Starting a Business in the Philippines for Expats

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The Philippines remains one of the top travel destinations in Southeast Asia. Beautiful beaches, a growing economy, and the gracious hospitality of the people are some of the most magnetic points about the Philippines. Filipinos' proficiency in English makes it easier to integrate for foreign visitors. English communication skills of locals make getting around the country safer and easier.

On the business side of things, a lot can still be improved. There needs to be better infrastructure; and public administration and governance need to be more transparent and efficient. The economy thrives on the transparency and efficiency of legal, business, financial, and government systems and frameworks as applied to business as well as the impartial application of the rule of law when it comes to disputes.

But as messy the national political scene is at the moment, the general direction of policy with regard to foreign investments and foreign-owned businesses has been positive. The GDP growth has been consistently growing at an average of 6% to 7%, and despite the COVID pandemic crisis, it is hard to ignore the growth potential cross-sectors. 

For international visitors who want to be more than tourists in the Philippines, you may consider investing in doing business in the country. As a developing economy, there is still plenty of room for growth. 

Can Expats Start a Business in the Philippines?

The short answer is: Yes.

The advantage of doing business as a Philippine corporation is the minimal capital requirements compared with foreign-owned companies. Partnering with Filipino citizens to start a company is a good way of getting your toes wet and making yourself known in the business community while investing relatively small amounts compared with building or investing in fully foreign-owned businesses.

To maintain the status of Philippine corporation, equity in the company is limited to a maximum of 40% for foreigners. This means you need to partner with Filipino citizens that you trust who, collectively, are going to own the other 60% of shares of the company. Expats will need a 9G visa.

Enterprise Options for Foreigners

Some areas of economic activity are restricted to Filipino citizens while some industries or business activities are more open to foreign investment only up to a specified level of equity ownership.

  1. Export Enterprises. Businesses involved in manufacturing, processing, or service, including tourism can be 100% foreign-owned if the economic activity does not fall under the Negative List.
  2. Domestic Enterprises. Overseas companies or foreign individuals can operate or invest under the broad category of "domestic market enterprise", enterprises producing goods for sale, or renders services majority to the domestic market. It requires capitalization of US $100,000 if the enterprise involves advanced technology, or if the enterprise employs at least 50 workers.
  3. Retail Trade. Selling of consumer goods and merchandise, e.g. stores or restaurants, or businesses selling directly to the public - requires a minimum paid-up capital of at least US $2,500,000 in investments, or establishing a store not less than US $830,000.
  4. Business-to-Business. Servicing and selling to other businesses can fully own companies while investing the relatively minimal sum of US $100,000 or US $200,000.

Important to note that incentives are available for businesses, both foreign and domestic, that are located in designated Special Economic Zones (SEZs), such as Cebu IT Park and Mactan Economic Zone. The Bureau of Investments (BOI) also incentivizes businesses such as a tax holiday for 4 years or more and tax exemptions from import and export fees. 

Spaces such as The Company Cebu, located in Cebu IT Park, make it easier and faster for you to set up a business because you are not boggled by challenges in finding commercial space, rent fees, administration, overhead, and more. 

It is integral to know your legal obligations, laws, and regulations, so seek legal representation or counsel prior to making the jump. As a foreign national, there are several other options for you to stay here as a resident and set up shop. If setting up a business is not feasible for you, you can reside here as an investor or retiree, which will require different requisites.

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To know more about the Expat options of doing business and residency, you can read Complete Expat’s Guide to Doing Business in the Philippines written by Atty. Kenneth Varona. 

 


 

Atty. Kenneth Varona is a lawyer and founding partner of VARONA LAW with the core competence of Civil Law, particularly Family Disputes, and matters involving Property Relations and Estates.

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