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How to Set Up a Domestic Corporation in the Philippines in 2021

Whether you are looking to grow your business and reduce your liability or hit the ground running with a fully incorporated company in the Philippines, your best all-round option is most likely a domestic corporation.<br><br><br>The Philippine government does not offer the traditional Private Limited Company (PLC) or Limited Liability Company (LLC), and has opted for the domestic corporation. <br><br>With that in mind, the domestic corporation serves largely the same purpose as a PLC or LLC under the<br>Philippinesu2019 Corporation Code. A domestic corporation takes on its own liabilities and is held responsible f

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How to Set Up a Domestic Corporation in the Philippines in 2021

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  1. How to Set Up a Domestic Corporation in the Philippines in 2021 Connect with us for the latest business updates: Linkedin Twitter Facebook

  2. How to Set Up a Domestic Corporation in the Philippines in 2021 Whether you are looking to grow your business and reduce your liability or hit the ground running with a fully incorporated company in the Philippines, your best all-round option is most likely a domestic corporation. TABLE OF CONTENTS 1. Organisational Structure of a Domestic Corporation 2. Officer Requirements for a Domestic Corporation The Philippine government does not offer the traditional Private Limited Company (PLC) or Limited Liability Company (LLC), and has opted for the domestic corporation. 3. The Different Types of Domestic Corporation 4. Minimum Capital Requirements for a Domestic Corporation With that in mind, the domestic corporation serves largely the same purpose as a PLC or LLC under the Philippines’ Corporation Code. A domestic corporation takes on its own liabilities and is held responsible for its debts, and its shareholder will only be held liable to the level of their share capital. 5. Tax Responsibilities of a Domestic Corporation 6. Required Documents for Applying to Create a Domestic Corporation 7. In this article, we’ll create a concise overview of the Philippine domestic corporation, covering the basics of its structure: The Steps Required to Register a Domestic Corporation | 2 Copyright © 2021 In.Corp Global Pte Ltd. All rights reserved. Last Updated June 2021

  3. Organisational Structure of a Domestic Corporation Similar to what you would expect from a traditional PLC or LLC, a domestic corporation has the following organisational requirements: Vietnam Tax Deadlines for 2021 The Articles of Incorporation must include two to 15 incorporators or directors that have formed the corporation. Each incorporator or director must hold at least one capital stock share. Vietnam allows you to choose from four fiscal year periods: 1. Limited Liability Company (LLC) The majority of the incorporators must be residents of the Philippines; however, they are not required to be citizens of the Philippines. In order for a foreign company to legally operate a business in the Philippines, it must appoint one resident agent who shall accept all legal processes, including summons served that emerge from that company’s operations in the Philippines. However, there are two dates that are the most important in terms of tax compliance in Vietnam — January 30, 2021, and March 30, 2021. Officer Requirements for a Domestic Corporation First Vietnamese Major Tax Deadline — January 30, 2021 2. Joint Stock Company (JSC) A domestic corporation in the Philippines must have at least four officers: Second Vietnamese Major Tax Deadline — March 30, 2021 Personal Income Tax (PIT) of Q4, 2020 – declaration and payment. President Treasurer Corporate Income Tax (CIT) of Q4, 2020 – declaration and paid on estimates. March 30, 2021, is the deadline for the following tax payments and/or declarations for 2020 in Vietnam. Value-added Tax (VAT) of Q4, 2020 – declaration and payment. Can be a non-resident but must be a director holding at least one share. Required to be a resident of the Philippines. Annual business license tax for Vietnamese companies. Financial statement or report of 2020: profit and loss, cash flow, balance sheet, and financial statement note. Tax settlement declarations of 2020: PIT settlement declaration and CITsettlement declaration. Statistic or compliance report of 2020. Foreign Direct Investment (FDI) reports. Corporate Secretary Compliance Officer Required to be a citizen of the Philippines. Required to be a resident of the Philippines. | 3 Copyright © 2021 In.Corp Global Pte Ltd. All rights reserved. Last Updated June 2021 Financial statements are only required if your company was registered before October 2020. Otherwise, you can compile the submission with your financial statement of 2021.

  4. how do you determine which form you need to submit to IRAS? Take a look Corporate Income Tax (CIT) payment Report of labour use CITand PIT settlement reports Value Added Tax (VAT) declaration and payment FDI report Audited financial report Personal Income Tax (PIT) declaration and payment The Different Types of Domestic Corporation Business license tax payment Report on foreign labour use Following the Philippine Foreign Investments Act of 1991, a domestic corporation can have any of the following equity structure: Other Corporate Compliance Deadlines in Vietnam for 2021 Quarterly Bi-annually Annually A domestic corporation with no foreign equity (100 percent Filipino-owned). CITand PIT settlement reports Report of labour use The full list of sectors that do require capital requirements is as follows: FDI report A domestic corporation with less than 40 percent foreign equity. Audited financial report Business license tax payment Vocational schools Language centres A foreign-owned domestic corporation with more than 40.01 percent foreign equity. Finance and Fin-tech Insurance Vietnam Tax Obligations for 2021 The foreign equity structure is determined by the nationality of the shareholders of the domestic corporation. Real estate companies Banking While not an exhaustive list, here is an overview of your major tax obligations in Vietnam for 2021. While 100 percent Filipino-owned domestic corporations can freely operate in any economic activity or industrial sector, domestic corporations with foreign ownership are restricted from participating in economic activities included in the Philippine Foreign Investments Negative List (FINL). Vietnam Corporate Income Tax Obligations Foreign Ownership Requirements in Vietnam Tax rate: 20% on assessable income; 32-50% for the oil and gas and other mineral extraction sectors. Related Read: Who can set up a One Person Corporation in the Philippines In fact, Vietnam does allow 100% foreign ownership of a business in the majority of industries. Significant exceptions are logistics, advertising, and tourism, for which you will need a Vietnamese Joint Venture Company. Tax year:January 1 to December 31 2021. Minimum Capital Requirements for a Domestic Corporation Annual Business License Tax Payment Generally speaking, foreign ownership regulations follow the World Trade Organisation (WTO) guidelines. However, there are some cases where some industries are neither covered by WTO guidelines nor by local laws — if this is the case, you will need approval for the ministry in charge of that industry. Tax rate: Depends on the business’s registered capital: Type of Domestic Corporation Minimum Capital Requirement Capital is 10 billion VND or less (~US$ 430,000). 0-40 percent foreign ownership OR exporting at least 60 percent of their products or have at least 60 percent of local ownership ~US$100 (PHP 5,000) 2 million VND (~US$ 85). Capital is more than 10 billion VND. 3 million VND (~US$ 130). Considered pioneers of Filipino industry, employing at least 50 Filipinos or using advanced technology. US$100,000 Branches, representative offices, business location, public service providers, and other business organizations. More than 40 percent foreign ownership US$200,000 1 million VND (~US$ 40). Tax deadline: January 30. | 4 | Copyright © 2021 In.Corp Global Pte Ltd. All rights reserved. Last Updated June 2021

  5. Tax Responsibilities of a Domestic Corporation A Filipino domestic corporation will be subject to monthly and/or quarterly value-added tax (VAT) or monthly other- Vietnam Personal Income Tax Obligations percentage tax (OPT or non-VAT). Tax rate:5 – 35% depending on the individual’s income. The income tax of a domestic corporation is 30 percent, based on its taxable net income. Investment capital requirements for domestic investors; or 1. Tax resident:Individual resides in Vietnam for at least 183 days in 12 consecutive months; individual who holds a permanent or temporary residency in Vietnam; an individual who rents a property in Vietnam for 183 consecutive days. 2. Other taxes may also apply, such as: Tax year:A calendar year which is the same as the individual’s tax year. Documentary stamp tax (DST) on the issuing of new shares or Based on Resolution 954/2020/UBTVQH14 on June 2, 2020, there were increases in family circumstance-based deductions for Personal Income Tax: lease agreements Withholding taxes on income payments (e.g. 5 percent on rental) Increase Individual Deduction from VND 9 million (US$390) per month to VND 11 million (US$476) per month. Investments that require special licenses. 3. Increase Family Deduction from VND 3.6 million (US$156) per month to VND 4.4 million (US$191) per month. Penalties for not meeting tax responsibilities in the These deduction increases will reduce the accessible income for PIT. Philippines include: Vietnam Foreign Contractor Withholding Tax Obligations 25 percent surcharge Deemed CIT rate: 0.1 – 10% depending on the business. 20 percent interest Deemed VATrate: 0 – 5% depending on the business. Penalties of PHP200 to PHP50,000,00 Applicable to: Foreign organisations with income derived from business in Vietnam. Vietnam Value Added Tax Obligations Tax rate:0 – 10% depending on the type of services and goods. Applicable to: purchases of goods and services (including goods and services purchased from non-residents), with certain exemptions. Vietnam Special Sales Tax Obligations Tax rate:7 – 150% depending on the type of product or service. Applicable to:The importers, producers, and providers of goods and services. Related Read:The 101 on expanding your business in Vietnam Interested to Set Up a Company in Vietnam? Speak To Us Today | 5 Copyright © 2021 In.Corp Global Pte Ltd. All rights reserved. Last Updated June 2021 Our company incorporation team can assist you with a seamless company set up process.

  6. Required Documents for Applying to Set Up a Domestic Corporation Vietnam Personal Income Tax Obligations Articles of Incorporation Treasurer’s Affidavit Tax rate:5 – 35% depending on the individual’s income. The domestic corporation’s name The Treasurer’s Affidavit shows the Treasurer-in-Trust Investment capital requirements for domestic investors; or Tax resident:Individual resides in Vietnam for at least 183 days in 12 consecutive months; individual who holds a permanent or temporary residency in Vietnam; an individual who rents a property in Vietnam for 183 consecutive days. of the planned domestic corporation has certified at Purpose/business type of the domestic corporation least 25 percent of its authorised capital stock. It must The names of incorporators and the total number of incorporators (there must be at least two incorporators) also show that at least 25 percent of the subscription Tax year:A calendar year which is the same as the individual’s tax year. has been paid and received by the Treasurer-in-Trust in cash for the benefit and use of the domestic The total amount and share of stocks of the domestic corporation Based on Resolution 954/2020/UBTVQH14 on June 2, 2020, there were increases in family circumstance-based deductions for Personal Income Tax: corporation. Increase Individual Deduction from VND 9 million (US$390) per month to VND 11 million (US$476) per month. Shareholder Information Internal Rules and Bylaws of the Domestic Corporation Investments that require special licenses. Increase Family Deduction from VND 3.6 million (US$156) per month to VND 4.4 million (US$191) per month. These deduction increases will reduce the accessible income for PIT. Copies of the foreign shareholders’ passports The domestic corporation must have written rules of Vietnam Foreign Contractor Withholding Tax Obligations conduct for elections of board directors and officers Tax Identification Number (TIN) of the local shareholders and general meetings. The bylaws must also include Deemed CIT rate: 0.1 – 10% depending on the business. the specific roles and expectations of each of the Two valid forms of identification for each of the shareholders Deemed VATrate: 0 – 5% depending on the business. officers. Applicable to: Foreign organisations with income derived from business in Vietnam. Vietnam Value Added Tax Obligations Tax rate:0 – 10% depending on the type of services and goods. Applicable to: purchases of goods and services (including goods and services purchased from non-residents), with certain exemptions. Interested to Set Up a Company in Vietnam? Speak To Us Today Our company incorporation team can assist you with a seamless company set up process. Vietnam Special Sales Tax Obligations Tax rate:7 – 150% depending on the type of product or service. Applicable to:The importers, producers, and providers of goods and services. Related Read:The 101 on expanding your business in Vietnam | 6 Copyright © 2021 In.Corp Global Pte Ltd. All rights reserved. Last Updated June 2021

  7. The Steps Required to Register a Domestic Corporation 1 Register the domestic corporation’s name with the Securities and Exchange Commission (SEC). You will receive a name verification slip. The domestic corporation’s name cannot already be in use or be deemed to be obscene or inappropriate. Register the domestic corporation’s name with the Securities and Exchange Commission (SEC). You will receive a name verification slip. The domestic corporation’s name cannot already be in use or be deemed to be obscene or inappropriate. 1 Register the domestic corporation with the appropriate Local Government Unit (LGU) to acquire: 2 Register the domestic corporation with the appropriate Local Government Unit (LGU) to acquire: A Mayor’s Permit form the Mayor’s Office Barangay Clearance A Business Permit from the Business Permit and Licensing Office (BPLO) of the relevant Municipal/City Hall A Mayor’s Permit from the Mayor’sOffice 2 Barangay Clearance A Business Permit from the Business Permit and Licensing Office (BPLO) of the relevant Municipal/City Hall Acquire the Corporate Taxation Registration from the Bureau of Internal Revenue (BIR). 3 Acquire the Corporate Taxation Registration from the Bureau of Internal Revenue (BIR). 3 Register the information of each employee of the domestic corporation to obtain the following for the employees: 4 Register the information of each employee of the domestic corporation to obtain the Philippine Health Insurance Corporation (Phil Health) health insurance following for the employees: 4 Philippine Health Insurance Corporation (PhilHealth) health insurance Home Development Mutual Fund (HDMF or Pag-Ibig Fund) housing loan benefits Home Development Mutual Fund (HDMF or Pag-Ibig Fund) housing loan benefits Social insurance from the Social Security System (SSS) Social insurance from the Social Security System (SSS) | 7 Copyright © 2021 In.Corp Global Pte Ltd. All rights reserved. Last Updated June 2021

  8. Conclusion - Where to Next for Setting Up Your Domestic Corporation in the Philippines 1. Although not easy, it is possible to create your domestic corporation in the Philippines yourself. However, we highly recommend you seek the advice of a trusted local incorporation service provider. It will almost always save you time, money, and frustration by delegating the tasks of incorporation to experts. If you’d like help on establishing your own domestic corporation in the Philippines, we have an expert team of lawyers, accountants, and incorporation specialists who will help you ensure your successful expansion in the Philippines. 2. If you have any questions about how you can establish your own contact us - it’s both our job and pleasure to help. domestic corporation in the Philippines , please do 3. 4. 5. Contact Us Let Us Help You Set Up Your Domestic Corporation in the Philippines | 8 Copyright © 2021 In.Corp Global Pte Ltd. All rights reserved. Last Updated June 2021

  9. IN.CORP GLOBAL PTE LTD 30 Cecil Street, #19-08 Prudential Tower, Singapore 049712 Phone: +65 6320 1888 Fax: +65 6438 2436 Email: info@incorp.asia Website:incorp.asia OUR REGIONAL PRESENCE The information contained herein is intended for general information purposes only and shall not be regarded asprofessional advice. Readers are therefore advised that before acting on any matter arising from these notes, they should discuss their particular situation with the Firm. No liability can be accepted for any action taken as result of reading the notes without prior consultation with regard to all relevant factors. FOLLOW US ON: Copyright © 2021 In.Corp Global Pte Ltd. All rights reserved.

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