What you need to know before starting up a business in the Philippines?
With a population over 100 million people, the Philippines is one of the fastest growing economies in the world and just last quarter finished with an impressive 6.9% growth that exceeded even the most optimist forecasts.
Despite its controversial administration, that did not seem to have shaken the foreign investors’ confidence and international debt watchers. The economic fundamentals remain strong and the number of foreign companies looking into investing in the Philippines is higher than has ever been. Given this, the competition for Foreign direct investment (FDI) is strong and the Philippines needs to step up his game and implement policies that can turn the country into a friendlier place to do business.
If you are looking into the Philippines as the next place for your business, here are some key aspects you should take into consideration before starting that journey.
Registering a Business
It takes 28 days, 16 procedures and an infinite number of documents to set up a business in the Philippines. In this particular indicator the Philippines stands at a disappointing 173th place in the world bank publication Ease of Doing Business that provides objective measures of business regulations for local firms across 190 countries. In the region, only Cambodia trails behind the Philippines
The first challenge is to decide which among the several legal structures is the most suitable for your business. Each of them brings a different set of requirements, headaches and the registration process and timeline vary tremendously. A new corporation can be registered within weeks but if you are looking to register a branch or representative office of a foreign company, get ready for the cumbersome process you have to endure with the Securities & Exchange Commission.
Tax Legal Framework
The tax reform everyone has been waiting for has finally been approved and is set to be implemented on January 1, 2018. This enables filipinos to increase their take home pay but on the other side hikes the prices of cars, fuel, tobacco, and some beverages among others
This reform is expected to increase the bureau of internal revenue turnover and to finance the increased budget on infrastructure.
The Philippines is likely to release a new foreign direct investment list which is expected to be significantly shorter. Restrictions in industries such as trade, retail, energy and infrastructure contractors are likely to be lifted.
The current administration made it very clear that infra-structure it’s a top priority for the country and the only way the Philippines to remain one of the fastest growing economies in the region. The Build, Build, Build program will pave way to the country’s first subway and upgrading the country’s infrastructure. Included in the construction is the renovation of the country’s major airports and runways, seaport and not to mention, the roads.
Given the heavy traffic in the Metro, the government is currently on the works in upgrading the country’s infrastructure. Included in the construction is the renovation of the country’s major airports and runways, seaport and not to mention, the roads.
Corporate Income Tax
The Philippines has the highest corporate tax rate in the Philippines with 30% based on the taxable income. Fortunately,this tax is expected to drop to 28 percent in 2019 and 25 percent in 2021, similar to the rates in neighboring countries which will certainly increase the competitiveness of the country.
When it comes to the payment of this tax, while filling and paying taxes is never fun wherever you are, in the Philippines this task is particularly daunting. Companies in the country are taking an average of 182 hours to comply with tax payments—36 for labor taxes, 38 for corporate income tax and 108 for consumption taxes.
The Philippines has enacted a number of tax incentives to encourage foreign players to invest in the country. The companies eligible for these are mostly manufacturers and companies who derive the most of its revenue from overseas.
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