Philippine Forms - DOING BUSINESS IN THE PHILIPPINES

DOING BUSINESS IN THE PHILIPPINES

What this is For:

A CHECKLIST

The checklist serves as a general guide for investors in preparing the requirements for doing business in the Philippines.

Also included in this checklist are agencies and their contact information. It is advisable to seek the assistance of the Board of Investments' One Stop Action Center (BOI-OSAC), the Bureau of Trade Regulation and Consumer Protection (BTRCP), the Philippine Economic Zone Authority (PEZA) and the Securities and Exchange Commission (SEC).

GETTING STARTED

General Registration Requirements

Investors setting up business in the country have to comply with the following general requirements:

Registration of corporations and partnerships Securities and Exchange Commission (SEC)

Registration of business name/single proprietorship Department of Trade and Industry -NCR

Registration for incentives availment under Executive Order 226 Board of Investments (BOI)

Registration with other Investment Promotion Agencies for incentive availment Philiippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), Clark Development Corporation (CDC), Cagayan Export Processing Zone, Phividec Industrial Authority, Zamboanga Economic Zone Authority

Registration of foreign investments for purposes of capital repatriation and profit remittances Bangko Sentral ng Pilipinas (BSP)

Securing Tax Identification Number (TIN) Bureau of Internal Revenue (BIR)

Securing locational clearance/business permit for firms locating in Metro Manila Metro Manila Development Authority (MMDA) / City Hall/Municipal Offices in the localities where the business will be set up

Securing an employer's SSS number Social Security System (SSS)

Securing membership in the government health care benefits system Philippine Health Insurance Corporation

Securing electric services connection Manila Electric Co. (MERALCO) for business in MERALCO franchise area; local electric utility firms for companies locating in non-MERALCO franchise area

Securing Water services Maynilad Water Works and/or Manila Water Company for firms locating in Metro Manila and Local Water Utilities Administration (LWUA) for firms locating outside Metro Manila

Securing Telephone services connection Philippine Long Distance Telephone Co. (PLDT), Bayantel, Digitel, Smart and Globelines

Operational Requirements

Certain requirements have to be complied with by the enterprise while in operation, expansion and/or diversification.

While in operation the following need to be accomplished:

Reportorial requirements (i.e. Audited Financial Statement, General Information Sheet); amendment of articles of incorporation/partnership Securities and Exchange Commission (SEC)

Reportorial requirements (i.e. Audited Financial Statement, ITR, etc); registration of business/expansion for incentives Board of Investments (BOI) , SBMA, PEZA , CDC, CEZA, PIA , ZEZA.

Regular tax payments BIR

Registration of Customs Bonded Warehouse (on Expansion/Diversification) Bureau of Customs (BOC)-Collectors of Port

Opening of Letter of Credit (L/C) Authorized Agent Banks (ABBs)

Export Declaration (Authority to Load/Certificate of Origin) Bureau of Customs - Export Coordination Division

Information sheet for first-time exporters Authorized Agent Banks (ABBs)

Payment of wharfage fees/exemption from payment Philippine Ports Authority (PPA)

SPECIAL PERMITS/CLEARANCES FOR SELECTED EXPORT BUSINESSES

Export of products will need clearances and permit prior to every shipment:

Clearance for export of animal and animal by-products Bureau of Animal Industry (BAI) For pets-BAI, For exotic animals, endangered animals-Parks and Wildlife Bureau(PWB)

Clearance for plant export Bureau of Plant Industry (BPI)

Clearance for export of food, drugs, and chemicals Bureau of Food and Drugs (BFAD)

Clearance/quota for coffee exports International Coffee Organization Certifying Agency (ICOCA)

Clearance quota allocation of garment and textile exports Garments and Textile Export Board

Clearance for export of fisheries and other aquatic products Bureau of Fisheries and Aquatic Resources (BFAR)

Special documentation certificate for preferential treatment of handicrafts export Department of Trade & Industry-National Capital Region (DTI-NCR)

Export clearance for regulated coconut products (matured nuts and seedlings) Philippine Coconut Authority (PCA)

Commodity clearance and license for fiber export Fiber Industry Development Authority (FIDA)

SPECIAL PERMITS / CLEARANCE / REGISTRATION

Special permits/clearances/registration are required when pursuing the following projects/activities:

Various types of visas -Special Investor's Resident Visa (SIRV), Special Retiree's Resident Visa(SRRV), 47(a)2, Treaty Trader's Visa, Pre-Arranged Employment Visa and its derivatives- Alien Certification of Registration(ACR), Immigration Certificate of Residence (ICR),Emigration Clearance Certificate (ECC) and Special Return Certificate (SRC) Bureau of Immigration (BI)

Alien Employment Permit (AEP) Department of Labor and Employment (DOLE)

Clearance for garment & textile exporters Garments and Textile Export Board (GTEB)

Registration for operation of Customs Bonded Manufacturing Warehouse Environmental Compliance Certification, Environmental Management Bureau, Department of Environmental and Natural Resources (DENR)

Projects involving land use/conversion Housing and Land Use Regulatory Board (HLURB), National Housing Authority (NHA), Department of Agrarian Reform (DAR)

Permit to construct/operate pollution-control devices Department of Environmental and Natural Resources (DENR)

Trademarks/ Patents registration Intellectual Property Office

Registration of power-generation projects Department of Energy (DOE)/National Power Corporation (NAPOCOR)

Philippine Standard (PS) Quality Mark to ensure that locally-manufactured consumer products conform to Philippine national standards Bureau of Product Standards (BPS)

Import Commodity Clearance (ICC) Quality Mark to ensure that imported consumer products conform with Philippine national standards Bureau of Product Standard (BPS)

License-to-Operate for projects which involve food, chemicals, and others Bureau of Food and Drug (BFAD)

Registration of tourism projects Department of Tourism (DOT)

Franchise for mass transit operation Land Transportation Franchising and Regulatory Board (LTRFB)

Telecommunication projects National Telecommunications Commission (NTC)

License/clearance for defense-related projects Department of National Defense (DND) / Philippine National Police (PNP)

Registration of advanced technology Department of Science and Technology (DOST)

Clearance for health-related projects Department of Health (DOH)

Clearance for oil exploration activities Department Of Energy (DOE)

Acquiring mining rights Mines and Geo-Sciences Bureau(MGB)

AVAILABLE FRONTLINES

a. One Stop Action Centers

Designated One Stop Action Centers provide facilities and services which enable the investor to obtain necessary investment information and documentation in one physical location. These OSACs are:

1. One Stop Action Center for Investments- at the Board of Investments (BOI)

2. One Stop Export Documentation Center- at the PhilExport, International Trade Center

3. One Stop Processing Center for Used Car Importation- at the Bureau of Customs (BOC)

4. One Stop Shop Tax Credit and Drawback Center- at the Department of Finance (DOF)

5. One Stop Action Center for Garments and Textiles-at the Garments and Textile Export Board (GTEB)

b. Technical Services & Quality

Agencies listed below provide various quality control and technical services to investors :

Technical Consultancy,Technology Transfer, Skill Development and Common Facility Services

Cottage Industry Technology Center (CITC)

Licensing and Accreditation, Consumer Protection and SME Development

Philippine Shippers' Bureau (PSB)

Textile Testing, Technical Training, and Research and Development

Philippine Textile Research Institute (PTRI)

Product Design, Packaging Design and Technology Demonstration

Product Development and Design Center of the Philippines (PDDCP)

Policy and Planning,Assessment and Certification, Registration and Accreditation and TESD Services( School, Enterprise-Based Services etc)

Technical Education and Skills Development Authority(TESDA)

Department of Labor and Employment (DOLE)

c. Export Marketing

When in need of export marketing support, the investor can consult various government agencies for free assistance in :

Matchmaking between exporters and buyers/ raw material suppliers

Export Assistance Network (The New Exponet)

Market information, strategy, product research, and foreign trade assistance

Bureau of Export Trade Promotion (BETP)

Garments export assistance

Garments and Textile Export Board -One Stop Action Center

Trading with socialist countries

Phil. International Trading Corporation (PITC)

Trade Fairs/Exhibition

Center for International Trade Exposition and Missions (CITEM)

Product Development and improvement

Product Development and Design Center of the Philippines (PDDCP)

How to File:

REGISTRATION FEES

Philippines Securities and Exchange Commission

Registration of corporations & partnerships(Securities and Exchange Commission) Main Fees to be Paid (in Pesos)

Stock Corporations

Filing Fee 1/5 of 1% of the Authorized Capital Stock but not less than P1,000.00

Legal Research Fee 1% of the Filing Fee but not less than P10.00

By-laws (fixed) 500.00

Stock and Transfer Book/Stamping 320.00/150.00

Non-Stock Corporations

Filing Fee of Articles of Incorporation 500.00

By-laws 500.00

Membership Book/Stamping 320.00/75.00

Partnership

Recording Fee for Articles of Partnership 1/5 of 1% of the partnership's capital but not less than P1000.00

Legal Research Fee 1% of the Filing Fee but not less than P10.00

Board of Investments

Registration for incentives availmentunder EO 226 Main Fees to be Paid(In Pesos)

Filing Fees for Application for Registration (under Book 1):

Project Costs not exceeding P 4 million 1,500.00

Project Costs exceeding P 4 million but not over P 20 million 3,000.00

Project Costs exceeding P 20 million but not over P 50 million 4,500.00

Project Costs exceeding 50 million 6,000.00

Fee for Certificate of Registration 1/10 of 1% of project cost but not less than P3,000.00 and not to exceed P 15,000.00

*/ Subject to increase

Department of Trade and Industry

Registration of Business Name - Single Proprietorship(Bureau of Trade Regulation and consumer Protection -- BTRCP) Main Fees to be Paid(In Pesos)

Application Fee

Single ProprietorshipCorporation 300.00500.00

Plus P15.00 Documentary stamp for each application

Clark Development Corporation (CDC) One-Time Fees

1. Registration of Enterprises

Project Cost not exceeding P 4 million P 2,000.00

Certificate of Registration & Tax Exemptions P 2,000.00

Permit to Operate (Annually) P 1,000.00

Temporary Permit to Operate P 500.00

2. Processing and issuance of Environmental Compliance Certificate (ECC) P 300.00

3. Construction In accordance with the National Building Code by CDC

NOTE : Regular fees including Clark Special Economic Zone Locations Association shall also be charged to cover expenses for security, road lighting, garbage collection, etc.

Availment of Incentives

a. Endorsement of 5% Gross Income Tax and of Income Tax Holiday P 1,200.00

b. Extension of ITH Entitlement Period P 1,200.00

III. CERTIFICATION / TRUE COPIES

1. Certificate of Registration P 120.00

2. Filing approval of application P 120.00

3. Other Documents P 120.00

TAX RATES

1. Taxation in the Philippines

The country's taxation system is governed by the Tax Reform Act 1997, passed into law on December 11, 1997 and became effective on 01 January 1998. The law was aimed at the expanding the country's tax base and maintaining the healthy fiscal standing of the government.

1.1 Corporate Income Taxes

Domestic/Resident Foreign CorporationsRegular Income Tax Rate 32% of net taxable income

Non-Resident Corporation Regular Income Tax 32% of the gross amount of Philippine-source income such as dividend, rents, royalties, compensation, and remuneration for technical services.

1.2 Income Tax Rates as Passive Income of Domestic/Resident Corporation

Dividends received from domestic corporations Not subject to tax

Interest on any currency bank deposit and yield or other monetary benefit from deposit substitutes and from trust fund and similar arrangements 20% of final tax

Interest from foreign currency deposits with foreign currency deposit units (FCDUs) 7 1/2% of final tax

gains from sale or exchange of shares of stock not listed and traded in the local stock exchange 5% capital gains tax (CGT) on net gains not exceeding P 100,00 and 10% on the excess.

Gains from sale or exchange of land or buildings not actually used in business and treated as capital issue 6% CGT on gross selling price or fair market value, whichever is higher

Royalties 20% final tax

1.3 New Taxes for Corporation Under the Tax Reform Act of 1997

Minimum Corporate Income Tax (MCIT) - A 2% MCIT on gross income on an annual basis is imposed on corporations whose regular corporate income tax liability is less than the MCIT beginning the fourth taxable year following the year they commenced business operation. Any excess of the MCIT over the normal tax shall be carried forward and credited against the normal tax for the three (3) immediately succeeding taxable years.Fringe Benefits Tax - Fringe benefits granted to supervisory and managerial employees are subject to 32% tax on the grossed-up monetary value of the fringe benefit. Fringe benefits given by OBUs regional operating headquarters of multinational companies, petroleum contractors and subcontractors to qualified alien employees and in certain cases, to Filipino employees, are taxed at 15% of the grossed-up monetary value of the fringed benefit.Improperly Accumulated Earnings Tax - a 10% tax is imposed on the improperly accumulated earnings of a corporation, except in the case of publicly held corporations, banks, and other non-bank financial intermediaries and insurance companies. When a corporation allows its earnings or profits to accumulate beyond its reasonable needs, it shall be assumed that the purpose is to avoid tax on stockholders, unless proven to the contrary.

1.4 Preferential Income Tax Rates for Non-Resident Corporations

Interest on foreign loans 20%

Dividends received form domestic corporations In general, 32%. This is reduced to 15% if the recipient foreign corporation is resident of a country which: Does not impose any tax on dividends received from foreign sources, or Allows a credit against the tax due from the nonresident foreign corporation taxes deemed to have been paid in the Philippines equivalent to 17%

Income derived form any foreign currency transaction with FCDUs and OBUs Exempt

Gains from sale of unlisted shares of stock in a domestic corporation 5% capital gains tax (CGT) on net gains not exceeding P100,000 and 10% on the excess

Rents and other fees paid to nonresident corporate lessors of aircraft, machinery and other equipment 7 1/2% on gross rentals or fees

Rents of charter fees paid to non-resident corporate owners of vessels chartered by Philippine Nationals 4 1/2% on gross rentals or fees

Fees paid to non-resident cinematographic film owners or lessors 25% on gross income

1.5 Individual Taxation

Non-resident aliens not engage in trade and business flat income tax rate 25%

Resident citizens/aliens (gainfully employed) Graduated income tax rates 0%-35%

Who Shall File:

1. An individual whose gross compensation income does not exceed his total personal and additional exemptions ;

2. An individual whose compensation derived from one year employer does not exceed P60,000 and the income tax on which has been correctly withheld;

3. An individual whose income has been subjected to final withholding tax (alien employee as well as Filipino employee occupying the same position as that of the alien employee of regional or area headquarters and regional operating headquarters of multinational companies, petroleum service contractors and sub-contractors, and offshore banking units, non-resident alien not engaged in trade or business), and

4. An individual who is exempt from income tax.

Married individuals shall file single return for the taxable year to include the income of both spouses, separately computing their individual income tax based on their respective taxable income. Where it is impracticable for the spouses to file one return, each spouse may file a separate return.

TAX TABLE

If Taxable Income is: Tax Due is: If Taxable Income is: Tax Due is:

Not over P10,000 5%

Over P10,000 but not over P30,000 P500+10% of the excess over P10,000 Over P140,000 but not over P250,000 P22,500+25% of the excess over P140,000

Over P30,000 but not over P70,000 P2,500+15% of the excess over P30,000 Over P250,000 but not over P500,000 P50,000+30% of the excess over P250,000

Over P70,000 but not over P140,000 P8,500+20% of the excess over P70,000 Over 500,000 P125,000+34% of the excess over P500,000

1.6 Value Added Tax (VAT)

Sale of goods, other properties, and services in the Philippines, as well as importation of goods to the Philippines, are subject to the 10% VAT. VAT is imposed on the gross selling price (in case of sale of goods) and gross receipts (in case of sale of services).

1.7 Stock Transaction Tax

1/2 of 1% of gross selling price is imposed on the sale, barter, exchange or other disposition of shares through the facilities of stock exchange.

1.8 Percentage Tax

TYPES OF BUSINESS PERCENTAGE OF TAX RATE

Banks - income from lending and financial leasing activities 1%, 3%, or 5% of gross receipts depending on the maturity date of the instruments, tax exempt if maturity period is over seven years.

Life insurance companies doing business in the Philippines 5% of the total premium collected

Electric, water and gas utilities 2% of gross receipts

Domestic common carriers of passengers 3% of gross receipts

International carriers 3% of gross receipts

Finance companies - income from lending and financial leasing activities 1%, 3%, or 5% of gross receipts depending on the maturity date of the instruments, tax-exempt if maturity period is over seven years

Other non-VAT registered businesses 3% of gross sales or gross receipts not exceeding P550,000.

1.9 Income Tax Rate for Special Corporation Entity

ENTITY RATe TAXABLE BASE

International Carriers 2.5% Gross Philippine Billings originating from the Philippines

Non-resident foreign corporation 33% (1999)32% (2000) Gross income from Philippine sources

Non-resident owner or lessor of aircraft, machinery and other equipment 7.5% Gross retails or fees

Offshore banking units (OBUs) and foreign currency deposit units (FCDUs) authorized by the BSP 10% Income from foreign currency transactions with local commercial banks, including branches of foreign banks that maybe authorized by the BSP to transact business with OBUs and FCDUs, including any interest income from foreign currency loans granted to residents.

Subcontractors engaged in Petroleum operations, Subcontractors engaged in Petroleum operations 8% final tax Gross income from service contract

Regional operating headquarters 10% Taxable income from authorized incentives

SOURCE: How to invest in the Philippines, Joaquin Cunanan & Co.* data as of September 2004

1. COST OF INDUSTRIAL LAND AND FACTORY BUILDING

1.1 Selling Rates of Industrial Lots P 2800/sqm and above*

1.2 Standard Factory Bldg. in Export Processing Zone $ 2.5/sqm and above

1.3 Lease rates of Lots in Export Processing Zone $ .40/sqm.

SOURCE: Philea rates depend on the location or site of the industrial land

2. RATES FOR OFFICE SPACE

LOCATION SELLING RATES RENTAL RATES

Makati P 70,000-10,000/sq. m P 550-650/sq.m

Ortigas/Quezon City P 45,000-60,000/ sq. m P 400/sq. m and above

SOURCE : FPDSavills* data as of September 2004

Philippine Economic Zone Authority (PEZA)

II. APPLICATION

1. Registration of Ecozone Enterprises

a. Application for New Project (non-pioneer) P 3,600.00

b. Application for New Project (pioneer) P 6,000.00

c. application for any Amendments in Registration P 1,200.00

d. Application for Conversion from Non-Pioneer to Pioneer P 2,400.00

e. Application for Expansion for Production Capacity P 2,400.00

2. Registration Fees

a. Registration for New Projects P 6,000.00

b. Registration for Expansion of Project - New Project P 3,600.00

c. Telecom Services and Other Utilities P 6,000.00 + 10% of monthly gross revenues from operations

d. All other Services Enterprise P 3,600.00

II. PROCESSING FEES