Setting up a representative or branch office in The Philippines

In most cases seafood buyers in the Philippines purchase directly from factories or they employ local buying agents. Normally buyers who purchase directly, informally hire a local representative who communicates with the factories and is responsible for quality control. In case a foreign company would like to have more control on its seafood transactions but does not want to incorporate a business under Philippine law, there are several alternatives that can be considered. There are three different business structures that can be registered in the Philippines.
  1. Branch office

A branch office is a foreign corporation organized and existing under foreign laws. It carries out business activities of the headquarters and derives income from the host country. For a branch office it is mandatory to register with the Securities and Exchange Commission (SEC). This commission is the national government regulatory agency charged with supervision over the corporate sector, the capital market participants, the securities and investment instruments market, and the investing public. It is required to put up a minimum paid in capital of US$200,000.00. There are two exceptions, when the remittance amount can be reduced with 50% to US$100,000.00. These exceptions are either when activity involves advanced technology or if a company employs at least 50 direct employees.
  1. Representative office

This is the easiest subsidiary structure to set-up in the Philippines. Similar to a branch office, a representative office is a foreign corporation organized and existing under foreign laws. For a representative office it is also mandatory to register with the Securities and Exchange Commission (SEC). Unlike a branch office, it does not derive income from the host country and is fully subsidized by its head office. It deals directly with clients of the parent company as it often acts as a communication centre. A representative office undertakes activities including dissemination of information, promoting company products, as well as quality control of products for export. It is required to have a minimum inward remittance of US$30,000.00 to cover the operating expenses.
  1. Regional headquarters / regional operating headquarters

Under Republic Act 8756, any multinational company may establish a regional headquarters (RHQ) or regional operating headquarters (ROHQ), as long as they are existing under laws other than the Philippines, with branches, affiliates and subsidiaries in the Asia Pacific Region and other foreign markets. Regional Headquarters (RHQ) An RHQ undertakes activities that are limited to acting as supervisory, communication and coordinating centre for its subsidiaries, affiliates and branches in the Asia Pacific region. It acts as an administrative branch of a multinational company engaged in international trade. It does not derive income from sources within the Philippines and does not participate in any manner in the management of any subsidiary or branch office it might have in the Philippines. It is required inward to have a minimum remittance of US$50,000.00 annually to cover operating expenses. Regional Operating Headquarters (ROHQ) Unlike to regional headquarters (RHQ) a regional operating headquarters derives income in the Philippines. For this type of business structure, the required capital is US$200,000.00 one-time remittance. An ROHQ performs the following qualifying services to its affiliates, subsidiaries, and branches in the Philippines:
  • General administration and planning
  • Business planning and coordination
  • Sourcing/procurement of raw materials components
  • Corporate finance advisory services
  • Marketing Control and sales promotion
  • Training and personnel management
  • Logistic services
  • Research and development services and product development
  • Technical support and communications
  • Business development