Tourism in the Philippines is thriving, thereby creating a rising demand for hospitality businesses. This article will guide you through the process of setting up a guesthouse, resort, or a hotel in the Philippines.
Table of contents
Tourism in the Philippines
In January 2017, tourist arrivals to the Philippines in one month reached a record high of 631,639, according to Trading Economics. Moreover, the Department of Tourism recently stated that more than 6.6 million tourists set their foot on the soil of the Philippines last year which is 11% more than in 2016.
Requirements for guesthouses, resorts, and hotels in the Philippines
The minimum capital requirement in the Philippines
The general minimum capital requirement for establishing a foreign company in the Philippines is US$200,000. However, depending on your business activities and the percentage of foreign equity, this requirement can also be higher or lower.
For example, retail trade companies with foreign equity need US$ 2.5 million of minimum paid up capital. Also, you might need to invest a lot more in some hospitality businesses, such as resorts.
As an alternative to a foreign company, you can also set up a local company which can be established with a significantly lower capital requirement. In the Philippines, a company is considered locally-owned when at least 60% of the shares are held by locals.
This advantageous opportunity drives many investors to turn to nominee shareholders when choosing their market entry strategy. However, make sure that the agreements between you and the nominee shareholder are revised by legal advisors. Emerhub can assist you with these contracts.
Read more about the minimum capital requirement in the Philippines.
Foreign ownership of housing businesses in the Philippines
The government understands the importance of foreign direct investment (FDI) in the Philippines and therefore, allows foreign investors to set up 100% foreign-owned companies in the Philippines, including businesses in the hospitality industry.
Some industries, however, are reserved for Filipinos and the foreign ownership is limited by the Foreign Investment Negative List.
How to set up a hotel in the Philippines
#1 Incorporation of a company in the Philippines
The process of company registration in the Philippines starts with verifying your company’s name and preparing the documents for the Securities and Exchange Commission and finalizes with tax and employee registration.
The process of registering a company in the Philippines usually takes 4-5 weeks.
Emerhub can prepare your documents and fully handle the process of company registration on your behalf so you can focus on developing your strategies instead of dealing with paperwork and learning local regulations.
Read more on how to set up a corporation in the Philippines.
#2 Environmental Compliance Certificate
Before your hospitality business can operate in the Philippines, it also needs to acquire an Environmental Compliance Certificate (ECC).
An ECC is necessary for certifying that your business activities will not cause any negative effect on the environment. In general, the Department of Environment and Natural Resources and the Environmental Management Bureau will issue the certificate within 30 working days.
There is a list of requirements on what you need to provide when applying for an ECC, including:
- Project description
- Environmental impact and management plan
- Geotagged photographs of the project site
- Affidavit of no complaint
Foreign land ownership in the Philippines
“Can foreigners own land in the Philippines?” is one of the most frequent questions among foreigners looking to invest in the area.
By the real estate law, foreign nationals cannot own land in the Philippines. The Investor’s Lease Act, on the other hand, allows foreign investors to lease land in the Philippines for up to 75 years.
In case of tourism projects, however, the investment must be at least US$ 5 million, 70% of which you need to realize within 3 years from the start of the lease contract.
If a corporation wishes to purchase land in the Philippines, a Filipino needs to own at least 60% of the shares. Fortunately, there are also a few exceptions to this 60/40 domestic corporation requirement.
On the contrary to highly regulated land acquisition in the Philippines, however, foreign nationals can buy buildings and condominiums on their own.
We have further explained the topic in our previous blog post about land acquisition in the Philippines.
Tax incentives in the Philippines
Also, make sure that you check the available tax incentives when embarking upon the process of registering your hospitality business in the Philippines. This way you will ensure that you maximize the benefit of doing business in the Philippines.
Emerhub can help to determine whether your business could be eligible for tax incentives the Philippines offers for tourism businesses.
Get started with setting up a resort or a hotel in the Philippines
Contact our consultants via the form below to start with setting up a tourism business in the Philippines. Emerhub will help you make a successful market entry to the Philippines.