Setting up a representative office in the Philippines is an ideal method for international companies to build a base before commencing full-scale business. This legal structure serves mainly as a communication hub, allowing a head office to manage client communications and quality control across the country.
The Nature of the Entity
A Philippines representative office is considered an arm of a foreign corporation. In contrast to a branch office, it cannot derive income from Philippine sources. Instead, all operating expenses must be completely funded by the parent company abroad. 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 a resident agent residing in the Philippines to handle legal summons on the company's behalf.
What Can You Do?
Although the scope of operations is limited, it offers philippines representative office significant advantages:
Data Gathering: Performing market analysis to understand the Philippine demand.
Marketing: Providing information about the head office's services.
Quality Control: Verifying that locally sourced goods 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 philippines representative office several essential phases:
Name Verification: Securing the business name with the SEC.
Paperwork: Preparing authenticated copies of the By-laws and philippines representative office financial statements from the home country.
Funding: Remitting the mandatory $30,000 into a local philippines representative office corporate account.
Application: Submitting the application form philippines representative office and supporting documents for license issuance.
Licensing: Obtaining Barangay clearance and filing with the BIR.
Why Choose a Representative Office?
Opting for a Philippines representative office is a strategic decision for businesses aiming to explore the market before taking on heavy tax burdens. It allows seamless back-office support and creates visibility in one of the region's fastest-growing economies. Once the market opportunity is validated, the office can later conversion into a branch for revenue-generating activities.