The operation by a branch of the branch office in the Philippines or any extension of your foreign corporation may prove to be difficult because of our local laws. The ease of getting the necessary certificates and licenses may facilitate their entry into the Philippines for the first time. The Branch Office, Southeast Asian Representative Office or Regional Headquarters, transacting business in the Philippines, is also subject to the jurisdiction of the Securities and Exchange Commission. Be sure to read other prerequisite requirements as established by the SEC in transacting business with your clients. Remember the first requirement, SEC will conduct a name verification so make sure beforehand that the name you have selected is reserved. After the verification, the necessary resolution or joint venture should be accomplished and later notarized.
It’s always wise and a mark of good corporate governance for a company to ensure that all existing corporate structures comply with the requisites of pertinent laws. In the Philippines, the most basic permit to secure is the business permit simply because without it, the branch could operate sub rosa and result in the undesirable consequence of being ousted by the mere disregard of legal necessity. If you’re looking to establish a branch office Philippines, our firm can help.
Understanding Business Permits in the Philippines
Foreign companies looking at establishing a presence in the Philippines can consider setting up a branch office as an option for their expansion strategy. They are a branch of their parent company in a foreign country and are allowed to partake in business activities subject to certain restrictions. The good thing about a branch office is that the foreign parent company has full control over their operations and can decide to close up shop anytime. A parent company can also establish a representative office, a domestic corporation, or a company with a 60/40 capital structure with a local partner. Unlike the domestic corporation, which has a separate legal identity from the parent company, the branch office is its parent company’s extension. For such reasons, the capital structure requirement for a branch office is flexible – there is no prescribed minimum capital requirement.
The issuance of business permits is a concern of the local government units (LGUs) in the Philippines. All businesses are required to secure one before the start of their operations. It doesn’t matter what type, business permits are a vital part of all ventures. It is essential to give due focus to this process in general because penalties for neglecting it are substantial too. Fines and penalties may be incurred if businesses open up shop without duly securing their business permits ahead of operations. Rules, requirements, and awfully hefty fees and penalties may differ from one LGU to another, so it is extremely crucial to settle this requirement well before operations commence. For more information and a consultation on a business permit for branch office, contact our team.
Legal Framework
The practice of regulated professions, including the issuance of business permits or the registration of all corporate and/or branch offices, is governed primarily by specific regulations by each of the respective professions. Large firms should ascertain whether their in-house legal department has the specific authorizations to undertake and complete registration with the SEC and secure all local and national permits necessary. Assuring that all local and national permits necessary are secured through the correct persons or authorizations will also help to protect any negotiations of concessions. Foreign non-competition regulation can also apply, in particular and depending upon the nationality of the investor. The Philippine Investment Law lists economic sectors or activities that are either reserved only to Filipino nationals or may be invested into with certain foreign equity restrictions, in the Negative List. With many options of law offices in Makati, consult FCB Law for topnotch law services.
Services Offered by FCB Law
FCB Law offers other specialized services including, but not limited to:
– Foreign Investments Act of 1991 (FIA) Cases: The Foreign Investment Act of 1991 encourages foreign investments in the country by liberalizing restrictions on foreign investors. However, this liberalization is subject to compliance with laws, morals, and public interest. FCB has represented both foreign and local corporations in these types of cases.
– Revised Rules of Procedure – SEC Cases: The Securities and Exchange Commission has the power to hear and try cases under its Revised Rules of Procedure. FCB has experience handling cases in this jurisdiction.
– STEs (Select Trading Enterprises) and Hearing Process: Select Trading Enterprises (STEs) are a special category of corporations that receive privileges such as the issuance of “indorsable” visas and working permits for foreign nationals. FCB has handled several STE and Department of Justice hearing cases.
– PEZA Registration: The Philippine Economic Zone Authority (PEZA) regulates economic zones in the Philippines. With PEZA registration, companies can enjoy fiscal and non-fiscal incentives, preferential tax regimes, and duty-free importation. FCB has extensive experience in processing different types of PEZA registrations.
Expertise in Business Permit Applications
While businesses can scour the internet for templates and DIYs that they can use in initiating their business permits project, oftentimes, securing business permits – much less securing all the necessary permits – is much more of a headache than we’d initially think. That’s the reality, though. But take caution: even specialists can confront a challenge or run into a wall. That said, availability, accessibility, and professionalism in client servicing are key factors in evaluating third-party organizations to engage in business permit applications. Know that these factors are just as critical as efficiency, accuracy or reasonableness of fee.
Business permits are necessary for the valid operations of businesses – a required legal obligation to do trade or commerce. And never take business permits lightly. The lack of a business permit disallows or significantly limits your options in running your business. Business permits are issued at the Local Government Unit (LGU) level, through mostly the Business Permit and Licensing Office (BPLO).
Recently, the Philippines government has cracked down on companies abusing provisions of the Philippines Rental Act, known as Batas Pambansa Blg. 881. Until recently, a company complacent with abiding by the rules for one of the exceptions available to foreign companies had operated on a notion that it was free from the Rental Act. It believed that it could enter into long-term rental contracts, commercial or technical assistance agreements, or other business relationships with related or unrelated parties, which could receive compensation for the full usage of goods or services. While these activities may have been lawful in accordance with other laws of the Philippines, the set-up as previously designed, proposed, or implemented was in conflict with the requirements under the Rental Act. These now have ramifications, particularly as regards the legality of the rental charges that were incurred by parent or sister companies based outside the Philippines.
Nevertheless, the LGU is acting in their capacity to regulate businesses operating within their jurisdiction. Remember, the revenues from business permit fees are generally not included in the IRA of the LGU. Know that you are contributing to help keep your city up and running, as cities are semi-autonomous, and the revenues generated stay within the city, to be able to deliver services to businesses and residents as well. At the end, securing a BP is yet another cost and an inconvenience. That said, not following the correct procedures may lead to the closure of your business. If you are ever in doubt about what to submit or about the process, do not hesitate to reach out to your local government business permitting division for clarification.
In the end, the business permit is the document issued by your LGU, which legally allows the existence of another establishment, in your case, a branch. Safeguard this blue-bordered certificate and have it prominently displayed in your office, as many customers or clients will not want to deal with a company that does not have the proper documents. Knowing this, the process of finally securing this business permit may be tedious and cumbersome. You will be required to submit documents, attend meetings, and of course, pay fees and taxes. For some, it may seem like a hassle, knowing you have already secured a lot of paperwork with the BIR, SEC, or DTI, then the bank, and these are all required by the LGU. It seems unfair and inequitable that they should ask you for still more.
Once all the necessary data has been collected, the investor should file the outbound form with the Bureau of Internal Revenue (BIR). The BIR will charge a minor amount of fees for the official receipts and a Documentary Stamp Tax. The data collected may then be brought to the DTI or the SEC to enable these bodies to issue the necessary licenses to the factory. Upon receiving the DTI or the SEC documents, the trading permit will be afterwards applied in the Ministry of Trade and Industry (DTI) for Filipinos who are involved in trading and in the SEC for foreign corporations that will interact in trading.
Many entrepreneurs from foreign countries will find that doing business in the Philippines is both rewarding and profitable with the rise of the country’s economy. However, a number of requirements will also face them before they may conduct their business. One of these involves getting a business permit for their branch office. Here is a summary of the points one needs to start with and all the information one needs when applying for a business permit for one’s branch office in the Philippines. The company website details to the local barangay hall. If the company is a corporation, a corporate secretary needs to issue and notarize the Secretary’s Certificate stating the board of the company. If there are any, one shall also record the identities of the individual foreign employees assigned to the Philippines.
