July 16, 2015 | Sharon Cheong
The Philippines has experienced a stable growth rate at around 6% along with other Southeast Asian countries. That's because the Philippines offers so many unique opportunities for investors and expat entrepreneurs looking to form an offshore company. The island nation has much to offer, including beautiful natural resources and areas that are fully westernized. Whether you're looking a good place to retire and build a profitable small business or it's just time to expand your business, the Philippines is a good choice.
Though the country currently has an investment grade rating, many investors and expat entrepreneurs are not sure how to get started. What are the first and most important steps? The process is actually fairly straightforward if you understand government regulations in the Philippines, but newcomers are often perplexed. That's why it can be very beneficial to hire a local consultant to ensure that you follow all laws and get the right paperwork submitted.
An investment visa can cost around $75,000 but it is not necessary to have one in order to open your own business. Some business types only cost a few hundred dollars to open. Of course, the fees and regulations vary based on the size and type of business you're opening. Foreigner business owners do have a different set of restrictions to abide by. For instance, they're not allowed to own real estate except for condos.
Step One: Reserve a Name
The first step to opening a business in the Philippines is to reserve your company name at the Securities and Exchange Commission (SEC). This is usually the first step in any country. SEC's website will do a search of the name you choose and let you know if it's already in use. This can take a day or two. It's best to have a back-up business name in case your initial name is taken.
Step Two: Open a Business Account
Deposit the required capital at the bank. The amount will depend on many factors. If you're confused about this, then ask a local accountant to help you find out how much money is required and get the account set up properly. As you move forward, little mistakes such as depositing the wrong amount can be costly, taking extra time and work.
Step Three: Barangay Clearance
This can be confusing to newcomers, but it's actually very simple. Go to your local Barangay office and fill out the application. The application will ask for all the standard info. It will also ask why you need a barangay clearance. There are a few documents to submit, such as the SEC Certificate of Incorporation and your company bylaws and articles of incorporation. The application will want general information about your business. There is a fee that must be paid at the time of your application and each district in the Philippines can set their own rates.
Step Four: Taxes
The Community Tax Certificate (CTC) must be obtained from the City Treasurer's Office. The amount of tax is assessed using several factors. One is the type of company structure. A sole proprietorship is generally a lower rate than a corporation. Taxes are charged at the formation of your company and then annually after that. It's best to hire a pro to make sure taxes are paid in full and on time.
Step Five: Business Permits
The Licensing Office or BPLO will issue your company the correct permit(s) to do business. They also issue other permits, such as electrical inspections, fire safety, location clearance, mechanical permits and many others. The fees vary depending on the nature of your business and occupied land area. You must have your barangay clearance in order to get this permit to operate.
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