For investors and businesses aiming to establish a presence in the Philippines, the domestic corporation is one of the most widely used business structures. To navigate the process effectively, understanding the key features of a domestic corporation is crucial to ensure legal compliance and unlock business opportunities. In this article, we will provide an overview of the essential aspects of domestic corporations, including their types based on ownership, requirements, and the registration process.
What is a Domestic Corporation in the Philippines?
Under the Revised Corporation Code of the Philippines (R.A. 11232), a domestic corporation is defined as a company incorporated under Philippine laws and required to have its principal office within the country. It is taxed on income generated from within the Philippines. This structure offers limited liability, similar to an LLC or PLC in other countries, where the company’s rights and obligations are separate from its shareholders.
Domestic corporations can be fully Filipino-owned, fully foreign-owned, or joint ventures.
Types of Domestic Corporations in the Philippines Based on Ownership Structure
A domestic corporation’s ownership structure is determined by the percentage of foreign equity, influencing compliance and the industries it can operate in. Based on ownership, there are three main categories:
Fully Filipino-Owned Domestic Corporations
These corporations are entirely owned by Filipino citizens, with 100% local ownership. They enjoy unrestricted participation in most business sectors and have access to government incentives for local enterprises.
Foreign-Owned Domestic Corporations (More Than 40% Foreign Equity)
These corporations have foreign ownership exceeding 40%. They are allowed to operate in various industries unless restricted by the Foreign Investment Negative List (FINL). For example, industries such as small-scale mining and private security services are off-limits to foreign ownership.
Examples of sectors open to foreign ownership (over 40%) include:
Wholesale trade
Manufacturing (except sectors related to natural resources)
Internet and e-commerce
Wellness centers
Lending, financing, and investment companies
IT businesses
BPO (Business Process Outsourcing)
Tourism and hospitality (e.g., hotels, resorts, travel agencies)
Domestic Corporation with Less Than 40% Foreign Equity
These companies are considered Filipino-owned for regulatory purposes. They allow foreign investment in industries where foreign ownership is capped. For instance, a company with less than 30% foreign equity can enter the advertising sector, which is otherwise closed to fully foreign-owned corporations.
If you are unsure about where your planned activities fit, local experts can help assess eligibility requirements for full or partial foreign ownership under the FINL and guide you through the incorporation process.
Legal Requirements for Establishing a Domestic Corporation in the Philippines
When setting up a domestic corporation in the Philippines, several legal requirements must be met:
Corporate Structure
A domestic corporation must have at least four key officers:
President: Oversees operations.
Corporate Secretary: Must be a Filipino citizen residing in the Philippines.
Treasurer: Manages the corporation’s finances.
Compliance Officer: Ensures adherence to legal and regulatory standards.
Capital Requirements
The minimum capital requirements depend on the level of foreign equity and the industry:
Filipino-Owned Corporations: Minimum capital of USD 100 (PHP 5,000).
Foreign-Owned Corporations: Minimum paid-up capital of USD 200,000, reduced to USD 100,000 if the business employs at least 50 workers or uses advanced technology.
How to Register Your Domestic Corporation in the Philippines?
SEC Registration
Submit essential documents like the Articles of Incorporation, By-Laws, and Treasurer’s Affidavit to the Securities and Exchange Commission (SEC). After approval, the SEC issues the Certificate of Incorporation.
Tax Registration
After SEC registration, the corporation must obtain a Taxpayer Identification Number (TIN) from the Bureau of Internal Revenue (BIR) and comply with tax obligations, including VAT, withholding taxes, and filing requirements.
Obtain a Business Permit
Secure a Mayor’s Permit from the local government unit (LGU) where the business will operate. This involves submitting the application form, SEC registration, and proof of business address or lease agreement.
Acquire Additional Permits and Licenses
Certain industries require extra permits, such as environmental clearances or specialized licenses. For companies employing foreign workers, experts can help secure work permits.
Post-Registration Compliance
After incorporation, ongoing compliance is necessary, including:
Annual Filings: Submit audited financial statements and general information sheets to the SEC.
Tax Filings: File monthly, quarterly, and annual returns with the BIR.
Corporate Records: Keep updated books and minutes.
License Renewals: Ensure timely renewal of licenses and permits.
Register Your Domestic Corporation in the Philippines with DV Consulting
DV Consulting assists investors and entrepreneurs with setting up and expanding businesses in markets such as the Philippines, Malaysia, Indonesia, Thailand, and Vietnam. Our local experts manage the company registration process and secure necessary licenses and permits, helping you operate in full compliance with local laws.
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