Doing Business License Philippines: A Guide for Foreign Corporations

A foreign corporation that wants to operate in the Philippines must first register with the Securities and Exchange Commission (SEC) under the Revised Corporation Code, and it must confirm that its planned activity is open to foreign equity under the Foreign Investment Negative List. Registration is not automatic: the SEC issues a licence to do business only after the applicant shows that the activity is permitted, that the required Filipino ownership is met where applicable, and that the supporting documents are complete.

What counts as doing business in the Philippines

The Foreign Investments Act of 1991, as amended, defines doing business broadly. It covers soliciting orders, entering service contracts, opening offices such as liaison offices or branches, appointing representatives or distributors under the foreign corporation's full control, and participating in the management, supervision or control of a domestic business.

A foreign entity that stays in the country for a total of one hundred eighty (180) days or more in any calendar year while carrying on those activities is also treated as doing business.

The law also lists acts that are not considered doing business. These include mere investment as a shareholder in a duly registered domestic corporation, having a nominee director or officer, appointing a representative or distributor who transacts in its own name and account, publishing a general advertisement, keeping stock in the Philippines solely for processing by another entity, consignment of equipment for processing products for export, collecting information, and performing services auxiliary to an isolated contract of sale.

The Foreign Investment Negative List

Before registering, a foreign corporation must check whether its intended activity appears on the Foreign Investment Negative List. The list identifies areas of economic activity where foreign ownership is limited to a maximum of forty percent (40%) of the equity capital of the enterprises engaged in them.

If the activity is on the list, the foreign corporation cannot hold the restricted level of equity and must either restructure its participation or choose a permitted activity. If the activity is not on the list, foreign equity may generally be fully allowed, subject to the requirements of the Revised Corporation Code and other special laws.

Steps to secure a doing business licence

1. Confirm the activity is open to foreign equity. Review the Foreign Investment Negative List for the specific business.
2. Verify and reserve the corporate name with the SEC. Under the Revised Corporation Code, a name may be reserved if it is distinguishable from names already reserved or registered, is not protected by law, and is not contrary to law, rules and regulations.
3. Prepare and file the registration documents. Submit the articles of incorporation and bylaws, together with the required supporting papers, to the SEC.
4. Secure the certificate of incorporation. The SEC issues the certificate once it finds the documents and information fully compliant with the Revised Corporation Code and other relevant laws.
5. Obtain the licence to do business. A foreign corporation registers as doing business in the Philippines under the Revised Corporation Code; the SEC issues the corresponding licence once the requirements are satisfied.
6. Secure local permits. Register with the city or municipal government through its Business Permits and Licensing Office, and with the Bureau of Internal Revenue and other agencies as applicable.

Registration and commencement of corporate existence

Under the Revised Corporation Code, a private corporation organised under the Code begins its corporate existence and juridical personality on the date the SEC issues the certificate of incorporation under its official seal. The incorporators, stockholders or members and their successors then constitute a body corporate under the name stated in the articles of incorporation.

The SEC may disapprove articles of incorporation or an amendment if they do not comply with the Code. Among the grounds are failure to follow the prescribed form, purposes that are patently unconstitutional, illegal, immoral or contrary to government rules and regulations, a false certification on subscribed or paid capital, and non-compliance with the required percentage of Filipino ownership under existing laws or the Constitution.

Ease of doing business safeguards

The Ease of Doing Business and Efficient Government Service Delivery Act of 2018 and its implementing rules require agencies to simplify requirements and procedures, reduce red tape, and expedite business-related transactions. The rules define a Business One Stop Shop as a single site or online portal designated for a local government's Business Permit and Licensing System, where applications are received and processed and approved licences, clearances, permits or authorisations are issued.

These rules also require agencies to publish a Citizen's Charter describing the requirements, procedure, responsible officers, maximum processing time, fees and complaint procedure for each service. A primary licence is defined as the privilege evidenced by a certificate or document issued by a licensing authority permitting an applicant to engage, operate or start a business.

Frequently asked questions

Do I need a licence to do business in the Philippines as a foreign corporation? Yes. A foreign corporation carrying on business in the Philippines must register with the SEC under the Revised Corporation Code and secure the corresponding licence to do business.

What is the difference between a branch office and a representative office? A branch office carries out the business activities of the head office and derives income from the host country. A representative or liaison office deals directly with the parent company's clients but does not derive income from the host country and is fully subsidised by its head office.

How do I know if my business is open to foreign ownership? Check the Foreign Investment Negative List, which identifies activities where foreign ownership is limited to a maximum of forty percent (40%) of equity capital.

Practical takeaways

• Confirm your activity is not restricted on the Foreign Investment Negative List before committing to a structure.
• Register with the SEC under the Revised Corporation Code; corporate existence begins on the date the certificate of incorporation is issued.
• Expect the SEC to scrutinise Filipino ownership percentages where the Constitution or special laws require them.
• Use the Business One Stop Shop and the agency Citizen's Charter to track requirements and processing times.
• Keep documentary proof of capital, ownership and the scope of activities, since these are the usual grounds for disapproval.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 11232 - AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES

• IRR REPUBLIC ACT NO. 11032 (CSC, ARTA, DTI Joint Memorandum Circular No. 2019-001) - THE IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 11032 OTHERWISE KNOWN AS THE "EASE OF DOING BUSINESS AND EFFICIENT GOVERNMENT SERVICE DELIVERY ACT OF 2018"

• IRR OF REPUBLIC ACT NO. 11647 - IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 11647 OR AN ACT PROMOTING FOREIGN INVESTMENTS, AMENDING THEREBY REPUBLIC ACT NO. 7042, OTHERWISE KNOWN AS THE "FOREIGN INVESTMENTS ACT OF 1991", AS AMENDED, AND FOR OTHER PURPOSES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.