How to Register a Domestic Corporation in the Philippines?

March 24, 2015

Establishing a domestic corporation in the Philippines offers entrepreneurs a robust business structure with limited liability, separate juridical personality, and access to investment incentives, making it an attractive option for local and foreign investors. This comprehensive guide outlines the step-by-step process of registering a domestic corporation, detailing capital requirements, organizational structure, taxation, and compliance obligations under Philippine law. With a focus on clarity and precision, this article equips readers with the knowledge needed to navigate the registration process while highlighting the expertise of Triple i Consulting, a trusted provider of business registration services.

Understanding the Requirements for a Domestic Corporation

A domestic corporation in the Philippines is a legal entity formed under the Revised Corporation Code, offering shareholders limited liability and the ability to operate as a separate juridical person. Before initiating the registration process, it’s essential to understand the foundational requirements, including capital contributions, incorporator rules, and officer roles. These elements ensure compliance with the Securities and Exchange Commission (SEC) regulations and set the stage for a successful setup.

Minimum Capital Requirements: A domestic corporation with 100% Filipino ownership or up to 40% foreign ownership requires a minimum paid-up capital of PHP 5,000 (approximately US$100). Corporations with over 40% foreign ownership must have a minimum paid-up capital of US$200,000 unless they meet specific exemptions, such as employing at least 50 Filipino workers, using advanced technology (validated by the Department of Science and Technology), or exporting at least 60% of their products, which reduces the requirement to US$100,000.
Incorporators: A domestic corporation must have 2 to 15 incorporators, each holding at least one share. The majority must be residents of the Philippines, and incorporators can be natural persons or juridical entities.
Mandatory Officers: The corporation must appoint four key officers: a president (who must be a director and shareholder), a corporate secretary (a Filipino citizen and resident), a treasurer (a resident, not necessarily Filipino), and a compliance officer (a resident).
Articles of Incorporation: This document outlines the corporation’s purpose, structure, and capital details. It must be submitted to the SEC during registration.
Corporate Name: The business name must be unique, not resembling existing entities, and compliant with SEC naming guidelines, such as including “Corporation” or “Inc.” in the name.

Navigating the SEC Registration Process

Registering a domestic corporation with the Securities and Exchange Commission (SEC) is the cornerstone of establishing a legal business entity in the Philippines. The SEC oversees corporate formation, ensuring compliance with the Revised Corporation Code. The process has been streamlined with digital tools, but attention to detail is vital to avoid delays or rejections.

Name Reservation: You can reserve a unique business name through the SEC’s online portal, esparc.sec.gov.ph. The process involves checking name availability and securing approval, typically within 1–2 business days, for a fee of approximately PHP 100.
Draft Articles of Incorporation: Prepare the Articles of Incorporation, including details on the corporation’s purpose, authorized capital stock, incorporators, and directors. Ensure accuracy, as falsity or misrepresentation can lead to registration revocation.
Submit Documents: File the Articles of Incorporation, bylaws, and supporting documents (e.g., incorporators’ IDs, treasurer’s affidavit) via the SEC’s online system or in person. Fees vary based on authorized capital, starting at PHP 1,000–2,000.
Pay Filing Fees: Settle SEC filing fees depending on the authorized capital stock. For example, a corporation with PHP 1 million in capital may incur PHP 2,000–5,000 fees.
Obtain Certificate of Registration: Upon approval, typically within 10–15 business days, the SEC issues a Certificate of Incorporation, formalizing the corporation’s legal existence.

Securing Tax and Local Government Permits

After SEC registration, a domestic corporation must comply with tax and local government requirements to operate legally. This involves registering with the Bureau of Internal Revenue (BIR) and obtaining permits from local government units (LGUs). These steps ensure that the corporation meets fiscal and regulatory obligations.

BIR Registration: Apply for a Taxpayer Identification Number (TIN) using BIR Form 1903 at the local Revenue District Office (RDO). Submit the SEC Certificate of Incorporation, Articles of Incorporation, and lease agreement for the business address. The BIR issues a Certificate of Registration, with PHP 2,000–4,000 fees.
Barangay Clearance: Obtain a clearance from the barangay (local community unit) where the business is located. This requires a business address and a small fee, typically PHP 500–1,000.
Mayor’s Permit: Apply for a business permit from the city or municipal hall. Submit the SEC certificate, BIR registration, barangay clearance, and lease agreement. Fees vary by LGU and business size, ranging from PHP 5,000 to PHP 20,000 annually.
Annual Tax Compliance: Domestic corporations are subject to a 25% corporate income tax (CIT) on taxable income. File yearly income tax returns (BIR Form 1702) by April 15 of the following year.
Tax Incentives: If the business operates in priority industries or export zones, register with the Board of Investments (BOI) or Philippine Economic Zone Authority (PEZA) for potential tax incentives, such as income tax holidays.

Registering for Employee Benefits and Compliance

Registration with government agencies for social benefits is mandatory for domestic corporations hiring employees. These agencies include the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (Pag-IBIG). Compliance ensures employees receive legally mandated benefits and protects the corporation from penalties.

SSS Registration: Register with the SSS using Form R-1 to provide employees with social security benefits, such as retirement and disability coverage. Submit the SEC certificate and Articles of Incorporation. Employers must remit monthly contributions based on employee salaries.
PhilHealth Registration: Enroll with PhilHealth to provide employees with health insurance. Submit Form ER2, along with the SEC certificate and employee details. Monthly contributions depend on salary levels and are split between employer and employee.
Pag-IBIG Registration: Use the Employer Data Form to register with Pag-IBIG for housing and savings benefits. Contributions are mandatory for employees earning at least PHP 1,000 monthly, with rates set at 1–2% of salary.
Employee Reporting: To maintain compliance, submit quarterly and annual reports to these agencies. Late submissions may incur penalties.
Exemption for Non-Employers: If the corporation does not hire employees, these registrations are not required, but future hiring will trigger this obligation.

Complying with Foreign Ownership and Industry Regulations

Foreign investors establishing a domestic corporation must navigate ownership restrictions outlined in the Foreign Investment Negative List (FINL). While specific industries allow up to 100% foreign ownership, others impose limits, requiring careful planning to ensure compliance. Understanding these regulations is vital for structuring the corporation appropriately.

Foreign Investment Negative List (FINL): The FINL restricts foreign ownership in industries like mass media (0% foreign ownership), retail trade with less than US$2.5 million capitalization (0% foreign ownership), and public utilities (up to 40%). However, manufacturing, IT-BPO, and renewable energy often allow 100% foreign ownership.
Capital Requirements for Foreign-Owned Corporations: Corporations with over 40% foreign ownership require US$200,000 in paid-up capital unless exemptions apply (e.g., 60% export orientation reduces it to US$100,000).
Industry-Specific Permits: Certain sectors, such as food and pharmaceuticals, require additional permits from agencies like the Food and Drug Administration (FDA). Verify requirements with the Department of Trade and Industry (DTI).
Anti-Dummy Law Compliance: Ensure compliance with the Anti-Dummy Law, which prohibits foreigners from holding officer positions in restricted industries unless allowed by the FINL.
BOI/PEZA Registration: Foreign-owned corporations in export-oriented or priority industries can register with BOI or PEZA for incentives like tax holidays or reduced duties on imported equipment.

Why Professional Assistance from Triple i Consulting is Essential

Registering a domestic corporation in the Philippines involves multiple government agencies, complex regulations, and potential pitfalls like delays or rejections due to incomplete submissions. Navigating this landscape requires expertise to ensure compliance and efficiency. Triple i Consulting, a trusted provider of business registration services, offers specialized guidance to streamline the process and mitigate risks.

Expert Navigation of SEC Requirements: Triple i Consulting ensures accurate preparation of Articles of Incorporation, bylaws, and other SEC documents, reducing the risk of rejection or revocation due to falsity or errors.
Compliance with BIR and LGU Regulations: The firm handles BIR registration, mayor’s permits, and barangay clearances, ensuring all filings meet agency standards and deadlines.
Guidance on Foreign Ownership: Triple i Consulting advises on FINL restrictions and capital requirements, helping foreign investors structure their corporations to maximize ownership while remaining compliant.
Employee Benefits Registration: The firm manages SSS, PhilHealth, and Pag-IBIG registrations, ensuring timely compliance for corporations hiring employees.
Ongoing Support: Beyond registration, Triple i Consulting provides services like annual report filing and tax compliance to maintain the corporation’s good standing with the SEC and other agencies.

Given the complexity of coordinating with the SEC, BIR, LGUs, and other agencies, partnering with Triple i Consulting is highly recommended to avoid costly mistakes and expedite the setup process.

Final Thoughts

Registering a domestic corporation in the Philippines is a strategic step for entrepreneurs seeking to establish a business with limited liability and access to a growing market. The process involves securing SEC registration, complying with tax and local government requirements, registering for employee benefits, and adhering to foreign ownership regulations. By understanding capital requirements, organizational structures, and compliance obligations, business owners can confidently navigate the process. However, the complexity of dealing with multiple agencies underscores the value of professional assistance. For a seamless registration experience, Triple i Consulting offers expert guidance tailored to your business needs.

Is Assistance Available?

Yes, Triple i Consulting provides comprehensive support to simplify the intricate process of registering a domestic corporation. Contact us today to schedule an initial consultation with one of our experts: