Expanding business presence in the Philippines presents significant opportunities with its strategic location, a young workforce, and a growing consumer market. The country offers a business-friendly environment, improving infrastructure, and strong government support, making it an attractive destination for investment and growth in Southeast Asia.

While there are various options for foreign companies and entrepreneurs, like establishing branches, representative offices, and headquarters, this article provides a complete guide to setting up and registering a subsidiary company in the Philippines. Read on and tell us in the comments how we can assist you in your business expansion.

What is a Subsidiary?

A subsidiary is a Philippine-incorporated domestic company that is wholly or partially owned by a foreign multinational corporation. Being locally incorporated, it exists under Philippine laws and enjoys a distinct and separate juridical entity from its shareholders and parent company abroad. It is a highly favored business expansion option for foreign investors due to its straightforward setup model and many other benefits.

Subsidiary Versus Branch Office

In the Philippines, a subsidiary is a separate legal entity from its parent company, with its own structure and operations. It follows Philippine laws and regulations, including minimum capital requirements, and operates independently, though the parent company holds a controlling interest.

On the other hand, a branch office is an extension of a foreign company, not a separate legal entity. It operates in the Philippines under the name of the parent company and is considered part of the foreign entity for legal and tax purposes. It is subject to specific regulations, including the requirement for a local representative or resident agent, and is directly liable for its own activities. It does not have the same level of independence as a subsidiary, as it must adhere to the directives of the parent company.

Two (2) Types of Subsidiaries in the Philippines

In the Philippines, there are two main types of subsidiaries—wholly owned and partially owned subsidiaries.

Wholly Owned Subsidiaries

In a wholly owned subsidiary, the parent company owns 100% of the shares and controls the subsidiary. It operates as a separate legal entity with its own financials, operations, and liabilities, while the parent company has full decision-making authority.

Partially Owned Subsidiaries

In contrast, a partially owned subsidiary is a corporation where the parent company owns more than 50% of the shares but not all. While the parent company retains significant control, minority shareholders can also participate in governance and decision-making. This structure is often used by foreign companies investing in the Philippines alongside local or other foreign investors.

Key Features of a Subsidiary Company

A subsidiary company in the Philippines is a separate legal entity, distinct from its parent, offering opportunities for investment with specific ownership, capital, and tax requirements.

Separate Legal Entity and Limited Liability

Like an ordinary domestic corporation, a subsidiary company is a distinct legal entity from its parent company under Philippine laws. It operates separately and is not considered part of the parent or its shareholders. As a result, the subsidiary’s incurred liabilities are not the liabilities of the parent company or its shareholders.

Ownership Structure

In the Philippines, a subsidiary must have more than 50% of its shares owned by the parent company. A wholly owned subsidiary is also allowed, i.e., if it exports goods or services or generates more than 60% of its revenue abroad. In some cases, a subsidiary may also need a local partner to comply with specific regulations.

Capital Requirements

Generally, a subsidiary company in the Philippines requires a minimum capital of US$ 200,000.00, which can be reduced to US$ 100,000.00 for companies using advanced technology, pioneering Filipino industry, or employing at least fifty (50) local workers. Export enterprises may have a capital requirement as low as US$ 100 (PHP 5,000).

Taxation

Subsidiaries in the Philippines are taxed like local companies, with a 25% tax on worldwide corporate income. They also face a 12% value-added tax (VAT) on most goods and services, while exported services are VAT-exempt. Additionally, dividends paid to non-resident shareholders are subject to a 25% withholding tax.

How to Set Up and Register a Subsidiary Company in the Philippines

A subsidiary company in the Philippines must register with the Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), local government units (LGUs), statutory agencies, and other government bodies, as may be required, to legally conduct its business. Follow these key steps to ensure full compliance with local laws and regulations:

1. Finalize the Business Structure and Other Details.

Aside from the business structure, start finalizing the industry of operations, trade agreements with the parent company, nationality of employees, and other business practices—all of which may affect the registration and operational processes. For instance, if more than 40% of the shares of a subsidiary are owned by a foreign parent company, it is considered a foreign-owned domestic corporation.

2. Verify and Reserve a Company Name.

After finalizing the details, select a unique corporate name, verify its availability, and have it reserved with the SEC through its online verification and reservation system.

3. Register as a Subsidiary with SEC.

After successful name verification and reservation, complete the online SEC registration through the Electronic Simplified Processing of Application for Registration of Company (eSPARC) and submit all duly signed and notarized documentary requirements, such as:

  • Name Verification Slip, which confirms the availability and approval of a proposed company name;
  • Articles of Incorporation (AOI), which document the creation of the subsidiary and define its purpose, structure, capitalization, incorporators, and other essential details;
  • Company By-Laws, which set the rules that govern the subsidiary’s internal operations and management;
  • Treasurer’s Affidavit that verifies the subscription and payment of the subsidiary’s capital stock;
  • Registration Data Sheet;
  • Proof or Inward Remittance to a Philippine bank (i.e., if foreign ownership exceeds 40%, a minimum paid-up capital of US$ 200,000 is required, unless export-oriented or based on existing laws);
  • Proof of Address, which can be a lease contract or property title for the corporation’s physical or virtual office address;
  • List the Names of Shareholders with their number of shares, and the amount they are investing;
  • Personal Details of Incorporators, including their names, nationalities, and addresses;
  • Treasurer-in-Trust;
  • Registration Fee Payment (i.e., normally including the approximately 0.2% of the authorized capital stock as a filing fee, 1% for SEC legal research fees, and PHP 210.00 for registering the subsidiary’s by-laws);
  • SEC Form F-100 or Application to Do Business Under the Foreign Investments Act (for a subsidiary with more than 40% foreign equity); and,
  • Other supporting documents, as may be required.
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4. Register the Stock and Transfer Book (STB).

Upon receiving the SEC Certificate of Incorporation, the subsidiary must register its Stock and Transfer Book (STB) with the SEC. This STB is an essential record used to monitor share ownership and facilitate the management of new share issuances, dividend distributions, and other shareholder-related activities.

5. Obtain a BIR Certificate of Registration (COR).

Register also with the Bureau of Internal Revenue (BIR), the tax authority in the Philippines, to obtain a BIR Certificate of Registration (COR), which contains the company’s Taxpayer Identification Number (TIN), VAT registration (if applicable), and other tax details. The subsidiary must also register its books of accounts, print official receipts and invoices according to the BIR standards, and comply with other tax regulations.

6. Secure Business Permits from the LGUs.

While registering with the BIR, the subsidiary may simultaneously apply for business permits with the LGUs.  The primary permits required are the Barangay Business Permit and the Mayor’s Permit. Additional permits and clearances may include the Locational Clearance, Zoning Certificate, Fire Safety Inspection Certificate (FSIC), and Sanitary Permit.

7. Apply for Secondary Licenses (if applicable).

If the subsidiary will operate in regulated sectors (e.g., banking, insurance, pharmaceuticals, etc.), it must apply for secondary licenses from the relevant regulatory bodies, such as the BSP for banking or the FDA for pharmaceuticals. The application typically requires submitting relevant documents, undergoing inspections, and meeting the industry-specific regulatory requirements.

8. Process Employer Registrations with Statutory Agencies.

Lastly, the subsidiary must also register with statutory agencies like the Social Security System (SSS), PhilHealth (PHIC), and Pag-IBIG Fund (HDMF) to ensure compliance with labor laws and provide employee benefits.

By completing these steps, a subsidiary company in the Philippines ensures legal registration, compliance with local regulations, tax requirements, and business permits. This process establishes a solid legal foundation, enabling smooth and successful business operations.

… and you might just need our assistance.

At FilePino, we simplify the process of registering your subsidiary company, ensuring compliance with all legal requirements. Our team of experts provides end-to-end support—from registration to regulatory compliance—so you can focus on your investments and growth strategies. 

Ready to register a subsidiary in the Philippines? Set up a consultation with FilePino today! Call us at (02) 8478-5826 (landline) and 0917 892 2337 (mobile) or send an email to info@filepino.com.