Unlike a branch office that can perform sales, a representative office is limited only to representing the parent foreign company and its interest.

A Representative Office in the Philippines is just an extension of its foreign parent, so a Representative Office in the Philippines is basically the same company.

This implies many things.

First, it is 100% owned by its foreign parent since it is essentially the same entity.

Second, any liabilities it has are also the liabilities of its foreign parent. This is sometimes a matter of concern for the foreign parent and if liability is a major concern, then a domestic corporation may be a better choice.

Third, a Philippine Representative Office is limited to the non-revenue generating processes of its parent.

I’ll explain this a bit and also explain what a Representative Office in the Philippines is allowed to do.

A Philippine Representative Office does not have its own Articles of Incorporation and By-Laws – it takes off from its parent’s articles and by-laws.

Because it is also limited to non-revenue generating activities, this means that its activities are restricted to back office work.

It’s a business structure that serves as an office extension of a foreign company that acts as administrative support or liaison office.

Representative Office Philippines, examples of work done:

• Quality control
• Customer support
• Accounting

This doesn’t cover everything, but it is a good example of the processes that a Representative Office in the Philippines can do.

Essentially, company formation in the Philippines is due to the fact that the parent company may be trying to have a cheaper back office.

As a back office, this type of company formation in the Philippines is not expected to have income.

(This is why no income taxes are included in Representative Office Taxation.)

It’s the best business structure to establish when a foreign investor is projecting a potential business market in the Philippines.

A Philippine Representative Office’s Capitalization is USD 30,000.

This USD 30,000 is also remitted annually by the parent company to cover the Philippine Representative Office’s expenses.

(Remember again, a representative office does not make any income. So, the USD 30,000 is used to cover expenses for the year.)

The SEC requirements for Representative Office include documents that show that this was complied with. These documents are the Certificate of Inward Remittance and the Certificate of Bank Deposit.

These 2 documents must be gathered so that the process of company formation in the Philippines can proceed.

Before you begin the process of company formation in the Philippines, the Resident Agent and the company address should be determined.

Let’s discuss what a Resident Agent in the Philippines is and why one is needed.

The appointment of a resident agent is highly recommended and must be authorized by a resolution of the Board of directors and an executed agreement of the Board of Directors of the foreign entity.

A Representative Office is an extension of the foreign company.

As an extension, it is not required to have a Board of Directors.

Instead, a Philippine Resident Agent is required.

A Philippine Resident is who the SEC and other government agencies such as the court will serve if there is a need.

A Resident Agent may also sign such things as the SSS enrollment form R1, as one of the post-SEC requirements for Representative Office Registration.

Resident Agent Guidelines:

• Must be a resident of the Philippines
• Can be a local, a foreigner or a domestic corporation
• A domestic corporation must be a company certified to be in good standing with the SEC

Check out our post on Resident Agents in the Philippines or get in touch with us to discuss with a corporate lawyer in the Philippines.

It is also important to use an office address not a condo or an apartment to avoid future conflicts with licenses and permits.

During the process of company formation in the Philippines, an address will be needed.

It is possible to use a temporary address.

However, it is advisable to make sure that the address is in the same Bureau of Internal Revenue District Office (BIR RDO) and the same local government unit.

It is possible to change a corporate address – however, it is quite a lot of work.

The Philippines Representative Office must essentially be closed at the local government units and the BIR RDO.

Then, they must be opened at the BIR RDO and the local government unit that has jurisdiction over the new corporate address – with the added fact that the company will likely go through a BIR audit before closure.

Transfer of business address could take up to 6 months or more than a year depending on the result of the BIR audit.

This BIR audit takes a while to complete.

And if it sounds like closing and reopening a representative office registration sounds like more work than the initial process of company formation in the Philippines, that’s because it is.

A company we work with transferred offices and the transfer process has taken more than a year.

Contact us for a consultation with a corporate lawyer in the Philippines from our staff if you need help or have additional concerns.

Established a representative office in the Philippines, which has the highest English literacy rate in the world and is cheap to maintain with a relatively low-cost labor force.

Representative Office Taxation is simplified because it is a non-income generating entity in the Philippines.

This has implications for its taxation burden (mostly good ones).

Representative Office Taxation Guidelines:

• No income taxes as it is non-revenue generating
• No VAT taxes are paid to the BIR as it is non-revenue generating although suppliers will of course charge VAT for purchases made by the office
• Withholding taxes on employee compensation from 0 to 35%
• Withholding taxes on any remittances to the head office

Representative Office Taxation is thus much simplified and should be a major consideration when considering company formation in the Philippines.

For further details on taxation, please contact us to discuss this with a corporate lawyer in the Philippines.

The final stage of company registration is SEC licensing and other LGU permit processing can take 1 to 2 months.

SEC Requirements for Representative Offices in the Philippines are below:

• SEC Form 104 – Representative Office Application
• Name Verification Slip
• Certified True Copy (CTC) of Board Resolution establishing the Representative Office in the Philippines and designating a Resident Agent
• Resident Agent acceptance of appointment
• Authenticated Financial Statements have several guidelines for how they must be prepared. The financial ratio must be 1 for Total assets/Total Liabilities
• Affidavit of Sound Financial Condition from President or Resident Agent
• Certified True Copy (CTC) of Articles of Incorporation & By-Laws
• Certificate of Inward Capital Remittance and Certificate of Bank Deposit of US$30,000.00 as capitalization requirements

Apostille Philippines has a lot of legwork but once you learn the process you can get it easier.

SEC Requirements for Representative Offices do look easy.

However, companies usually encounter delays in the authentication of the documents because it is quite cumbersome.

Authentication can be done either through the authentication process itself or through apostille.

Authentication is done when a country is not part of the Hague Convention. It requires consularization at the PH embassy.

Apostille is done when a country is part of the Hague Convention and is different for each country. Still, there are often several steps.

Additionally, preparing the AFS as per the guidelines can also take a long time.

SEC rules are requiring a foreign businesses to file annual reports and submit authenticated audited financial statements if AFS exceeds one year.

The guidelines for SEC requirements for Representative Office’s Financial Statements have revised a few years ago, but it can still take a lot of work.

Here are the guidelines:

1. For countries where Audited Financial Statements are required, the Authenticated AFS for the previous year audited by an independent CPA is required.

2. For countries where Audited Financial Statements are required and the Audited Financial Statements are more than a year old, the latest Authenticated Audited Financial Statements can be submitted along with Authenticated Unaudited Financial Statements not exceeding one year can be accepted.

3. For countries where Audited Financial Statements are not required, Authenticated unaudited financial statements not later than a year are required. In addition, an authenticated Certification from the company’s legal counsel stating that audited financial statements are not required and stating the supporting law.

You can get the representative office build-up assistance by contacting a corporate lawyer in the Philippines.

The SEC Process for a Representative Office in the Philippines has the following steps.

It should be followed by representative office BIR registration and local government office registration. This will complete the entire process of company formation in the Philippines.

Representative Office Philippines: Step-by-Step Process

1. Gather Representative Office requirements including SPAs, and director information – note that this can take some time.

2. Appoint a Resident Agent and present an acceptance of appointment unless he signed the application form

3. Fund the business and get a Certificate of Inward Remittance and a Bank Certificate of Deposit

4. Determine the Office Address

5. Register at the SEC and upload the requirements

6. Pay the SEC fees

This is 1/10% of 1% of the actual inward remittance in Philippine peso, but it should not be less than Php 2,000

7. Address SEC concerns, if applicable

8. Pick up the Certificate of Registration

9. Continue post-SEC company formation in the Philippines by completing Representative Office BIR Requirements and working on submissions at the City Hall, Pag-ibig, SSS, and Philhealth.

It is going to have a lot on your plate when putting business management in the Philippines.

Please note that you must complete the post-SEC requirements as well.

These are mandatory requirements.

The City Hall and Barangay Permit are necessary for operation.

Meanwhile, Pagibig, Philhealth and SSS are employer-required items that you must comply with if you are hiring employees.

When SEC and post-SEC registration are done, then the company formation in the Philippines is complete.