How to Form a Holding Company in the Philippines for Multiple Businesses and Properties

A holding company is an entity created primarily to own shares in other companies and/or hold title to assets such as real estate, investments, and intellectual property. In the Philippine setting, a well-structured holding company can simplify management of multiple businesses, centralize family wealth, ring-fence risks, and support tax-efficient succession planning—provided it is formed and operated correctly.

This article lays out the legal, regulatory, tax, and practical considerations for forming a Philippine holding company that will own multiple operating companies and properties.

1. What a Holding Company Is (and Is Not)

1.1 Core Function

A holding company (often called a “holdco”) controls or materially influences other companies by owning their shares. It may also own properties directly and lease them to operating companies (opcos) or third parties.

1.2 What Makes It a “Holding Company”

Philippine law does not create a special “holding company” type. The label comes from what the corporation does, not how it is registered.

1.3 Typical Uses

Group structure: One parent owning multiple subsidiaries.
Asset protection: Properties placed under holdco, operations under separate opcos.
Succession planning: Heirs inherit shares of holdco instead of many scattered assets.
Capital raising / joint ventures: Easier to bring in investors at subsidiary level.
Tax planning: Potential use of dividends and intercompany arrangements.

1.4 What It’s Not

Not a way to evade taxes or creditor claims.
Not automatically exempt from regulation.
Not a substitute for proper corporate governance.

2. Legal Basis and Governing Law

The main laws and rules you’ll encounter:

Revised Corporation Code (RCC) – governs corporate formation, powers, governance, and reporting.
Securities and Exchange Commission (SEC) regulations – registration, reportorial requirements, corporate restructuring.
National Internal Revenue Code (Tax Code) as amended – income tax, VAT, withholding, documentary stamp taxes, transfer taxes.
Local Government Code – business permits, real property tax.
Foreign investments laws (if foreign ownership is involved):
- Foreign Investments Act
- Public Service Act, Retail Trade Liberalization Act, etc.
- Constitutional limits on land ownership and certain industries.
Anti-Dummy Law – prohibits arrangements that circumvent foreign ownership limits.

3. Choosing the Right Entity for Your Holding Company

You generally have these options:

3.1 Domestic Stock Corporation (Most Common)

Best for: multiple shareholders, family groups, investor-ready structure.

Key features:

Separate legal personality.
By default, perpetual existence.
Flexible capitalization.
Can own shares of other corporations without special licensing.

3.2 One Person Corporation (OPC)

Best for: single owner who wants a holding vehicle.

Key features:

One stockholder (natural person, trust, or estate).
Requires a nominee and alternate nominee for continuity.
Not allowed for certain regulated industries, but fine for holding subsidiaries and property.

3.3 Partnership

Best for: very small groups with high trust.

Downsides:

Less standard for multi-company control.
Greater personal exposure unless limited partnership is used.
Harder to scale and transfer.

Practical reality: For a holding company, a corporation or OPC is usually superior.

4. Capital Structure, Ownership, and Control Planning

4.1 Minimum Capital

There is no universal minimum paid-up capital for most domestic corporations (unless you’re entering a regulated industry). However, banks, insurance, lending, and some sectors impose high minimum capital under special laws.

4.2 Share Class Planning

Holding companies often use:

Common shares for voting control.
Preferred shares for economic benefits without control.
Non-voting shares for estate planning.

This allows control to stay with key founders while distributing economic rights to family members or investors.

4.3 60/40 Filipino Ownership Rules

If subsidiaries are in industries with foreign ownership limits (e.g., landholding, natural resources, public utilities), the holding company’s ownership must respect these limits at each relevant level.

Important: A foreigner cannot indirectly own land through a Philippine corporation if doing so breaches constitutional limits.

5. Step-by-Step: Forming the Holding Company

Step 1: Decide the Structure

Sketch the target setup:

Holding company
Subsidiaries (existing or to be formed)
Properties to be held (directly or via property subsidiaries)

Step 2: Prepare Incorporation Documents

For a stock corporation or OPC, you need:

Articles of Incorporation
Bylaws (not required at filing for OPC, but governance rules still matter)
Treasurer’s affidavit (for regular corp)
Undertaking to change name if required by SEC
Cover sheet, forms required by SEC’s system

Your Articles should include:

Primary purpose that includes holding shares and/or owning and leasing property.
Secondary purposes if you plan to do financing, leasing, management services, etc.

Step 3: Reserve Name with SEC

Reserve a corporate name through SEC’s online system and ensure it is distinctive.

Step 4: File with SEC and Obtain Certificate of Incorporation

Once approved, SEC issues:

Certificate of Incorporation
SEC registration number

Step 5: Post-SEC Registrations

After SEC approval:

Barangay clearance
Mayor’s/Business permit (even for holding companies, usually required if there is an office or revenue activity)
BIR registration (Form 1903, 0605, etc.)
- Authority to print receipts/invoices (if earning revenue)
- Books of accounts
SSS / PhilHealth / Pag-IBIG (if you will have employees)

6. Bringing Existing Businesses Under the Holding Company

Once the holdco exists, you have several legal routes:

6.1 Share Swap / Stock Transfer (Most Common)

Owners transfer their shares in opcos to holdco in exchange for holdco shares, or by sale.

Documents:

Deed of Assignment/Sale of Shares
Board and stockholder approvals (of opco and holdco)
Stock certificates reissued to holdco
Update of stock and transfer book

Tax points:

Possible capital gains tax if sold.
Documentary stamp tax on share transfer.
If structured as tax-free exchange and qualified under the Tax Code, capital gains may be deferred subject to BIR requirements.

6.2 Subscription by Holdco (If You’re Increasing Capital)

Opcos issue new shares, and holdco subscribes.

Tax points:

Documentary stamp tax on original issuance.
No capital gains tax because issuance is not a sale.

6.3 Merger or Consolidation (Advanced)

Holdco merges with opcos or consolidates them for group simplification.

Requires:

SEC merger plan approval
Appraisals (if assets involved)
Notice to creditors
Special tax rulings if you want tax-free treatment

This is powerful but paperwork-heavy.

7. Moving Real Properties Into the Holding Company

There are two main approaches:

7.1 Hold Properties Directly Under Holdco

Owners transfer title to holdco.

Methods:

Sale
Donation
Contribution as capital

Tax and fees you must plan for:

Capital gains tax or corporate income tax on gains (depending on seller)
Documentary stamp tax (DST) on deed
Transfer tax (local)
Registration fees (Registry of Deeds)
Potential VAT if property is ordinary asset of a VAT-registered seller and within VAT scope

7.2 Create a Property Subsidiary

A separate “propco” holds title; holdco owns propco shares.

Pros:

Isolates property risk and liabilities.
Easier to sell property by selling propco shares instead of transferring title.

Cons:

Additional compliance and cost.

8. Tax Treatment of Holding Companies

8.1 Corporate Income Tax

Holdco is taxed like any normal corporation:

On income such as dividends, interest, rent, management fees, gains on sale of shares or property.

8.2 Dividends from Domestic Subsidiaries

Dividends received by a domestic corporation from another domestic corporation are generally exempt from income tax (intercorporate dividends). This is a core advantage of a holding company structure.

8.3 Dividends from Foreign Subsidiaries

Usually taxable as income, unless protected by tax treaties or special regimes.

8.4 VAT

Holdco may be VAT-registered if it provides taxable services (e.g., management services, leasing). Pure dividend income is not subject to VAT.

8.5 Withholding Taxes

Intercompany payments must follow withholding rules:

Rent paid to holdco
Management fees
Interest on intercompany loans

Mismanaging withholding taxes is one of the top BIR risk areas for groups.

8.6 Transfer Pricing

If transactions between holdco and subsidiaries are not at arm’s length, BIR can adjust income. This matters for:

Management fees
Shared services
Intercompany loans
Lease arrangements

8.7 Tax-Free Reorganizations

Certain transfers of shares/assets to a holdco can qualify as tax-free exchanges. This requires meeting statutory tests and often entails applying for BIR confirmation.

9. Corporate Governance and Compliance

9.1 Board Structure

For regular corporations:

at least 2 incorporators and directors, up to 15
directors must own at least 1 share each

For OPC:

single director (the owner)

9.2 Consolidated Group Governance

Good practice:

Holdco board oversees strategy, capital allocation, and risk.
Subsidiary boards handle operations within limits.
Written group policies on dividends, funding, and approvals.

9.3 SEC Reportorial Requirements

Expect to file annually:

General Information Sheet (GIS)
Audited Financial Statements (AFS)
Other disclosures if applicable

Failure results in penalties and possible revocation.

9.4 BIR and LGU Compliance

Annual ITR and AFS attachments
Withholding tax returns
VAT returns (if registered)
Local business tax, RPT if holding property

10. Risk Management and Asset Protection

10.1 Liability Separation

Keep operations and risky activities in subsidiaries. Holdco should be lean and policy-driven.

10.2 Avoid “Piercing the Corporate Veil”

Courts may disregard separation if:

Holdco is used to defraud creditors
Subsidiaries are mere alter egos
Corporate formalities are ignored

How to avoid this:

Separate bank accounts and books
Proper intercompany contracts
Board approvals and minutes
Adequate capitalization at subsidiary level

11. Foreign Ownership and Property Restrictions

11.1 Land Ownership

Only Filipino citizens and corporations with at least 60% Filipino ownership can own land. If the holdco will own land directly, it must be Philippine-owned within constitutional limits.

11.2 Indirect Ownership Rules

Layering corporations does not escape restrictions. Regulators and courts look at beneficial ownership and control.

11.3 Industries with Limits

If subsidiaries operate in partially nationalized sectors, check allowable foreign equity and whether different tests apply (capital vs voting).

12. Succession and Estate Planning Benefits

Holding companies are popular for family groups because:

Heirs inherit shares, not fragmented properties.
Easier to impose family governance via bylaws and shareholder agreements.
Enables orderly buy-sell and exit rules.

Common tools:

Shareholder agreements
Voting trusts
Preferred shares for income distribution
Restrictions on share transfers

13. Common Mistakes to Avoid

Vague corporate purpose (causing regulatory issues when buying subsidiaries/property).
Skipping tax planning before transfers (leading to surprise CGT/DST liabilities).
Under-capitalizing subsidiaries, making holdco liable in substance.
No intercompany documentation (BIR disallowances).
Letting holdco run operations directly, blurring liability lines.
Ignoring foreign ownership and land rules.
Late SEC/BIR filings, generating penalties.

14. Practical Variations of Holding Company Structures

14.1 Classic Group

Holdco → multiple opcos Holdco owns shares only; properties are in a propco.

14.2 Property-First

Holdco owns key real estate and leases to opcos. Pros: asset insulation. Cons: leasing income triggers tax and compliance.

14.3 Hybrid with Family Layers

Family members hold shares in family holdco → which owns operating holdco → which owns opcos Used when families want governance separation.

15. Frequently Asked Questions

Q: Can a holding company have no revenue? Yes, if it only receives dividends. But it still must file required SEC and BIR reports.

Q: Do I still need a Mayor’s Permit if I’m just holding shares? Often yes if there is a registered office and any activity. Some LGUs allow minimal-activity classification, but practice varies.

Q: Is it better to hold property directly or through a property subsidiary? Direct ownership is simpler; a property subsidiary improves risk isolation and makes future sale by share transfer easier.

Q: Can I form a holding company to reduce taxes? A holdco can be tax-efficient legally (e.g., intercorporate dividends), but improper structuring can increase taxes. Planning matters.

Q: Can foreigners be part of the holding company? Yes, subject to ownership limits affecting what the holdco and its subsidiaries can legally own/do.

Closing Note

Forming a Philippine holding company is legally straightforward, but transferring businesses and properties into it is where most legal and tax complexity sits. The right structure depends on the nature of your businesses, whether land is involved, family or investor goals, and your long-term exit or succession plan. A careful, staged implementation with complete documentation is the difference between a holding company that protects and streamlines wealth—and one that creates avoidable tax exposure and compliance risk.