Good to know
Good to Know
- The headline USD 200,000 minimum paid-in capital only applies to foreign-owned companies selling mainly to the Philippine domestic market — an export-oriented company (exporting 60%+ of output) or a company with 40% or less foreign equity can incorporate with the standard PHP 5,000 baseline capital.
- Incorporation itself (SEC) is separate from getting a Manila city business permit — you cannot get the Mayor's Permit until the SEC Certificate of Incorporation exists, so budget for both stages in your timeline.
- You'll need a Philippine bank account and a real, physical registered office address (a P.O. box is not accepted) before you can even finish the SEC filing, since capital must be deposited and certified before submission.
- Even with 100% foreign ownership, Philippine corporate law requires a Filipino resident corporate secretary and at least one Philippine-resident director — this is a management/compliance rule, not an equity requirement, and firms typically use a hired corporate secretary to satisfy it.
- Double-check the current Foreign Investment Negative List (FINL) for your specific business activity before committing to a structure — equity caps and capital thresholds vary significantly by sector and the list is revised periodically.
- The 25% standard corporate income tax rate applies to both domestic corporations and resident foreign corporation branches operating in Manila; a lower 20% rate exists but is aimed at small domestic corporations under strict asset/income thresholds and is not automatically available to foreign-owned entities.
- Because DTI sole proprietorships legally require a Filipino citizen owner in most practical scenarios (foreign eligibility exists on paper via a CAEB but is capital-intensive and rarely used), nearly all foreign entrepreneurs in Manila incorporate a company with the SEC instead of trying to register as a sole proprietor.
- Corporate compliance in the Philippines is genuinely two-track: national BIR taxes (income tax, VAT/percentage tax, withholding) plus a completely separate annual local government (LGU) business permit renewal and local business tax with Manila City Hall — missing either track can hold up renewals of the other.
- SEC-registered corporations have their own recurring paperwork (GIS, Audited Financial Statements) on top of BIR filings — this is genuinely more administrative overhead than many first-time foreign founders expect, and most hire a local accountant or corporate-services firm rather than self-file.
Filing Obligations
National Bir
- Corporations must register with the BIR, obtain a Certificate of Registration (Form 2303), and secure a TIN.
- Quarterly Income Tax Returns (BIR Form 1702Q) are due 60 days after each quarter's close and must be filed even when there is no tax due (a nil return).
- The Annual Income Tax Return is generally due mid-April following the taxable year-end; corporations must maintain books and issue BIR-registered receipts/invoices.
- All Annual Income Tax Returns must now be filed electronically through eFPS, eBIRForms, or an accredited Tax Software Provider.
- VAT registration/filing applies once gross sales or receipts exceed the PHP 3,000,000 annual threshold; below that threshold a percentage tax regime applies instead of VAT.
Local Government Unit Manila
- Separate from national BIR taxes, a business must secure and annually renew a Mayor's/Business Permit and barangay clearance with the Manila City government where it is physically based.
- LGUs (including Manila) also levy their own annual local business tax, generally calculated on gross sales/receipts under the Local Government Code; exact schedules and rates are set by city ordinance and should be confirmed directly with the Manila City Treasurer's/Business Permits Office rather than assumed from national figures.
Sec Filings For Corporations
- General Information Sheet (GIS) due within 30 days of the annual stockholders' meeting.
- Audited Financial Statements (AFS) due within 120 days of fiscal year-end.
- Delinquent SEC filings can block share transfers and trigger SEC sanctions.
Corporate Income Tax
- Non Resident Foreign Corporations
- Taxed only on gross Philippine-source income (not the local-entity route most nomads/founders would use).
Standard Rate
- Rate Percent
- 25
- Applies To
- Domestic corporations (worldwide income) and resident foreign corporations / branch offices (Philippine-source income only).
- Description
- Regular Corporate Income Tax (RCIT) applied to net taxable income.
Reduced MSME Rate
- Rate Percent
- 20
- Eligibility
- Net taxable income not exceeding PHP 5,000,000 and total assets not exceeding PHP 100,000,000 (excluding land).
Minimum Corporate Income Tax
- Rate Percent
- 2
- Basis
- 2% of gross income, payable if greater than the RCIT liability, beginning the corporation's 4th taxable year.
Withholding On Outbound Payments
- Dividends paid to a foreign parent/shareholder: 30% withholding, reducible under an applicable tax treaty.
- Branch profit remittances abroad: 15% withholding, reducible under treaty.
- Royalties to non-resident foreign corporations: 25% final withholding, reducible under treaty.
Structure Options For Foreigners
Branch Office
- Legal Status
- An extension of the foreign parent company rather than a separately incorporated Philippine entity; the head office abroad remains directly liable for the branch's obligations.
- Tax Treatment
- Taxed as a resident foreign corporation — same CIT rates as a domestic corporation, but only on Philippine-source income.
- Capital Requirement
- Must obtain a License to Do Business from the SEC and assign inward-remitted capital, commonly at least USD 200,000 unless the branch qualifies as export-oriented or otherwise exempt.
Representative Office
- Restriction
- Cannot earn or generate income locally and is funded entirely by inward remittances from the head office, which must meet a minimum annual remittance requirement.
- Legal Status
- Permitted only for non-commercial liaison, marketing, or quality-control functions on behalf of the foreign head office.
- Relevance For Nomads
- Not usable for a business that wants to bill local clients or generate PHP revenue.
Sole Proprietorship Dti
- Liability
- No separate legal personality — the individual owner is personally liable for all business debts and obligations.
- Legal Status
- Sole proprietorships are registered with the Department of Trade and Industry (DTI), not the SEC.
- Foreigner Eligibility
- Sources disagree in practice: under the Foreign Investments Act (RA 7042, as amended by RA 11647), a non-Philippine national may register a sole proprietorship after first obtaining a Certificate of Authority to Engage in Business (CAEB) from DTI, provided the activity is not on the Foreign Investment Negative List. In practice, many corporate-services guides describe this route as rarely used by ordinary foreign freelancers because it also requires meeting the FIA's minimum paid-in capital thresholds and does not provide any liability protection (the owner is personally liable for all business debts).
- Capb Application Fee Example
- ₱5,530
Typical Minimum Capital For Foreign Sole Proprietors Or Domestic Market Activity
- Standard Threshold
- ₱12,300,000
- Reduced Threshold Conditions
- Reduced to roughly USD 100,000 if the business uses advanced/proprietary technology or directly employs at least 50 Filipino workers.
- Note On Currency
- This threshold is set directly in USD by the Foreign Investments Act; the PHP figure shown is an approximate conversion at current rates, not the statutory figure.
Domestic Corporation Sec
- Liability
- Separate legal entity — limited liability for shareholders.
- Legal Status
- Registered with the Securities and Exchange Commission (SEC); the standard route for almost all foreign-owned businesses in Manila.
- Foreign Ownership Rules
- Up to 100% foreign ownership is allowed for export-oriented or service businesses not listed on the Foreign Investment Negative List. For companies serving the domestic market, foreign ownership is generally capped at 40% (60% must be Filipino-owned) unless the minimum paid-in capital thresholds noted above are met, in which case up to 100% foreign ownership may be permitted.
Scope Note
Covers local business tax implications for a foreign-owned company in Manila (corporate tax rate, filing obligations) and the practical freelancer/sole-proprietor vs. full company distinction for foreigners.
Practical Freelancer Note
Most foreign remote workers/freelancers in Manila whose clients and income are entirely foreign-sourced do not register any local Philippine business entity at all — they are taxed (if at all) as individuals rather than through a PH company structure. A foreigner who wants to formally bill Philippine clients or hire local staff, however, will almost always need either an SEC-registered corporation (the realistic default) or, in the rare case of qualifying under the Foreign Investments Act's capital thresholds, a DTI-registered sole proprietorship.
Incorporation Process And Requirements
- Overview
- Foreigners incorporate in Manila the same way as local investors: through the national Securities and Exchange Commission (SEC), not a city-specific registry. Manila's city government only issues the local Mayor's Permit/business license after SEC registration is complete. No local Filipino partner is legally required to incorporate — 100% foreign ownership is allowed in any business activity not listed on the Foreign Investment Negative List (FINL); restricted sectors instead require at least 60% Filipino ownership (the '60/40 rule').
- Governing Body
- Securities and Exchange Commission (SEC) of the Philippines, under the Revised Corporation Code (RA 11232) and the Foreign Investments Act (RA 7042, as amended by RA 8179 and RA 11647).
- Official Registry Link
- https://esparc.sec.gov.ph/
Timeline
- Sec Review
- SEC review of a complete application is typically advertised as around 7 working days from filing.
- Full Process
- Realistic end-to-end timeline from name reservation through SEC Certificate of Incorporation is commonly cited as 30-60 days, depending on document completeness and whether the business activity needs endorsement from another regulator.
- Additional Steps
- Barangay Clearance, Mayor's Permit, BIR registration, and SSS/PhilHealth/Pag-IBIG employer registration add further time on top of SEC incorporation before a foreign-owned company can legally hire staff and issue receipts in Manila.
Typical Cost
- Sec Filing Fees
- SEC filing fees are not a flat figure — they are calculated mainly as roughly 0.2% of authorized capital stock plus a legal research fee, so total government filing cost scales with how much capital the corporation states in its Articles of Incorporation.
- Local Business Permit And Bir
- Separate from SEC costs: Barangay Clearance, Mayor's Permit, and BIR registration each carry their own smaller fees, plus documentary stamp tax on shares, and these are excluded from the SEC figures above.
- Professional Service Packages
- Law firms and corporate service providers commonly quote all-in incorporation packages (excluding the paid-in capital itself and excluding BIR/local permit fees) in the range of roughly PHP 40,000–150,000, i.e. very approximately USD 650–2,450, depending on complexity and whether foreign-equity documentation (F-100, bank remittance handling) is needed.
Capital Requirements
Foreign Owned Retail
- Minimum Paid Up Capital
- ₱25,000,000
- Description
- Foreign-owned retail trade enterprises (RA 11595, Retail Trade Liberalization Act)
Export Enterprise 60pct Or More Exported
- Minimum Paid In Capital
- ₱5,000
- Description
- Enterprises exporting at least 60% of output/services can be up to 100% foreign-owned with only the standard baseline paid-up capital for any domestic corporation
Domestic Market Enterprise Over 40pct Foreign Equity
- Minimum Paid In Capital
- ₱12,300,000
- Reduced Threshold Conditions
- Can drop to a lower threshold if the enterprise uses advanced technology certified by the Department of Science and Technology, or directly employs a minimum number of local workers (sources cite either 50 or 15 employees depending on which recent amendment is applied)
- Reduced Minimum Paid In Capital
- ₱6,150,000
- Description
- Corporations selling primarily within the Philippines (more than 40% domestic sales) with more than 40% foreign equity
Core Incorporation Steps
- 1. Verify the planned business activity against the current Foreign Investment Negative List (FINL) to confirm allowable foreign equity percentage.
- 2. Reserve/verify the corporate name through SEC's eSPARC online portal.
- 3. Draft the Articles of Incorporation and By-Laws, plus the Treasurer's Affidavit; foreign-owned corporations must also complete SEC Form F-100 regardless of the foreign equity percentage.
- 4. Open a temporary ('in-trust-for') bank account with a Philippine bank and remit the required minimum paid-in capital, then obtain a Bank Certificate of Deposit / Certificate of Inward Remittance.
- 5. Submit the name, Articles of Incorporation, By-Laws, F-100, and bank certificate electronically via SEC's eSPARC system.
- 6. Pay the SEC registration/filing fees once SEC issues a Payment Assessment Form; fees are calculated primarily as a percentage of authorized capital stock plus a legal research fee.
- 7. Submit signed, notarized (and for documents executed abroad, authenticated/apostilled) hard copies to the SEC within 60 calendar days of approval to receive the Certificate of Incorporation.
- 8. Secure Barangay Clearance for the registered office address.
- 9. Obtain the Mayor's/city Business Permit from the Manila local government unit (this is the actual city-level 'business permit' step; requires the barangay clearance, fire safety inspection, and zoning clearance).
- 10. Register with the Bureau of Internal Revenue (BIR) for a Tax Identification Number and official receipts/invoices.
- 11. Register as an employer with SSS, PhilHealth, and Pag-IBIG before hiring any staff.
Local Partner Or Sponsor Requirements
- General Rule
- No mandatory local equity partner for activities outside the Foreign Investment Negative List (FINL); a corporation can be up to 100% foreign-owned.
- Restricted Sectors
- Sectors on the FINL (e.g. mass media, land ownership, small-scale retail, some professions, domestic utilities in certain configurations) require at least 60% Filipino ownership, capping foreign equity at 40%.
- Minimum Incorporators
- A standard domestic stock corporation needs 2 to 15 incorporators (natural persons, partnerships, associations, or corporations).
- Resident Officer Requirement
- At least one director must be a Philippine resident, and the corporate secretary must be a Filipino citizen and resident — this is a governance requirement, not an equity/ownership stake.
AI-generated estimateData refreshed July 2026
This section has no cited sources.
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Data last updated July 2026 · Verify anything important.