Things You Need to Know About a Representative Office in the Philippines

A Representative Office in the Philippines is a foreign corporation organized and existing under foreign laws, but is physically located in the Philippines. It does not derive income from the host country and is fully subsidized by its head office.
 
It is not subject to income tax since it is not allowed to generate any income from the services that it offers in the Philippines. The representative office is also ineligible for PEZA and BOI Registration.
 
Under Philippine laws, a Representative Office can only perform activities similar to the following:

• Facilitation of orders from the head office’s clients
• Dissemination of information and conduct of promotional activities about company products
• Undertaking of quality control of company products
• Undertaking of other related administrative activities from the head office

Steps on Registering a Representative Office in the Philippines

1. Register with the Securities and Exchange Commission (SEC) to obtain a License to Do Business through a Representative Office
2. Obtain business permits from the local government unit (LGU) where the Representative Office will be located, such as:

• • Barangay Clearance
  • Mayor’s Permit
  • Business Permit to Operate

3. Register with the Bureau of Internal Revenue (BIR) to obtain a corporate tax identification number
4. If the Representative Office will employ local employees, register as an employer with the following agencies:

• • Social Security System (SSS)
  • Philippine Health Insurance Corporation (PhilHealth)
  • Home Development Mutual Fund (Pag-IBIG Fund)

5. Apply for Work Visa for foreign directors, executives, and employees, which can be done right after obtaining the SEC license

Registration Requirements to Set up a Representative Office

Foreign corporations must submit the following documentary requirements to SEC:

• Cover sheet
• Notarized F-104 Application Form
• Certified copy of the Board Resolution of the parent company authorizing the establishment of the Representative Office and designating a Resident Agent to receive summons and legal proceedings (can be a Philippine resident or foreign national residing in the Philippines)
• If the home country of the parent company requires Audited Financial Statements (AFS):
  • Audited financial statements of the parent company certified by an independent certified public accountant (CPA) and authenticated by the Philippine Consulate/Embassy (for the immediately preceding year at the time of filing of the application)
  • Authenticated audited financial statements available as of the time of filing of the application and Authenticated unaudited financial statements (AUFS) as of the date not exceeding one year immediately prior to the filing of the application signed by an officer of the foreign corporation (if there is no AFS for the immediately preceding year at the time of filing of the application)

 
If the home country of the parent company does not require Audited Financial Statements:

• Authenticated unaudited financial statements as of the date not exceeding one (1) year immediately prior to the filing of the application; and
• Authenticated Certification signed under oath by an officer of a responsible regulatory institution or by the parent company’s legal counsel that the parent company is not required to prepare and submit audited financial statements (must also cite the law or regulation on which it is based, and attach the print out of the law)
• Certified copies of the Articles of Incorporation of the parent company (must have English translation if in a foreign language other than English)
• Compliance with financial ratio of:

• • Ratio – Solvency
  • Formula – Total assets/ total liabilities
  • Benchmark Value – 1:1
  • Certificate of Inward Capital Remittance and Certificate of Bank Deposit of US$30,000 as initial capital and annual support for operating expenses
  • Affidavit of undertaking to change corporate name (if not stated in the application form)
  • Acceptance of Appointment of Resident Agent (if agent is not the signatory of the application form)
  • Endorsement or clearance from appropriate government agencies (if applicable)
  • Affidavit executed by the President or Resident Agent stating that the foreign corporation is solvent and sound in its financial condition

  The Resident Agent

  The appointment of a resident agent is mandatory.
   
  A resident agent may either be:

  • An individual who must be residing in the Philippines, of good moral character, and of sound financial standing; or
  • A domestic corporation of sound financial standing, and with proof that it is in good standing as certified by the SEC.

   
  As a condition to the issuance of the license for the representative office, a written power of attorney must be filed with the SEC. This power of attorney should:

  • designate the resident agent on whom summons and other legal processes may be served in all actions or other legal proceedings against the foreign corporation; and
  • consent that service upon such resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign corporation at its home office.

   
  The foreign corporation must also execute and file with the SEC an agreement or stipulation stating:
   
  “The (name of foreign corporation) hereby stipulates and agrees, in consideration of being granted a license to transact business in the Philippines, that if the corporation shall cease to transact business in the Philippines, or shall be without any resident agent in the Philippines on whom any summons or other legal processes may be served, then service of any summons or other legal process may be made upon the Commission in any action or proceeding arising out of any business or transaction which occurred in the Philippines and such service shall have the same force and effect as if made upon the duly authorized officers of the corporation at its home office.”
   
  Failure to appoint and maintain a resident agent, or to submit a statement to the SEC of the change of its resident agent or address, may cause the revocation or suspension of the foreign corporation’s license to transact business in the Philippines.
   
  If you need help in establishing a representative office in the Philippines, we at Filepino are the local experts to call. Get in touch with us at +63.917.892.2337 or send us a message here.