Registration of Business and Foreign Direct Investments by Atty. Melvelyn Barrozo
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A documentation about Registration of Business and Foreign Direct Investments in the Philippines by Atty. Melvelyn Barrozo of Kittelson & Carpo Consulting. Discussion Topic from ANZCHAM Coffee Mornings - April 23, 2015
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Registration of Business and Foreign Direct Investments by Atty. Melvelyn Barrozo
- 1. Registra)on of Business and Foreign Direct Investments By: Attorney Melvelyn S. Barrozo Registration of Business and Foreign Direct Investments
- 2. ! § Introduction! Ø Types of Business Entities! Ø Corporate Entities! § Business Registration Process! Ø SEC/DTI! Ø Local Government Unit! Ø Bureau of Internal Revenue! Ø SSS, Philhealth, and HDMF! § Registration with Bangko Sentral ng Pilipinas! PRESENTATION OUTLINE! !
- 3. Sole Proprietorship ! Partnership ! Corporation ! 1. Creation! Registration with the Department of Trade and Industry (DTI)! By agreement or contract; governed by the Civil Code of the Philippines.! ! By operation of law- Corporation Code of the Philippines! 2. Existence! No separate existence from the sole proprietor/owner! Separate and distinct from each of the partners.! Separate and distinct from its individual stockholders, members and officers.! ! 3. Succession! Sole proprietorship ceases to exist upon the death of the sole proprietor or expiration of its term.! ! The death, insolvency or withdrawal of any partner would automatically bring about the dissolution of the partnership.! Its legal capacity enables it to continue despite death, insolvency or withdrawal of any of its shareholders or members.! A. TYPES OF BUSINESS ENTITIES Kittelson & Carpo Consulting
- 4. Sole Proprietorship ! Partnership ! Corporation ! 4. Liability! The extent of liability of the sole proprietor may extend to his personal assets and properties that are not exempt from execution.! General partners are personally liable for the debts of the partnership and is not only limited to what is invested in the partnership but also to their other assets and properties.! ! ! Liability of shareholders is limited to their contributions to the corporate capital.! 5. Authority to Bind! The sole proprietor has full command and control of the business.! Every partner is considered an agent of the partnership and by his own act, the partner can bind the partnership.! Only the board of directors or its agents can bind the corporation.! Kittelson & Carpo Consulting A. TYPES OF BUSINESS ENTITIES
- 5. 2. Organized #under Foreign #Laws! ! #a. Branch office ! i. Stock! ii. Non-stock! #b. Representative office! #c. Regional Headquarters ! (RHQ)! #d. Regional Operating # # Headquarters! # #(ROHQ)! ! Kittelson & Carpo Consulting B. CORPORATE ENTITIES!
- 6. 1. Domestic corporation/ Subsidiary! ! ! a. Stock! b. Non-stock ! – foundation, civic! organizations, homeowners’! associations ! ! Kittelson & Carpo Consulting B. CORPORATE ENTITIES!
- 7. Characteristics/ Entry Model! Domestic Corporation/ Subsidiary! Branch! Regional or Area Headquarters (RHQ)! Regional Operating Headquarters (ROHQ)! Representative Office! A. Nature! Separate & distinct from head office (HO), hence, its liabilities are generally not regarded as the liabilities of the HO! Extension of the HO, thus, liabilities are considered liabilities of HO! Acts as supervisory, communications & coordinating center for at least two (2) affiliates, subsidiaries or branches of the head office in the Asia Pacific region & other foreign markets! Performs qualifying services to at least two (2) its affiliates, subsidiaries or branches in the Phils. such as general administration & planning; business planning & coordination; sourcing & procurement of raw materials & components; corporate finance; advisory services; ! Deals w/ clients of the HO and performs activities such as: ! ! information dissemination;! communication center;! promotion of HO's products; &! quality control of products for export; ! B. CORPORATE ENTITIES!
- 8. Characteristics/ Entry Model! Domestic Corporation/ Subsidiary! Branch! Regional or Area Headquarters (RHQ)! Regional Operating Headquarters (ROHQ)! Representative Office! A. Nature! marketing control & sales promotion; training & personnel management; logistics services; research & development services & product development; technical support & maintenance; data processing & communication; & business development ! Not allowed to offer services to third parties;! ! Cannot derive income from the Phils. ! B. CORPORATE ENTITIES!
- 9. Characteristics/ Entry Model! Domestic Corporation/ Subsidiary! Branch! Regional or Area Headquarters (RHQ)! Regional Operating Headquarters (ROHQ)! Representative Office! ! B. Taxability! 1. Corporate Income tax! Subject to 30% income tax on worldwide income unless registered with PEZA. ! ! PEZA-registered enterprises:! - Income tax holiday for the first four (4) years of operation! - Preferential tax rate of (5%) after the lapse of the ITH! Not subject to income tax since it may not earn or derive income from the Phils. Not qualified to register with PEZA.! The ROHQ may derive income from the Phils. but subject to 10% preferential tax rate on taxable income. Not qualified to register with PEZA.! Not subject to income tax & VAT on the theory that it does not, and may not, derive income from the Philippines! 2. Value Added Tax (VAT)! Subject to 12% VAT unless it is an export enterprise and registered with PEZA. In the latter case, zero percent (0%) VAT rating shall apply.! Sale of goods and services to RHQ is 0% VAT! Subject to 12% VAT; Export services performed by an ROHQ for its affiliates located outside the Philippines is 0% VAT Not subject to VAT ! B. CORPORATE ENTITIES!
- 10. Characteristics/ Entry Model! Domestic Corporation/ Subsidiary! Branch! Regional or Area Headquarters (RHQ)! Regional Operating Headquarters (ROHQ)! Representative Office! A. Nature! Separate & distinct from head office (HO), hence, its liabilities are generally not regarded as the liabilities of the HO! Extension of the HO, thus, liabilities are considered liabilities of HO! Acts as supervisory, communications & coordinating center for at least two (2) affiliates, subsidiaries or branches of the head office in the Asia Pacific region & other foreign markets! Performs qualifying services to at least two (2) its affiliates, subsidiaries or branches in the Phils. such as general administration & planning; business planning & coordination; sourcing & procurement of raw materials & components; corporate finance; advisory services; ! Deals w/ clients of the HO and performs activities such as: ! ! information dissemination;! communication center;! promotion of HO's products; &! quality control of products for export; ! B. CORPORATE ENTITIES!
- 11. Characteristics/ Entry Model! Domestic Corporation/ Subsidiary! Branch! Regional or Area Headquarters (RHQ)! Regional Operating Headquarters (ROHQ)! Representa- tive Office! ! 3. Branch Profit Remittance Tax (BPRT)! dividends paid by a Philippine subsidiary to non-resident shareholders is subject to 30% in general or 15% subject to certain conditions; Or preferential tax treaty rates apply! profits remitted to head office (HO) subject to 15% or 10% tax depending on applicable tax treaty; ! ! if located in a special ecozone (i.e., PEZA- registered), it is tax exempt! n.a! Income from Philippine sources when remitted to the HO is subject to 15%! n.a! 4. Local taxes, fees or charges imposed by a local government unit! Subject to local taxes, etc.. unless PEZA- registered! Exempt from all kinds of local taxes, fees or charges imposed by a local government unit, EXCEPT real property tax on land improvements and equipment! n.a! B. CORPORATE ENTITIES!
- 12. Characteristics/ Entry Model! Domestic Corporation/ Subsidiary! Branch! Regional or Area Headquarters (RHQ)! Regional Operating Headquarters (ROHQ)! Representa- tive Office! ! 5. Documentary Stamp Tax (DST)! a subsidiary is liable for DST on the original issuance of shares of stock at the rate of 0.5% of the shares subscribed! ! Not subject to DST since it does not issue shares of stock! 6. Allocation of overhead expenses! Not entitled to allocation of overhead expenses of the HO! Subject to certain conditions, expenses of the head office (HO) may be allocated to the Philippine branch office! Borne by the head office! ! 7. Improperly Accumulated Earnings Tax (IAET)! ! If the subsidiary accumulates earnings beyond its reasonable needs it is subject to 10% IAET! ! ! ! n.a! B. CORPORATE ENTITIES!
- 13. Characteristics/ Entry Model! Domestic Corporation/ Subsidiary! Branch! Regional or Area Headquarters (RHQ)! Regional Operating Headquarters (ROHQ)! Representa- tive Office! ! 8. Withholding tax on compensation of executives! 5% to 32%! Expatriates executives are subject to 15% preferential tax rate (same rate for Filipinos w/ managerial & technical positions; Filipino executives: 15% or 5% to 32%)! 5% to 32%! ! C. Capitalization! Subsidiary w/ more than 40% foreign equity - at least USD200,000 ! UNLESS ! export oriented (60% of gross sales) – Php5,000! ! Special laws apply! ! Foundation – Php1M! 100% foreign- owned entity - USD200,000! UNLESS ! export oriented (60% of gross sales)- Php5,000! ! Special laws apply! ! Foundation – Php1M! Minimum inward remittance: USD50,000.00 & every year thereafter! USD200,000! USD30,000! B. CORPORATE ENTITIES!
- 14. Characteristics/ Entry Model! Domestic Corporation/ Subsidiary! Branch! Regional or Area Headquarters (RHQ)! Regional Operating Headquarters (ROHQ)! Representative Office! D. Number of incorporators! 5 - 15 incorporators/ directors (natural persons; & majority must be Phil. residents)! ! May be set up w/ only one person who will act as resident agent! E. Deposit requirement of securities w/ SEC! ! n.a! At least Php100, 000 + annual additional deposit of 2% of the amount by which the branch office's gross income exceeds Php5 million.! ! n.a.! B. CORPORATE ENTITIES!
- 16. SEC #! • Name verification slip! – File an appeal if denied! • Articles of Incorporation and By-Laws/Articles of Partnership! • Treasurer’s Affidavit! • Bank certificate! • Cover Sheet! • SEC Application Form! Kittelson & Carpo Consulting A. SEC / DTI!
- 17. DTI! • Filipino sole proprietorship! – Business Name Registration Form (Form No. 16)! • Foreign Sole Proprietorship! – Interview Sheet! – Duly Accomplished Forms – Form Nos. 16 & 17! – Appointment of Filipino Resident Agent! – Proof of Inward Remittance/Bank Certificate! Kittelson & Carpo Consulting A. SEC / DTI!
- 18. DTI! Kittelson & Carpo Consulting – Authority to Verify Bank Accounts! – Certification from Resident Alien not seeking Remittance of Profits and Dividends Abroad! – Copy of Valuation Report from BSP, if investment is other than foreign exchange! A. SEC / DTI!
- 19. 1 Characteristic s/Entry Model Domestic Corporation/ Subsidiary Branch Regional or Area Headquarters (RHQ) Regional Operating Headquarters (ROHQ) Representative Office F. Post-SEC Registration Requirement s 1. Annual Audited Financial Statements (AAFS); 2. General Information Sheet (GIS); 3. Reports under the Securities Regulation Code if listed or public company 1. AAFS; 2. GIS; 3. Reports under the Securitie s Regulatio n Code if listed or public company 4. Securitie s Deposit 1. AAFS; 2. GIS; 3. Proof of Inward Remittance (Note: To be submitted also with BOI) 1. AAFS; 2. GIS (Note: To be submitted also with BOI) 1. AAFS; 2. GIS A. Post-SEC Registration Requirements!
- 20. • Barangay Clearance! • SEC Registration Certificate, Articles of Incorporation, and By laws! • Proof of ownership/Notarized lease contract! • Application Form! • Comprehensive General Liability Insurance ! • SEC Registration Certificate, Articles of Incorporation, and By laws! • Proof of ownership/Notarized lease contract! • Locational/Zoning Clearance ! • SEC Registration Certificate, Articles of Incorporation, and By laws! • Proof of ownership/Notarized lease contract! • Occupancy Permit – building & unit! • Certificate of No Renovation! • Pictures of office unit – interior & exterior! • Locational Map! • Proof of Payment of Real Property Tax ! Kittelson & Carpo Consulting B. Local Government Unit!
- 21. Fire Safety Inspection Certificate! • Payment of fee! ! Temporary Sanitary Permit ! • Microbiological Water Analysis! • Certificate of Pest Control! • Copy of X-ray result! • Personal Profile of all employees! • Drug Test results! Community Tax Certificate! • Payment of fee! ! Mayor’s/Business Permit Permit – Renewed annually (January 20th) ! or Quarterly (20th Day of the Next Quarter)! Kittelson & Carpo Consulting B. Local Government Unit!
- 22. A. BIR Registration – Done annually: On or before January 30th ! • Copy of DTI Business Name Registration/SEC Registration and ! • Articles of Incorporation/Articles of Partnership! • Copy of Mayor’s Permit! • BIR Form 1903 – Application for Registration! • BIR Form 2000- Documentary Stamp Tax on Originally issued shares ! • (domestic corp.)! ! B. Authority to Print" • BIR Form 1906 ! • BIR Certificate of Registration of the corporation/taxpayer! • Job order! • Final & clear sample of Principal & Supplementary Receipts/Invoices! • BIR Certificate of Registration of Accredited Printer! • BIR Annual Registration Fee (BIR Form 0605) of Accredited Printer! • Quarterly Report of Accredited Printer! ! Kittelson & Carpo Consulting C. Bureau of Internal Revenue!
- 23. C. Books of Accounts! • New set of books of account! • BIR Certificate of Registration! ! ! ! ! Kittelson & Carpo Consulting C. Bureau of Internal Revenue!
- 24. Employer Registration Form (R-1)! ! Employment Report (SS Form R-1A)! • Details of at least one employee! ! Specimen Signature Card (SS Form L-501)! • Authorized Signatories! • Sole proprietorship- owner, legal spouse or attorney in fact! • Partnership – Managing Partner! • Corporation- President, Chairman or Corporate Secretary! • Branch office- highest ranked official of the branch! ! Sketch of Business Address! ! Kittelson & Carpo Consulting D. Social Security System!
- 25. Employer Data Record (ER1)! ! Employee Data Record (ER2)! ! DTI/SEC Certificate of Registration! ! Philhealth Membership Registration Form (for individual employee)! " " Kittelson & Carpo Consulting E. Philippine Health Insurance Corporation (Philhealth)!
- 26. Employer’s Data Form ! ! Specimen Signature Form! ! SSS Certification! ! Proof of Business Existence" • Sole Proprietorship – DTI Registration and Business/ Mayor’s Permit! • Partnership/Corporation – SEC Registration, Articles of Incorporation and By laws; and Business/Mayor’s Permit! Kittelson & Carpo Consulting F. Home Development Mutual Fund (Pag-IBIG)!
- 27. Why Register! ! • Entitles foreign investors to purchase FX from authorized agent banks or authorized foreign exchange corporations for! • Servicing of capital repatriation! • Outward remittance of dividends/profits ! Kittelson & Carpo Consulting III. Bangko Sentral ng Pilipinas!
- 28. ` When to Register! ! • One (1) year from date of inward remittance/actual transfer of assets! ! ! Kittelson & Carpo Consulting III. Bangko Sentral ng Pilipinas!