The Philippines continues to thrive as a tech-forward talent hub. The well-educated, English-proficient workforce is a natural fit for both remote and local opportunities — positioning Philippine talent as an appealing option for many businesses.
If you’re looking to unlock the full potential of the Philippine workforce, establishing a legal entity can be a smart next step. It opens the door to operating in one of Southeast Asia’s most stable and well-established labor markets.
But before you start envisioning business meetings over coffee and pandesal in Manila, it’s essential to understand what you’ll be getting into. Opening a legal entity isn’t as simple as flipping a sign on your door to “Open.” There are multiple legal and administrative steps to knock out first.
Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources or qualified professionals.
Key takeaways:
- There are several options for companies looking to establish a presence in the Philippines, including domestic corporations, branch offices, regional headquarters, and regional operating headquarters.
- The multi-step process of opening a business entity in the Philippines includes costly business registration fees, complex filing requirements, and the need to maintain a physical presence — all before you make your first local hire.
- Interpreting bureaucratic requirements and language barriers can create ongoing administrative hurdles for companies opening a local entity in the Philippines.
Understanding Legal Entity Types in the Philippines
Ready to expand your operations into the Philippines, but not sure how to get started? Here’s an overview of the most common options to open a business in the country:
Domestic Corporation
For international organizations seeking to hire locally in the Philippines and maintain a long-term operational presence, a domestic corporation is often the best choice.
A domestic corporation allows for the entity to be wholly owned by a company outside of the Philippines. By incorporating locally, leadership also maintains complete control over payroll administration, tax compliance, and statutory benefit management.
In addition to the ability to manage employees directly, a domestic corporation provides the necessary autonomy to lease commercial property, engage in local trade, and oversee fiscal obligations, such as corporate income tax and VAT.
Branch Office
A branch office operates as a direct extension of a parent company, as opposed to a separate legal entity. This enables organizations to conduct income-generating activities and hire local staff under their existing business name.
Opening a branch office enables companies to integrate their Philippine operations directly into their global corporate structure without the need for a new board of directors.
While opening a branch office might be a good choice for larger organizations, the increased liability exposure and upfront capital costs often make it less practical for startups or small- to mid-sized enterprises.
Consequently, most growing firms favor the domestic corporate model over opening a branch office to mitigate risk and meet local compliance standards more efficiently.
Regional Headquarters (RHQ)
A Regional Headquarters (RHQ) functions as an administrative and coordination hub for a company’s broader Asia-Pacific operations.
Unlike other corporate structures, an RHQ is prohibited from generating local income or engaging in commercial trade within the Philippines. Instead, its functions include offering management support, delivering internal training, and organizing regional planning. An RHQ can only hire staff to support its internal work.
For companies focused on scaling an operational workforce, building a local sales team, or establishing a profit-generating center, this model is generally not suitable for their needs.
Regional Operating Headquarters (ROHQ)
A Regional Operating Headquarters (ROHQ) is an extension of a multinational firm. Unlike an RHQ, an ROHQ may generate revenue, but it must come from specific activities, such as IT support or financial administration.
An ROHQ can employ local professionals in the Philippines, but its scope of operations is legally limited to back-office functions and technical services.
While this model is a strategic choice for corporations establishing a centralized shared service center, it rarely aligns with the needs of firms seeking a nimble local presence.
6 Steps to Opening a Legal Entity in the Philippines
The entity setup process is lengthy and complex, involving registering with multiple government bodies and relevant social security agencies. While timelines vary, the entire process can take anywhere from several weeks to a few months, depending on the complexity and the company's preparedness.
Here’s a breakdown of some of the major milestones you’ll need to complete during the process of opening an entity:
Step 1: Reserve and Register the Company Name With the Securities and Exchange Commission
Formalizing a presence in the Philippines begins by confirming that your company’s preferred name is available and then registering it with the Securities and Exchange Commission (SEC).
The process involves submitting the Articles of Incorporation along with supporting documentation, such as the treasurer’s affidavit and name verification slip, for a compliance review. If the name is available and all other paperwork is in order, the SEC will issue a Certificate of Registration.
Companies must also select a business address, as it is an essential component that will impact subsequent costs for government permits and regulatory fees.
Step 2: Get Your Barangay Clearance
Once SEC registration is complete, a company must obtain a Barangay Clearance from the local district in which the office is located.
Barangay Cleance offers certification that confirms your business is a recognized entity within your local Philippine community. Additionally, it helps document that intended operations align with Philippine laws.
This process serves as a first layer of municipal oversight, involving a formal filing and a nominal fee paid at the local hall.
Step 3: Obtain Your Business Permit (Mayor’s Permit)
The next step is to secure a Mayor’s Permit. This business license requires the submission of the SEC registration and Barangay Clearance. These documents must be included alongside proof of address and a fire safety inspection certificate.
The application process involves a formal assessment of municipal fees and a physical site inspection by local authorities.
The permit must be renewed every January.
Step 4: Register With the Bureau of Internal Revenue
Registering with the Bureau of Internal Revenue (BIR) is a requirement to formally integrate a business into the Philippine tax system.
Once registered, a Tax Identification Number (TIN) and a Certificate of Registration (COR) will be issued, which serve as the official record of the company’s tax obligations.
During this phase, leadership must define the entity’s tax profile — such as selecting VAT or non-VAT status — while simultaneously registering the company’s books of accounts.
Furthermore, the business must secure an Authority to Print (ATP) to issue official receipts or invoices, which are mandatory for all commercial transactions. This company registration ensures that the entity remains compliant with national revenue regulations and is legally authorized to collect and remit taxes.
Step 5: Register with Other Government Agencies (SSS, PhilHealth, Pag-IBIG)
As an employer of Filipino workers, a company must register with the three primary social welfare agencies that administer mandatory employee benefits:
- Social Security System (SSS) for social insurance
- PhilHealth for national health coverage
- The Home Development Mutual Fund (Pag-IBIG) for housing and savings benefits
Step 6: Open a Corporate Bank Account
Once a company is formally registered, it must open a dedicated corporate bank account to manage local capital and payroll.
Most Filipino financial institutions require specific documentation to open a bank account. This documentation includes:
- SEC Certificate of Incorporation
- Articles of Incorporation and Bylaws
- BIR Certificate of Registration
- Mayor’s Permit
In addition to these government-issued documents, banks require a notarized Board Resolution that specifically authorizes account opening and designates the official signatories.
It’s also important to note that many banks require at least one authorized signatory to appear in person to finalize the application and fulfill Know Your Customer (KYC) protocols.
Payroll, Tax, and Ongoing Compliance
The six steps we covered above are just the starting point for opening a legal entity in the Philippines. The process also entails several ongoing responsibilities, including payroll management and tax compliance.
Taxes, in particular, can get complicated. Employers are typically responsible for withholding and remitting income tax, social security contributions, and other required benefits on behalf of employees.
On top of that, regular filings, reporting, and occasional audits are essential for maintaining compliance with local regulations. Keeping everything up to date is necessary to avoid penalties and ensure your entity operates smoothly.
Common Challenges When Setting Up a Legal Entity
Common challenges facing companies with local entities in the Philippines include:
- Navigating local bureaucracy
- Managing competing timelines
- Interpreting regulatory requirements
Language barriers and unfamiliar administrative processes can also slow progress and may lead to compliance issues in the future. That's why it's essential to work with local experts or trusted partners at every step.
EORs as an Alternative to Opening a Legal Entity
For companies that want to hire in the Philippines without the hassle of establishing a local entity, a flexible and cost-efficient alternative is available.
Employer of Record (EOR) services enable businesses to hire employees compliantly while avoiding the costs and legal exposure associated with operating an entity.
By partnering with an EOR, companies eliminate the time and expense of incorporation fees, local legal counsel, and the ongoing burden of complex monthly filings.
An EOR offers an ideal solution for testing the Philippine market or scaling a distributed team without the long-term commitments of a physical presence, enabling companies to bring on new employees in days, not months.
Save Time & Money: Hire in the Philippines With RemoFirst
If you’ve crunched the numbers and determined that opening a local entity in the Philippines isn’t the right fit for your business, but you still want to employ Filipino workers, RemoFirst can help.
Working with an EOR like RemoFirst bypasses the need for you to incorporate in the Philippines. When you partner with us to employ your Filipino talent, we assume full responsibility for managing local payroll, tax withholding, social security contributions, and employee benefits administration, including healthcare.
Our expert partners on the ground know all the ins and outs of Philippine labor law, from drafting compliant employment contracts to managing complex onboarding processes and will ensure your company is fully compliant with local employment laws.
Ready to learn more about how RemoFirst can help you legally employ workers in the Philippines and more than 185 other countries? Schedule a demo today.
