OPTIONS FOR SET-UP

Entry Model Registration Requirements Incentives Advantages

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Option 1 –DOMESTIC CORP. (Organized under Philippine Laws) 1. consists of 5 incorporators, maybe 100% Filipino-owned or with 60% Fil and 40% foreign-equity structure 2. no subscription from the mother company 3. has its own identity 4. stock or non-stock company 5. filing fee is 1/5 of 1% of the authorized capital stock (ACS) Securities and Exchange Commission (Registration of Articles of Inc.) Registration with Incenties - 1.Philippine Economic Zone Authority (PEZA)/or 2.Board of Investments (BOI) under Book I of E.O. 226 .

(PEZA locators) May choose to locate inside an export processing zone and register with PEZA; or -Export oriented enterprise at least 70% of output shd.be exported -Activities listed in the PEZA Priority Projects such as Tourism Ecozone Locator, Medical Tourism Enterprise, Agro-Industrial Ecozone Enterprise, etc. (BOI applicants) -Register with BOI and may locate

outside the ecozone -IPP listed projects and if not listed in the

IPP, at least 50% of output is for export if Filipino-owned and least 70% of output for export if foreign-owned)

Products/services may either be directly or indirectly export. (Indirect exporters may sell goods to firms to exporter registered with PEZA or to other ecozone locators) Application is downloadable in the PEZA and BOI website - www.peza.gov.ph www.boi.gov.ph

� Fiscal Incentives 1. Income Tax Holiday (ITH) for the first 4

to 8 years of operation 2. Special 5% tax rate after lapse of ITH

(companies located in an Ecozone) 3. Tax- and duty-free importation of

machinery, equipment, spare parts, raw materials and supplies (for Ecozone locators

4. Unrestricted use of consigned equipment

5. Tax credit on domestic capital equipment

6. Additional deduction for training expense (for Ecozone locators)

7. Tax credit on imported raw materials 8. Additional deduction for labor expense

(not simultaneously availed with ITH) 9. Exemption from wharfage dues, and

any export tax, duty, impost and fees � Non-fiscal Incentives 1. Employment of foreign national 2. Permanent resident status for foreign

investors and immediate family (for ecozone locators)

3. Simplified customs procedures 4. Privilege to operate bonded

manufacturing warehouse

� World-class, environment-

friendly economic zones � PEZA is a ONE-STOP

SHOP including : o Building and

occupancy permits o Special immigrant visa o Import and Export

permits o Environmental

Clearance Certificate made easy because of PEZA-DENR MOA

o Locators are exempted from securing LGU business permits

o Simplified registration form and processing

-BOI has full support for investors who would like to do business in the country from their pre-operating to post-registration stage of their project. -BOI has created a new issue facilitation team under the Investments Aftercare Services Department (IASD) incharged of the Aftercare services program.

Options for Entry

OPTIONS FOR SET-UP

Entry Model Registration Requirements Incentives Advantages

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Option 2 - SUBSIDIARY (ownership maybe owned by a domestic corporation or a subsidiary of a foreign corporation) (Domestic Subsidiary) 1. Consist of 5 incorporators with more than 40% foreign-equity 2. Organized under Phils. laws 3. Most of the company shares/stocks are held by the mother company abroad 5. Earning or non-earning 5.US$200,000.00 paid-up capital (if not for export). 6. P5,000 minimum paid up capital if for export. Securities and Exchange Commission (SEC) Registration with Incentives - the Philippine Economic Zone Authority (PEZA) or -Board of Investments (BOI)

1. For foreign entities (more than 40%

foreign-owned) at least 70% of total services/goods rendered must be exported if it will avail incentives with PEZA/BOI

2. May qualify to register with the BOI if the

project/business activity is listed under the Investments Priorities Plan (IPP) and maybe allowed domestic sale if project is pioneering

3. 100% of services/products may be

rendered/sold to the domestic market, provided that the firm’s paid-up capital is at least US$200,000.00 which may be lowered to US$100,000.00 if the project (a) involves advanced technology as determined by the Department of Science and Technology or (b) employs 50 direct labor force.

� Fiscal Incentives 1. Income Tax Holiday (ITH) for 4 to 8 years of operation 2. Special 5% tax rate after lapse of ITH (companies located in an Ecozone) 3. Tax and duty-free importation of machinery, equipment, spare parts, raw materials and supplies (for Ecozone locators) 4.Unrestricted use of consigned equipment 5. Tax credit on domestic capital equipment 6. Additional deduction for training expense (for ecozone locators) 7. Tax credit on imported raw materials 8.Additional deduction for labor expense (not simultaneously availed with ITH) 9. Exemption from wharfage dues, and any export tax, duty, impost and fees � Non-fiscal Incentives 1. Employment of foreign national 2. Permanent resident status for

foreign investors and immediate family (for ecozone locators)

3. Simplified customs procedures 4. Privilege to operate bonded

manufacturing warehouse

� World class, environment-

friendly economic zones � PEZA is a ONE-STOP

SHOP including : o Building and

occupancy permits o Special immigrant visa o Import and Export

permits o Environmental

Clearance Certificate made easy because of PEZA-DENR MOA

o Locators are exempted from securing LGU business permits

o Simplified registration form and processing

Options for Entry

OPTIONS FOR SET-UP

Entry Model Registration Requirements Incentives Advantages

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Option 3 – RHQ/ROHQ

Register/operate as a Regional Headquarters (RHG)/Operating Headquarters (ROHQ) under R.A. 8756 Establishment of Multinational Company with Regional/Operating Headquarters in the Philippines) Functions – RHQ (engaged in int’l trade with affiliates, subsidiaries, branches in the Asia Pacific Region and other foreign markets) 1. Acts as administrative branch

of a multinational company engaged in international trade

2. Serves as supervision, communications and coordination center for its subsidiaries, affiliates and branches in Asia Pacific Region

3. Does not earn income in the Philippines

ROHQ Engaged in int’l tade with affiliates, subsidiaries, branches in the Asia Pacific Region and other foreign markets). Performs qualifying services exclusively to its affiliates, subsidiaries and branches in the Asia Pacific region and other foreign markets.

ROHQ -

Derives income from undertaking the following qualifying services:

� General administration and planning � Business planning and coordination � Sourcing/ procurement of raw

materials components � Corporate finance advisory services � Marketing control and sales

promotion � Training and personnel management � Logistics services � Research and development services

and product development � Technical support and maintenance � Data processing and

communications

� Business development

RHQ is required to remit annually to the Philippines an amount that is necessary to cover its operations and the said amount should not be less than US$50,000.00; ROHQ requires to have a minimum inward remittance of US$200,000.00 (one time only) or its equivalent in an acceptable foreign currencies. -File/submit application with the BOI-PERD, and if it is approved, BOI will be the one to endorse company’s letter- approval to SEC for the issuance of the Certificate of Registration. SEC Filing fee: RHQ Filing fee – P5,000 ROHQ – 1% of the actual remittance but not less than 1% of peso equivalent of $200 at the time of remittance (BOI) Filing Fee with BOI –P4,500.00

RHQ/ ROHQ INCENTIVES TO EXPATRIATES

1. Multiple entry visa (including spouses and unmarried children below 21 years old) valid for three (3) years within 72hrs from submission of documents 2. Exempt from securing ACR 3. Tax and duty-free importation of household goods and personal effects 4.Travel tax exemption (personnel and their dependents) 5.Withholding tax of 15% on compensation income applicable to both alien and Filipino holding managerial and technical positions INCENTIVES TO RHQ 1. Exemption from corporate income tax, but shall file Annual Info. Return from the BIR 2. Exemption from Value Added Tax on sale/lease of goods and property, and rendition of services INCENTIVES TO ROHQ

1. Subject to preferential income tax rate

of 10% on taxable income 2. Subject to 10% VAT RHQ/ROHQ 3. Exemption from all kinds of local taxes,

fees or charges, except real property tax on land improvements and equipment

4. Tax- and duty-free importation of

training materials and equipment 5. Privilege to import of new motor

vehicles (subject to payment of taxes and duties)

� ROHQ derives income in the Philippines

REGIONAL WAREHOUSE of RHQ and ROHQ(register with PEZA)

� A multinational company established as an ROHQ/RHQ may also establish a Regional Warehouse in an ecozone o Used to store spare parts,

components, semi-finished products and raw materials

o Undertake limited activities of a packing & labeling nature

o Materials stored in a RW will not be subject to import taxes & duties, unless they are w/drawn for use in local market.

OPTIONS FOR SET-UP

Entry Model Registration Requirements Incentives Advantages

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Option 4 – BRANCH OFFICE (a corporation organized under foreign laws) Register first with the -

Securities and Exchange Commission (SEC) under the Foreign Investmetns Act Registrable with the Philippine Economic Zone Authority (PEZA) to avail of incentives if it is an export oriented company

Functions - Carries out business activities of the head office and derives income from the host country. May operate any business activity in industries not listed in the Negative List of Foreign Investments Act or R.A. 7042 A. Requires to remit from its head office at least US$200,000.00 (one time remittance), can be reduced to US$100,000.00 if: 1. Activity involves advanced technology; and 2.Employ at least 50 direct employees B. Requires to post a bond of P100,000.00 to pay for its resident creditors (requirement by SEC) Minimum paid up capital of P5,000.00 if for export SEC Filing Fee – 1% of the actual inward remittance but not less than P2,000.00

May enjoy benefits and incentives if registered with PEZA such as: 1. Income tax holiday for the first 4 to 8 years of operation; 2. Special 5% tax rate after lapse of ITH 3. Tax and duty-free importation of machinery, equipment, spare parts, raw materials and supplies 4. Unrestricted use of consigned equiipment 5.Tax credit on domestic capital equipment 6. Additional deduction fro training expense 7. Exemption from wharfage dues, and any export tax, duty, impost and fees 8. Permanent resident status for foreign investors and immediate family Tax and duty-free importation of household goods and personal effects of the expatriates as long as visa is converted to non-immigrant visa or immigrant visa.

Derives income in the Philippines Qualifies to register with PEZA if it is an export-oriented firm and may locate within the Ecozone zone. P5,000.00 minimum paid up capital if export oriented.

OPTIONS FOR SET-UP

Entry Model Registration Requirements Incentives Advantages

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Option 5 – REPRESENTATIVE OFFICE (a corporation organized under foreign laws)

Securities and Exchange Commission (SEC) under the Foreign Investments Act

- Deals directly with the clients of the parent company but does not derive income from the host country - Fully subsidized by its head office. - Undertakes activities such as but not limited to information dissemination and promotion of the company’s products as well as quality control of products. - Requires to inwardly remit US$30,000.00 (one time remittance) for its operating expenses. -Filing Fee – 1/10 of 1% of the actual inward remittance of the corporation converted into Philippine currency but not less than P2,000.00

-Tax and duty-free importation of household goods and personal effects of expatriates as long as visa is converted into a non-immigrant visa or immigrant visa. -Exempted from Corporate Income Tax

OPTIONS FOR SET-UP

Entry Model Registration Requirements Incentives Advantages

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OPTIONS 6 - RETAIL TRADE BUSINESS Registration under the Retail Trade Nationalization Act or R.A. 8762 Securities and Exchange Commission (SEC)

100% Foreign-owned is allowed as long as it complies with the following qualification requirements: -Minimum paid up capital of US$2.5M (if less than the amount, then it has to be Filipino-owned) -Five (5) retailing branches or franchises around the world -Five-year track record in retailing Application is filed with the BOI-Legal Department while registration is secured with the Securities and Exchange Commission (SEC)

None under the law

Options for Entry

Please refer to the following websites for further information/details:

a. www.sec.gov.ph

b. www.boi.gov.ph

c. www.peza.gov.ph

or email NERBAC (National Economic Research and Business

Assistance Center) at www.nerbac.gov.ph