How to Start a Dropshipping Business in the Philippines

In a study by We Are Social and Meltwater, more than half of Filipinos connected to the internet make at least one online purchase per week. This amounts to PHP 487.5 billion (USD8.24 billion) worth in sales from electronics, food, and fashion purchased online. 

Due to this large market for online shopping, many local and foreign investors are entering the dropshipping business in the country. It’s an easier way to break into the e-commerce market, especially for beginners and foreigners. Instead of managing your own online retail business logistics and inventory, your supplier would handle it for you. 

So, how do you get started? In this article, we will cover what is the dropshipping model and what are your legal foundations for starting an online business. This includes business registration and tax filing as an online seller in the Philippines. 

How Does Dropshipping in the Philippines Work?

At its core, dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when you sell a product, you purchase the item from a third party and have it shipped directly to the customer.

Here’s how it works: 

1. A customer buys a product from your online shop for PHP1,000. 
2. You will then go to your supplier’s website to buy the exact same product for PHP600. 
3. When you order the product, you will key in your customer’s name and address. 
4. The supplier then packs the product to your customer. 
5. The customer receives the order and you keep the PHP400 different as your profit, 

In the Philippines, this model is particularly attractive because it bypasses one of the biggest hurdles in local business: logistics. Moving goods across an archipelago of 7,641 islands can be challenging especially for budding sellers. By dropshipping, you shift that burden to your supplier.

Can a Foreigner Dropship in the Philippines?

Foreigners can own a dropshipping business in the Philippines. But unlike local entrepreneurs who can register as a sole proprietor, foreigners are subject to the Retail Trade Liberalization Act (RTLA).

To own a dropshipping business as a foreigner, you must be at least one of the following: 

1. Meet Capital Requirements:  To own 100% of a retail business, you need to have a minimum paid-up capital of PHP 25 million (approx. USD450,000 USD). This is a mandatory requirement under Republic Act No. 11595. 
2. Establish Local Partnership: To bypass the capital requirements, you can have a “60/40” structure with a Filipino partner where they own 60% of the equity. 

Compliance for Specific Products in the Philippines

A key area you should know about when dropshipping in the Philippines are product-specific regulations. Some goods in the Philippines require specific licenses and approvals before you are allowed to sell them online. Here are some of the most common goods that need special requirements: 

• Cosmetics, Food, Supplements, etc.: if you are dropshipping regulated goods such as skin care, vitamins, or “organic” snacks, you are required to have a License to Operate (LTO) and a Certificate of Product Registration (CPR) form the Philippine Food and Drug Administration (FDA). 
• Electronics: this includes walkie-talkies, routers, radio-controlled gadgets. You need a permit from the National Telecommunications Commission (NTC) before you can start selling these products. 
• Trademarked Intellectual Property (IP): Selling counterfeit or “inspired” goods is illegal and will lead to an immediate ban on major platforms. Using trademarks like “Disney” or “Nike” without a license is a criminal offense under Philippine law. To protect your business and build long-term value, you must register your own brand with the Intellectual Property Office of the Philippines (IPOPHL).

Emerhub can assist you in obtaining these additional requirements for your dropshipped items in the Philippines.

Mandatory Disclosures Under RA 11967

Dropshippers in the Philippines are classified as e-retailers or online merchants under RA 11967 (Internet Transactions Act of 2023). As a dropshipper, you must comply with mandatory disclosures to protect consumers and ensure transparency. 

Here are mandatory disclosures that you should know about as an online seller:

• Core Product Disclosures: you must clearly indicate your product’s name, brand of goods/services, price, description, condition, and your contact information. Accurate descriptions prevent deceptive practices under RA 7394, covering shipping, returns, and warranties.
• Business Identity Rules: your business details such as name, physical address, contact details (email/phone), and DTI/SEC registration number must be visible to your customers. You must submit these details to the e-commerce Bureau of the Department of Trade and Industry (DTI).
• Additional protections:
  • Privacy Policy: Under the Data Privacy Act of 2012 (RA 10173), you are considered a “Personal Information Controller.” You are legally mandated to disclose what data you collect (names, addresses, phone numbers) and how you protect it. Failure to provide this transparency can lead to heavy fines from the National Privacy Commission (NPC).
  • Return and Refund Policy: The Consumer Act of the Philippines (RA 7394) explicitly forbids “No Return, No Exchange” policies for defective goods. You must provide a clear mechanism for repairs, replacements, or refunds. The DTI mandates that these policies be prominently displayed and easily accessible before a customer completes a purchase.

Local vs International Dropshipping Pathways

Part of the process for starting a dropshipping business in the Philippines is to decide where your products are coming from. This can dictate shipping times and COD viability. Your supplier can either be based locally or internationally. 

The Local Route (Shopee/Lazada/TikTok Shop)

Many Filipino dropshippers source from local wholesalers or “mega-sellers” already based in Binondo or warehouse hubs in Bulacan and Cavite. Local suppliers are ideal for beginners who want to test the waters with minimal risk or those who prioritize satisfaction through fast delivery and COD options. 

The International Route (Aliexpress/CJ Dropshipping)

This is the classic global model where you source products directly from manufacturers in China or other international hubs. It’s ideal for experienced e-commerce entrepreneurs with a high-budget marketing strategy who are looking to scale a “branded” dropshipping store or those targeting a specific niche with unique products not found locally.

Who Pays for Customs?

If you do decide to go the international route, keep in mind that the Customs Modernization and Tariff Act (CMTA RA 10863) mandates a Des Minimis rule. Importations with a value of PHP 10,000 and below are exempt from import duties and taxes. 

With this regulation, you can either do the following:

• “DDU” Approach (Delivery Duty Unpaid): This is the default for most small dropshippers. The customer is technically the importer. If the item exceeds the PHP 10,000 threshold, the courier (like DHL or FedEx) will contact the customer to pay the duties and 12% VAT before delivery.
• “DDP” Approach (Delivery Duty Paid): Some advanced suppliers offer DDP shipping. Here, the seller (you) pays the duties upfront through the supplier. This is much better for customer experience because there are no “surprise” fees at the door, but it eats into your margins.

If you decide to scale and move to a “bulk dropshipping” model (where you store some fast-moving items in a local 3PL warehouse), you will need to register as an importer with the BOC. 

This is a complex process where Emerhub can assist to ensure your goods don’t get stuck in customs. 

How to Register your Dropshipping Business in the Philippines as a Foreigner

As a foreigner, you must register your business with the Securities and Exchange Commission (SEC). Under the RTLA, foreigners are prohibited from establishing a Sole Proprietorship with the DTI available only to Filipinos. 

Step 1: Incorporating with the SEC

The incorporation process involves submitting your Articles of Incorporation and Bylaws through the SEC’s online portal (eSPARC). Foreigners can opt to register their business into: 

• One Person Corporation (OPC): This is a popular choice for solo foreign entrepreneurs. It allows you to be the sole stockholder and director, providing limited liability protection.
• Domestic Corporation: Requires at least 2 to 15 incorporators. If you have Filipino partners, this is the most common way to bypass the high capitalization requirements of the RTLA. By having a 60% Filipino-owned structure, you can operate with much lower capital.

During this stage, you must also appoint key officers. While the owner of an OPC can be the Director and President, the law requires a separate Corporate Secretary and Treasurer who must be Philippine residents. This ensures that the government has a local point of contact for legal and financial accountability, even if you are based overseas. 

Step 2: Obtaining Business Permits and Virtual Offices

Even if you are abroad, your Philippine corporation needs a registered address. Since many foreign dropshippers don’t need a physical shop, they use a Virtual Office in a major hub like Makati or BGC. This address is used to secure your:

1. Barangay Clearance: This is a certificate issued by the smallest government unit (the barangay) where your business is located. It serves as a “community-level” stamp of approval, certifying that your business complies with local neighborhood ordinances and has no pending disputes within that specific area.
2. Mayor’s Business Permit: Also known simply as a Business Permit, this is the primary license issued by the City or Municipal Hall. It is the official authorization that grants your corporation the legal right to operate within that city’s jurisdiction, ensuring you have met all local health, fire, and zoning safety standards.

If you have a warehouse or an office in the Philippines, you need additional permits from the LGU. This includes Fire Safety Inspection Certificate (FSIC) or Sanitary Clearances. You will also need additional permits for dropshipping regulated goods and electronics. 

Step 3: BIR Registration

Once you have your DTI/SEC and Mayor’s Permit, you must get your Certificate of Registration (COR) or Form 2303. This is your “license” to pay taxes. You will also need to:

• Register your Books of Accounts.
• Apply for Authority to Print (ATP) invoices/receipts (though many are moving to e-invoicing).

Keep in mind that the BIR has been very clear through the Revenue Memorandum Circular (RMC) No. 60-2020: all persons doing business online are required to register. Furthermore, Revenue Regulations (RR) No. 16-2023 now mandates that e-commerce platforms (like Shopee and Lazada) withhold a 1% tax on the gross remittances to online sellers.

Dropshipping Business Made Easy with Emerhub

The Philippine regulatory landscape is famous for being paperwork-heavy. For a foreigner, missing a single monthly BIR filing or failing to renew a Mayor’s Permit can lead to massive surcharges and even “Blacklisting” by the Bureau of Immigration.

Here’s how we can help:

• Corporate Secretarial Services: We act as your local resident agent and handle SEC filings.
• Virtual Office: We provide a prestigious Makati address for your registration.
• BOC Accreditation: We help your business become a registered importer.
• Tax & Accounting: We handle all monthly and annual BIR compliance so you can manage your store from anywhere in the world.

Start your dropshipping business in the Philippines with Emerhub! Contact our local experts for a free consultation.