A subsidiary company is a corporation in the Philippines that is majority-owned or controlled by a foreign or local parent company. Unlike a branch office, a subsidiary is considered a separate legal entity, giving it liability protection and allowing it to engage in activities independently. Registering a subsidiary in the Philippines involves several legal steps to ensure compliance with corporate, tax, and investment regulations. This guide outlines the step-by-step process to register a subsidiary company in the Philippines.
Step 1: Determine the Business Structure and Foreign Equity Restrictions
Before registering, consider the following:
100% Foreign Ownership is allowed in many sectors, but some industries have foreign ownership restrictions under the Foreign Investment Negative List (FINL).
If the parent company is foreign, check compliance with the Foreign Investments Act (RA 7042).
A subsidiary is a domestic corporation and must comply with the Revised Corporation Code of the Philippines (RA 11232).
Step 2: Reserve and Register the Business Name
Use the Securities and Exchange Commission (SEC) Name Reservation System to check and reserve the subsidiary’s corporate name.
The name should not be similar to existing entities and must comply with SEC name guidelines.
Step 3: Prepare the Required Documents
The parent company must submit several documents to the SEC:
Articles of Incorporation and By-Laws – The corporate charter outlining business structure, ownership, and operational rules.
Board Resolution or Parent Company Certification – Authorizing the creation of the subsidiary and designating representatives.
Treasurer’s Affidavit – Declaring that the required capital has been deposited.
SEC Application Form – Including details about business operations, incorporators, and shareholders.
Foreign Parent Company’s Documents (if applicable):
Authenticated copies of the parent company’s Certificate of Incorporation and By-Laws.
Board Resolution approving the establishment of the subsidiary.
Appointment of a Resident Agent (if parent company does not have a local representative).
Step 4: Capitalization Requirements
A subsidiary with 60% Filipino ownership can have a minimum capital requirement of PHP 5,000.
A wholly foreign-owned subsidiary must have a minimum paid-up capital of USD 200,000 (or USD 100,000 if it employs at least 50 Filipino workers or introduces advanced technology).
Certain industries have specific capitalization rules under the SEC and Board of Investments (BOI).
Step 5: Submit the Application to the SEC
Submit all required documents to the SEC’s Company Registration and Monitoring Department.
Pay the corresponding registration fees, which vary depending on capital stock.
Upon approval, the SEC will issue the Certificate of Incorporation, granting legal status to the subsidiary.
Step 6: Register with Other Government Agencies
Once the SEC registration is complete, the subsidiary must register with the following agencies:
A. Bureau of Internal Revenue (BIR)
Secure a Taxpayer Identification Number (TIN) and Certificate of Registration (BIR Form 2303).
Register books of accounts and official receipts/invoices.
B. Local Government Unit (LGU) Registration
Obtain Barangay Clearance from the barangay where the business is located.
Apply for a Mayor’s/Business Permit from the city or municipal hall.
Secure zoning, environmental, and fire safety permits, depending on the business type.
C. Social Security and Labor Compliance
Register with Social Security System (SSS), PhilHealth, and Pag-IBIG if hiring employees.
Comply with DOLE labor laws for employment contracts and workplace regulations.
Step 7: Compliance with Investment Incentives (If Applicable)
Foreign subsidiaries may register with the Board of Investments (BOI) or Philippine Economic Zone Authority (PEZA) for tax incentives, including:
Income Tax Holidays (ITH)
Customs duty exemptions
Reduced corporate income tax rates
Conclusion
Registering a subsidiary company in the Philippines offers numerous advantages, including liability protection, independent operations, and access to investment incentives. However, the process involves multiple regulatory steps to ensure compliance with SEC, BIR, LGU, and labor laws. Business owners and foreign investors should seek legal assistance to navigate the legal and tax complexities of setting up a subsidiary in the Philippines effectively.
Navigating the business landscape in the Philippines can be both rewarding and intricate. Whether you’re embarking on a new venture or scaling up, ensuring that your corporate endeavors are in line with local regulations is paramount.
At CBOS Business Solutions Inc., we pride ourselves on simplifying these processes for our clients. As a seasoned professional services company, we offer comprehensive assistance with SEC Registration, Visa processing, and a myriad of other essential business requirements. Our team of experts is dedicated to ensuring that your business is compliant, well-established, and ready to thrive in the Philippine market.
Why venture into the complexities of business registration and compliance alone? Allow our team to guide you every step of the way. After all, your success is our commitment.
Get in touch today and let us be your partner in achieving your business goals in the Philippines.
Email Address: gerald.bernardo@cbos.com.ph
Mobile No.: +639270032851
You can also click this link to schedule a meeting.
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