Philippine Company Investment Introduction

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PHILIPPINE COMPANY

INVESTMENT

 PHILIPPINE COMPANY  INVESTMENT INTRODUCTION

 

Table of Contents

  • Philippine company registration tax system
  • Philippine economic growth
  • Financial revenue and expenditure
  • Major labor exporting countries
  • Development of subcontracting industries
  • Investment Special Economic Zone in the Philippines
  • Philippine company registered investment incentives
  • Board of Investment for investment offers
  • Investment incentives in special economic zones in the Philippines
  • Registered Philippine company's investment incentives

 

 

Foreign investors can enter into joint ventures with Filipinos in accordance with the legally prescribed shareholding ratio

  • The emerging market of 2 billion people is in the ASEAN! The huge business opportunities have become the focus of the world. How can ASEAN surpass Europe to create a free trade zone in Asia? What new business opportunities can you catch? ASEAN 10 countries: Established on August 8, 1967, there were five founding members, namely Singapore, Malaysia, Thailand, the Philippines, Indonesia, and later ten countries including Brunei, Vietnam, Laos, Myanmar, and Cambodia.
  • The ASEAN-China Free Trade Area was fully implemented in 2010. China and ASEAN six countries, namely Singapore, Malaysia, Thailand, the Philippines, Indonesia, and Brunei, have reduced industrial product tariffs to 0%, and another ASEAN 4 Countries, namely Myanmar, Vietnam, Laos and Cambodia, will reduce tariffs to 0% by 2015.
  • In order to attract more investment to open a company in the Philippines, the Philippine government continues to adopt and implement policies that are parallel with enlightened liberalization, liberalization, and privatization. Continue efforts to further establish Philippine companies for existing and future investors to improve the business environment, including reducing the operating costs of establishing corporate investments in the Philippines, improving infrastructure, and identifying good governance. The government divided the investment area of the Philippines into four. The first area is Beilu Song and Mindanao as agricultural industrial and commercial investment zones; the second investment area is industrial city special zones, namely Clark, Sumi, Jiala Xishun and the port of East Coast; the third area is tourism The resort area is the northern island of the lion, the bone and the old Mindanao; the fourth area is the network area of the call center, namely the business information technology area from Baguio to Jala.
  • If Taiwanese businessmen want to invest in the Philippines or set up a company, they should prepare in advance the documents for the registration of the Philippine company, and go to the government to apply for registration of the company in the Philippines. If there are any registration rules in the establishment of the company in the Philippines, For documents, taxation systems, and investment incentives, you must first ask the relevant Philippine professional agency company to avoid unnecessary costs.

 

Philippine company registration tax system

Taxation of Philippine company registration in general area investment is as follows

Indirect taxes:

  1. Excise Taxes: There are two types of goods that can be divided into the amount of expropriation and the ad valorem (2-60%). The products subject to the consumption tax include spirits, alcoholized alcohol, tobacco products, cigarettes, and petroleum. Products, videotapes, saccharin, cars, non-essential items (such as jewelry, perfume, leisure yachts, and boats), mineral products and local oil.
  2. Value-added taxes: The Philippines implemented the VAT system on January 1, 1988. On May 5, 1994, the Expanded VAT Law expanded the scope to the original class. VAT's goods, property, and services industries. Since February 1, 2006, the value-added tax has been increased from 10% to 12%.
  3. Percentage Taxes
    The applicable business and tax rates are as follows:
    i. Banking: From 0% to 7%.
    Ii. Insurance company operating in the Philippines: 5% of total revenue.
    Iii. Hydropower business: 2% of total revenue.
    Iv. Broadcasting business (with an annual turnover of fewer than 10 million pesos): 3% of total revenue.
    v. Transportation industry: 3% of total revenue.
    Vi. Securities trading: 0.5%.
    Vii. Other unpaid VAT companies: 3% of total income or sales of less than 1.5 million pesos.
  4. Documentary Stamp Taxes: including bank checks, loans, bonds, deposit replacement, securities, real estate sales and transfer, insurance policies, etc.

Philippine income tax receipt information:

  1. The tax portion of the registered Philippine company: has been reduced to 30% since January 1, 2009.
  2. Individual part: The personal income tax rate ranges from 5% to 32%, as detailed below:

NO.          Personal income tax range (unit: peso)          The personal income tax rate
-----------------------------------------------------------------------------------------------------------------
1              10,000 or less                                                  5%
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2              10,000 or more ~ 30,000                                 10% of the excess
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3              More than 30,000~70,000                               15% of the excess
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4              70,000 or more ~ 140,000                               20% of the excess
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5              More than 140,000~250,000                           25% of the excess
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6              250,000~500,000                                            30% of the excess
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7              More than 500,000                                          32% of the excess

 

In addition to indirect taxes and income taxes, there are also real estate taxes (5% to 35%), stock transaction taxes, capital gains tax, local taxes, gift taxes, inheritance taxes, travel taxes, and dividend repatriation taxes (the branch is 15%, subsidiaries is 35%) etc.

  • Investment incentives in the Freeport Area of Subic Bay
    Investors who set up a company in Subic Bay, Philippines, in principle, only pay 5% of operating gross profit (ie total income minus direct costs), other taxes are exempt, but the relevant personal income tax portion cannot be deducted.

 

 

Philippine economic growth:

In 2012, the Philippines' economic growth reached 6.6%, exceeding the target of 5%-6% set by the Philippine government, ranking the highest in Southeast Asia, 6.2% better than Indonesia, 5.6% in Malaysia, 5.0% in Vietnam, 6.4% in Thailand and 1.3% in Singapore. Next to China's 7.8%, investment in the Philippines was mainly affected by factors such as the low base period in 2011 (previous year), increased public construction expenditure and strong consumer spending, which made more and more investors go to the Philippines to set up a company.

 

 

Financial revenue and expenditure

  • Before the global financial crisis broke out in September 2008, the main policies of the Philippine government still focused on narrowing the fiscal deficit, enhancing investor confidence, and trying to achieve fiscal balance in 2008. After the financial crisis broke out, in order to help the Philippines to tide over the global economic crisis, the government changed its spending to expand its spending as the main axis of governance and launched a total of 330 billion pesos (about 7.42 billion US dollars) of the 2009-2011 Economic Resiliency Plan (ERP). To stimulate consumption, promote government and private investment, and implement monetary easing by reducing interest rates and increasing liquidity. Since the budget deficit mostly relies on the single source of financial assets for sale, and the expansion of expenditures in the second half of the year, the budget deficit of 68.1 billion pesos (about 1.53 billion U.S. dollars) was generated in 2008, equivalent to 0.9% of gross domestic product, lower than the original. Set a target of 75 billion pesos (about 1.68 billion US dollars), but higher than the 12.4 billion pesos in 2007 (about 280 million US dollars).

Balance of payments

  • Affected by the global economic recession, the current account surplus of the Philippines in 2008 was 4.2 billion US dollars, a 41% decrease from the 7.1 billion US dollars in 2007; the capital and financial accounts had a deficit of 1.9 billion US dollars, in sharp contrast with the 2007 surplus of 3.5 billion US dollars. . In 2008, the balance of payments surplus was $89 million, far less than the $8.557 billion in 2007, a record low in four years, indicating a deterioration in the external economic environment. The decline in the current account surplus in 2008 was due to a trade deficit of $7.6 billion, partially offsetting overseas workers’ remittances. The global economic crisis has led investors to deter, which is the main reason for the deficit in capital and financial accounts. However, due to the surge in domestic labor returns from the Philippines in March 2009, as of the end of April 2009, the balance of payments of the Philippines had increased to US$2.19 billion, up from US$2.14 billion in the same period of 2008. Under the note of overseas borrowing, the balance of payments surplus for 2009 is estimated at US$700 million, up from US$89 million in 2008, and foreign exchange reserves are maintained at US$37.5 billion.

The stock market, exchange rate

  • Affected by the global financial crisis, the Philippine stock index fell to 3,617 points from 1,617 points in 2008, a sharp decrease of 48%. More than half of the losses were caused after the financial crisis broke out in mid-September, but it was slightly reduced on May 21, 2009. Recovered to 2,334 points. However, for the Philippines, the loss of wealth is not serious, because the population invested in the capital market is not large, and after the lessons of the Asian financial turmoil, the Philippine banking system has performed relatively well in this storm. However, after the third quarter of 2008, there was a decline in earnings, an increase in non-performing assets and a recession, which put pressure on banks with poor operations.

 

 

Major labor exporting countries

  • The Philippines is one of the largest labor exporting countries in the world. According to the statistics of the Philippine Central Bank, the number of overseas workers has exceeded 10 million, accounting for 10% of the country's total population. From January to November 2012, the Philippines received overseas labor remittances compared with the same period of the previous year. It grew by 6.1% to reach US$21.6 billion, equivalent to 10% of the GDP of the Philippines. In addition, the World Bank reported that the Philippines’ overseas labor remittances reached US$24 billion in 2012, followed by India’s US$70 billion, China’s US$66 billion, and Mexico’s third place.

 

 

Development of subcontracting industries

  • The Philippines is now leveraging its general English advantage to drive the business process outsourcing industry, which grows by an average of more than 20% a year, two-thirds of the outsourcing industry comes from customer service centers, and the remaining one-third comes from software development, animation and Non-customer service department such as engineering design. What is worth mentioning in the Philippine business investment process outsourcing is Call Center. At present, there are about 400 Call Centers in the Philippines, and the scale of employees ranges from 25,000 to 10 people. The Philippine Call Center industry is the largest in the world in terms of India, with 75% of its industry concentrated in Luzon (Malaysia), followed by Vysaya in the central and Aachen Island in the south. The core of the operation of the Call Center in the Philippines is that the operating costs are lower than those of the United States, Canada, Australia, etc., the network line facilities are complete, the operating experience is rich, the government supports it, the staff of the Philippines are diligent and have language advantages and business needs. skill. More than 90% of the Philippine Call Center uses English, and 10% also offers services in 17 special languages ​​such as Chinese and Japanese. Philippine Call Center employees earn between 16,000 pesos and 18,000 pesos per month (the US dollar to the peso exchange rate is approximately 1:42). The establishment of Call Center in the Philippines by foreign investors is subject to a limit of not more than 40% of the registered capital. Different preferential measures such as tax holiday and import tax exemption are applicable to the establishment of the Philippine Investment Committee or the special economic zone. There are currently 174 Call Centers operating in the Special Economic Zone.

 

 

Investment Special Economic Zone in the Philippines

Special Economic Zones, or ECOZONES for short, are designated by the government as a balanced development of agricultural, industrial, commercial, and recreational areas. The Philippine Special Economic Zone is as follows:

Investment Special Economic Zone in the Philippines01            Investment Special Economic Zone in the Philippines02

1.Industrial Estates (IEs): As a large area of ​​
industrial use, it is equipped with roads,
water, and underground wastewater systems,
built-up
factories, and residential buildings for

community use.

2.Export Processing Zone (EPZs): Special
industrial land, whose users are mainly
export-oriented enterprises. The incentive
benefits for processing export zones include
exemption from import duties and taxes on
capital equipment, raw materials, and parts.

Investment Special Economic Zone in the Philippines04            Investment Special Economic Zone in the Philippines04

3.Freeport Zones: Refers to areas close to
ports or airports. In this area, import duties
are not required for unloading, repackaging,  

sorting and handling of imported goods.
However, if the goods are shipped to a non-
free port area, customs duties are required.

4.Tourist and Recreational Centers: Refers to
the provision of service facilities to domestic
and foreign passengers visiting the SEZ,
including hotels, leisure centers, small

apartments, and sports facilities.

 

Philippine company registered investment incentives 

The establishment of a company in the Philippines to handle investment promotion business and provide investment incentives is as follows: 

Philippine company registered investment incentives01  

1.Board of Investment (BOI): Annually publishes an Investment Priority Plan (IPP) to
provide various incentives for companies in the Philippines to apply for investment in

designated areas of the program. (IPP approved by the Presidential Office, the
project awards project was updated on June 13, 2012. The project will include
agriculture and fisheries processing industry, shipbuilding industry, knowledge service
industry, civilian construction industry, energy industry, infrastructure construction,
research and
development. 13 industries including green industry, tourism, strategic
planning,
Public-Private Partnership (PPP) program, automobile (transportation) and
disaster
prevention and recovery are included in the awards and can be enjoyed by
the government. Tax and financial concessions, including tax holidays, etc.).

 

 

Philippine company registered investment incentives02  

2.The Philippine Economic Zone Authority (PEZA) of the Ministry of Trade and
Industry: Provides various preferential measures for those who invest in public and    
private export processing zones in various parts of the Philippines.

 

 

Philippine company registered investment incentives03   3.Clark Development Corporation (CDC): Provides preferential treatment for
companies investing in the Clark Special Economic Zone in the former US military     
base in northern Manila, Luzon.

 

 

Philippine company registered investment incentives04   4.Subic Bay Metropolitan Authority (SBMA): Provides preferential treatment for
companies investing in the Subic Bay Freeport Zone in the former US military base in
northern Manila, Luzon.

 

 

In addition, the Camboyan Special Economic Zone in the northern part of Luzon Island, the Aurola Special Economic Zone in the central part of Luzon Island and the Zamboanga Special Economic Zone in the southwest of Mindanao have administrative agencies providing investment incentives to investors.

 

 

Board of Investment for investment offers

In the Philippines, the investment incentives for the establishment of a company in the Philippines under the Investment Priority Program (IPP) for the registration of foreign trade investment committees (registration committees) are as follows:

  • Tax concessions: 4 years of corporate income tax (Income Tax Holiday, ITH), if the investment in innovative technology pioneers, the tax holiday can be extended from 4 years to 6 years.
  • Non-tax concessions
  1. Foreigners may be employed.
  2. Simplify customs clearance procedures.
  3. Exemption from import tax on certain equipment for 10 years.
  4. It can operate a bonded warehouse.
  5. Provide multiple visa offers.
  6. Exemption from personal living goods import tax and tourist tax.

 

 

Investment incentives in special economic zones in the Philippines

Investment incentives for foreign companies registered in the Philippine Economic Zone Authority (PEZA, 257 in the country): Foreign investment in various economic zones, export processing zones and bonded zones under the jurisdiction of PEZA. Foreign companies that invest in various economic zones, export processing zones and bonded zones under the jurisdiction of PEZA may own 100% of the shares, but the products must be 100% exported. If approved, 30% of the products can also be sold in the Philippines.

 

   A.Types of the Philippine Economic Zone: The Philippine Economic Zone is mainly
   composed of 96 economic zones under the jurisdiction of PEZA and the
   independently operated Foddke Industrial Zone, Cagayan, Zamboanga, Subic, and
   Clark Freeport. The Philippine
government actively encourages the private sector to
   set up various types of economic zones while establishing and operating economic
   zones. The so-called economic zone operated by the private sector means that the
   land in the park is privately owned. The infrastructure in the park is invested and built
   by private operators, open to domestic and foreign investors, and enjoys the same
   preferential treatment as the economic zone operated by the government. Among the
   96 economic zones under the jurisdiction of PEZA, there are 92 economic zones
   operated by the private sector and 4 enterprises invested in the zone; only 4
   economic zones directly operated by PEZA and 436 enterprises invested in the zone.

 

     B.Philippine companies set up investment sources and industry distribution in the
     economic zone. From the source of investment in the economic zone, Japan is the
     largest source of overseas investment in the Philippine Economic Zone. In recent
     years, Japan’s investment in the Philippine Economic Zone accounted for 41% of
     PEZA’s total investment, the United States accounted for 13%, ranking second, the
     Netherlands accounting for 8%, the United Kingdom accounting for 6%, Singapore
     accounting for 5%, and South Korea accounting for 4%. 2%, Taiwan and Malaysia
     account for 1% respectively, and other countries and regions account for 1%.
     Investments from the Philippines accounted for 17% of total investment.

 

Tax/non-tax concessions 

  1. Tax concessions:
    (1) Four-year tax holiday, pioneer status investment for 6 years tax holiday. After the expiration, except for 5% of the operating gross profit, all national taxes and various local taxes are exempted.
    (2) Machines and their accessories are tax-free. (3) Exemption from export tax, harbor tax and consumption tax on local goods, labor, telecommunications, and water and electricity.
  2. Non-tax rental benefits:
    (1) Simplify customs clearance procedures. (2) Foreigners can be employed. (3) Multiple visa treatments, etc. (4) Preferential measures for foreign companies registered in Subic Bay and Clark Freeport:
  3. Tax Incentives:
  1. Except for the corporate tax of 5% of operating gross profit, other local taxes and national taxes are free.
  2. Customs duties are free.
  3. There is no limit to the shareholding of the outsiders (the domestic sales of the products shall not exceed 35%). 
  4. No foreign exchange controls.
  5. The fees of his customs and business sources may be deducted from the tax base of the above corporate tax.

 Non-tax rental benefits:

  1. 14 days visa-free.
  2. Provide a special visa for foreign nationals.

 

 

Registered Philippine company's investment incentives

  • Implementing a more convenient business registration system: The Philippine Department of Trade and Industry implemented the new Philippine Business Registry (PBR) system in the first quarter of 2011, making it easier and more cost-effective for companies in the Philippines to set up companies. At the same time, alleviate the bureaucratic administrative interference of the government. After the implementation of the PBR system, the Ministry of Trade and Industry, the Securities and Exchange Commission, the tax bureau, the social welfare system, the health insurance company and the local government will further integrate horizontally in the business registration business applied for registration of Filipino companies, and complete the business within 15 minutes.
    Relaxation of a number of foreign exchange control measures: On October 28, 2010, the Central Bank of the Philippines implemented a number of measures to ease foreign exchange controls, which made the capital outflow more liberal and slowed down the pressure on the Philippine peso to appreciate against the US dollar due to the inflow of hot money. The Philippine Central Bank’s relaxation of foreign exchange controls includes:
  1. The upper limit for foreign investment and the purchase of foreign bonds of the Philippines is raised from US$30 million to US$60 million.
  2. Overseas investments of more than US$60 million are only required to be reported to the Central Bank without prior approval.
  3. The period for the conversion of foreign exchange and reinvested earnings into pesos is extended from the original 2 to 7 banking days to 30 banking days.
  4. The non-trading nature of the purchase limit is raised from US$30,000 to US$60,000.
  5. When a foreign passenger leaves the country, the upper limit of the peso against the US dollar is raised from US$200 to US$5,000.
  6. In order to pay for import purchases, the upper limit for the purchase of US dollars from banks is raised from US$100,000 to US$1 million.
  7. Private enterprises can repay foreign debts in advance, and do not need to obtain approval from the central bank beforehand.

 

Inter Area has many years of experience in business and industry and has a stronghold in Manila, Philippines. It can not only pay attention to the basics of Southeast Asian entity company registration, Philippine company investment establishment, Manila company registration. Etc., but complete from the establishment of the company's consulting, application documents, Philippine companies set up documents, local industrial and commercial registration to follow-up accounting services agents. Inter Area provides one-stop service for customers, so that investors in the Philippines can truly operate in the Philippines as a company, and can be placed in the local area to pay attention to various business affairs.

 

 

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