The Philippines allows full foreign ownership in most business sectors under Republic Act No. 7042 (Foreign Investments Act of 1991), as amended by R.A. 8179, R.A. 11647, and related laws. Foreign investors intending to engage in activities that are open to 100% foreign equity may choose between establishing a Branch Office (extension of the foreign parent company) or a Domestic Corporation with 100% Foreign Ownership (commonly called a “fully foreign-owned corporation” or subsidiary).

While both structures permit 100% foreign ownership and control, they differ fundamentally in legal personality, liability, taxation, profit repatriation, capital requirements, operational flexibility, and compliance obligations. The choice between the two has significant long-term commercial and legal consequences.

1. Legal Personality and Existence

Branch Office

Has no separate legal personality from the foreign parent company.
Considered a mere extension or office of the head office.
All contracts, obligations, and liabilities incurred in the Philippines are directly attributable to and enforceable against the foreign parent company.

Fully Foreign-Owned Corporation (Subsidiary)

Separate and distinct juridical personality from its foreign shareholders.
Exists independently; the parent company is not directly liable for the obligations of the Philippine subsidiary beyond its subscribed capital.
Governed by the Revised Corporation Code (R.A. 11232) as a domestic stock corporation.

Practical consequence: In a subsidiary, creditors can only run after the assets of the Philippine corporation. In a branch, creditors can pursue the worldwide assets of the foreign parent company.

2. Minimum Capitalization Requirements

Branch Office

General rule: US$200,000 minimum assigned capital that must be inwardly remitted and converted to Philippine pesos (SEC Memorandum Circular No. 8, Series of 2021).
Reduced to US$100,000 if the branch:
(a) uses advanced technology (as certified by DOST), or
(b) directly employs at least 50 Filipinos.
For domestic-market enterprises (selling more than 40% of goods/services to the local market), the US$200,000 is mandatory unless the US$100,000 exception applies.
Export-oriented branches (at least 60% export) are exempt from minimum capital if they register with PEZA, BOI, or other IPAs.

Fully Foreign-Owned Corporation

No prescribed minimum capital under the Foreign Investments Act for corporations engaging in domestic market activities that are 100% open to foreigners.
Revised Corporation Code requires only PHP 5,000 minimum paid-up capital for ordinary stock corporations.
However, if the corporation will employ foreign nationals under 9(g) visas or engage in activities requiring higher capital (e.g., financing companies, investment houses), higher capitalization may be imposed by other regulators.
Retail trade enterprises (even 100% foreign-owned) must have at least PHP 25,000,000 paid-up capital under R.A. 11595 (Retail Trade Liberalization Act amendment).

Practical consequence: The subsidiary is significantly cheaper and faster to capitalize.

3. Registration and Licensing Authority

Branch Office

Licensed and regulated by the Securities and Exchange Commission (SEC) as a foreign branch.
Requires SEC License to Do Business in the Philippines.
Must appoint a Resident Agent (Filipino citizen or domestic corporation) who is personally liable to accept summons if the branch fails to do so.

Fully Foreign-Owned Corporation

Registered with the SEC as a domestic stock corporation.
No “license to do business” requirement; it simply obtains a Certificate of Incorporation.
No resident agent requirement (though a resident director or corporate secretary is required).

4. Taxation

Branch Office

Subject to 25% corporate income tax (or 20% if gross income ≤ PHP 5M and net taxable income ≤ PHP 3M) on net Philippine-sourced income (CREATE Law).
Profits remitted to the head office are subject to 15% Branch Profit Remittance Tax (BPRT) on the amount actually remitted or earmarked for remittance.
BPRT is final withholding tax; no further tax upon receipt by the head office (unless the jurisdiction of the head office imposes additional tax).
VAT, withholding taxes, and local business taxes apply normally.

Fully Foreign-Owned Corporation

Same 25%/20% corporate income tax on net taxable income.
Dividends distributed to foreign shareholders are subject to final withholding tax of 25% (or lower treaty rate).
No Branch Profit Remittance Tax.
May avail of income tax holiday (ITI) or 5% gross income tax incentives if registered with IPAs (PEZA, BOI, etc.) — same as branches.

Key tax planning difference:
The subsidiary avoids the 15% BPRT. Instead, dividends are taxed at 25% (or treaty rate). If the parent company is in a jurisdiction with a favorable tax treaty (e.g., Singapore, Netherlands, Japan), the effective tax on profit extraction can be lower via the subsidiary structure.

5. Profit Repatriation

Branch Office

Profits may be freely remitted upon presentation of the Bangko Sentral ng Pilipinas (BSP) covering Authority to Remit and proof of BPRT payment.
Subject to BSP registration of inward capital if the branch intends to remit profits in excess of its assigned capital.

Fully Foreign-Owned Corporation

Dividends can be declared and remitted upon compliance with SEC solvency requirements and payment of dividend tax.
No BSP registration required for dividend remittances (BSP rules apply only to capital repatriation and loan repayments).

6. Liability and Risk Exposure

Branch Office
Unlimited personal liability of the foreign parent company. Any judgment against the Philippine branch is enforceable against the parent worldwide.

Subsidiary
Limited liability. Shareholders are liable only to the extent of their subscription. The corporate veil protects the parent company (piercing the veil is possible but difficult under Philippine law).

7. Operational and Structural Flexibility

Branch Office

Cannot create subsidiaries in the Philippines without SEC approval (since it is not a juridical entity).
Cannot own real property except for office condominium units or land for its immediate use (subject to constitutional restrictions).
Easier to close: simply file cessation of operations with SEC and BIR.

Subsidiary

Can own land (subject to 40% foreign equity limit for land ownership unless for industrial/commercial use under certain laws).
Can establish its own subsidiaries or branches.
Can convert into a One-Person Corporation (OPC) if desired.
More complex dissolution process (requires three-year winding-up period unless short-term).

8. Documentary and Compliance Requirements

Branch Office
Heavier documentation:

Authenticated copies of Articles of Incorporation of parent
Board resolution authorizing establishment of branch
Financial statements of parent (audited)
Proof of inward remittance
Resident agent acceptance
Annual submission of General Information Sheet (GIS), Audited Financial Statements (AFS) of both branch and parent, and proof of inward remittance.

Subsidiary
Standard domestic corporation documents:

Articles of Incorporation and By-Laws
Treasurer’s Affidavit
Only the subsidiary’s AFS required annually (parent AFS not required unless consolidated reporting is elected).

9. Advantages and Disadvantages Summary

Aspect	Branch Office	Fully Foreign-Owned Corporation (Subsidiary)
Legal personality	None (extension of parent)	Separate juridical entity
Liability	Unlimited (parent fully liable)	Limited to corporate assets
Minimum capital	US$200,000 (or US$100,000 with conditions)	Generally PHP 5,000 (higher for certain sectors)
Tax on profit remittance	15% BPRT	25% dividend tax (or treaty rate)
Ease of closure	Simpler and faster	Requires formal dissolution
Ability to own land	Very limited	Possible (subject to restrictions)
Compliance burden	Higher (parent documents required)	Lower
Preferred by banks/lenders	Less preferred (no separate personality)	Preferred (limited liability)
Suitability	Short-term projects, regional hubs, testing the market	Long-term investment, asset-heavy operations, risk isolation

Conclusion and Practical Recommendation

For most foreign investors planning long-term operations in the Philippines, the fully foreign-owned domestic corporation (subsidiary) is overwhelmingly the preferred structure because of:

limited liability protection,
significantly lower capitalization requirement,
absence of branch profit remittance tax,
simpler compliance,
greater operational flexibility, and
better reception by Philippine banks, landlords, and counterparties.

The branch office is now chosen mainly in the following situations:

The investor wants to test the market with minimal long-term commitment.
The activity is project-based or short-duration (e.g., construction contracts).
The parent company prefers to keep all profits at head-office level without declaring dividends.
The parent is in a jurisdiction with no tax treaty and wants to avail of the 15% BPRT as a final tax.

Since the amendments introduced by R.A. 11647 (2022) and the CREATE Law, the advantages of the subsidiary structure have become even more pronounced, making the branch office a relatively rare choice except in specific circumstances.

Investors should always validate the latest Foreign Investment Negative List (currently the 12th FINL issued in 2022, as amended) to confirm that the intended activity indeed allows 100% foreign equity before choosing either structure.