A Report on:

1. SEC Registration2. DTI Registration3. Subsidiary vs. Branch4. Regional Headquarters

Prepared By:Daniel RicioLA Villarico

Tricia BarbaFerdinand

Nica ErguizaPatricia De GuzmanAdrianne Tan-Gatue

SEC RegistrationThe Express Lane

Under the express lane system, applications for registration of articles of incorporation and by-laws and articles of partnership with cash payment of subscription are processed upon presentation of all documents and certificate of registration released after 2 days from the time of payment of filing fee.

1.   Verify proposed corporate name with records division (SEC Annex Bldg.). Reserve name in case incorporation documents will not be submitted within 3 days. Reservation for a fee is up to 30 days.

2.   Buy an express lane form for a specific line of business from the Express Lane Center.

3.   Present accomplished express lane forms/documents to the express lane unit of the company registration and monitoring department (CRMD) at SEC ground floor for pre-processing.

SEC Registrationa. Business requiring a secondary franchise for their prior comments.

b. Upon receipt of favorable endorsement, stamping of "approved for payment" follows if all papers are found in order by processing staff.

4.   Proceed to Cashier (Ground Floor) for payment of filing fees.

5.   Cashier forwards the application for records set up assignment work cell, sorting, encoding, assignment of registration number. Then forwarded to the Express Lane Unit for recording, typing of certificate of incorporation and review.

6.   Express Lane Unit forwards the application with certificate of incorporation to the director for signature.

7.   Approved documents are updated through the computer for Work Assignment Status (WAS).

8.   Claim the certificate of incorporation at the Releasing Unit, Records Division (Ground Floor) upon presentation of receipt of payment of filing fee.

SEC RegistrationThe Regular Lane

1.   Verify proposed corporate name with Records Division. Reserve name in case submission of documents for incorporation will not

be made within 3 days. Reservation for a fee is up to 30 days.

2. Prepare documents required to be submitted as per brochure.

3.   Proceed to cashier for payment of filing fee. (Ground Floor) 

4. Submit 6 copies of documents to the Receiving Unit. (Records Division) 

5.   The documents are forwarded to Financial Analysis and Audit Division (FAAD) of Company Registration and Monitoring Department (CRMD) for processing/examination of capital and preparation of report by the assigned examiner.

SEC Registration7.   Approval by the FAAD Assistant Director.

8. The documents together with the FAAD report will be forwarded to Corporate and Partnership Registration Division (CPRD) for processing of the legal aspect of incorporation.

9.   Papers are assigned to processors

10. Businesses requiring a secondary franchise are indorsed to the department/agency concerned for their prior comments.

11. Return indorsed documents to CPRD for further action by processors.

12. The papers are assigned to the clerical pool for typing of the certificate of incorporation.

SEC Registration13. The papers are returned to the processors for

his review and initial of the certificate of incorporation.

14. The papers are forwarded to the Assistant Director of CPRD for further review and initial of the certificate.

15. The papers are forwarded to the CRMD director for signature of the certificate of incorporation.

16. Claim the certificate of incorporation at the Releasing Unit, Records Division  (Ground Floor) upon presentation of receipt of filing fee.

SEC RegistrationNotes: 4    

1. Applications of domestic corporations (stock) where subscribed capital stock are paid in cash are forwarded by the Records Division directly to the CRPD.

 2. Verified name is deemed unofficial unless and until approved by the

commission, i.e. after issuance of the certificate of incorporation.

3. For businesses involving pre-need plans and commodity futures, clearance of the proposed corporate name from pre-need department and market regulation department, respectively, is required before verification of the name with the Records Division at the SEC Annex Bldg. (For all applications for registration, express or regular lane.) 4. The application for registration of non-stock corporations is processed solely by the CRPD. 5. Application under the Foreign Investment Act of 1991 or those with more than 40% foreign equity are pre-processed first by CRMD before payment of filing fee.

DTI RegistrationPDF File:

http://www.dti.gov.ph/dti/uploads/file/BRR-Learning%20Center.pdf

Branch Office vs Subsidiary

As to Taxability

Branch

1.Subject to income tax only on Philippine source income

2.Profits remitted by the branch to its head office are subject to branch profit remittance tax of 15% or 10% depending on certain tax treaties; however, if located in a special economic zone then they are tax exempt.

3.A branch office is not subject to documentary stamp tax (DST) simply because it does not issue shares of stock

4.Subject to certain conditions, overhead expenses of the Head Office may be allocated to the Philippine branch office

5.A branch is not liable to pay the 10% improperly accumulated earnings tax

Subsidiary (Domestic Corporation)

1.Subject to income tax on worldwide income

2.Dividends paid by a Philippine subsidiary to non-resident shareholders is subject to 30% in general or 15% subject to certain conditions or preferential tax treaty rates.

3.A subsidiary is liable to pay DST on the original issuance of shares of stock  at the rate of P2.00 for every P200.00 or fractional part of the par value of the shares of the outstanding  shares of stock

4.The Philippine subsidiary is not entitled to the allocation of overhead expenses of its parent company.

5.A subsidiary is liable to pay the 10% improperly accumulated earnings tax.

Branch Office vs Subsidiary

As to its Nature

Branch

A branch office is merely an extension of the head office, thus its liabilities are considered liabilities of the head office

Subsidiary (Domestic Corporation)

A subsidiary is a juridical entity separate and distinct from that of its parent company, hence its liabilities are generally not regarded as the liabilities of the parent company.

Branch Office vs Subsidiary

As to its Capitalization

Branch

As a 100% foreign-owned entity, a branch must have a capital of at least US$200,000 unless the branch will be exporting goods or services or generating revenue from abroad amounting to more than 60% of its gross sales it can be fully foreign owned, as it is considered an Export Enterprise under the Foreign Investments Act.  Hence, the  branch can be registered with as little as P5,000 paid up capital.  However, most banks require P25,000 - P50,000 to open a corporate bank account.

Subsidiary (Domestic Corporation)

A subsidiary with more than 40% foreign equity must also have a minimum paid up capital of at least US$200,000 unless  the company will be exporting goods or services or generating revenue from abroad amounting to more than 60% of its gross sales it can be fully foreign owned, as it is considered an Export Enterprise under the Foreign Investments Act.  Hence, the company can be registered with as little as P5,000 paid up capital.  However, most banks require P25,000 - P50,000 to open a corporate bank account.

Branch Office vs Subsidiary

As to the Number of Incorporators

 Branch

A branch may be set up with only one (1) person who will act as  the resident agent

 Subsidiary (Domestic Corporation) The establishment of a subsidiary requires at least five (5) but not more than fifteen (15) incorporators/directors (all of whom must be natural persons) majority of whom must be residents of the Philippines.

Branch Office vs Subsidiary

As to the deposit requirement of securities with SEC

 Branch

A branch is required initially to deposit with the SEC for the benefit of present and future creditors, acceptable securities with market value equivalent to at least P100,000 plus an annual additional deposit of 2% of the amount by which the branch office’s gross income exceeds  five (5) million pesos

 Subsidiary (Domestic Corporation)

Subsidiaries are not required to deposit securities with the SEC.

Branch Office vs Subsidiary

As to Registration Requirements

 Branch

A branch is required to obtain a license to do business here in the Philippines with the Securities and Exchange Commission (SEC).  This license shall be issued by the SEC upon compliance with the following requirements:

1. Fill up and file the SEC Form 103 (Application of a Foreign Corporation) to Establish a Branch Office in the Philippines). This application may be signed by any person authorized  by the applicant’s Board of Directors. If this is signed outside of the Philippines, it must be authenticated by the nearest Philippine Embassy or Consulate. Pay the SEC filing and legal research fees. 

 Subsidiary (Domestic Corporation)

For the establishment of a subsidiary in the Philippines, it must be registered with the SEC.  The SEC will require the following from the applicant:

1. A corporate name which must not be similar to existing names already registered with the SEC.;

2. The Articles of Incorporation must provide the specific purpose or purposes for which the corporation is being formed.

Branch Office vs Subsidiary

As to Registration Requirements

 Branch

2. Pay the SEC filing and legal research fees.  For the registration of a branch with a US$200,000 assigned capital, the SEC registration fees shall be calculated on the basis of its converted equivalent in Philippine pesos.  For an initial assigned capital of US$200,000, the SEC registration fees may be calculated as the peso equivalent of the following:

Filing Fee (US$200,000 x 1%)=US$2,000  + Legal Research fee

(US$2,000 x 1%) =US$20.00 or a total of US$2,020. (this will not apply to export oriented businesses)

 Subsidiary (Domestic Corporation)

3. As to the capital stock  requirement and since the foreign equity will exceed 40%, it must have a minimum paid up capital of US$200,000 as provided under the Foreign Investments Act unless export oriented.  For this purpose, the applicant must submit a Certificate of Inward remittance issued by a Philippine bank on the remittance of at least US$200,000 net of bank charges to your Philippine account;

4. Provide the name of the subscribers to the authorized capital stock of the corporation and the number of shares  and amount subscribed by each subscriber.

Branch Office vs Subsidiary

As to Registration Requirements

 Branch

3. Remit the initial assigned capital of US$200,000 which should be remitted separately from the registration fees.  The US$200,000 shall be remitted directly to the Treasurer-in-Trust account opened for and on behalf of the branch office;

4. Submission of the latest audited financial statements.  Such financial statements must be authenticated by the Philippine Embassy or Consulate of the place of execution thereof. Submission of the Articles of Incorporation, by-laws or similar document authenticated by the Philippine Embassy or Philippine Consulate.

 Subsidiary (Domestic Corporation)

5. Provide the names, nationalities, addresses, passport numbers of the incorporators.  Under the Corporation Code of the Philippines, a corporation must have at least five (5) but not more than fifteen (15) individual incorporators who must own at least  one (1) share in the company and majority of whom must be residents of the Philippines.

6. Provide the name of the Treasurer-in-Trust appointed by the subscribers.

Branch Office vs Subsidiary

As to Registration Requirements

 Branch

5. Within sixty (60) days after obtaining the license to operate, the branch office is required to deposit marketable securities worth at least P100,000 with the SEC which may be withdrawn upon cessation of the Philippine branch’s operations

 Subsidiary (Domestic Corporation)

7. Pay the filing fee for the registration  which will be approximately 0.2% of the subsidiary’s authorized capital stock, plus 1% of such SEC fee for the SEC legal research fees and P210.00 for the registration of the subsidiary’s by-laws.

Regional Headquarters

• Regional Headquarters/Regional Operating Headquarters(RHQs/ROHQs) are owned and operated by a multinational company. The RHQ or ROHQ can register in the Philippines as long as a company or corporation is existing under laws other than the Philippines. Should have branches, affiliates, customers and subsidiaries in the Asia Pacific Region.

• An RHQ undertakes activities that are limited to acting as coordinating center for its subsidiaries, affiliates and branches in the Asia-Pacific region. It operates as the administrative branch of a foreign company engaged in trade in the region. It does not manage the Philippines subsidiary branches and cannot derive income from sources within the Philippines.

Regional Headquarters

• A ROHQ performs the general administration business planning, and coordination of the Asia Pacific Region. It may source raw materials or market products, train employees and conduct research and development. It may derives its income from Philippines operations.

• RHQ and ROHQ's are usually used by multi-national companies interested in seperating their operations within the Philippines for tax and legal purposes. Regional Operating Headquarters can receive special benefits from the Philippines. Check out all the benefits given to Regional Operating Headquarters.

Regional Headquarters

From Triple I Consulting Firm: Setting-Up your Regional Headquarters and Regional Operating Headquarters:• Business Registration• Government Licensing• Office Set-up• Tax Incentive Programs• Business Development

Total Registration Process is 2-3 months

Regional Headquarters

Requirements for RHQ/ROHQ

• Name Verification to be completed by Dept of Trade and Industry DTI.

• Submission of Board Resolution authorizing the creation and establishment of the branch office in the Philippines. The board resolution must be translated into English and approved by the Philippines Embassy in the home country of the foreign corporation.

• Submission of financial statements of the parent company certified by a CPA and approved by the Philippines Embassy in the home country of the foreign corporation.

Regional Headquarters

• Authenticated copy of the Articles of Incorporation and By-Laws approved by the Philippines Embassy in the home country of the foreign corporation submitted to Philippines Securities and Exchange Commission (SEC).

• Certification from the Philippine Embassy in the applicant’s home country that the foreign company is an entity engaged in international trade with affiliates, subsidiaries or branch offices in the Asia Pacific and other foreign markets.

• Registration with Board of Investments BoI.

• Certification of inward remittance for minimum paid-up capital.

• - 50,000 USD annually for RHQ

• - 200,000 USD one time remittance for ROHQ.

Regional Headquarters

• Licenses and clearance from necessary government offices

• Filing of Tax Identification Number TIN with Bureau of Internal Revenue BIR.

• If employing individuals must register with government offices.

• Business permit and Mayor's License for city of operation.

Regional Headquarters

Procedure

• Secure endorsement from Board of Investments BOI

• Secure reserved name for branch office from DTI

• Present accomplished forms/docs for pre-processing at SEC

• Present Verification from local bank of minimum paid up capital in trust account

• Present BoI Endorsement

• Pay filing fees to cashier

• Claim Registration from records division from Records Division

• Complete licensing with all applicable government agencies.

ReferrencesSEC Registration:http://www.sec.gov.ph/STEPS_IN_REGISTRATION.htm

DTI Registration:http://www.dti.gov.ph/dti/uploads/file/BRR-Learning%20Center.pdf

Subsidiary vs Branch Company:http://www.kittelsoncarpo.com/philippines-business-registration/branch-vs-subsidiary-corporation

Regional Headquarters (RHQ):http://www.tripleiconsulting.com/main/philippines-business-registration/business-organized-under-foreign-law/register-regional-headquarters