A Representative Office is a very popular structure for foreign entities looking to do business in the Philippines as it allows 100% foreign ownership and control.

Below I’ve listed the most important features of a Representative Office:

• Extension of the foreign company
• It may perform services such as quality control, information dissemination, customer service and other business processes
• Liability is shared with the parent
• Instead of a Board, a Representative Agent is needed who must be a resident of the Philippines
• Does not generate income from any of the services it offers in the Philippines
• 100% foreign ownership & control
• Inward remittance of USD 30,000 annually to fund the Representative Office in the Philippines as it is fully subsidized by the head office
• Representative Office Taxation is easier to manage as there is no income tax to pay as it does not generate any income and correspondingly no VAT on that. Withholding taxes are applicable

I’ll discuss each in more detail below, but for additional information, please contact us to set up a consultation with a corporate lawyer in the Philippines.

A Representative Office is a popular choice but is often considered in conjunction with a Branch Office and a Subsidiary.

To compare them quickly against each other, I’ve put together a table of comparison.

As you can see, there are several benefits to establishing a Representative Office. 

• Cost Efficiency: Establishing a representative office is typically more economical than setting up a subsidiary or branch, making it an appealing option for companies looking to offshore their cost centers with minimal financial commitment. A representative office requires USD 30,000 to establish. 
• Simplified Taxation: Since representative offices do not generate income, they are exempt from income tax, which simplifies financial management for foreign companies. 
• Simplied Governnance: Instead of a board, a representative agent is needed. A representative agent must be a resident of Philippines and can be a local, a foreigner or another entity.
• 100% Foreign Ownership: A representative office is 100% owned and controlled by its foreign parent. 

Unlike a branch office that can sell to the Philippine market, a representative office can only act as a cost center

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 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.

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.

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 require 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 establishment of a representative office necessitates adherence to SEC regulations. 

In terms of incorporation, documentation such as financial statements and proof of inward remittance are required. 

After incorporation, there are several reporting requirements that must be adhered to as well. 

I’ll provide a quick overview of the SEC Process for a Representative Office 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 which 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.

There will be a lot on your plate if you are setting up a business 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.

Remember that there are regular reporting requirements that must be adhered to after company formation to the SEC and also to the BIR.

These must be regularly complied with so that the company operates without issue. 

Engaging with a corporate lawyer well-versed in Philippine law is recommended to effectively navigate these compliance requirements.

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.

Below are the Frequently asked questions about representative office Philippines

1. What activities can a representative office perform?

 A representative office is permitted to conduct activities such as marketing, quality control, and customer service, but it cannot generate income.

2. What are the costs associated with setting up a representative office?

 The primary financial obligation involves an annual remittance of USD 30,000 from the parent company to cover the operational expenses of the office.

3. What is the liability of a Philippine representative office? 

The liability of a Philippine representative office is shared with its parent entity.

4. Can a Philippine representative office be 100% foreign owned? 

Yes, a Philippine representative office can be 100% foreign owned.

5. What is the difference of Branch Office vs Representative office? 

A Branch Office can derive revenue from the Philippines while a Representative Office cannot. Additionally, a Branch Office’s minimum  capitalization is USD 200,000 vs a Representative Office’s minimum capitalization of USD 30,000.