Definition

Procedure to
Establish

Commencem
ent of Term

Filing Fee

Capital
Requirement

Subsidiary
A subsidiary is a domestic corporation
organized under Philippine law. It may
engage in such line or lines of activities
as may be authorized under its articles
of incorporation.

1.

Reservation
of
company
name
2. Opening of a bank account
for remittance of capital
3. Filing of application with the
Securities
and
Exchange
Commission (SEC)
A subsidiary commences to have
corporate
existence
and
juridical
personality upon the issuance of a
certificate of incorporation by the SEC.
1/5 of 1% of the authorized capital stock
or the subscription price of the
subscribed capital, whichever is higher
(but not less than P1,000), plus P2,000
for the SEC Form F-100 and P 510 for the
by-laws. A name reservation fee of P40
(valid for 30 days) and an additional
legal research fee of 1% of the basic
filing fee are charged. For applications
under the Foreign Investments Act, an
additional P2,000 shall be charged
For domestic market enterprises, the
paid-in equity capital must be at least
US$ 200,000. If they involve advanced
technology as determined by the
Department of Science and Technology
(DOST) or employ at least 50 direct
employees, the minimum paid-in capital
of US$ 100,000 shall be allowed.

Branch
A branch is an extension of the foreign
parent corporation. It carries out the
business activities of the foreign parent
corporation and may derive income
from within the Philippines. Not having
a separate personality from its foreign
parent corporation, it is usually
authorized to perform all the activities
that the parent company may perform
under its charter, unless otherwise
restricted under Philippine law. The
application for the branch license can
indicate which of the applicants
activities it would like to pursue.
1.
Reservation of company
name
2.
Opening of a bank
account for remittance
of capital
3.
Filing of application with
the SEC
A branch may commence to transact
business in the Philippines upon the
issuance of its SEC license.
1% of the actual inward remittance to
the branch converted into Philippine
pesos (but not less than P2,000) must
be paid. A name reservation fee of P40
(valid for 30 days) and an additional
legal research fee of 1% of the basic
filing fee are charged. For applications
under the Foreign Investments Act, an
additional P2,000 shall be charged.

US$ 200,000 must be remitted as the

assigned capital.

For export market enterprise, the

minimum capital required is P5,000.

Tax Payment

In the case of Edge Phil, the Philippine

SEC will require it to have a minimum
paid in of US$200,000 to be 100%
foreign-owned.
It must pay documentary stamp tax on

None

in
Relation
to
Setting
up Entity

Documents
Needed

its original issuance of shares at the rate

of P1 for every P200 of the aggregate
par value of the shares, payable to the
Bureau of Internal Revenue (BIR)
within five days from the close of the
month following its incorporation.
o Cover Sheet
o Name
Verification
and
Reservation slip
o Foreign Investment Application
Form (SEC Form F-100)
o Articles of Incorporation
o By-laws
o Bank Certificate of Remittance
and Deposit (although this is no
longer required to be submitted
to the SEC, the SEC would still
sometimes still ask for this to
determine the exchange rate
used for the paid-up capital)
o Treasurers
affidavit
with
authority to verify bank deposit
o Joint
affidavit
of
two
incorporators
to
change
corporate name (not required if
already stated in Articles of
incorporation)
o Endorsement
from
relevant
government
agencies
that
regulate the activities of the
company, if any.
Note: Documents signed abroad must be
authenticated by the Philippine Embassy
or Consulate in the country where
signed.

Cover Sheet
Name
Verification
and
Reservation slip
o Application Form [F-103 for
Stock Branch Office (SBO)]
o Authenticated copy of the
Board Resolution that:
(a) authorizes the establishment of
branch in the Philippines;
(b) designates the resident agent (RA)
to whom summons and other legal
processes may be served in behalf of
the foreign corporation; and
(c) stipulates that in the absence of
such agent or upon cessation of its
business in the Philippines, any
summons or legal processes may be
served to the SEC as if the same is
made upon the corporation at its home
office.
o Authenticated copy of the
Articles of Incorporation with an
English translation if in foreign
language other than English
o Financial Statements:
(a) for the immediately preceding year
at the time of the filing of the
application;
(b) audited by an independent Certified
Public Accountant (CPA) of the home
country;
(c) authenticated before the Philippine
Consulate/Embassy
o Compliance
with
Financial
Ratios - Solvency and Liquidity
ratio of 1:1 and a Debt to Equity
Ratio of 3:1;
o Notarized
Proof
of
Inward
Remittance
such
as
bank
certificate of inward remittance
or credit advances
o Affidavit of undertaking to
change corporate name (not
required if already stated in the
Application Form)
o RAs
acceptance
of
appointment (nor required if RA
is
the
signatory
in
the
Application Form)
o Endorsement/Clearance
from
appropriate
government
o
o

agencies

Need
for
Local
Participants
in
the
Setting-up
Process
Need
for
Local
Participants
Going
Forward

Need
for
Local
Business
Address
Need
Regular
Filings

Limited
Liability

for

Five incorporators are needed. Majority

of the incorporators must be residents of
the Philippines.

The Corporation Code requires 5 to 15

directors, majority of whom should be
residents
of the Philippines. The
statutory corporate officers are: (1)
President;
(2)
Treasurer
and
(3)
Secretary. Only a Philippine citizen and
resident may be elected as secretary of
a corporation while under SEC policies,
only a Philippine resident may be elected
as treasurer of a corporation.
The principal place of business of the
corporation
must
be
within
the
Philippines.

File the general information

sheet (GIS) within 30 days
from its annual meeting.
o Financial
statements
(FS)
stamped received by the BIR
within 120 days after the end of
the fiscal year indicated in the
FS. The FS shall be audited by an
independent CPA registered with
the
Board
of
Accountancy
(BOA) if the stock corporation
has paid-up capital of P50,000 or
more. Otherwise, the FS shall be
certified under oath by the
treasurer of the corporation.
o Registrations and filings with the
BIR
o Business permit from the local
government unit were the offices
are located
o Registrations and filings with the
Department
of
Labor
and
Employment
and
related
agencies,
in
respect
of
employees.
The subsidiarys liabilities are separate
and do not become the liabilities of its
foreign parent corporation because of its
separate juridical personality. Recovery
o

Note: Documents signed abroad or

notarized abroad must be authenticated
by the Philippine Embassy or Consulate
in the country where signed.
There is a need to designate a resident
agent to whom summons and other
legal processes may be served in behalf
of the corporation.

The foreign corporation must appoint a

RA.

The principal office is located at the

home
country
of
the
foreign
corporation. However, the applicant
must specify a place in the Philippines
where it will hold and operate office.
o File the GIS within 30 days from
the anniversary date of the
issuance of the SEC license.
o FS stamped received by the
BIR within 120 days after the
end of the fiscal year indicated
in the FS. The FS shall be
audited by an independent CPA
registered with the Board of
Accountancy if the stock branch
office has an assigned capital of
P50,000 or more. Otherwise,
the FS shall be certified under
oath by the treasurer of the
corporation.
o Registrations and filings with
the BIR
o Business permit from the local
government unit were the
offices are located
o Registrations and filings with
the Department of Labor and
Employment
and
related
agencies,
in
respect
of
employees.
Considering that the branch office is
deemed to be one and the same entity
as the parent company, all of the assets
of a foreign corporation with a branch

Application
of Local Law

Taxation
Income

of

Taxation of
Dividends/
Profit

Deposit
of
Securities

for damages and/or liabilities is limited

to the capital and assets of the
subsidiary in the Philippines
Since a subsidiary is a corporation
incorporated in the Philippines, local
laws apply.

A subsidiary is liable for tax at the rate

of 30% on its entire net income from
sources
within
and
without
the
Philippines or the Minimum Corporate
Income Tax (MCIT), whichever is
higher.
A final withholding tax of 30% shall be
imposed on the amount of cash and/or
property dividends received from a
domestic corporation, which rate can be
reduced to 15% provided that the home
country of the foreign parent company
shall allow a tax-sparing credit or does
not impose any income tax on the
dividends. The rate can also be lower if
provided for under an applicable tax
treaty.

No deposit of securities with any entity is

required.

office in the Philippines may be exposed

to claims and judgments obtained
against it in the Philippines.
Any foreign corporation lawfully doing
business in the Philippines shall be
bound by all laws, rules and regulations
applicable to domestic corporations of
the same class, except such only as
provided for the creation, formation,
organization
or
dissolution
of
corporations or those which fix the
relations, liabilities, responsibilities, or
duties of stockholders, members or
officers of corporations to each other or
to the corporation.
A branch is taxed only on the net
income derived from Philippine sources
at the rate of 30% or the MCIT,
whichever is higher.

Any profit remitted by a branch to its

head office shall be subject to a tax of
15% which shall be based on the total
profits applied or earmarked for
remittance without any deduction for
the
tax
component.
interests,
dividends, rents, royalties, including
remuneration for technical services,
salaries, wages, premiums, annuities,
emoluments
or
other
fixed
or
determinable annual, periodic or casual
gains, profits, income and capital gains
received by a foreign corporation during
each taxable year from all sources
within the Philippines shall not be
treated as branch profits unless the
same are effectively connected with the
conduct of its trade or business in the
Philippines. The said tax shall be
withheld by the payor corporation.
Within 60 days after the issuance of the
license to transact business in the
Philippines, a branch must deposit with
the SEC for the benefit of present and
future creditors securities with an
actual market value of at least
P100,000.
Within 6 months after each fiscal year,
it must deposit with the SEC additional
securities equivalent in actual market
value to 2% of the amount by which its

gross income for that

exceeds P5,000,000.

fiscal

year

Additional securities shall be deposited

if the actual market value of the
securities on deposit has decreased by
at least 10% of their actual market
value at the time they were deposited.
The branch may collect the interest or
dividends on the securities deposited.
In the event it ceases to do business in
the Philippines, it may apply for the
return of the securities deposited upon
proving to the satisfaction of the SEC
that it has no liability to Philippine
residents, including the Philippine
Government.