The Cost of Setting Up a Representative Office in the Philippines
A practical guide for foreign corporations
1. What a Representative Office Is—and Is Not
A Representative Office (RO) is a Philippine-licensed extension of a foreign corporation that cannot earn or receive income in the Philippines. Its activities are limited to:
- Information dissemination, product promotion, and quality control
- Acting as a liaison between the head office (HO) and Philippine clients or suppliers
- Undertaking such other auxiliary services without commercial transactions locally
Because an RO is not a separate juridical entity, all liabilities remain with the HO.
Legal basis:
- §1(b), Foreign Investments Act (FIA), R.A. 7042 as amended
- Rule 4, SEC Memo Circular No. 17-2019 (Guidelines for Foreign Corporations)
- §§140–150, Revised Corporation Code (R.A. 11232) on foreign corporations
2. Minimum Financial Commitment
| Requirement | Amount | Notes |
|---|---|---|
| Initial inward remittance | USD 30,000 | One-time; must be remitted within 30 days from SEC license issuance |
| Annual operating funds | USD 30,000 per year | Must be remitted within 30 days of each anniversary date to keep the license in good standing |
The SEC will revoke the RO’s license if the annual remittance is not proven.
3. One-Time Formation Costs (Typical 2025 Figures)
| Item | Statutory Fee (₱) | Practical Range (₱) | Remarks |
|---|---|---|---|
| SEC Name Reservation | 200 | 200–400 | Valid for 30 days; renewable |
| SEC Filing Fee | 1/10 of 1 % of the inward remittance but ≥ 2,000 | 2,000–1,500 | Based on USD 30k @ ₱56 / USD ≈ ₱1.68 M → fee ≈ ₱1,680 (but floor is ₱2,000). Add 1 % LRF & ₱1,010 FIA fee. |
| Legal Research Fund (LRF) | 1 % of filing fee | 20 | Collected with SEC fee |
| Docs. Stamp Tax on RO Charter Docs | 2,265 | 2,265 | Fixed under DST regulations |
| Notarization & Apostille/Consular Authentication | — | 15,000–40,000 | Depends on HO’s jurisdiction and doc. volume |
| Resident Agent Acceptance Fee | — | 3,000–10,000 | If appointing a law firm or CSP |
| Mayor’s/Business Permit (year 1) | — | 10,000–50,000 | Varies by LGU; usually 0.1 % of capital + garbage & zoning fees |
| Barangay Clearance | — | 1,000–5,000 | LGU-specific |
| BIR Registration (Form 1903) | 500 | 500 | Plus ₱30 DST on ATP authority |
| Books of Accounts & Official Receipts | — | 5,000–15,000 | Printing receipts optional but advisable |
| Alien Employment Permit (per foreign hire) | 9,000 | 9,000 | 1-year AEP; higher for multi-year |
| 9(g) Visa or 47(a)(2) | — | 10,000–25,000 | Excludes express lane & BI fees |
| Professional Service Fees | — | 150,000–250,000 | Lawyer/CSP handling end-to-end setup |
Ballpark Total (excluding office lease & visas): ₱200,000 – ₱400,000 (≈ USD 3,500 – 7,000)
4. Recurring Annual Costs
| Item | Typical Annual Outlay (₱) | Key Details |
|---|---|---|
| USD 30k Annual Remittance | ≈ ₱1.7 M | Proof submitted to SEC |
| SEC Annual Registration Fee | 2,000–5,000 | Paid on anniversary date |
| Audited Financial Statements (AFS) | 40,000–100,000 | CPA audit required even if zero income |
| General Information Sheet (GIS) | — | File within 30 days of anniversary |
| Mayor’s Permit Renewal | 10,000–30,000 | January of each year |
| BIR Annual Registration | 500 | Every January |
| SSS, PhilHealth, Pag-IBIG Contributions | 18 %+ of payroll | Same as local entities |
| Books & OR Reprinting (as needed) | 5,000–10,000 | Every 5 yrs or upon exhaustion |
| Resident Agent Retainer | 12,000–24,000 | Optional, if outsourced |
5. Tax and Accounting Considerations
- Income Tax: An RO earns no Philippine-source income; therefore it is not subject to income tax or VAT.
- Withholding Taxes: Must withhold on salaries, rent, and professional fees (even if the RO itself is tax-exempt).
- Transfer Pricing: Payments to HO (e.g., reimbursements) must be properly documented to avoid re-characterization.
- Currency Controls: Remittances must be coursed through Bangko Sentral-authorized banks; present BSP Form A for registration if funds will later be repatriated.
- Books & Audit: Even with zero revenue, the RO must keep books of accounts and file an AFS prepared under Philippine standards (PFRS).
6. Step-by-Step Process Timeline (Fast-Track Scenario)
| Week | Milestone | Responsible |
|---|---|---|
| 1 | Board & shareholders approve RO; prepare legalized docs | HO |
| 2 | Apostille/Consularize, courier to PH | HO |
| 3 | Name reservation & draft SEC Form F-103 | Counsel/CSP |
| 4 | File with SEC; pay fees | Counsel |
| 5 | SEC issues License Certificate | SEC |
| 6 | Open bank, inward remit USD 30k; secure BIR TIN | RO |
| 7 | Register with LGU (Mayor, Barangay) | RO |
| 8 | Enroll in SSS, PhilHealth, Pag-IBIG; begin operations | RO |
Total elapsed time: 6–8 weeks (longer if consularization is slow).
7. Common Hidden or “Soft” Costs
- Office rent & fit-out: Most commercial landlords require 3 months’ security deposit + 3 months’ advance, plus fit-out at USD 100–300 / m².
- IT infrastructure: At least PHP 75k for basic corporate-grade internet and hardware.
- Relocation & housing allowances for expatriates.
- Contingency fund for exchange-rate fluctuations on the USD 30k remittance.
8. Comparison With Other Foreign-Entity Options
| Feature | Representative Office | Branch Office | Domestic Subsidiary |
|---|---|---|---|
| Can earn local income? | No | Yes | Yes |
| Minimum capital | USD 30k/year | USD 200k* | ₱5k (but FIA may require USD 200k) |
| Taxation | None on income | 25 % RCIT on PH income | 25 % RCIT |
| Liability | HO unlimited | HO unlimited | Limited to sub’s assets |
| Ideal for | Marketing, QC, liaison | Sales & services without separate corp | Full-scale PH operations |
*Lower capital possible for export-oriented or advanced tech activities.
9. Compliance Risks and Penalties
| Lapse | Typical Penalty |
|---|---|
| Failure to present proof of USD 30k remittance | Revocation of SEC license |
| Late filing of AFS or GIS | ₱1,000–10,000 per year plus daily fines |
| Operating outside “auxiliary” scope (i.e., selling) | Income tax assessments plus 50 % surcharge and VAT, possible criminal charges |
| Non-registration with LGU/BIR | Closure orders, surcharges, tax liens |
10. Practical Tips to Keep Costs Down
- Bundle authentication. Legalize all documents in one consular appointment to save courier runs and fees.
- Use a corporate service provider that offers all-in compliance packages; bundled pricing is often cheaper than à-la-carte.
- Lease in PEZA IT parks if the RO will later upgrade to a Branch; transition is simpler and some LGUs waive local taxes.
- Repatriate excess funds through BSP-registered channels so withdrawals later are not taxed as dividends.
- Calendar all deadlines—penalties escalate quickly.
Conclusion
Setting up a Representative Office in the Philippines is relatively quick and capital-light, but the statutory USD 30 k annual infusion and layered government fees mean realistic first-year costs hover between ₱2 M and ₱2.5 M once operating expenses are factored in. Careful document preparation, disciplined remittance scheduling, and proactive compliance can keep both up-front and recurring costs predictable—allowing the foreign parent to establish an effective Philippine presence for marketing, sourcing, or quality assurance without triggering Philippine income taxation.
Disclaimer: This article is for general information only and is not legal advice. Specific costs vary by locality, exchange rate, and agency policies. Always obtain professional counsel for an accurate, up-to-date quotation tailored to your circumstances.