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Forms
of Doing Business |
Choice of Entity
The main vehicles used by foreign investors are
corporations and branches. Joint ventures tend
to be feasible investment vehicles only for
construction projects and certain energy
operations.
The regulatory environment tends to favor the
establishment of a subsidiary over a branch, as
foreign ownership restrictions preclude
operation of a branch in certain industries.
There are no significant impediments to
investment repatriation. However, to facilitate
the remittance of profits, inward foreign
investments should be registered with the Bangko Sentral ng Pilipinas.
Branch profits remittances are subject to 15%
tax under the Tax Code, although this may be
reduced under some tax treaties. The statutory
tax rate on profits remitted by way of dividend
is 35%, although tax treaties and other factors
are likely to reduce the rate to 10% or 15% in
practice.
Corporation
Forming a corporation requires between five
and 15 incorporators, each of whom must hold at
east one share of stock. A majority of the
directors (or trustees) must be resident in the
Philippines.
Financial institutions, retail trade
enterprises, and foreign owned corporations are
subject to minimum capitalization requirements.
The minimum paid-up capital for foreign-owned
corporations is US$200,000, unless they are
export-oriented, involve advanced technology or
will employ at least 50 employees.
Branch
Foreign corporations are required to obtain a
license from the Securities and Exchange
Commission (SEC) before they may do business in
the Philippines, which typically involves
remitting capital of at least US$200,000 to the
Philippines. Failure to obtain a license will
result in the corporation losing its ability to
sue in local courts.
Foreign Ownership
Restrictions
Foreign ownership is restricted in corporations
undertaking activities listed in the Foreign
Investments Negative List (FINL). Branches
cannot engage in activities listed in the FINL
because they do not have the requisite Filipino
ownership.
Foreign ownership participation in management.
To set up a domestic corporation, a majority of
the incorporators/directors must be Philippine
residents.
The ratio of foreign directors to the total
number of directors should generally not exceed
the ratio of foreign equity to the total equity
in the corporation.
No employee representation is necessary in the
board of directors.
Liquidating an
Investment
There are no impediments to shareholders
liquidating their investments by selling or
assigning their shares, other than restrictions
that may be contained in the bylaws of
corporation, such as minimum holding periods for
initial public offerings.
Tax Considerations
Branches receive the most favorable tax
treatment for foreign investors. Application of
a relevant tax treaty may overcome some domestic
limitations on deductibility, while the treaty
source rules potentially allow allocated
interest and royalties expense to avoid
Philippine withholding taxes. PEZA-registered
branches are also exempt from the 15% branch
profit remittance tax.
Professional
Advice
Philippine registration requirements are quite
extensive, and the consequences of failing to
comply with all obligations can extend to being
prevented from undertaking further business
activities in the Philippines or being precluded
from pursuing legal actions in court.
Using local professional firms to coordinate and submit documents can help
to ensure that the various registration
requirements are met.
The Intellectual Property Code requires the
inclusion of mandatory clauses and the exclusion
of prohibited clauses in technology transfer
agreements which, if not complied with, may
result in the contract being unenforceable.
Careful drafting may also be required to ensure
there are no unexpected tax consequences. Local
professional firms can review draft contracts
and identify provisions that might have
unexpected consequences for the investor.
Company Law
 Philippine law governing commercial activities
is derived from a mixture of Spanish civil law
and U.S. common law. The Philippine Corporation
Code, Tax Code, Securities Code, and Insurance
Code are generally based on their U.S.
counterparts. The laws on sales, partnership,
agency, contracts, credit transactions,
contained in the Philippine Civil Code of 1949,
are based on the Spanish Civil Code.
The Foreign Investments Act of 1991 is also
relevant for investors, because it places
constraints on the extent to which foreign
investors may own enterprises that engage in
certain activities. There are also special laws
that regulate certain industries.
United States precedents are not binding on
Philippine courts. However, when the law
concerned is based on its United States
counterpart, the precedents can have persuasive
effect.
Forms of Business Enterprise
The following forms of business entity may be
established.
1. Corporation:
Corporations are juridical persons established
under the Corporation Code and regulated by the
Securities and Exchange Commission with a
personality separate and distinct from that of
its stockholders. The liability of the
shareholders of a corporation is limited to the
amount of their share in the capital.
2. Close (private)
Corporation:
A close corporation is particular type of
corporation subject to less rigid formal
requirements than other corporations. In this
form of entity, management and ownership are
merged because of direct stockholder management
of the corporation.
To be a close corporation, a corporation must
have 20 or fewer shareholders, must have certain
restrictions on share transfer, and cannot be
engaged in mining or oil, banking, insurance,
public utilities, education or other activities
considered to be in the public interest. It also
cannot have two-thirds or more of its voting
stock owned by a corporation that is not a close
corporation.
3. Branch:
Foreign corporations may establish a branch in
the Philippines if the laws of their home
country similarly allow Filipino citizens and
corporations to do business there. Branches are
required to register with the SEC and secure a
license to do business in the Philippines.
However, a branch cannot be used to conduct
activities that are included in the Foreign
Investment Negative List, because it does not
have the requisite Filipino ownership.
4. Partnership:
Under the Civil Code of the Philippines, a
partnership is treated as a juridical person,
having a separate legal personality from that of
its members. Partnerships may be either general
partnerships, where the partners have unlimited
liability for the debts and obligations of the
partnership, or limited partnerships, where one
or more general partners have unlimited
liability and the limited partners have
liability only up to the amount of their capital
contributions.
A general professional partnership is the
business entity commonly used by professionals
such as accountants and lawyers to practice
their profession.
5. Joint Venture:
Corporations may enter into a consortium
among themselves to finance a specific venture.
Joint ventures, while not expressly recognized
as such under the Civil Code, are afforded the
same legal status as a partnership.
6. Sole
Proprietorship:
An individual may operate a business as the sole
beneficial owner of the business. This "one-man"
form of business organization is most common in
small retail trade operations.
Foreign
Enterprise Entities
The most common form of corporate vehicle used
by foreign investors is the corporation. One
reason is that a branch cannot be used if the
activities to be undertaken are included in the
Foreign Investment Negative List. By contrast, a
corporation readily accommodates the requisite
Filipino ownership.
Branches are, however, still commonly used as
corporate vehicles, since they tend to receive
more favorable tax treatment They are also the
only vehicle that can be used if an investor
wants to establish a regional headquarters in
the Philippines.
Finally, the absence of tax on profit
remittances should make them the vehicle of
choice for investors locating in a special
economic zone. Joint ventures tend to be
feasible investment vehicles only for
construction projects and certain energy
operations. Joint ventures in other activities
are subject to unfavorable tax treatment as
partnerships.
Corporation
Formation procedures
The formation of corporations is governed by the
Corporation Code. However, if foreign investors
are to own shares in a corporation, the Foreign
Investments Act of 1991 will also be relevant,
as it places constraints on foreign ownership in
enterprises engaged in certain activities
Registration Requirements
Corporate existence and juridical personality
commences from the date the Securities and
Exchange Commission (SEC) issues a certificate
of incorporation. However, before a corporation
may commence operations in the Philippines, it
must also register with the Bureau of Internal
Revenue (BIR), the Social Security System (SSS),
the Home Development Mutual Fund (HDMF), the
Philippine Health Insurance Corporation (PhilHealth),
and the local government unit where its
principal office will be located. Registration
with the SEC and other government agencies
usually takes six to eight weeks in total to
complete.
To establish a corporation, between five and 15
individuals must act as incorporators. They must
each own or subscribe to at least one share, and
a majority of them must be residents of the
Philippines. At least 25% of the authorized
capital stock must be subscribed at the time of
incorporation, and at least 25% of that
subscribed stock must be paid. However, when the
capital stock consists of no-par value shares,
the subscriptions must be paid in full.
Once incorporation formalities are completed,
the incorporators may sell their shares. The
corporation will still need to retain at least
five shareholders, as it must have at least five
directors, each of whom must hold at least one
share.
Among the more important documents required to
be filed with the SEC on applying for
incorporation are the articles of incorporation,
by-laws, and the treasurer's affidavit
indicating that the necessary capital has been
subscribed and paid up.
Formation
Costs
The cost of registering a corporation will
depend on its capital structure. Filing fees
with the SEC are 0.2% of the authorized capital
stock for the corporation, while nominal filing
fees will also be payable to the relevant local
government unit.
The original issue of shares of stock is also
subject to a documentary stamp tax equivalent to
0.5% of the par value of the shares. There are
also charges for the other government agencies,
but the amounts involved are minimal.
Public Disclosure of Information Requirements
The SEC requires the submission of audited
financial statements by stock corporations with
paid-up capital of at least P50,000. The
statements must also be accompanied by a
statement by management that it takes
responsibility for the information and
representations in the financial statements.
In addition, corporations are required to file
annual information sheets with the SEC,
providing information on the corporation's
general profile, such as the names of directors
and officers, stockholders and capital
composition, investments, treasury shares,
retained earnings, and dividends.
All information filed by corporations is
available at the SEC for public inspection.
Capital Structure
Minimum authorized, issued and paid-in capital
Corporations are required to have minimum
paid-up capital of P5,000. For corporations
trading in certain industries, however, the
minimum capitalization is higher.
At least 25% of the capital stock of a
corporation must be subscribed, and 25% of the
subscribed capital must be paid up. If foreign
investors will hold more than 40% of the shares
in a Philippine corporation that produces goods
for sale or renders services or otherwise
engages in business in the Philippines, the
general requirement under the Foreign
Investments Act is a minimum capitalization of
US$200,000.
This is reduced to US$100,000 if the corporation
will undertake activities involving advanced
technology or employ directly at least 50
employees. Export-oriented enterprises are not
subject to the minimum capitalization
requirement.
 Under the Foreign Investments Act, ownership
requirements are based on the "capital stock
outstanding and entitled to vote." In
determining outstanding capital stock, the Act
does not differentiate between ordinary shares
and shares carrying only partial voting rights
or paying preferential dividends.
For certain a specialized activity, such as
banking and retail trade, the minimum
capitalization is substantially higher if
foreign investors are to hold more than 40% of
the shares of a corporation. Share capital may
be contributed in cash (in any acceptable
currency) or property.
Par value or no-par value
Shares of stock may have par value or no-par
value, as provided in the articles of
incorporation. In both cases, the shares should
be paid in cash or in kind at a fair valuation
equal to the par or issued value of the stocks.
No-par value shares may not be issued for a
consideration less than P5 per share.
Minimum and maximum number of shareholders
Because of the requirement that the directors of
a corporation each hold at least one share, all
corporations require a minimum of five
shareholders. Except for close corporations,
there is no limit on the maximum number of
shareholders in a corporation.
Types of
Share Ownership
Philippine corporations may issue only
registered shares. Details of share ownership
and changes thereto must be recorded in the
corporation's Stock and Transfer Book.
Classes of Shares
Corporations are permitted to classify shares,
and each class of shares may have such rights,
privileges and restrictions as are stated in the
articles of incorporation. At least one class of
share, however, must carry full voting rights.
Major classes of shares of stock may be grouped
into the categories of common and preferred
stock, and voting and non-voting stock. However,
the Corporation Code still entitles holders of
non-voting shares to vote on a number of
specified matters relating generally to
fundamental changes in the corporation's
business or in the relationships between
stockholders.
Founders' shares classified as such in the
articles of incorporation can be issued granting
certain rights and privileges not enjoyed by the
owners of other stocks. However, an exclusive
right to vote and be voted for in the election
of directors must be for a limited period of not
more than five years.
Loans and Debentures
Corporations may incur bonded indebtedness by
issuing bonds to the public or to a specific
group of lenders. The bonds may be issued either
in bearer form or for registration in the
owner's names.
The issuance of bonds or debentures requires
approval by stockholders representing at least
two-thirds of the outstanding capital stock of
the corporation. If the bonds or debentures will
be issued to 20 or more holders, approval is
also required from the SEC.
Increases and
Decreases in Capital
Subject to SEC approval, a corporation may
increase or decrease its capital stock by a
majority vote of the board of directors and a
two/thirds vote of the shareholders. Whether a
corporation is allowed to decrease its capital
stock will depend on the purpose and how it will
carry out the decrease.
In any case, capital cannot be reduced if
creditors will be prejudiced. Increases in
capital may be funded by cash or property
infusion, or by converting existing retained
earnings into capital by way of stock dividends.
Capital Contributions
Amounts received in excess of the par value of
shares are treated as additional paid-in
capital. There are no restrictions on how a
corporation may apply its additional paid-in
capital, except that it generally may not be
distributed as dividends.
Transferability of
Shares
The transfer of shares is not unreasonably
restricted but may be regulated under certain
conditions, especially if transfer impairs the
rights of the creditors or other shareholders.
No transfer is valid, except between the
parties, until it is recorded in the books of
the corporation and the relevant taxes
(percentage tax of 0.5% of the sale proceeds if
the shares are traded through the facilities of
the Philippine Stock Exchange, or documentary
stamp tax equivalent to 0.375% of the par value
otherwise) have been paid.
Shares of stock against which the corporation
holds an unpaid claim are not transferable in
the corporate books.
Liability of
Shareholders
A shareholder may be personally liable for
corporate debts only to the extent of the
shareholder's subscribed capital. However, the
shareholder is liable for damages arising from a
breach of fiduciary duties, fraud, gross
negligence and other unauthorized acts such as
the unlawful disposition of corporate assets.
Relationship of Shareholders, Directors and
Officers
Directors' Responsibility
The board of directors exercises corporate
powers, and is responsible for the conduct of
the business of a corporation. However, certain
activities, such as the reconstruction of
capital and the creation of bonded indebtedness,
require the direct participation of shareholders
in the form of a vote. The directors of a
corporation are elected by the shareholders. At
least one share of the capital stock registered
must be in the director's name in the books of
the corporation.
The directors formally organize by electing from
among themselves a president. The directors also
elect a treasurer who may or may not be a
director, a secretary who must be a resident and
a citizen of the Philippines and other officers
as may be provided for in the bylaws. Any two or
more positions, except those of president and
secretary and of president and treasurer, may be
held concurrently by the same person.
Directors'
Liability
The official position of a director is one of
trust. To the corporation and its shareholders,
they act as trustees. To third parties, they act
as agents. Directors are liable for losses and
damages resulting from gross negligence,
assenting to patently unlawful acts, bad faith
in directing the affairs of the corporation and
acquiring personal or pecuniary interest in
conflict with their duties as directors.
Meetings and Voting Rights
Regular meetings of shareholders are held
annually on a date fixed in the bylaws. Special
meetings of shareholders can be held whenever
they are considered necessary, or as provided in
the bylaws. Proxy voting is permitted, but
notarization is necessary to make the proxy
valid against third parties. Documentary stamp
tax of P15 is also payable.
Dividends
The board of directors may declare cash
dividends out of unrestricted retained earnings.
Distributions from additional paid-in capital or
premium on capital may be declared only as stock
dividends. Stock corporations are prohibited
from retaining surplus profits in excess of 100%
of their paid-in capital stock, except under any
one of the following circumstances:
It is justified by definite corporate expansion
projects or programs approved by the board of
directors.
The corporation is prohibited under a loan
agreement with any local
or foreign financial institution or creditor
from declaring dividends without the lender's
consent, and the consent has not been secured.
It can be clearly shown that retention is
necessary because of special circumstances, such
as the need to maintain a special reserve for
probable contingencies.
Stock dividends may be issued to convert surplus
profits into authorized capital, and are not
subject to income tax. They are, however,
subject to a documentary stamp tax of 0.5% of
the actual value represented by each share.
The issue of stock dividends requires approval
by stockholders representing at least two-thirds
of the outstanding capital stock of the
corporation.
Liquidation, Receivership
Corporations may be dissolved for any of the
following causes.
Expiration of the period provided for in the
articles of incorporation.
Enactment of a special law requiring
dissolution.
A judicial decree of forfeiture.
Failure to organize and commence business
within two years from the date of incorporation.
Inoperative for five years after it has
commenced operations.
Voluntary dissolution, judicial or
extra-judicial.
Corporate assets may be liquidated by the
corporation itself through the board of
directors and creditors, by receivership, or by
trusteeship. Liquidation through the board of
directors takes three years from corporate
dissolution. Liquidation by receivership and
trusteeship may extend beyond three years. Under
the trust-fund doctrine, impairment of capital
is prohibited, principally to protect the
corporation's creditors. Upon dissolution, the
right of shareholders to the distribution of
corporate assets is subordinated to the rights
of the creditors.
The interests of the shareholders in the
remaining assets are in proportion to their
shareholdings, in the absence of any contrary
provision in the articles of incorporation and
in the certificates of stock. Holders of stocks
preferred as to assets must be paid before
holders of common stock and holders of stocks
preferred as to dividends.
As an alternative to dissolution, a financially
distressed company, or creditor(s) holding at
least 25% of the company's total liabilities,
may appeal to the Regional Trial Court to place
the company under corporate rehabilitation. The
Court will then, within five days, appoint a
rehabilitation receiver, suspend the enforcement
of claims against the company and forbid the
company from making any payment of its
outstanding obligations until the court can
review the petition.
The court will also require creditors and
interested parties to file their respective
comments on or oppositions to the petition not
later than 10 days before the initial hearing.
In the initial hearing, the court will review
the comments or oppositions of the creditors and
other parties with similar interests,
and will determine whether there is merit in the
petition for corporate rehabilitation. If the
court is satisfied, it will refer the
rehabilitation plan to the receiver who will be
required to submit his recommendations within
120 days of the initial hearing.
Before submitting the final revision of the
rehabilitation plan, the receiver together with
the company may meet with the creditors to
discuss the proposed plan and make appropriate
modifications or revisions. The Philippines does
not have a specialized court system for the
insolvency proceedings, which hampers
development of the requisite expertise on the
intricacies of corporate issues and the
quick-response mechanism necessary for the
courts to handle corporate rehabilitation issues
efficiently.
Thus court proceedings can be tedious and
lengthy, and do not guarantee recovery. Because
of these shortcomings, most secured creditors
would prefer to ensure timely recovery by
enforcing their rights over the collateral
through the foreclosure of mortgages. Unsecured
creditors, by contrast, tend
to pursue informal "workout agreements" with the
company.
Books and Records
All corporations must maintain books of account,
consisting of a journal and a ledger or their
equivalents. Subsidiary books may also be kept
as required by the particular business. It is an
administrative requirement that all books be
registered with the BIR before they may be used.
Corporations are also required to keep records
of all business transactions, minutes of
meetings of directors and shareholders, a stock
and transfer book and annual financial
statements at its principal place of office.
These books and records shall be open to the
inspection of any director or stockholder upon
written request.
Statutory Audit
A statutory audit is required for all
corporations with authorized capital stock or
paid-up capital exceeding P50,000, including
branches of foreign corporations. It is also
required for any corporation whose gross sales
or earnings exceed P150,000 in any quarter.
Branch of a Foreign Corporation
Because it does not have the requisite Filipino
ownership, a branch may only undertake business
activities that are not included in the FINL.
Unlike a corporation, which requires a set of
officers, a branch office may operate with only
one resident agent, who may also serve as the
general manager.
Types of Branch Operation
Branches can, subject to constraints imposed by
the FINL, be used to conduct the business
operations of a multinational in the
Philippines. A general requirement is that
US$200,000 be inwardly remitted to the
Philippines as assigned capital.
However, branches engaged in activities
involving advanced technology, or that employ at
least 50 direct employees, are required to
inwardly remit the reduced amount of US$100,000
as assigned capital. Export-oriented branches
are not subject to minimum assigned
capitalization requirements. Special rules
exist, however, for certain types of branch
operations, as follows.
A representative or liaison office can be
established to undertake activities such as
promoting and disseminating information about a
multinational's products, including dealing
directly with the clients of the head office.
The activities cannot extend to direct income
generating activities and the office is funded
on a straight reimbursement of cost basis
meaning that no taxable income arises.
Establishing a representative office requires an
initial inward remittance of US$30,000, and the
subsequent expenses of the office to be met by
the head office.
A regional or area headquarters (RHQs) can be
established to serve principally as a
supervision, communications and coordination
centre for the subsidiaries, branches or
affiliates of a multinational company operating
in the Asia-Pacific region and other foreign
markets. It is allowed to operate only as a cost
centre, and may not participate in any manner in
the management of any subsidiary or other branch
office the multinational has in the Philippines,
or to solicit or market any goods or services.
Establishing a RHQ requires an annual inward remittance of US$50,000,
which may be used to cover the operational costs
of the headquarters. The Philippines also has
special rules for regional operating
headquarters (ROHQs), which are established to
perform various qualifying support services to
its affiliates, subsidiaries or branches in the
Philippines, in the Asia-Pacific region and in
other foreign markets. Inward remittance of
US$200,000 as assigned capital is still
required, as for normal branch operations.
However, ROHQs are entitled among other benefits
to a preferential tax rate of 10% on their
income.
Branch Formation Procedures
In the same manner as a corporation, a branch is
required to register with the SEC and the other
government agencies before it may commence
actual operations. Documents required to be
submitted include certified and authenticated
copies of the directors' resolution authorizing
the establishment of a branch and appointment of
an attorney-in-fact or a resident agent in the
Philippines, the audited financial statements of
the corporation, and its articles of
incorporation.
A bank certification that the minimum required
capital has been inwardly remitted must also be
submitted. Within 60 days from the issuance of
the license to transact business, a branch
office is required to submit to the SEC
securities with an actual market value of
P100,000. Further, within six months after the
end of each fiscal year, additional securities
are required to be deposited equivalent in
market value to 2% of the amount by which its
income for that fiscal year exceeds P5,000,000.
Branch Formation Costs
The cost of registering a branch will depend on
the amount of its assigned capital. Filing fees
with the SEC are 1% of the assigned capital for
the branch, while nominal filing fees will also
be payable to the relevant local government
unit. There are also charges for the other
government agencies, but the amounts involved
are minimal.
Public Disclosure of Information
Requirements
The public disclosure of information
requirements for branches is the same as for
corporations.
Conduct of the Entity
Because the directors of a foreign corporation
are beyond the jurisdiction of the Philippine
authorities, the Philippines does not have any
rules governing the way the affairs of a branch
should be conducted by its responsible officers.
If there were issues with the way the branch
conducts its affairs with third parties, any
legal actions would be undertaken against the
corporation only. The security deposit
requirements for branch operations were
established to provide some cover against such
eventualities.
Liquidation, Receivership
To liquidate a branch office and repatriate its
capital, a branch must file a petition with the
SEC for withdrawal of its license to operate in
the Philippines. The following conditions must
be met:
All claims that have accrued in the Philippines
must have been paid, compromised or settled.
All taxes, imposts, assessments and penalties,
if any, lawfully due to the Philippine
government or any of its agencies must have been
paid.
The petition must have been published once a
week for three consecutive weeks in a newspaper
of general circulation.
Books and Records
The books and record keeping requirements for
branches are the same as for corporations.
Statutory Audit
The statutory audit requirements for branches
are the same as for corporations.
Partnership
A partnership has a separate legal personality
from that of each of the partners. A partnership
will be either general or limited, depending on
the liability of the partners. A partnership is
general when all the partners are personally
liable for the contracts of the partnership once
its assets are exhausted. In a limited
partnership, at least one partner has unlimited
personal liability, but the liability of other
partners is limited to the amount of their
capital contributions.
A partnership is the legal entity commonly used
by professionals seeking to exercise their
common profession, such as accountants and
lawyers. For tax purposes, they are referred to
as "general professional partnerships," and are
taxed as conduit vehicles, rather than as
corporations as is the case for other
partnerships. Under the Civil Code, however,
they are treated as any other partnership.
Partnerships are not commonly used as business
entities, other than by professional firms. In
general, any person who can enter into
contractual relations may become a partner. A
partnership can also become a partner in another
partnership, either with natural persons or with
other partnerships. As a matter of public
policy, a corporation may not be a partner in a
partnership.
However, the SEC may allow a corporation to
become a partner in a partnership where the
contract of partnership provides that it is to
be managed jointly by all the partners and that
the partners are to be collectively liable to
partnership creditors. The corporation must also
be permitted to enter into a partnership by its
articles of incorporation.
A partnership with more than P3,000 in capital
must register with the SEC. Registration follows
the pattern outlined above for corporations. The
filing fee for the articles of partnership is
the greater of P1,000 or 0.2% of the partnership
capital.
Partnerships are subject to the same record
keeping and statutory audit requirements as
corporations.
Joint Venture
Corporations may enter into a consortium among
themselves to finance a specific venture and
divide the profits according to the terms of the
agreement. Joint ventures, while not expressly
recognized as such under the Civil Code of the
Philippines, are afforded the same legal status
as a partnership. Consequently, because the tax
rules for partnerships are harsher than for
corporations, joint ventures established in the
traditional sense tend to be uncommon. The more
common approach is to establish a new
corporation, with the "joint venturers" holding
shares in the corporation.
The exception is for investments in construction
projects, or in energy operations pursuant to an
operating or consortium agreement under a
service contract with the Philippine government.
In these cases, the joint venture will be
treated as a conduit vehicle for tax purposes,
which overcomes the punitive nature of the tax
rules applying to partnerships.
Sole
Proprietorship
Sole proprietors must register with the Bureau
of Trade Regulations and Consumer Protection of
the Department of Trade and Industry, as well as
the appropriate local government unit. They are
not usually subject to the regulations and
requirements governing corporations and
partnerships in the operation of their business.
However, if the activity involves the practice
of a profession included in the Foreign
Investments Negative List (FINL), registration
of an alien individual will not be allowed.
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