Expanding your business into the Philippines through a branch office is a strategic move that allows for direct market participation while maintaining centralized control. Unlike a subsidiary, a branch office is an extension of the foreign parent company rather than a separate legal entity. This guide explores the registration process, compliance requirements, and tax implications for 2026.
Branch Office vs Subsidiary: Key Differences
Choosing between a branch and a subsidiary is a foundational decision. While both allow for 100% foreign ownership in most sectors, they differ in liability and legal personality.
Legal Entity: A subsidiary is a domestic corporation with a separate juridical personality. A branch is a mere extension, tax implications branch office philippines meaning the parent company’s assets are exposed to the branch’s liabilities.
Capitalisation: A branch generally requires an assigned capital of US$200,000. This can be reduced to US$100,000 if the branch employs at least 50 local workers or uses advanced technology.
Governance: A subsidiary requires at least five incorporators and a board of directors. A branch only needs a Resident Agent to receive legal summons.
Requirements and Registration Process
To register a branch office in the Philippines, a foreign corporation must secure a License to Do Business from the Securities and Exchange Commission (SEC).
Opening a Branch Office Checklist
SEC Form F-103: The primary application form for foreign corporations.
Authenticated Board Resolution: Authorising the establishment of the Philippine branch and appointing a resident agent.
Audited Financial Statements: The parent company's latest financial statements, showing solvency, must be authenticated by the Philippine Consulate/Embassy in the home country.
Articles of Incorporation: Certified copies of the parent company's founding documents.
Proof of Inward Remittance: A bank certificate showing the remittance of the required assigned capital (e.g., US$200,000) into a local Treasurer-in-Trust account.
Step-by-Step Process
1.
Name Reservation: Verify and reserve the business name with the SEC.
2.
3.
Document Authentication: Ensure all foreign-issued documents are apostilled or authenticated.
4.
5.
Capital Remittance: Open a temporary bank account to deposit the assigned capital.
6.
7.
SEC Filing: Submit all requirements and pay the filing fees (typically 1% of the assigned capital).
8.
9.
Local Permits: After receiving the SEC license, register with the Bureau of Internal Revenue (BIR), obtain a Mayor's Permit, and register with social agencies (SSS, PhilHealth, and Pag-IBIG).
10.
Tax Implications and Compliance
branch office compliance philippines offices are considered "Resident Foreign Corporations" and are taxed only on income sourced within the Philippines.
Tax Obligations
Corporate Income Tax (CIT): Generally 25% of net taxable income.
Branch Profit Remittance Tax (BPRT): A 15% tax is applied to profits remitted to the head office. However, branches registered with the Philippine Economic Zone Authority (PEZA) may be exempt from this.
Value-Added Tax (VAT): A 12% VAT applies if annual gross sales exceed ₱3,000,000.
Securities Deposit: Within 60 days of registration, the branch must deposit marketable securities (e.g., government bonds) worth at least ₱100,000 with the SEC as a "bond" for local creditors. An additional 2% of gross income exceeding ₱5,000,000 must be deposited annually.
A branch office offers the benefits of full parent-company control and simpler profit repatriation without the need for formal dividend declarations. However, the unlimited liability and higher initial capital requirements mean it is best suited for robust foreign firms looking for a direct presence. Ensuring compliance with the SEC's annual reportorial requirements and the BIR's digital filing systems is essential to maintaining your license to operate.
Branch Office vs Subsidiary: Key Differences
Choosing between a branch and a subsidiary is a foundational decision. While both allow for 100% foreign ownership in most sectors, they differ in liability and legal personality.
Legal Entity: A subsidiary is a domestic corporation with a separate juridical personality. A branch is a mere extension, tax implications branch office philippines meaning the parent company’s assets are exposed to the branch’s liabilities.
Capitalisation: A branch generally requires an assigned capital of US$200,000. This can be reduced to US$100,000 if the branch employs at least 50 local workers or uses advanced technology.
Governance: A subsidiary requires at least five incorporators and a board of directors. A branch only needs a Resident Agent to receive legal summons.
Requirements and Registration Process
To register a branch office in the Philippines, a foreign corporation must secure a License to Do Business from the Securities and Exchange Commission (SEC).
Opening a Branch Office Checklist
SEC Form F-103: The primary application form for foreign corporations.
Authenticated Board Resolution: Authorising the establishment of the Philippine branch and appointing a resident agent.
Audited Financial Statements: The parent company's latest financial statements, showing solvency, must be authenticated by the Philippine Consulate/Embassy in the home country.
Articles of Incorporation: Certified copies of the parent company's founding documents.
Proof of Inward Remittance: A bank certificate showing the remittance of the required assigned capital (e.g., US$200,000) into a local Treasurer-in-Trust account.
Step-by-Step Process
1.
Name Reservation: Verify and reserve the business name with the SEC.
2.
3.
Document Authentication: Ensure all foreign-issued documents are apostilled or authenticated.
4.
5.
Capital Remittance: Open a temporary bank account to deposit the assigned capital.
6.
7.
SEC Filing: Submit all requirements and pay the filing fees (typically 1% of the assigned capital).
8.
9.
Local Permits: After receiving the SEC license, register with the Bureau of Internal Revenue (BIR), obtain a Mayor's Permit, and register with social agencies (SSS, PhilHealth, and Pag-IBIG).
10.
Tax Implications and Compliance
branch office compliance philippines offices are considered "Resident Foreign Corporations" and are taxed only on income sourced within the Philippines.
Tax Obligations
Corporate Income Tax (CIT): Generally 25% of net taxable income.
Branch Profit Remittance Tax (BPRT): A 15% tax is applied to profits remitted to the head office. However, branches registered with the Philippine Economic Zone Authority (PEZA) may be exempt from this.
Value-Added Tax (VAT): A 12% VAT applies if annual gross sales exceed ₱3,000,000.
Securities Deposit: Within 60 days of registration, the branch must deposit marketable securities (e.g., government bonds) worth at least ₱100,000 with the SEC as a "bond" for local creditors. An additional 2% of gross income exceeding ₱5,000,000 must be deposited annually.
A branch office offers the benefits of full parent-company control and simpler profit repatriation without the need for formal dividend declarations. However, the unlimited liability and higher initial capital requirements mean it is best suited for robust foreign firms looking for a direct presence. Ensuring compliance with the SEC's annual reportorial requirements and the BIR's digital filing systems is essential to maintaining your license to operate.