Setting up a representative office in the Philippines is an ideal strategy for foreign corporations to establish a base without engaging in commercial operations. This business entity acts mainly as a liaison hub, allowing a head office to coordinate market research and product inspections within the archipelago.
The Nature of the Entity
A representative office in the Philippines is considered an branch of a foreign corporation. Unlike a domestic subsidiary, it cannot derive revenue locally. Rather, all operating expenses must be completely funded by the head office. Since it is not a revenue-generating unit, it is usually exempt from local income taxes, making it a cost-effective option for multinationals.
Capital Needed
To register a representative office, the Securities and Exchange Commission stipulates a minimum capital deposit of US$30,000. This fund is meant to handle the office's startup operating costs. Moreover, the foreign corporation must select philippines representative office a resident agent residing in the Philippines to handle legal summons on philippines representative office the company's account.
What Can You Do?
Although the philippines representative office scope of operations is limited, it offers important advantages:
Data Gathering: Conducting market analysis to understand the local demand.
Promotion: Disseminating information about the parent company's services.
Quality Control: Monitoring that Philippine goods meet the global specifications.
Customer Liaison: Serving as a bridge between local clients and the main office.
The Registration Process
The process to founding your Philippines representative office requires several essential phases:
Company Name: Reserving the corporate name with the Securities and Exchange Commission.
Document Preparation: Compiling legalized copies of the Articles of Incorporation and financial statements from the head office.
Capital Remittance: Transferring the mandatory USD 30,000 into a local bank account.
Filing: Presenting the philippines representative office application form and supporting documents for license issuance.
Licensing: Getting 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 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 entity can be considered for conversion into a philippines representative office full corporation for commercial activities.