Philippines Company Formation: Key Benefits and Tax Rules

Business in Southeast Asia has become the de facto standard in terms of profitability, security, opportunities and level of protection in the first third of the 21st century. Global processes of digitisation of economic relations and shifting priorities have propelled the Philippines offshore to the leading position in the ranking of preferences of business people, investors, start-up founders and businessmen working in the financial technology sector. Therefore, the country is considered one of the second wave of Asian tigers, along with Indonesia, Malaysia, Thailand, and Vietnam.

Registering a company in the Philippines allows you to set up and launch a commercial project of any complexity, with virtually no restrictions on business areas. The country’s authorities encourage the inflow of foreign investment, and corporate legislation takes into account modern trends in globalisation and the gradual transition of business to online. The national regulator (BOI, Board of Investments) monitors compliance with regulations and protects the interests of foreign businesses.

Taxes in the Philippines are low, so it is advantageous to register not only start-ups but also companies seeking to enter global markets in this jurisdiction. The country has a well-developed financial sector, and legal entities and their founders will have no problems opening personal and corporate bank accounts. The Philippines’ special economic zones, controlled by PEZA (Philippine Economic Zone Authority), offer special conditions for doing business.

The economy is growing steadily, with high-tech products accounting for over 50% of exports. The fintech sector in the Philippines has formed and launched trends away from the traditional value system focused solely on industrial production and agriculture. There are no complaints from the FATF regarding the jurisdiction, and the main OECD recommendations aimed at combating aggressive tax practices are being followed.

Business profile of the Philippines:

• official languages — Filipino (Tagalog), English;
• form of government: presidential republic;
• location — Southeast Asia;
• Time zone: GMT UTC+ 8;
• currency — Philippine peso (₱ , PHP), USD/PHP exchange rate — 1:57.03;
• main economic sectors: manufacturing, business process outsourcing (BPO) in the Philippines (Business Process Outsourcing) is a world leader, hi-tech, agriculture;
• GDP —$ 437 billion, GDP per capita —$ 3.8 thousand.

Advantages of registering a company in the Philippines

There are several jurisdictions in Southeast Asia where you can conduct a profitable and promising business. If reputation is particularly important, Singapore, Hong Kong, South Korea or Taiwan would be suitable for businesspeople. However, this is often not a priority. To launch a commercial project in a favourable legal and tax environment, you can also consider the Philippines as an offshore location.

The main advantages of this jurisdiction are:

• strategic location — in the centre of Asia, at the intersection of major trade and logistics routes;
• large and potentially very promising domestic market;
• no communication problems (English is widely used);
• state support for business and incentives for foreign investment — PEZA and BOI regulate established business relations rather than strictly controlling them;
• the Philippines’ special economic zones offer favourable conditions for doing business;
• developed corporate infrastructure;
• opening a bank account in the Philippines does not take much time and does not involve significant risks of rejection;
• Favourable conditions for registering and developing start-ups.
• Outsourcing in the Philippines can significantly reduce corporate costs.
• The company can receive tax breaks and privileges.
• The legal framework in the Philippines is adapted to the realities of the digital economy.
• Affordable and skilled workforce with relatively low salary expectations.

How beneficial is it to register a company in the Philippines when the world’s leading business centres — Hong Kong, Singapore and Taiwan — are so close by? The answer depends on the specific characteristics of the business project. If minimising the budget and expanding prospects are priorities, then the Philippines offshore may be right for you. The jurisdiction has its strengths and no systemic weaknesses.

But in some cases, there is no alternative. For example, fintech business in the Philippines remains profitable without any additional conditions. The same can be said about outsourcing. The BPO industry in the Philippines has been a world leader for several years, and this position is only strengthening and being confirmed by the overall growth of the economy.

Personal income taxation

Most foreigners living in the country are non-residents, in other words, foreign non-residents. According to formal criteria, this status is assigned when an individual is in the jurisdiction without clear intentions determining the length of stay. This means that the standard qualification condition (180 days within a calendar year) ceases to be the main factor.

Personal taxes in the Philippines are generally formed and calculated based on the taxpayer’s resident status. Resident citizens must include all their income in the tax base, regardless of the country where it was actually received. Non-residents and foreigners, regardless of whether they live in the Philippines or not, are subject to taxation on income received within the jurisdiction.

Basic PIT rates for foreign residents and non-residents (effective from 2023):

Personal taxes in the Philippines for foreigners are finally calculated taking into account the current restrictions:

• for residents and non-residents who are engaged in business or trade — 20%;
• for non-residents who are not engaged in business or trade — 25%.

Personal income taxation in the Philippines, additional information:

• the total social tax that foreigners must pay in 2025 is PHP 51,000, which includes contributions to the Social Security System (SSS) and the Philippine Health Insurance Corporation (PHIC);
• Foreigners working in the Philippines are not required to contribute to the Home Development Mutual Fund (HDMF).
• Capital gains tax (for non-resident foreigners) is 0.6% (of the gross sale price of listed shares) and 15% (of the net capital gain for unlisted shares).
• tax on income from the sale of real estate (on the greater of the two — the transaction amount or fair market value) — 6%;
• tax on investment income sourced in the Philippines (for non-resident foreigners), in any form — interest, dividends or royalties:
  • 20% — for those engaged in trade or business in the Philippines;
  • 25% — for all others;
• tax on interest on foreign currency deposits (FCDU, Foreign Currency Deposit System) for residents — 15%, for non-residents — none;
• tax on interest on long-term deposits or investments in the form of savings — none;
• The Philippines has concluded 44 double taxation agreements;
• royalties from literary and musical works — 10%.

Corporate taxes in the Philippines

Businesses in Southeast Asia compete not only with other regions (the Caribbean, Europe, the United States, Japan), but also with each other. The traditional economy is transforming in the 21st century, digital technologies are being actively introduced, and the struggle for foreign investment is intensifying.

However, the low corporate tax rate in the Philippines is no longer an unconditional advantage. The OECD’s efforts to combat aggressive optimisation methods have raised difficult questions for jurisdictions that practise this approach. The reputation of pure offshore jurisdictions is gradually declining, and these trends are becoming particularly pronounced with the introduction of a minimum corporate income tax.

In light of these facts, at the end of 2024, the Philippines undertook a large-scale tax reform aimed at reviving the country’s economy. This is to be achieved through the introduction of tax incentives and the overall optimisation of the fiscal burden on businesses. The main provisions of the initiative are set out in a law called Create More (CREATE MORE Act, R.A. 12066, signed on 17 February 2025).

How taxes will be calculated and levied in the Philippines, main innovations:

• companies that meet the requirements of the expanded deduction regime will pay corporate tax in the Philippines at a rate of 20%;
• All sales to export-oriented companies (qualification criterion: at least 70% of sales) will be subject to zero VAT, provided there is a direct link to export activities.
• sales to bonded warehouses of export-oriented companies are exempt from VAT, but not the export sales themselves (usually, but not always);
• Extended requirements for requests concerning input VAT refunds have been formulated.
• For certain categories of taxpayers, a requirement to issue electronic invoices has been introduced.
• New deductions have been introduced for a) small taxpayers and b) medium and large companies that use electronic invoices.
• A special corporate income tax (SCIT) has been introduced at a rate of 5%.
• additional benefits have been introduced under the Enhanced Deduction Regime (EDR);
• local authorities have been granted the right to levy regional taxes, with a maximum rate of 2% (of gross income).

Corporate tax in the Philippines for local resident legal entities (* — additional conditions apply):

Corporate tax in the Philippines for foreign legal entities that are residents:

Corporate tax in the Philippines for foreign legal entities that are non-residents:

Other corporate taxes in the Philippines:

• VAT — 12% (of gross sales price);
• Customs duties — rates depend on the imported goods and are calculated based on the harmonised tariff nomenclature of ASEAN (Association of South East Asian Nations);
• Excise duties — from PHP 3 to PHP 10 per unit of fuel (litre, kilogram, less commonly — tonne), cars — from PHP 4 to PHP 50;
• Documentary Stamp Tax (DST) — the rate depends on the type of document and transaction;
• capital gains tax — 6% (of the gross sale price or fair market value, whichever is higher), 15% (on transactions with Philippine securities if they are not traded on the local stock exchange);
• social security contributions are paid separately from employees, in most cases the rates are the same;
• tax on additional benefits provided by the employer to management personnel — 35%;
• Gift tax (for gratuitous transfer of property) — 6% if the amount exceeds PHP 250,000;
• regional (local) business tax — the rate is usually no more than 3%, for rural real estate — up to 1%, for urban real estate — up to 2%.

Forms of doing business

The corporate legal framework in the Philippines provides a fairly wide range of company types available for registration, covering the requirements of most business people and investors. For businesses in Southeast Asia, this is an exception to the rule, as the choice is usually limited to a few formats.

What to look for when determining the optimal organisational and legal form:

• ease of registration and initial setup;
• requirements for authorised capital in the Philippines (formal and actual);
• level of legal liability — limited and full (unlimited);
• available tax incentives in the Philippines and the overall level of fiscal burden;
• requirements for the structure and management scheme (shareholders’ meetings, profit distribution, etc.).

When choosing a format for doing business offshore in the Philippines, it is necessary to consider not only these key factors, but also the individual characteristics of the business project.

Characteristics of the main formats for doing business in the Philippines:

Basic corporate requirements:

• Sole proprietorship — for starting up start-ups and small businesses. Foreigners can register a sole proprietorship (capital requirements must be met, and the structure must not be included in the FINL — Foreign Investment Negative List). Permission must be requested from the local government unit (LGU). Registration with the Bureau of Internal Revenue (BIR) and obtaining a Tax Identification Number (TIN) are mandatory. If employees are to be hired, additional registration with the Philippine government authorities will be required.
• Partnership — for professionals and joint ventures. Minimum of 2 participants, registration with the SEC (Securities and Exchange Commission) is mandatory. Additional permits may be required to conduct business.
• Corporation — for medium and large businesses. From 5 to 15 founders (natural persons only). Registration with the SEC and state regulatory authorities is mandatory. Requirements for the declared and paid-up authorised capital must be met.
• One-person corporation — for sole proprietors. Registration with the SEC is mandatory. Foreign registration is permitted (additional conditions apply). If an individual has a professional licence, it is usually not possible to start an OPC. The organiser must appoint a corporate secretary, treasurer, candidate and alternate candidate. Registration with the LGU and BIR is similar to opening a corporation.
• Cooperative — for socially oriented businesses. At least 15 members. Registration with the CDA (Cooperative Development Authority) is mandatory. Initial capital requirements depend on the business sector and the objectives of the cooperative. Registration with the BIR (with issuance of a TIN) is required.

Other permitted legal forms of doing business in the Philippines:

• Branch Offices — a division of a foreign company, considered an integral part of the parent structure, must comply with the regulations and rules established in the Philippines;
• representative offices — cannot generate income or engage in any commercial activity; their purpose is to organise access for foreign companies to the Philippine market; their functions include marketing, research, promotion of goods or trademarks, and providing information to customers;
• Regional Headquarters (RHQ) — the corporate office of a foreign company in a specific region, whose main tasks are supervision, management, control, and coordination (with regard to subsidiaries and any affiliated persons).
• regional operating headquarters (ROHQ) — unlike an RHQ, it can conduct commercial activities in the Philippines; additional tasks are the same as those of a regional headquarters.

Features of doing business

Investing in the Philippines is a profitable and promising commercial project. It is reliably protected by well-thought-out and modern corporate legislation, and the attitude towards foreign business is favourable. The country’s economic development dynamics are consistently positive, and the likelihood of sudden changes in the political, financial, social or banking spheres is minimal.

The Philippines offshore jurisdiction is well suited for launching not only cross-border trading businesses. After registering a company here, it can operate in virtually any field and will have access to all the advantages of the jurisdiction, including tax breaks and favourable corporate legislation.

What to look for when planning to start and run a business:

• Asset protection in the Philippines is possible using various legal mechanisms — APT (Asset Protection Trusts), Asset Protect insurance programmes, LLC company registration, inheritance planning measures, etc.
• Compliance in the Philippines is strict, KYC/AML procedures are mandatory, especially when opening a bank account in the Philippines, and FATCA requirements are observed.
• The legal framework in the Philippines regarding intellectual property allows for the protection of trademarks, industrial designs, copyrights, and patents.
• The minimum authorised capital depends on the residency status of the legal entity and the field of business.
• Nominee services are permitted.
• The company must submit audited financial statements (AFS) and general information sheets (GIS) to the SEC annually.
• The approximate annual cost of maintaining the company’s operations is PHP 15,000 to PHP 50,000.
• Assets in the Philippines can be protected through effective legal instruments such as holding structures and trusts.
• Audits are mandatory for companies with a gross quarterly turnover of PHP 150,000, legal entities with foreign capital, and organisations representing the public interest.
• The Philippines has concluded 44 double taxation agreements;
• The Philippines complies with FATCA requirements, and participation in the automatic exchange under the AEOI CRS (Standard for Automatic Exchange of Financial Account Information, Common Reporting Standard) is currently being implemented.
• The Philippine economic zones, which are supervised by PEZA, offer businesspeople and investors special conditions for doing business.
• You can obtain a Special Investor’s Resident Visa (SIRV), which grants you the right to live and conduct business in the Philippines without any time restrictions. The minimum investment threshold is$ 75,000.
• Outsourcing to the Philippines allows you to optimise your business budget by transferring part of the production stages to third-party contractors.

Conclusion, findings

Registering a company in the Philippines is the gold standard when a business’s goals involve expansion into Southeast Asia. The region has a large domestic market, most countries’ economies are on the rise, and consumer incomes are growing.

Alternative projects based on exporting services from the Philippines, doing business in free economic zones, and outsourcing will be no less promising. These areas are potentially very profitable, especially given the mild tax climate in the jurisdiction, loyal corporate requirements, and a well-developed legal framework that stimulates commercial operations.

Investing in the Philippines involves minimal risk, as the country is showing positive growth dynamics, and its political and financial stability makes it possible to implement complex projects where immediate returns are not a priority. The fintech sector in the Philippines is one of the most promising areas for investment, with a significantly better cost-to-potential-profit ratio than in traditional areas of business.

The jurisdiction complies with the anti-money laundering recommendations of the FATF and OECD, which simplifies legal business and significantly reduces the element of uncertainty due to possible claims from international regulators. Tax incentives in the Philippines will be of interest not only to business people but also to investors, creating profitable and, most importantly, legal instruments for financial optimisation.