Dezan Shira in the Philippines

Dezan Shira & Associates have maintained an Alliance partner in The Philippines since 2013 and provide pre-entry advisory, corporate establishment, tax planning, accounting, compliance and audit services throughout the country, managed from offices in Manila. Our Alliance Partner firm employs numerous local legal, tax, accounting and audit staff to support this function and are one of the largest firms in the city.

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Regional Intelligence: The Philippines

The Philippine Islands became a Spanish colony during the 16th century; they were ceded to the U.S. in 1898 following the Spanish-American War. In 1935, the Philippines became a self-governing commonwealth and on July 4, 1946 the Republic of the Philippines attained its independence. The 20-year rule of Ferdinand Marcos ended in 1986, when a “people power” movement in Manila forced him into exile and installed Corazon Aquino as president. Her presidency was hampered by several coup attempts that prevented a return to full political stability and economic development. The country saw increased stability and progress on economic reforms throughout the 1990s and was one of the few economies to avoid contraction following the 2008 global financial crisis. The Philippines faces increased tension with China over disputed territorial and maritime claims in the South China Sea.

The economy has weathered global economic and financial downturns better than its regional peers due its minimal exposure to troubled international securities, lower dependence on exports, relatively resilient domestic consumption, large remittances from four to five million overseas Filipino workers, and a rapidly expanding business process outsourcing industry. Efforts to improve tax administration and expenditure management have helped ease the Philippines’ tight fiscal situation and reduce high debt levels. The country has received several credit rating upgrades on its sovereign debt, and has had little difficulty tapping domestic and international markets to finance its deficits. On average, depending on the type of business, it takes 34 days to set up a business in the Philippines

The government in Manila has also been working to boost the budgets for education, health, cash transfers to the poor, and other social spending programs, and is relying on the private sector to help fund major infrastructure projects under its Public-Private Partnership program. Long term challenges include reforming governance and the judicial system, building infrastructure, improving regulatory predictability and the ease of doing business, and attracting higher levels of local and foreign investment. However, the Philippine Constitution and other laws continue to restrict foreign ownership in important activities/sectors such as land ownership and public utilities.

The Philippines has eight SEZs or free port areas, 17 specific agri-business zones and a further 250 proclaimed economic zones spread throughout the country. These mainly come under the jurisdiction of the Philippine Economic Zone Authority.

Please find the full contact information of our Asian Alliance Partner in the Philippines here.

Dezan Shira Asian Alliance Member in the Philippines

The Machica Group
Unit 1101 Cityland 10 Tower 1,
156 H.V. dela Costa Street,
Ayala North, Makati City, Manila, 1209,
The Philippines

204 P. Burgos Street,
Brgy. 23-A,
Tacloban 6500
The Philippines

Tel: +63 2 562 8190
Cell: +63 917 3060208
Email: Philippines@dezshira.com
Regional Contact Person: Michael Machica - Partner, Operations

The Philippines’ Bureau of Immigration is responsible for processing and issuing visa requests in the country. For foreigners seeking employment in the Philippines, there are three eligible non-immigrant visa types. These are:

  • 9(A): Short-term business visit
    • The 9(A) visa covers any short-term business activity pursued by a foreign worker in the Philippines and is valid for 59 days. The Bureau of Immigration on a case-by-case basis will grant an “Extension of Authorized Period of Stay” approval for those individuals seeking a longer visit.
  • 9(D): Foreign treaty trader or foreign investor
    • The 9(D) visa covers two types of activities by foreigners: international trade and investment. A treaty trader is anyone engaging in cross-border trade with the Philippines and is subject to existing trade treaties. A foreign investor is any nonlocal engaged in the financing and operation of a Filipino business enterprise.
  • 9(G): Pre-arranged employment
    • The 9(G) visa covers any foreign national seeking long-term employment in the Philippines. The applicant’s employer must submit an Alien Employment Permit request with the Bureau of Immigration before a 9(G) visa will be issued.
  • Special Investment Visa
    • There are two special visa categories for foreign nationals involved in investment or endorsed businesses within the Philippines. The Pro-Investment Visa Upon Arrival program allows Board of Investment approved employees to receive a visa upon arrival in the Philippines for a duration of 30 days to six months. The Special Investors Resident Visa (SIRV) will be awarded to foreign nationals who have invested US$50,000 or more in tourism and retirement park projects

For individuals planning to visit the Philippines for 30 days or less, no visa is required, but trips in excess of 30 days will require a valid visa. Visa applications can be made through any Filipino Consular Office or by submitting a notarized application via mail to the Philippine Consulate General prior to travel or at the Bureau of Immigration upon arrival.

Investment Vehicles Available to Foreign Investors

The Philippines allows 100 percent foreign ownership in almost all sectors as well as offering a Build-Operate-Transfer (BOT) investment scheme that other Asian countries emulate. State-owned enterprises are being privatized and the banking, insurance, shipping, telecommunications, aviation, mining, and power industries have been deregulated. Incentive packages include a reduced corporate income tax, 32 percent, and companies in the Special Economic Zones (Eco Zones) subject to only five percent overall tax rates. Multinationals looking for regional headquarters are entitled to incentives such as tax exemptions and tax and duty-free importation of specific equipment and materials

The Philippines allows the following investment vehicles:

  • Single proprietorship
    • A business with a single owner and not registered as a corporation, partnership or limited liability company. A sole proprietor can work as an independent contractor or operate a small business.
    • Required capital: US$200,000
  • Branch office
    • A foreign-organized corporation that is registered in the Philippines under existing foreign laws. A branch office should carry out the business activities of its parent company, and is authorized to earn income from its operations inside and outside the Philippines. Its main purpose is to provide marketing, sales, or customer assistance to new and existing customers of its parent corporation.
    • Required capital: US$200,000, which can be reduced to US$100,000 if (a) activity involves advanced technology, or (b) company employs at least 50 direct employees.
  • Domestic partnership
    • Treated as juridical person, having a separate legal personality from that of its members. May either be general partnerships, where the partners have unlimited liability for the debts and obligation of the partnership, or limited partnerships, where one or more general partners have unlimited liability and the limited partners have liability only up to the amount of their capital contributions.
    • There are no minimum financial investment requirements
  • Corporation
    • Juridical persons established under the Corporation Code and regulated by the Securities and Exchange Commission with a personality separate and distinct from that of its stockholders. The liability of the shareholders of a corporation is limited to the amount of their share capital.
    • Required capital: five thousand pesos (5,000).
  • Regional Operating Headquarters
    • Regional headquarters are suitable only for businesses that plan to utilize the Philippines as a manufacturing or services hub in a much larger operation
    • Required capital: US$200,000, one time remittance.
  • Regional Headquarters
    • Undertakes activities that are limited to acting as a supervisory, communication, and coordinating center for its subsidiaries, affiliates and branches in the Asia-Pacific region, acting as an administrative branch of its multinational parent company engaged in international trade.
    • Required capital: US$50,000 annually to cover operating expenses.
  • Representative office
    • An office established by a company to conduct marketing and other non-transactional operations.
    • Required to have an initial minimum inward remittance in the amount of US$30,000 to cover its operating expenses

Corporate Income Tax

  • Rate: 30 percent based on net income for resident companies, or two percent minimum corporate tax rate based on gross income. For nonresident companies, 30 percent based on gross income.
  • Residency: Considered resident if the company is carrying out business in the Philippines.
  • Compliance: Self-assessment system with the annual income tax return due on the 15th day of the fourth month following the close of the fiscal year.
  • Incentives: Certain R&D expenses are deductible, and other incentives are available for businesses in preferred areas

Indirect Tax

  • Rate 12 percent VAT.
  • Imposed on the sale of goods, services, and property, as well as the importation of goods.
  • Some goods and services are subject to zero percent VAT.

Individual Income Tax

  • Rate: Up to 32 percent.
  • Employers are required to deduct a certain amount from the salary of each employee for the Social Security Fund and Medicare System.

TAX TREATIES

You can find extensive collection of Philippines’ tax treaties from our Knowledge Sharing Platform.

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