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Today, the Philippine economy is the second fastest growing economy in all of Asia. The Philippines is literally experiencing an economic sprint, with annual GDP growth above six percent per year for four consecutive periods.
So what does the Philippines offer for business?

The Philippines has many trade agreements with neighboring countries that entrepreneurs can use to their business advantage. This allows the Philippines to reduce costs and simplify access to surrounding markets.

Why you should consider the Philippines as an investor

The Philippines is experiencing economic growth that will continue. The Philippines thus becomes a suitable destination for investment or for the transfer of already existing business activities. The Philippines is a member of the Association of South Asian Nations, which also helps business. The Philippines offers an educated, English-speaking workforce.

If you are already familiar with the tax system in the Philippines, you probably know that the basic rate for corporate income tax is set at 30%. It is therefore one of the highest tax rates globally. But the important thing is that for newly registered companies it is possible to take advantage of the tax breaks offered by the Philippine government. The government offers concessions for up to 6 years and that is quite a long time
to save you a lot of money.

Another relief worth mentioning is the exemption of dividends from withholding tax, but this only applies to resident companies or individuals. For foreign companies, the withholding tax rate is 30 %, which can be reduced to 15 % under certain conditions.

Another good news is the existence of many double taxation treaties. An important advantage for all traders with foreign partners and clients. Knowledge of VAT is important, the basic rate of which in the Philippines is 12 % and all entities with an annual turnover exceeding 1,919 million pesos (that's about 42,500 US dollars) must register for it.

Before you start registering your company in the Philippines, you need to familiarize yourself with the following

  • All companies must apply for a license at their local SEC (Securities and Exchange Commission) office
  • The company is required to have a Philippine address, keep accounts and file tax returns.
  • Incorporating a company in the Philippines requires five founding members and Filipinos must form the majority.

Apart from the above conditions and limitations, the Philippines is an interesting growth environment with great potential for investors and entrepreneurs.

Despite clear accolades of economic success, the Philippines remains the country with the largest gap between rich and poor in the region. The Philippines also ranks at the bottom of the World Bank's Doing Business 2017 index, which points to ongoing problems for foreign investors in the country. Here, the Philippines ranks 99th, in the bottom half of the countries ranked, and is getting worse. The „Starting Business“ category is especially problematic, which is confirmed by many entrepreneurs' experiences. Starting a company and doing business in the Philippines is so demanding that the various bureaucratic requirements literally „mummify“ the entrepreneur in a network of regulations, requirements or corruption.

Nevertheless, the economic potential of the country, which became part of the ASEAN Economic Community at the end of 2015, is obvious. The combined ASEAN market already has a larger GDP than India.

The Philippine economy itself is expected to be among the 30 largest economies in the world by 2028, which, in addition to economic growth, also contributes to the rapid growth of the country's popu­lation. The horizon of ambition was outlined by HSBC's analysis, which predicts that the Philippines will become the world's 16th largest economy by 2050.

Basic information

  • Type of legal entity: limited liability company
  • Establishment period: 15 working days
  • Number of shareholders: minimum 1, maximum not specified
  • Shareholders: they can be FO or business entities
  • Share capital: non-citizens must deposit a minimum of $200,000
  • Shares on bearer: not allowed
  • A registered address in the Philippines is required
  • Local registered agent is required
  • Directors: the minimum is 1, a natural person
  • Director residency: one of the directors must reside in the Philippines

Taxation

  • Corporate income tax is 30 %
  • Branch tax rate 30 %
  • Dividend tax rate is 0% for local owners, 30 % for foreign owners
  • Capital gains tax is 5 %-10 %
  • Net operating losses can be carried against income for 3 years forward
  • The standard rate of VAT (Goods and Services Tax) is 12 % for most goods and services. Certain goods and transactions are exempt from tax
  • VAT registration is mandatory if the company's taxable turnover in the last 12 months exceeded PHP 1,500,000 (approx. EUR 29,000)
  • Double taxation agreements with 39 countries applied, reducing tax rates on dividends, interest and royalties
  • Accounting. Accounting and preparation of accounts is necessary, filing of tax return is necessary
  • An audit is required if the company has an annual revenue exceeding SGD 5 million
  • Anonymity and privacy. Information about administrators and shareholders is published in the company register

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