Setting up a representative office in the Philippines is an ideal strategy for foreign corporations to build a base before engaging in commercial business. This legal structure serves mainly as a communication hub, allowing a head office to manage promotional activities and quality control across the archipelago.
What is a Representative Office?
A Philippines representative office is viewed as an arm of a overseas entity. In contrast to a branch office, it does not earn income from Philippine sources. Instead, all financial requirements must be fully subsidized by the parent company abroad. Because it does not function as a profit-making entity, it is generally free from corporate income tax, which makes it a budget-friendly entry point for foreign firms.
Key Requirements and Capitalization
To incorporate a Philippines representative office, the SEC requires a initial inward remittance of thirty thousand US dollars. This amount is used to cover the entity's initial expenses. In addition, the parent firm must appoint a local representative who lives in the Philippines to accept official notices on the company's behalf.
Scope of Operations
While the range of activities philippines representative office is limited, it delivers significant opportunities:
Market Research: Performing feasibility studies to gauge the Philippine market landscape.
Marketing: Providing information about the head office's products.
Inspection: Verifying that locally sourced materials 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 name with the Securities and Exchange Commission.
Document Preparation: Compiling legalized copies philippines representative office of the Articles of Incorporation and financial statements from the head office.
Capital Remittance: Remitting the mandatory USD 30,000 into philippines representative office a local bank account.
Application: Presenting the application form and supporting documents for license philippines representative office issuance.
Licensing: Obtaining Barangay clearance and filing with philippines representative office the BIR.
Final Thoughts
Opting for a Philippines representative office is a prudent decision for enterprises aiming to explore the waters without 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 later conversion into a full corporation for commercial activities.