UncategorizedThe differences between Branch and Representative Office

March 24, 2015

Philippines prevailed in 2014 as one of the fastest growing economies in the globe and the projections for 2015 remain positive and the economy is expected to grow by 6.4%.

Choosing the best business structure to set up in the Philippines can be a tough decision, especially in a country where changing a company structure is not allowed, and the process of closing takes several months. When foreign companies decide to explore opportunities in the Philippines, the first option at sight in most cases is the Branch Office.

Although a Branch Office can be a good option to companies planning to establish an arm in the Philippines, it is relevant to ask yourself first what are the goals of your company. If revenue generation, business development or client acquisition is not one of them, then a second option should be taken into consideration.

A Representative office is a very suitable structure for companies aiming to reduce costs in their countries of origin, transferring back office and administrative operations for example. Because a Representative Office is not allowed to generate revenue, the corporate income tax of 30% is not applicable.

The main functions of a Representative Office include customer support, marketing, quality control, information dissemination and back-office operations. The biggest advantage for this structure is the required capital, which is as low as USD 30,000, a considerable difference compared to the USD 200,000 necessary to set up a Branch Office. Aside from the required capital – which can be lowered to PHP 100,000 if export-oriented – a Branch office also requires the company to purchase a minimum amount in local stocks.

However, the Representative and the Branch offices share some similarities.  None of them requires a board of directors, for instance. The appointment of a Resident Agent, who serves as a point of contact of the company in the Philippines, is sufficient. Also, both structures require documents from the parent company, such as the Financial Statement, a Board Resolution and the Articles of Incorporation.

If you wish to enjoy the benefits of the cheap and high-skilled local labor force and is seeking for advice on the best structure for your business, don’t hesitate to contact Triple i. With more than 7 years of experience incorporating hundreds of companies in the Philippines, our team will be able to provide the necessary information to make your business succeed.

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