The legal requirements for starting a business in the Philippines depend on its

type of business and industry. Partnerships and corporations are required to

be registered with the Securities and Exchange Commission (SEC), while
single proprietorship businesses are not. Proprietorships are instead required
to register with the Department of Trade and Industry (DTI) for the registration
of their business name.

The DTI certificate of registration only registers the “trade name” of a

business but not the business itself. This doesn’t also give anyone a
license to commence their business operation as they still need to obtain
official receipts and invoices to issue to their customers. Furthermore,
they still need to register with other government offices to comply with
their requirements before business operation.

Basic requirements

The following are the basic requirements to start commencing your

business in the Philippines:

1. SEC registration – for registering as a partnership or corporation

2. DTI registration – for registering your business trade name (BTR)

3. Mayor’s business permit – for getting the license to operate in the city
or municipality and payment of your local business taxes.

4. BIR registration – for getting TIN, official receipts and invoices,

registering your books of accounts, and paying your national internal
revenue taxes (Income tax, VAT or Percentage Tax, Withholding Taxes,
etc.,

5. SSS, PhilHealth, and Pag-Ibig Fund registration – for registering

yourself or company as an employer and for remitting your employees’
contribution together with your employer’s share.
Usually, the BIR and the City/Municipality Office require the certificates
of registration with the SEC or DTI before a business can be registered
with them. Thus, you need to register through those offices to start
commencing your business.

In early 2012, the government has launched the Philippine Business

Registry (PBR) system – a one-stop shop for entrepreneurs who need to
register with the various government agencies, such as the DTI, SEC,
BIR, SSS, Pag-Ibig Fund and Philhealth. However, this service is only
available to a few cities in Metro Manila and is not yet available
nationwide.

Special requirements

Aside from the basic requirements, there are also special licenses or
registrations that must be obtained by a business to start its operation.
For example, banks, financing company, lending company, pawnshops,
money changers, money remittance business, and other financing
institutions are required to be registered with the Bangko Sentral ng
Pilipinas (BSP). If you are manufacturing and selling products related to
food and drugs, you also have to register with Bureau of Food and Drugs
(BFAD). For schools and entities involved in providing education, they
should register with the Commission on Higher Education (CHED) and
Department of Education (DepEd).

Starting a Business in Philippines as a Foreigner – A Complete

Guide
 General Overview

As a newly industrialized country, the Philippines is still an economy with a large

agricultural sector; however, services have come to dominate the economy. Much of
the industrial sector is based on processing and assembly operations in the
manufacturing of electronics and other high-tech components, usually from foreign
multinational corporations.
Agriculture employs 32% of the Filipino workforce and this is according to World Bank
statistics. Agriculture accounts for 12% of Philippines GDP as of 2013, according to the
World Bank. The type of activity ranges from small subsistence farming and fishing to
large commercial ventures with significant export focus. The Philippines is the world’s
largest producer of coconuts producing 19,500,000 tons in 2009.
Coconut production in the Philippines is generally concentrated in medium-sized farms. By
1995, the production of coconut in the Philippines had experienced a 6.5% annual growth and
later surpassed Indonesia in total output in the world. The Philippines is also the world’s largest
producer of pineapples, producing 2,198 thousand metric tons in 2009. Other products include
rice, rubber etc.
The Philippines is also a major player in the global shipbuilding industry with shipyards in
Subic, Cebu, General Santos City and Batangas. It became the fourth largest shipbuilding nation
in 2010. Subic-made cargo vessels are now exported to countries where shipping operators are
based. South Korea’s Hanjin started production in Subic in 2007 of the 20 ships ordered by
German and Greek shipping operators. The country’s shipyards are now building ships like bulk
carriers, container ships and big passenger ferries. General Santos’ shipyard is mainly for ship
repair and maintenance.
Facts and Figures That Will Interest as an Investor/Entrepreneur in Philippines
If you are a Filipino expatriate (expat) who wants to start business in the Philippines or a
foreigner who wants to invest in Philippine business, there are few things that you need to know
about the business laws and regulations in the Philippines.
Be sure to take of these things to save you from business headache and lawsuits that could result
from ignoring them. Here are some points that you need to consider:

1. A foreigner cannot form a solely owned business in the Philippines without a heavy investment
(for a corporation, you are looking at USD$200,000).
2. A foreigner can have up to 40% ownership in a corporation – minimum capital to start a
corporation is only Pesos 5,000 (approximately USD $1,000).
3. The best way to be in business in the Philippines is to be married to a Filipina who holds
ownership of the proprietorship, or form a corporation with a Filipina spouse with you owning
40% and she owning 60%.
4. You also enter into a corporation with 40% ownership with a Filipina girlfriend or a Filipino
friend – but consider the huge risk of having no control over your fellow majority stock owner(s).
5. Depending on the purpose of the corporation (such as purchase of a real estate – land or house),
it might still make sense that when the property is sold you would be entitled to your share of
the proceeds.
6. There is one exception whereby you CAN become a 100% owner of a corporation and that is if
the corporation is formed to purchase land, or your other shareholder is your spouse, and she
dies. Under this arrangement, as the heir to your deceased spouse, you are able to retain 100%
ownership of the property.

Factors that Encourages You to Invest in Philippines

  This nation is becoming attractive for investment, experts say, as the economy grows and large
corporations expand operations there. When it comes to emerging markets, the average
investor is focused on Brazil, Russia, India and China – known as the BRIC countries. But some
smaller developing countries are also worth a look as they pull ahead in terms of economic
growth and attract booming industries.
 One notable example: The Philippines grew its gross domestic product 7.2 percent in 2013, and
the country has trumped India as the leading destination for call centres. Large corporations
including JP Morgan Chase and Procter & Gamble recently expanded operations there.
 Unlike residents of many other emerging markets, Filipinos speak English fluently, and the
country supplies low-wage workers that appeal to large companies growing their operations
overseas. These factors make the Philippines an attractive area.
 What sets [the Philippines] apart is an improved political environment. President [Benigno S.
Aquino III’s] reform agenda has paid dividends in the last couple years,” “They imposed new
taxes, such as sin taxes on tobacco and alcohol, raising money that can be redeployed into
infrastructure.”
 New infrastructure attracts global businesses and bodes well for the Philippines’ tourism
industry, which is underdeveloped. The country has also been insulated from some of the
effects of international market downturns thanks to the number of remittances it receives from
citizens living abroad.

Economic Analysis
The Philippine economy has been growing steadily at an average annual rate above 6 percent for
the past five years. The government has pursued legislative reforms to enhance the
entrepreneurial environment and develop a more vibrant private sector to generate broader-based
job growth. Despite some progress, poor infrastructure remains a serious impediment to
economic growth.

 2016 Economic Freedom Score: 63.1 (up 0.9 point)

 Economic Freedom Status: Moderately Free
 Global Ranking: 70th
 Regional Ranking: 14th in the Asia–Pacific Region
 Notable Successes: Monetary Freedom and Management of Public Finance
 Concerns: Rule of Law and Labour Freedom
 Overall Score Change Since 2012: +6

Overcoming lingering institutional challenges will require a deeper commitment to reform.

Although the perceived level of corruption has declined, more effective anti-corruption measures
need to be institutionalized. The judiciary remains susceptible to political interference and does
not provide dependable enforcement of the law.
Corruption and cronyism are rife in business and government. A few dozen leading families hold
a disproportionate share of land, corporate wealth, and political power. A culture of impunity,
stemming in part from case backlogs in the judicial system, hampers the fight against corruption.
The rule of law is generally weak as courts are hampered by inefficiency, low pay, intimidation,
and corruption.
Possible Challenges and Threats of Starting a Business in Philippines
The Philippines’ newly industrialised economy has been tipped as being among the most
promising in the world, but doing business can a tricky task without the help of local experts.
With the 12th largest population and the 43rd largest economy in the world, the Philippines
certainly has the scope for development. Included in Goldman Sachs’s Next Eleven economies
among the likes of Mexico, South Korea and Turkey, there has been a tremendous transition over
the 21st century from an agricultural base to a service-based economy.
But despite the many modernisations undertaken by the country, the World Bank and
International Finance Corporation (IFC) rank the Philippines in 138th place (out of 185
economies) for ease of doing business, highlighting the importance of local knowledge. Few
challenges include

 Hierarchy
 Making decisions
 Personal relationship
 Face
 Time

Starting a Business in Philippines as a Foreigner – Legal Aspect

 License and Permits You Need to Do Business in Philippines

People do business to make a living, serve their community, and pursue their dreams. It is good
to hear a person who’s taking risk to start his or her business, whether small, medium or big.
However, the process of starting and registering a business can be one of the most crucial stages
of doing business.
Getting the right permits and licenses should be done before running a business; otherwise, you
may end up operating a business without a license, which can be punishable under certain
business laws. That is why if you are an aspiring business person or entrepreneur, and if you
want to conform to the government’s rules on establishing and legalizing a business, you have to
be aware of the following list of business permits and licenses in the Philippines.

1. Barangay Clearance – The barangay clearance is a certificate that your business complies with
the requirements of the barangay where your business is located. To get a barangay clearance,
you may visit the barangay office where your business is located.
2. DTI Business Name (BN) Registration Certificate – This is the certificate of registration of your
business trade name. It gives you the power to use your registered business trade name for
business operation. It also protects your business name against being used and registered by
other business establishments.
3. SEC Certificate of Registration – Corporations (stock or non-stock) and partnerships have to
secure a certificate of incorporation or certificate of partnership with the Securities and
Exchange Commission (SEC) to be considered as legal or juridical entities. These certificates are
also used as a requirement for registering with the BIR, Mayor’s Office, and other government
offices. Take note that sole proprietorship businesses are not registered with SEC, but they are
registered with the DTI.
 4. Mayor’s Business Permit– Businesses have to secure a Mayor’s Business Permit or the Local
Government Office where their business are located and operated. Requirements in obtaining a
Mayor’s Business permit vary from different cities or municipalities. This permit is also a
requirement by the BIR in issuing a BIR certificate of registration.
5. BIR Certificate of Registration. Any business must be registered with the Bureau of Internal
Revenue to comply with the Philippine tax requirements. BIR registration will assign a TIN
(Taxpayer Identification Number) to the company or business owner, will give the business
authority to print its official receipts and invoices, and registered its books of accounts.
6. SSS Employer’s Registration. Republic Act No. 8282 or otherwise known as the Social Security
Act of 1997 requires businesses or business owners who use the services of another person or
employees in business, trade, industry, or any undertaking to be registered with the SSS (Social
Security System).
7. PhilHealth Employer’s Registration. All businesses and employers are also required to register
with PhilHealth to enable them to provide social health insurance coverage to their employees.
8. Pag-IBIG Employer’s Registration. Employers also have to register with the Home Development
Mutual Fund (HDMF) to secure their Pag-IBIG Employer ID Number and to provide the required
benefits to their employees, who should be Fund members.
9. DOLE Registration. Businesses with five or more employees are encouraged to register with the
Department of Labour of Employment (DOLE) for the purpose of monitoring their compliance
with labour regulations. For companies with 50 or more workers, they are required to register
with DOLE, under the Bureau of Local Employment which administers the registration of
establishments.

There are maybe other business permits that are required for certain types of businesses aside
from what we have listed and mentioned above. Moreover, please remember that legalizing your
business doesn’t only extend to registering it and securing a license or permit.
The Best Legal Entity for Starting a Business in Philippines

 Sole proprietorship

This is a business structure owned by your spouse who has full authority in her own name and
owns all the assets. However, she also will owe and answer personally to all liabilities or suffer
all losses, but enjoys all the profits. It is easy to form and simple to register with the government.

 Partnership

This is a business structure owned by two or more partners. One with more than Pesos 3,000
capital has to register with the Securities and Exchange Commission. All the partners have
unlimited personal liability for the affairs of the business. There is no benefit to you as a
foreigner with this form of ownership by your spouse.

 Corporation

This is the preferred form of ownership if the business is going to be anything larger than a small
hobby type business. For a small business, you are best off just being in a sole proprietorship –
due to the low cost and ease of formation and its relative freedom from regulation by the
government.
However, for a business of any significance (a real estate ownership business, a franchise, a
significant manufacturing or export business, etc.), this is definitely the preferred form of
ownership, and you as the foreigner can retain up to 40% ownership.
Minimum paid up capital requirement for a Philippine business is Pesos 5,000 and it is regulated
by the Securities and Exchange Commission. The shareholders/owners liability is simply limited
to their amount of the share capital. There must be at least five (5) incorporators, each of which
must hold at least one share. So what you do, for example, is issue 56 shares to your spouse, 4
shares to her relatives, and 40 shares to yourself.
Legal documents You Need to Run a Business in Philippines

1. SEC registration – for registering as a partnership or corporation

2. DTI registration – for registering your business trade name (BTR)
3. Mayor’s business permit – for getting the license to operate in the city or municipality and
payment of your local business taxes.
4. BIR registration – for getting TIN, official receipts and invoices, registering your books of
accounts, and paying your national internal revenue taxes (Income tax, VAT or Percentage Tax,
Withholding Taxes, etc.).
5. SSS, PhilHealth, and Pag-Ibig Fund registration – for registering yourself or company as an
employer and for remitting your employees’ contribution together with your employer’s share.
6. Usually, the BIR and the City/Municipality Office require the certificates of registration with the
SEC or DTI before a business can be registered with them. Thus, you need to register through
those offices to start commencing your business.

List of Government Agencies and Parastatals that are In-charge of Registering businesses
and Issuing Licenses and Permits in Philippines

1. BIR (Bureau of Internal Revenue)

Who needs to register?

 Individual
 Sole Proprietorship
 Corporation/Partnership

It all starts with the BIR. You cannot operate your business without your business tax
identification number (TIN). You need to do these at the BIR

 Register your business establishment and all its branch offices, if any. You do this at the BIR
Revenue District Office (RDO) in the place where your business is located. Once you obtain your
Certificate of Registration, you must display it in a conspicuous place within your business
establishment.
 Register your books of accounts. You accomplish this at the same RDO.
  Request for permit to print and issue receipts and invoices. You must thereafter post a notice in
your business premises stating that your establishment issues receipts; and that if no receipt is
issued by the cashier, then the customer must ask for one.

2. DTI (Department of Trade and Industry)-: Before you can conduct business in the country, you
need to register a name associated to your business. This is called business name registration
(BNR). This is required if a person will use a name other than his true name.

3. SEC (Securities and Exchange Commission)

The SEC is an agency under the Philippine Department of Finance that is responsible for
regulating the securities industry. It supervises all registered business entities in the country (with
the power to suspend and revoke registrations), investigate violations of securities laws and
impose sanctions, and make policies with regard to the market in securities. It also supervises
stock and bond brokers as well as the stock exchanges.

4. PEZA (Philippine Economic Zone Authority) /BOI (Bureau of Immigration)

PEZA is handled by the Department of Trade and Industry. The PEZA and BOI are focused on
businesses that are export-oriented, specifically in designated Special Economic Zones. The BOI
is the primary agency responsible for investment promotion in the country and offers a wide
range of incentive schemes for both Filipino and foreign investors.

5. Local Barangay-: You need to secure a company barangay clearance first in the barangay where
your business will be operating. It is also a requirement when registering for a Mayor’s Permit.

6. City Hall

A Business Permit is sometimes also referred to as a Mayor’s Permit, because it is processed at

the City Hall – the office of the mayor. Securing a business permit from the Mayor’s Office can
only be done after accomplishing two other registrations: The registration of your business with
the Department of Trade and Industry or DTI (for single proprietorship) or with the Securities
and Exchange Commission or SEC (for partnership or corporation.

7. SSS/PHILHEALTH/PAG-IBIG

The term “employee” denotes any person legally employed in the Philippines, any person
compulsorily covered by the GSIS under the Commonwealth Act 186, or any person
compulsorily covered by the SSS under Republic Act 1161. Such employee is automatically
covered for these government mandated employee benefits. This includes self-employed
individuals or freelancers.