Types of Business in the Philippines for Foreign Investors

For foreign investors, entering the Philippine market begins with understanding the types of business entities available and the regulations governing foreign ownership. The structure you choose determines how your business operates, from ownership and control to taxation, compliance, and liability.

This guide outlines the main entity options for foreign individuals and companies, helping you make informed decisions.

Types of Business Entities For Foreign Individuals

If you are a foreign investor or company planning to establish a separate legal entity in the Philippines (a subsidiary), there are two primary business structures available: a Foreign-Owned Domestic Corporation (FODC) and a One Person Corporation (OPC). Each option differs in ownership control, liability protection, and regulatory obligations. Choosing the right structure is essential to ensure compliance, maximize control, and align with your long-term business goals.

Domestic Corporation

A domestic corporation is a separate legal entity that provides limited liability to its shareholders. It can be Filipino-owned or foreign-owned, depending on the shareholding composition. Foreign investors often choose this structure because it allows access to investment incentives from agencies like BOI or PEZA, depending on the company’s activities and location.

However, domestic corporations generally require USD 200,000 in paid-in capital. This can be reduced to USD 100,000 if the company employs at least 50 Filipino workers or uses advanced technology.

Key requirements for establishing a domestic corporation include:

• Minimum of two incorporators (individuals or entities).
• At least one resident director.
• SEC and BIR registration, plus local business permits.

If foreign ownership of the corporation exceeds 40%, the entity becomes a Foreign-Owned Domestic Corporation (FODC), which is subject to the FIA and FINL. This structure is commonly used for export-oriented or long-term operational ventures seeking stability and control in the Philippine market.

One Person Corporation (OPC)

An OPC allows a single shareholder, whether an individual, trust, or estate, to form a corporation with limited liability. This structure combines the flexibility of sole ownership with the protection of a corporate entity. It requires a nominee and alternate nominee election to ensure business continuity in case of the shareholder’s death or incapacity. Additionally, it requires a minimum capital, typically starting at PHP 100,000 (~USD 1,750), but this varies based on industry. 

One Person Corporations are suitable for startups, small-scale ventures, or pilot projects that want a streamlined setup without multiple incorporators, as they offer full control with simplified management. However, it should be noted that this structure is not allowed in certain industries like banking and insurance. 

Foreign Corporations Licensed in the Philippines

Foreign investors who already have companies operating overseas can expand into the Philippines without forming a new domestic corporation. Instead, you can consider establishing offices that are extensions of your parent company, with full control and liability, such as the following:

Branch Office

A branch office is an extension of your foreign corporation that can conduct commercial activities and generate income in the Philippines. Setting up a branch office requires an SEC license to operate, along with the appointment of a resident agent in the country. The branch must also have a minimum inward remittance of USD 200,000 to serve as its starting capital.

Profits earned by the branch can be repatriated to the parent company. This structure is suitable for foreign investors looking to directly engage in the Philippine market without forming a separate domestic corporation.

Representative Office

For those whose primary focus is on non-income-generating activities such as liaison work, market research, promotional initiatives, or quality control, a representative office is a suitable entity. Like a branch, it must register with the SEC and remit a minimum of USD 30,000 to cover operating expenses. 

Since this structure cannot earn income, it is exempt from local income tax, making it a low-cost option for investors looking to establish a presence in the Philippines. It can be used to assess opportunities before you commit to full-scale commercial operations.

Regional Operating Headquarters (ROHQ)

An ROHQ enables a foreign company to coordinate, support, and provide administrative or technical services to its regional affiliates, subsidiaries, or branches from the Philippines. Establishing an ROHQ requires SEC registration and a minimum inward remittance of USD 200,000, along with annual reporting to the SEC and the Bureau of Internal Revenue (BIR).

The ROHQ is subject to a 10% preferential corporate income tax on income derived from services provided to its affiliates. However, it cannot engage in commercial trade or provide services to third parties in the general Philippine market. Its activities are limited to intercompany services such as technical support, administrative assistance, training, consultancy, or business coordination.

This structure is suitable for multinational companies looking to centralize their regional operations or support operations in the Philippines while maintaining a cost-efficient and legally compliant structure for limited-income activities.

Joint Ventures

For foreign investors who prefer to collaborate with local partners with a combination of capital, expertise, and market access, a joint venture is preferable. This structure is often applicable for entering industries that impose foreign equity restrictions under the FINL, or when local knowledge is critical for business success.

There are two main types of joint ventures in the Philippines:

• Contractual Joint Venture: This setup formation is purely through an agreement between parties, without creating a separate legal entity. Each participant remains individually liable according to the terms of the contract. It is typically for short-term projects or collaborations that do not require a permanent corporate presence.
• Corporate Joint Venture: Registered as a Philippine domestic corporation with the Securities and Exchange Commission (SEC). Even if it is majority or wholly foreign-owned, it is governed by Philippine corporate law, not by foreign entity regulations. Industries covered by the FINL must still comply with applicable equity limits.

To form a joint venture, both parties must create a comprehensive Joint Venture Agreement (JVA) that clearly outlines capital contributions, profit-sharing arrangements, management responsibilities, and exit mechanisms for all parties involved. 

For corporate joint ventures, the JVA determines the minimum paid-up capital but must comply with SEC capitalization requirements for domestic corporations.

Key Investment Laws for Foreigners in the Philippines

One of the key investment laws that you should keep in mind is the Foreign Investments Act (FIA), as amended by RA 11647. It liberalized foreign ownership rules, allowing up to 100% foreign ownership in most industries not listed under the Foreign Investment Negative List (FINL). The amendment has also introduced a simplified registration process for foreign SMEs and tech startups that meet specific innovation or employment thresholds. 

To further streamline investment facilitation, the amendment established the Inter-Agency Investment Promotion Coordination Committee (IIPCC), tasked with coordinating the efforts of different government agencies involved in promoting and regulating foreign investments.

Investment Promotion and Tax Incentives for Foreign Entities in the Philippines

The Philippine government actively promotes foreign investment through a range of tax incentives and fiscal programs designed to reward performance and long-term contribution to the country.

Under the CREATE Act (RA 11534), the corporate income tax reduction is to 25% for large corporations and 20% for qualified SMEs. At the same time, the Act reformed the country’s incentive framework, making it performance-based, targeted, and time-bound.

Businesses can now qualify for fiscal incentives such as income tax holidays, enhanced deductions, or preferential tax rates based on specific performance metrics like export growth, local employment, innovation, or technology transfer.

The Fiscal Incentives Review Board (FIRB) governs these incentives from investment promotion agencies such as:

Board of Investments (BOI)

Registering with the BOI is suitable for companies in priority sectors like manufacturing, renewable energy, and IT services. Under the CREATE Act and Strategic Investment Priority Plan (SIPP), BOI-registered companies can qualify for target fiscal incentives, such as:

• Income Tax Holidays (ITH) for 3 to 8 years, depending on location and industry.
• Duty-free importation of capital equipment and raw materials.
• Enhanced deductions or preferential tax rates after the ITH period.
• Access to government support programs, including training, infrastructure facilitation, and export assistance.

Philippine Economic Zone Authority (PEZA)

The incentives under PEZA are for export-oriented manufacturers and IT enterprises operating within designated economic zones and IT parks. PEZA-registered companies can enjoy:

• Income Tax Holidays (ITH) for 4-6 years, followed by a special 5% tax on gross income earned (GIE) in place of all national and local taxes (subject to CREATE transition rules).
• Exemptions from import duties and VAT on capital equipment, raw materials, and supplies.
• Simplified customs procedures and fast-track visa processing for foreign executives and technical personnel.

These incentives significantly lower operating costs and make the Philippines an attractive destination for both manufacturing and service-based investments.

How Emerhub Supports Your Market Entry Into the Philippines

Navigating business registration, compliance, and operational setup in the Philippines can be a complex ordeal, especially if you’re new to the market. Emerhub’s local experts ensure a smooth and efficient process, providing advice and strategizing your market entry into the Philippines. 

Our services include:

• Company Registration and Licensing: Handles SEC registration, obtaining local permits, and compliance with any sector-specific regulations.
• Structuring Entities and Contractual Agreements: Structuring joint ventures, setting up your branch offices, and drafting contractual agreements with local partners.
• Accounting and Tax Services: Corporate tax registration, bookkeeping, BIR filings, and compliance with guidance on tax incentives.
• HR and Payroll Support: Payroll management, accurate social security contributions, statutory benefits compliance, and staff onboarding.
• Ongoing Compliance and Reporting: Handling annual reports, board resolutions, and other regulatory filings while keeping your business fully compliant with local laws.

Planning to invest in the Philippines? Reach out to our business consultants for expert guidance on the best structure, compliance, and incentives for your business.