes around one to two weeks.

Cost: PHP 2,400 business tax (25% of 1% of paid-up capital) + PHP 200 mayor’s permit + PHP 150 sanitary inspection fee + PHP 50 signboard fee + PHP 300 business plate + PHP 100 QCBRB + PHP 545 zoning clearance + PHP 1,300 garbage fee+ PHP 300 FSIC (10% of all regulatory fees).

Buy special books of account at bookstore

Special books of accounts are required for registering with the BIR. The books of accounts are sold at bookstores nationwide. One set of journals consisting of four books (cash receipts account, disbursements account, ledger, general journal) costs about PHP 400.

If the company has a computerized accounting system, it may opt to register it under the procedures laid out in BIR Revenue Memorandum Order Nos. 21-2000 and 29-2002.

The BIR Computerized System Evaluation Team is required to inspect and evaluate the company’s computerized accounting system within 30 days from receipt of the application form (BIR Form No. 1900) and complete documentary requirements.

Apply for Certificate of Registration (COR) and TIN at the Bureau of Internal Revenue (BIR)

After the taxpayer obtains the Taxpayer Identification Number, the company must pay the annual registration fee of PHP 500 at any duly accredited bank, using payment form BIR Form 0605).

All newly formed corporations subject to SEC registration are issued pre-generated TIN by SEC-Head Office, which is indicated on their SEC Certificate of Registration. The corporation only has to register its pre- generated TIN with the BIR and report all internal revenue taxes that it expects to be liable for.

The requirements for application for COR with the BIR are:

  • Duly accomplished and filled-out BIR Form No. 1903 (Application for Registration for Corporations);
  • Payment Form (BIR Form No. 0605);
  • SEC Certification of Incorporation;
  • Articles of Incorporation and By-laws;
  • Contract of Lease (with BIR Form No. 2000 and supporting BIR Payment Form as proof of payment of documentary stamp tax on the lease agreement);
  • Documentary Stamp Tax Return (BIR Form No. 2000) on the original issuance of shares and Payment Form (for the DST payment);
  • Mayor’s Permit/Business Permit Application (duly stamped received by the Business Licensing Division of the local government of Quezon City).

Pay the registration fee and documentary stamp taxes (DST) at the AAB

The rate of documentary stamp tax on original issuance of shares of stock shall be PHP 1.00 for every PHP 200 or fractional part thereof, of the par value, of such shares of stock.

The documentary stamp tax return shall be filed and the tax paid on or before the fifth (5th) day after the close of the month of approval of SEC registration.

Cost: (PHP 500 registration fee + PHP 5,165 DST on original issuance of shares of stock. DST on the lease contract is not included in the computation of the cost)

Obtain the authority to print receipts and invoices from the BIR

The authority to print receipts and invoices must be secured before printing the sales receipts and invoices. The BIR issued Revenue Regulations No. 18-2012 and it became effective on January 18, 2013. It adopted the online system for authority to print official receipts, sales invoices and other commercial invoices. In this regard, all unused or unissued receipts and invoices which were printed prior to January 18, 2013 will be deemed valid only until June 30, 2013.

To obtain the authority to print receipts and invoices from the BIR, the company must submit the following documents to the Revenue District Office (RDO):

  • Duly completed application for authority to print receipts and invoices (BIR Form No. 1906);
  • Job order;
  • Final and clear sample of receipts and invoices (machine-printed);
  • Application for registration (BIR Form No. 1903);
  • Proof of payment of annual registration fee (BIR Form No. 0605).

Have books of accounts and Printer’s Certificate of Delivery (PCD) stamped by the BIR

After the printing of receipts and invoices, the printer issues a Printer’s Certificate of Delivery of Receipts and Invoices (PCD) to the company, which must submit this to the appropriate BIR RDO (i.e., the RDO which has jurisdiction over the company’s principal place of business) for registration and stamping within thirty (30) days from issuance. The company must also submit the following documents:

  • All required books of accounts;
  • VAT registration certificate;
  • SEC registration;
  • BIR Form W-5;
  • Certified photocopy of the ATP;
  • Notarised taxpayer-user’s sworn statement enumerating the responsibilities and commitments of the taxpayer-user.

The company must also submit a copy of the PCD to the BIR RDO having jurisdiction over the printer’s principal place of business.

Register with the Social Security System (SSS)

To register with the SSS, the company must submit the following documents:

  • Employer registration form (Form R-1);
  • Employment report (Form R-1A);
  • List of employees, specifying their birth dates, positions, monthly salary and date of employment;
  • Articles of incorporation, by-laws and SEC registration.

Upon submission of the required documents, the SSS employer and employee numbers will be released. The employees may attend an SSS training seminar after registration. SSS prefers that all members go through such training so that each member is aware of their rights and obligations.

Register with the Philippine Health Insurance Company (PhilHealth)

To register with PhilHealth, the company must submit the following documents:

  • Employer data record (Form ER1);
  • Report of employee-members (Form ER2);
  • SEC registration;
  • BIR registration;
  • Copy of business permit.

Upon submission of the required documents, the company shall get the receiving copy of all the forms as proof of membership until PhilHealth releases the employer and employee numbers within three months.

Register with Home Development Mutual Fund (Pag-ibig)

To register with the HDMF, the corporation must submit the following documents:

  • Employer’s Data Form (EDF [FPF040]);
  • Specimen Signature Form (SSF[FPF170]);
  • Copy of SEC Certificate of Incorporation;
  • Copy of Approved Articles of Incorporation and By-laws;
  • Board Resolution or Secretary’s Certificate indicating the duly designated Authorized Representative.

Upon submission of the complete documents and payment of the first contribution to the fund, the Pag-IBIG will issue the HDMF number and the HDMF Certificate of Registration.

Branch Office

A Philippine branch office of a foreign corporation is a form of an operating resident foreign corporation in the country where its legal entity is being brought to engage in some activities of its parent company abroad. As such, the company must secure a License to do Business in the Philippines for its branch office.

Since a Branch Office is an income producing entity, it is subject to 30% income tax and 12% VAT on its local sale. Furthermore, it is subjected to withholding taxes on income payments and compensation.

Documentary Requirements

  • Form F103 or Application of a Foreign Corporation to Establish a Branch Office in the Philippines;
  • Name Verification Slip. As mentioned, this is reserved manually with the Security and Exchange Commission for a minimal fee of PHP 40 for every 30 days up to a maximum of 90 days;
  • Authenticated copy of Board Resolution authorizing establishment of office in the Philippines designating resident agent and stipulating that in absence of such agent or upon cessation of business in the Philippines any summons may be served to SEC as if the same is made upon the corporation at its home office;
  • Financial Statements as of a date not exceeding one year immediately prior to the application certified by independent CPA of home country and authenticated before the Philippine Consulate/Embassy;
  • Authenticated copies/Certified copies of the Articles of Incorporation/Partnership with an English translation, if in a foreign language;
  • Proof of inward remittance (US$200,000) minimum;
  • Resident Agent’s acceptance of appointment (if not signatory in application form).

License to do Business in the Philippines

The request will undergo initial evaluation of the SEC and approval normally comes after 2-10 days. Connected fees and other registrations are likewise required such as community tax certificate, barangay clearance, fire permit, occupancy permit and similar.

Tax Registration

The Security and Exchange Commission will assign a Tax Identification Number that must be formally registered with the Bureau of Internal Revenue (BIR).

Processing

After the recent improvement in the online processing system, completing all the above requires approximately 3-4 weeks. We recommend you to secure all required services to a GEO agency to assist you in the complete registration of the company in the Philippines.

Representative Office

Under our current tax rules, a representative office is not liable to pay income tax since it derives no income from the Philippines. The Court of Tax Appeals (CTA) pronounced that a representative office, as defined, is fully subsidized by its head office in the form of foreign inward remittances which is utilized to cover the expense in doing business.

Documentary Requirements

  • Form F-104 or Application of a Foreign Corporation to Establish a Representative Office in the Philippines;
  • Name Verification Slip. This should be reserved manually with the SEC for PHP 40 for every 30 days up to a maximum of 90 days, subject to renewal;
  • Authenticated copy of Board Resolution authorizing establishment of office in the Philippines; designating resident agent & stipulating that in absence of such agent or upon cessation of business in the Phil. Any summons may be served to SEC as if the same is made upon the corporation at its home office;
  • Financial Statements as of a date not exceeding one year immediately prior to the application certified by independent CPA of home country and authenticated before the Philippine consulate/embassy;
  • Affidavit executed by the resident agent stating that mother office is solvent and in sound financial condition;
  • Authenticated copies of Articles of Incorporation with an English translation if in foreign language other than English;
  • Proof of inward remittance (US$30,000) minimum such as bank certificate;
  • Resident Agent’s acceptance of appointment (if not signatory in
    application form).

Recommended

  • Verify/reserve proposed name;
  • Get F-104 form from CRMD;
  • Present accomplished forms/docs for pre-processing at CRMD;
  • Pay filing fees to cashier;
  • Claim license from Records Division.

Time: 2 days from filing.

 

Regional Headquarters/Regional Operating Headquarters

A RHQ/ROHQ is an office whose purpose is to act as an administrative branch of a multinational company engaged in international trade which principally serves as a supervision, communications and coordination center for its subsidiaries, branches or affiliates in the Asia-Pacific Region and other foreign markets and which does not earn or derive income in the Philippines.

A RHQ is not allowed to do business or earn income from the host country, unlike a branch or subsidiary.

The required minimum capital for a RHQ is the amount of not less than USD 50,000. All funds of the RHQ shall be utilized for salaries and other emoluments, including fringe benefits of personnel, rental of offices, transportation expenses, communication fees and similar costs for the maintenance of the RHQ in the Philippines.

A ROHQ is a branch office established in the Philippines and engaging in:

  • General administration and planning;
  • Business planning and coordination;
  • Sourcing and procurement of raw materials and components;
  • Corporate finance advisory;
  • Marketing control and sales promotion;
  • Training and Personnel management
  • Logistics services;
  • Research and development services;
  • Technical support and maintenance;
  • Data processing and communication;
  • Business Development.

 

By law, ROHQ are prohibited from offering qualifying services to entities other than their affiliates, branches or subsidiaries, as declared in their registration with SEC.

The minimum capital requirement for a ROHQ is no less than USD 200,000.

Licensing Requirements

  • Secure license with the Philippine Securities and Exchange Commission (SEC), upon favorable recommendation of the Board of Investments (However, ROHQs of banking and financial institutions are required to secure licenses from both the SEC and the Bangko Sentral ng Pilipinas (BSP).
  • Minimum Requirements.
    • Certification from the Philippine Consulate Embassy, or duly authenticated certification from the Philippine Dept. of Trade and Industry or its equivalent in the foreign firm’s home country that the firm is engaged in international trade with affiliates, subsidiaries, or branches in the Asia-Pacific region and other foreign markets.
    • Certification from the principal officer of the firm that the firm has been authorisedby its Board of Directors to establish its RHQ in the Philippines, specifying the following:
      • Activities of the RHQ shall be limited to acting as supervisory, communication, and coordinating center for its subsidiaries, branches, and affiliates in the region;
      • RHQ will not derive any income from sources within the  Philippines;
      • RHQ shall notify the BOI and the SEC of any decision to close down or suspend its operations 15 days before the same is effected.
    • An undertaking that any violation of the Omnibus Investments Code and its implementing rules and regulations shall constitute sufficient cause for the cancellation of RHQ’s license to operate.

Foreign Partnership

A foreign partnership or Joint Venture can occur when a cooperative arrangement of corporations to jointly perform a single project with each of the partners contributing to the performance.

Capital Requirement

If foreign interest exceeds 40% of the outstanding capital stock of the JV, the required minimum capital is USD 200,000. If advanced technologies (as determined by the Philippine Department of Science and Technology) are applied within the project or the business directly employs minimum 50 employees the minimum capital is reduced to USD 100,000. The minimum capital requirement of USD 200,000 does not apply to enterprises that export at least 60% of their output or domestic purchases.

Taxes

The JV is taxed on income derived from sources within and without the Philippines at the rate of 30%. Dividends are generally taxed at 30% but the rate may be reduced to 15% in case the country where the non-resident company has domicile grants any tax benefits on dividends.

If a foreign corporation invest in the Philippines by acquiring shares in an existing domestic corporation or by merging/consolidating with a domestic corporation, it shall be subject to the regular 30% tax rate. The same rate applies if the foreign company choose to enter into a management contract with a domestic corporation to manage all or substantially all of the business of a domestic corporation.

Documentary Requirements

  • Name of verification slip;
  • Get F-105 Form from CRMD;
  • Articles of Partnership;
  • Written joint undertaking to change corporate name signed by two (2) incorporators/Directors;
  • Clearance/endorsement from other govt. agencies, if applicable;
  • Proof of remittance of foreign partners (only for those partners who want to register their investments with BSP);

Recommended

  • Verify/secure proposed name;
  • Buy articles of Partnership forms from the Express lane;
  • Get FIA Form 105 from CRMD;
  • Get endorsement of other government agencies, if needed;
  • Presents accomplished forms/docs for pre-processing at CRMD;
  • Pay filing fees to cashier;
  • Claims Certificate of Incorporation from releasing Unit, Records Division.

Time: 1 day from filing

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in the Philippines, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in the Philippines they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in the Philippines
  • the company needs help with tax, employment, immigration and payroll compliance in the Philippines

The complexity of employment regulations in the Philippines makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in the Philippines allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in the Philippines.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into the Philippines. Read more about outsourced employment through Shield GEO.

  • Tax Compliance : What is FATCA and who is affected?

Tax Compliance : What is FATCA and who is affected?

  • Tax Compliance : What is FATCA and who is affected?

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