Foreign Company Registration in the Philippines: 100% Ownership Options, Requirements, and Costs

Introduction

The Philippines offers a relatively open environment for foreign investments, governed primarily by Republic Act No. 7042, also known as the Foreign Investments Act (FIA) of 1991, as amended by Republic Act No. 8179. This framework allows foreign nationals and entities to establish businesses with up to 100% foreign ownership in most sectors, provided they do not fall under the restrictions outlined in the Foreign Investments Negative List (FINL). The FINL, periodically updated by Executive Order (e.g., the 12th Regular FINL issued under Executive Order No. 65 in 2018, with subsequent amendments), categorizes industries where foreign ownership is limited or prohibited, such as mass media, practice of professions, and land ownership.

For sectors not on the FINL, 100% foreign ownership is permissible, making the Philippines attractive for foreign investors in areas like manufacturing, IT-BPM (Business Process Management), tourism, and renewable energy. The primary regulatory body for company registration is the Securities and Exchange Commission (SEC), with additional oversight from agencies like the Board of Investments (BOI), Philippine Economic Zone Authority (PEZA), and Department of Trade and Industry (DTI) depending on the business type and incentives sought.

This article provides a comprehensive overview of options for registering a foreign company with 100% ownership, the associated requirements, and estimated costs. Note that while 100% ownership is feasible, certain activities may require minimum capitalization, local partnerships, or compliance with anti-dummy laws to prevent circumvention of ownership restrictions. Investors should consult legal experts for tailored advice, as laws and regulations evolve.

Options for 100% Foreign Ownership

Foreign entities can register businesses in the Philippines through several structures, each suited to different operational needs. The key options allowing 100% foreign ownership include:

1. Domestic Corporation

Description: A corporation incorporated under Philippine laws, treated as a local entity but can be fully owned by foreign shareholders. This is the most common structure for foreign investors seeking full control.
Eligibility for 100% Ownership: Allowed in non-restricted sectors (e.g., export-oriented manufacturing, e-commerce, software development). If the business involves land ownership or natural resources, foreign equity is capped (e.g., 40% for land under the Constitution).
Key Features: Perpetual corporate life (unless specified otherwise), limited liability for shareholders, and ability to list on the Philippine Stock Exchange if desired.
Subtypes:
- One Person Corporation (OPC): Introduced by Republic Act No. 11232 (Revised Corporation Code of 2019), allows a single foreign natural person or entity to own 100% without needing local nominees. Ideal for solo entrepreneurs.
- Regular Corporation: Requires at least two incorporators (can be foreign), with a board of directors (minimum 5, majority must be Philippine residents).

2. Branch Office

Description: An extension of a foreign parent company, not a separate legal entity. It operates under the parent's name and is subject to Philippine laws.
Eligibility for 100% Ownership: Fully foreign-owned, suitable for companies already established abroad looking to expand operations like sales, marketing, or manufacturing.
Key Features: No separate shareholders; profits remittable to the parent after taxes. Must appoint a resident agent in the Philippines.
Limitations: Cannot engage in retail trade (restricted under Republic Act No. 8762, Retail Trade Liberalization Act, which requires at least PHP 25 million paid-up capital for 100% foreign retail).

3. Representative Office

Description: A non-income-generating liaison office for promoting the parent company's products/services, market research, or information dissemination.
Eligibility for 100% Ownership: Fully foreign-owned, but limited to non-revenue activities. No sales or contracts can be executed.
Key Features: Must remit at least USD 30,000 annually for operating expenses. Registered with the SEC.

4. Regional Headquarters (RHQ) or Regional Operating Headquarters (ROHQ)

Description: Under Republic Act No. 8756, these are for multinational companies (MNCs) coordinating regional operations.
- RHQ: Non-commercial, supervisory role only (e.g., oversight of subsidiaries).
- ROHQ: Can perform qualifying services like R&D, business development, but income must derive from affiliates outside the Philippines.
Eligibility for 100% Ownership: Exclusively for foreign MNCs with affiliates in the Asia-Pacific region and at least one outside.
Key Features: Tax incentives available (e.g., 10% tax on taxable income for ROHQ). Must employ at least five expatriates.

5. Partnership or Sole Proprietorship

Description: Less common for foreigners due to unlimited liability.
- General Partnership: Can be 100% foreign if not in restricted sectors, but partners have joint liability.
- Sole Proprietorship: Foreigners can register via DTI, but limited to non-restricted activities and no land ownership.
Eligibility for 100% Ownership: Possible, but not recommended for large-scale operations due to liability risks.

For incentives like tax holidays, investors can register with BOI (under the Omnibus Investments Code of 1987) or PEZA (for ecozone locators), which often favor 100% foreign-owned export enterprises.

Requirements for Registration

Registration processes vary by structure but generally involve the SEC. Key requirements include:

General Requirements

Pre-Registration: Name verification and reservation with SEC (online via eSPARC system).
Minimum Capitalization:
- Domestic Corporation/OPC: PHP 5,000 minimum paid-up capital, but higher for certain sectors (e.g., USD 200,000 equivalent for domestic market enterprises under FIA if over 40% foreign-owned and not export-oriented; waived for export enterprises with at least 60% export sales).
- Branch Office: USD 200,000 inward remittance (can be lower if advanced technology or 50+ employees).
- Representative Office: USD 30,000 annual remittance.
- RHQ/ROHQ: USD 50,000 (RHQ) or USD 200,000 (ROHQ) initial investment.
Documents:
- Articles of Incorporation/Partnership (for corporations/partnerships) or Application for Branch/Rep Office.
- By-laws.
- Treasurer's Affidavit (for capitalization).
- Proof of inward remittance (bank certificate).
- Authenticated copies of parent company's documents (e.g., articles of incorporation, board resolution) if applicable, apostilled or consularized.
- Visa requirements: Foreign investors need a 9(g) pre-arranged employment visa or 47(a)(2) special non-immigrant visa; SIRV (Special Investor's Resident Visa) for investments over USD 75,000.
Resident Agent: Mandatory for branches and reps; must be a Philippine resident or entity.
Anti-Dummy Law Compliance: Republic Act No. 7042 prohibits using dummies to evade ownership limits; penalties include fines and imprisonment.

Step-by-Step Process

Name Reservation: Online via SEC, valid for 30-90 days.
Document Preparation and Submission: Via SEC's online portal or in-person.
Payment of Fees: Upon approval.
Post-Registration: Obtain Tax Identification Number (TIN) from Bureau of Internal Revenue (BIR), business permits from local government units (LGUs), and register with Social Security System (SSS), PhilHealth, and Pag-IBIG for employees.
Additional Approvals: For regulated sectors (e.g., banking via Bangko Sentral ng Pilipinas), or incentives (BOI/PEZA application post-SEC).

Timeline: 1-3 months, faster with online systems.

Special Considerations

Export vs. Domestic Market: Export-oriented businesses (60%+ exports) have lower capital requirements and more incentives.
Land and Real Property: Foreigners cannot own land but can lease for up to 50 years (renewable 25 years) under the Investors' Lease Act.
Professions: Restricted to Filipinos (e.g., law, medicine), but foreign professionals can practice under reciprocity agreements.
Amendments: Post-registration changes (e.g., capital increase) require SEC approval.

Costs Involved

Costs vary by structure, scale, and location (e.g., higher in Metro Manila). Estimates are in Philippine Pesos (PHP) or USD (approx. PHP 55 = USD 1 as of 2025). These are approximate and exclude VAT (12%).

Filing and Registration Fees

SEC Fees:
- Name Reservation: PHP 100-500.
- Incorporation (Domestic Corp): 1/5 of 1% of authorized capital stock (min. PHP 2,000) + legal research fee (1% of filing fee).
- Branch/Rep Office: PHP 5,000-10,000 + 1/5 of 1% of remitted capital.
- RHQ/ROHQ: PHP 5,000 application fee.
BOI/PEZA Registration: PHP 1,500-6,000 application fees; additional for incentives.

Professional and Legal Fees

Legal/Consultancy: PHP 50,000-200,000 for document preparation, depending on complexity.
Accounting/Audit: PHP 20,000-50,000 initial setup.

Capital and Remittance Costs

Minimum Capital: As above (e.g., USD 200,000 = ~PHP 11 million).
Bank Fees for Inward Remittance: 0.5-1% of amount.

Operational Setup Costs

Office Lease: PHP 500-1,500/sqm/month.
Business Permits: Mayor's Permit (PHP 5,000-20,000/year), Barangay Clearance (PHP 500-2,000).
Visa Processing: PHP 10,000-50,000 per applicant.
Annual Compliance: SEC annual report (PHP 2,000-5,000), BIR taxes (corporate income tax 20-25% under CREATE Act of 2021).

Total Estimated Startup Cost for a 100% Foreign-Owned Corporation: PHP 500,000-2,000,000 (excluding capital), plus ongoing annual costs of PHP 100,000-500,000.

Tax Implications and Incentives

Taxes: Corporate income tax at 20% (for domestic market enterprises) or 25% base, with incentives reducing to 5% GIT for PEZA-registered. VAT 12%, withholding taxes on dividends (15-30%).
Incentives: Income tax holidays (4-7 years) for pioneer projects via BOI; duty-free imports for PEZA.

Risks and Challenges

Bureaucracy: Delays in processing.
Corruption: Mitigated by online systems.
Enforcement: Strict on dummy arrangements.
Economic Factors: Currency fluctuations, political stability.

Conclusion

Establishing a 100% foreign-owned company in the Philippines is straightforward in non-restricted sectors, offering access to a skilled workforce and ASEAN markets. However, thorough due diligence on the FINL and compliance is essential. For updates, refer to official sources like SEC and BOI websites. Professional legal advice is recommended to navigate nuances and ensure compliance.