Foreign Business Inquiry

Hi!

I just have a few questions in mind. I was hired by a foreign company to help them start up the business in the Philippines. I sent them a proposal on how to proceed which is either creating a branch office or a representative office.

What they want to happen is to start the business and see if it will be successful.

My question is before getting any licenses can we already operate in the Philippines? or we have to get a license first depending on the intention of the company?

you should get the proper licenses first if you want to do this by the book.

So if we just get the license while doing our transaction will that be against the law?

you can begin preliminary activities such as setting up your office, and negotiating transactions, but finalizing them is another question

Hi!

Appreciate the response.

sorry follow up question.
Upon reading online it states that the a Filipino should own 60% of the stocks in order for a foreign company to start in the Philippines but since we are just opening a branch office will that be necessary?

I'm the only Filipino employed under their company so I would want to understand the process a little better.

it depends on what line your business will be in. there are some industries where there are restrictions in owner ship. look for the negative lists in dti.

Ive already checked that and in terms of the product and the services we are all clear.
So does that mean that if it's not in the negative list then we can proceed as it is?

jeremiaiglesia12 wrote:Ive already checked that and in terms of the product and the services we are all clear.
So does that mean that if it's not in the negative list then we can proceed as it is?

It's easier to answer if you tell what it is No need to tell product, but which group?

It seem it's not exporting. (Export business is allowed to be owned 100 % by foreign. For instance Call Centers are counted as "export" too if at least 60% of the revenue is for alien customers. There are a few other exceptions, but they demand big investments.) Almost all other are max 40 % foreign owned if allowed at all.

All businesses need permits.
Some need licenses too.

it's a conveyor and logistics business - apologize for all the questions just want to make sure that I understand everything and how it goes.

jeremiaiglesia12 wrote:it's a conveyor and logistics business - apologize for all the questions just want to make sure that I understand everything and how it goes.

Then I guess it's retail. If I remember corect, then it's max 40 % (or perhaps it's 0 foreign ownership. (I haven't researched that any proper because I'm not interested in retail business myself.)

If it's PRODUCTION in the Philippines, then it's max 40 % foreign owned, except if it's an export business.

Do they aim at exbanding it to big if the market want it, and they want to be owner of the BUSINESS?

Or do they just want to SELL their products they make in other country? If so, you can perhaps make a deal YOU is whole owner, but they own the products. = You is a type of agent (with consignation stock owned by them).
Your business can start with making Market research for them, so you can earn some in the startup too.

No problem. There are a lot of questions. I have researched it 2 years now and have still a list of questions left

It's going to be an export type of thing.

I'm currently their employee I was actually confused about that.

well mostly because I thought that they just need to name a Filipino representative and in the SEC they just need my approval when I process the license.

I was thinking the 60-40 thing is for investing in stocks not for opening up a company hahahah.
I'm pretty new at this so your help and answers are very refreshing and informative.

jeremiaiglesia12 wrote:It's going to be an export type of thing.

I'm currently their employee I was actually confused about that.

well mostly because I thought that they just need to name a Filipino representative and in the SEC they just need my approval when I process the license.

I was thinking the 60-40 thing is for investing in stocks not for opening up a company hahahah.
I'm pretty new at this so your help and answers are very refreshing and informative.

I have studied much for own use (I'm a foreigner who plan to live and have business in the Philippines.)

Producing IN the Philiipines?
So no missunderstanding - 100 % foreign owning allowed in "Export" business is when it's produced in and exported FROM the Philppines.

There are "export zones" which have some big benefits, but it cost much to rent there.

IF they are interested in SELLING
and own the PRODUCTS,
not bothering to own the BUSINESS,
then it's much easier to do as I wrote above.

But IF it's PRODUCTION in the Philippines and export much to other countries, then it's mostly easiest to let them be (full or main) owner.

In some cases it's perhaps best to start a Joint Venture between a foreign company and a Filipino "company" (which can be a simpler type than SEC.)

I've been trying to research the benefits of them naming me as the "owner" of the business but it seems that I cant get a straight answer. Do you have a knowledge regarding this?
Do you already have a company in the Philippines?

jeremiaiglesia12 wrote:I've been trying to research the benefits of them naming me as the "owner" of the business but it seems that I cant get a straight answer. Do you have a knowledge regarding this? Do you already have a company in the Philippines?

I have experience from INTERNATIONAL business, but not in the Philippines yet. But I have made much research about gaving business in the Philippines including reading rather much Philippine law, as a part of preparing to start a business there. (It will be a type of production, but I haven't decided yet if it will be a product to sell exporting to abroad or selling all in the Philppines.)

Well. I try to think what's best for BOTH of you and your foreign business partner
I haven't understood if it's an sell agent business or production in the Philippines. (I believe it's the first, then it's NOT an "export business" in Philippine law pooint of view, so they can own max 40 % anyway. But if so p1 is best if you can make a solution where they find their money safe enough.)
1. Production in other country and IMported to the Philippines?
Depending of how big they aim at. IF they can be satisfied with the security they get by the "consignation solution" I described ib an earlier post, then it's best if they are just that, specialy if you can get YOUR business approved as a BMBE, because you would get big tax benefits by that. DON'T make a Joint Venture then. because I believe it's risk a BMBE will not be approve then. And DON'T name it to related to theur company name because that can be a disaproval reason too.
If they hesitate because they want an owning share, they CAN'T have that in this solution, but you can offer them e g a share of the profit if you sell the business. But read the rules concerning BMBE (=Barangay Micro Business Enterprise). BEFORE you offer them anything.
An advantage for them too, is such business can get the registration cheaper and faster so the business can start fast.
NOTE! DON'T describe your business as agent for only them in the application, wriite you will sell such types of equipment.
The barangay/municipaly office handle and are suppouse to have the information about BMBE, so you can get the rules there or at internet.

2. If the production will be in the Philippines aiming at export FROM the Philippines, and aim at being big, then you can make a Market test first, but then establish the production in an "Export zone". Then the company will get good tax benifits. They can own whole or ket you have some percent of the owning to motivate you extra
The advantage for you with this is, then it's THEIR responcinbility to take care of some business leading things, which you don't have experience in.