Register a Representative Office – Philippines
A Representative Office in the Philippines is a business structure that acts as a local liaison office for a foreign corporation that seeks to establish a corporate presence in the country without engaging in income-generating activities.
The foreign corporation is referred to as the parent company and its head office fully subsidizes the operating expenses and incurs all the liabilities of the representative office in the Philippines.
Representative offices are considered extensions of foreign corporations and do not have a separate legal personality from their parent companies. The laws governing their formation, existence, and dissolution are the laws of the country where their parent companies were organized or established.
They are not allowed to generate income in the Philippines and offer services to third parties. Hence, their parent companies are required to remit at least US$30,000.00 every year to support their operations as well as cover their operating expenses.
Under Philippine laws, a representative office is only allowed to engage in the following activities:
Registration Requirements for a Representative Office in the Philippines
Foreign corporations are only allowed to do business in the Philippines through a representative office after obtaining a License to Do Business in the Philippines from the Securities and Exchange Commission (SEC). To secure a License to Do Business, a foreign corporation needs to provide the following documentary requirements:
Since none of its income is generated in the Philippines, it is exempted from paying income and value-added taxes to the taxing authority in the country – the Bureau of Internal Revenue (BIR). It is, however, subject to withholding taxes on its remittances to its parent company and employee compensation.
A consequence of its tax exemption is that it is not qualified to apply for fiscal and non-fiscal tax incentives from the Board of Investments (BOI) or Philippine Economic Zone Authority (PEZA).
As a cost center, a representative office is an ideal business structure for foreign companies that want to reduce costs in the countries where they operate. They can transfer their back office, customer service, IT and technical support, administrative operations, and product marketing platform to the Philippines through a representative office.
Many foreign corporations often choose between a representative office and a branch office when planning to set up operations in the Philippines. Both business entities operate as extensions of their head offices from abroad and possess the same legal personalities as their parent companies. But unlike representative offices, a branch office is allowed to generate income in the Philippines and do business in the same manner as its head office (under conditions allowed by Philippine laws).