Representative Office
Representative Office
A Representative Office is an extension of a foreign business entityand so shares liability with its parent. This type of business structure does not generate revenue from the Philippines and is ideal for outsourced back-office operations. It is not subject to income tax or VAT.
WHAT ARE THE ADVANTAGES & DISADVANTAGES OF A REPRESENTATIVE OFFICE?
LIABILITY EXTENDS TO FOREIGN PARENT
A representative office in the Philippines does not have separate legal personality and shares liability with its parent.
100% FOREIGN OWNERSHIP
A Philippine representative office can be 100% foreign-owned and is limited to non-commercial activities like HR, marketing, etc.
RESIDENT AGENT
Foreign corporation in the Philippines must have a resident agent to officially receive legal summons.
NO INCOME TAX AND VAT
A representative office in the Philippines is exempt from income tax and VAT as it earns no local income.
Foreign Company Info
Resident Agent Needed
Actual Location
Capitalization
A Representative Office allows a
foreign company to establish a fully subsidized cost center in the Philippines in support of the business of the overseas parent company. It is limited to information dissemination and support services and allows the company to tap into the Philippines educated English speaking work force and maintain full control. It is the best option for those seeking a dedicated support center in the Philippines.
Atty Britanico, Founder
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FREQUENTLY ASKED QUESTIONS
A Representative Office is an extension of its foreign parent company in the Philippines. It serves as an administrative support or liaison office and does not generate income. It performs non-revenue generating services such as quality control, customer support, and accounting.
A Philippine Representative Office’s Capitalization is USD 30,000. This amount is also remitted annually by the parent company to cover the office’s expenses, as the office does not make any income.
A Resident Agent is a local representative who liaises with the SEC and other government agencies in the Philippines. The Resident Agent can be a local, a foreigner, or a domestic corporation and must be a resident of the Philippines. They are required because the Representative Office, being an extension of a foreign company, does not need a Board of Directors.
The Representative Office does not generate any income and thus does not pay any income or VAT taxes. However, withholding taxes on employee compensation from 0 to 35% and on any remittances to the head office are applicable.
The process includes appointing a Resident Agent, determining an office address, gathering necessary documents and information, funding the business, registering at the SEC, addressing SEC concerns, and continuing post-SEC company formation by completing BIR Requirements and submissions at the City Hall, Pag-ibig, SSS, and Philhealth.
The requirements include an application form, name verification slip, authenticated financial statements, Certificate of Inward Capital Remittance and Certificate of Bank Deposit of US$30,000.00, among others.
An office address is crucial during the process of company formation. The address should be in the same Bureau of Internal Revenue District Office (BIR RDO) and the same local government unit. Changing the address can be cumbersome, as it involves closing and reopening the office registration with local government units and the BIR RDO.
Changing an office address could take up to 6 months or more depending on the result of the BIR audit. The process involves closing the office at the current local government units and BIR RDO and reopening it at the new location, with a potential BIR audit before closure.
The annual inward remittance of USD 30,000 is meant to cover the expenses of the Representative Office in the Philippines as it does not generate any income of its own.
It means that a Representative Office does not engage in any business or activities that earn it revenue. Its activities are restricted to non-revenue generating processes, like back-office work.