There are several vehicles to start your business here in the Philippines. One of the most popular methods is to set-up and incorporate a domestic stock corporation. A corporation is a common medium of doing business because it has several advantages, one of which is the limited liability of stockholders –– stockholders of a domestic corporation are only liable up to extent of their investment.

Potential incorporators and businesses face the problem of not knowing the administrative requirements of setting up a corporation, as it requires maneuvering through the different Philippine government agencies. The Revised Corporation Code (Republic Act No. 11232) was also recently passed into law last February 2019. This development changed the market entry requirements for corporations at the Securities and Exchange Commission (SEC).

This a brief guide of setting up and incorporating a stock corporation in the Philippines, taking into mind the Revised Corporation Code:

Pre-incorporation matters

  • Determine who will be the incorporators (those who will originally form the corporation). Any person, partnership, association or corporation, singly or jointly with others, but not more than fifteen (15) can be an incorporator of a corporation. Each incorporator must own or be a subscriber to at least one (1) share of the capital stock.
  • Reserve a corporate name at the SEC. You have to ensure that your planned corporate name is: (1) not distinguishable from another that is already reserved or registered for the use of another corporation; (2) or if such name is already protected by law; or (3) when its use is contrary to existing laws, rules or regulations. Think of at least three (3) corporate names, create an account at the SEC Company Registration System, and reserve your corporate name. This reservation is good for 30 days.
  • Obtain a business address.
  • Draft the articles of incorporation and bylaws. The articles of incorporation would state the prospective corporation’s: (1) name, (2) corporate purposes, (3) principal address, (4) term of existence, (5) incorporator details, (6) directors’ details, (7) capital stock, (8) written undertaking to change the corporate name in the event that another entity has acquired a prior right, among others. It is highly recommended to engage the services of a lawyer in drafting these important documents. The bylaws contain the internal procedures of the corporation relating to meetings, quorums, modes of voting, qualifications of directors, list of corporate officers, and other matters for the proper and convenient transaction of corporate affairs.
  • Pay the fees to the SEC. There are fees for: filing the articles of incorporation, legal research, filing the by-laws, and verification and reservation of the corporate name.
  • Submit the requirements to the SEC and wait for the issuance of the Certificate of Incorporation. The SEC will also issue a pre-registered Tax Identification Number (TIN) to the corporation, once approved.

Post-incorporation matters

The Certificate of Incorporation is the metaphorical “birth” of the corporation. However, there are required permits and governmental clearances before one can engage in business through a corporation.

Local Government Permits

  • Barangay Clearance. The barangay is the smallest administrative division in the local government of the Philippines. Each unit may require different documents before a clearance may be issued, but as a general rule, these might be required:
    • SEC Certificate of Incorporation;
    • Approved articles of incorporation;
    • Location map;
    • Transfer Certificate of Title or notarized lease over the premises; and
    • Barangay clearance fee.
  • Community Tax Certificate (CTC). The CTC is an annual fee assessed by local governments for individuals and businesses living or operating within their territorial jurisdiction. There is a basic Five Hundred Peso (PHP500.00) fee for corporations,
  • Mayor’s Permit. Just like the barangay, every jurisdiction’s requirements differ. As a general guideline, the following may be required:
    • SEC Certificate of Incorporation;
    • Location map;
    • Barangay Clearance;
    • Building Permit;
    • Certificate of Occupancy;
    • Fire Safety Inspection Certificate; and
    • Sanitary Permit;
  • Business Permit. This can be obtained from the Business Permit and Licensing Office of the City or Municipal Hall. The requirements vary per jurisdiction, but the documents for the Mayor’s Permit may be referred to as a general guideline. The fees also vary per jurisdiction.

Bureau of Internal Revenue (BIR)

  • Pay the Documentary Stamp Tax (DST) for the original issue of shares. Time is of the essence for this step, as the DST must be paid within five (5) days after the close of the month of the date of registration before the SEC as shown in the Certificate of Incorporation/Certificate of Recording/License to Do Business in the Philippines.
    • Under the Tax Reform for Acceleration and Inclusion Act (TRAIN Law), the DST for original issue of shares shall be Two Pesos (PHP2.00) on each Two Hundred Pesos (PHP200.00), or fractional part thereof, of the par value of the shares of stock.
    • Failure to pay the DST within the deadline subjects the corporation to a 12% interest, 25% surcharge, and a compromise penalty.
  • Obtain a BIR Certificate of Registration. Register as a taxpayer within the Revenue District Office where the corporation will conduct business. The following are needed:
    • Duly accomplished BIR Form 1903 (Application for Registration);
    • Duly accomplished BIR Form 0605 (Payment Form) and pay Five Hundred Pesos (PHP500.00);
  • Apply for an authority to print receipts or invoices. You will need to accomplish BIR Form 1906 (Application to Print Receipts and Invoices), and submit your BIR Certificate of Registration. You will be issued an Authority to Print, which should be submitted to an accredited printer. The BIR will give you of a list of authorized printers.
  • Register your books of accounts. You will be advised by the BIR to have books of accounts such as ledgers, journals, etc. Have these stamped, and record your financial transactions in these.
  • Attend a mandatory taxpayer’s briefing. The BIR will require new registrants to attend a short seminar to inform them of the necessary tax returns that are needed to be filed.

Employment permits and clearances

  • Philippine labor laws require employers to register their employees with the:
    • Social Security System (SSS);
    • Philippine Health Insurance Corporation (PhilHealth); and
    • Home Development Mutual Fund (Pag-IBIG).
  • If foreign nationals will be employed by the company:
    • Obtain an Alien Employment Permit (AEP) from the Department of Labor and Employment; and
    • Apply for a work visa from the Bureau of Immigration.

Business Name

  • Register with the Bureau of Trade Regulation and Consumer Protection. Corporations must register with the said office, if it plans to use a business name that is different from its registered business name before the SEC or the BIR. This includes a different business name that may is written or printed on any agreement or business transaction, and any sign or billboard conspicuously exhibited in plain view in its place of business.

If you need help in registering or incorporating a corporation in the Philippines, you may email the attorneys at inquiries@sblaw.ph.

Sanchez &Bongalon is headed by a Pampanga lawyers in Angeles City, Pampanga, Philippines. You may contact the attorneys at +63 927 423 1703 (Globe) | +63 949 717 9229 (Smart) for any queries. If you wish for a personal consult, send a text or email to set a meeting at Workspace45, 2nd Floor, HTPT Building, MacArthur Highway, Angeles City, Pampanga, Philippines 2009.