Financing Company Information & Documentary Requirements

Financing Company Information & Documentary Requirements Philippines

A corporation in the Philippines requires at least 5 incorporators and 5 directors. An incorporator is a founding shareholder. The incorporators and directors can be the same persons. Every director must own at least one share of the corporation. All the directors must be residents of the Philippines. The corporate secretary must be a Filipino citizen and resident of the Philippines. The treasurer must be a Filipino citizen and resident of the Philippines. No person can be the President and the Corporate Secretary at the same time or the President and Corporate Treasurer at the same time.

Definition:  Financing companies’ hereinafter called companies, are corporations, except banks, investments houses, savings and loan associations, insurance companies, cooperatives, and other financial institutions organized or operating under other special laws, which are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, by direct lending or by discounting or factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel mortgages, or other evidences of indebtedness, or by financial leasing of movable as well as immovable property.

Rights and Power – Financing companies shall have the following powers:

  1. Engage in quasi-banking and money market operations with the prior approval of the Bangko Sentral ng Pilipinas;
  2. Engage in trust operations subject to the provisions of the General Banking Act upon the prior approval of the Bangko Sentral ng Pilipinas;
  3. Issue bonds and other capital instruments subject to the pertinent laws, rules and regulations;
  4. Rediscount their paper with government financial institutions subject to relevant laws, rules and regulation;
  5. Participate in special loan or credit programs sponsored by or made available through government financial institutions;
  6. Provide foreign currency loans and leases to enterprises that earn foreign currency by exports or other means, subject to existing laws and regulations promulgated by the Bangko Sentral ng Pilipinas.

The SEC shall allow the inclusion of the foregoing rights and powers in the Articles of Incorporation of a financing company after submission by the applicant financing company of the appropriate license/authority issued by the government agency involved.

Foreign Ownership of a Financing Company
100% foreign ownership of a financing company is allowed Republic Act No. 10881, lapsed into law on July 17, 2016. No foreign national may be allowed to own stock unless the country of which he is a national accords reciprocal rights to Filipinos. In the case of corporations owning shares in a lending company, the citizenship of the individual owners of voting stock in such corporations shall be the basis in the computation of the percentage. More than 40% foreign ownership requires a minimum paid-in capital of US$ Two Hundred Thousand (USD200,000.00).

Minimum Capital Requirement
The minimum required paid-in capital is:

  1. Ten Million Pesos (PHP10,000,000.00) for the head office in Metro Manila and other first class cities.
  2. Five Million Pesos (PHP5,000,000.00) in other classes of cities
  3. Two Million Five Hundred Thousand Pesos (PHP2,500,000.00) in Municipalities

Additional Capital Requirement – A financing company shall be required to put up minimum additional capital for each branch, agency, extension office or unit as follows:

  1. One Million Pesos (PHP1,000,000.00) : Metro Manila and other first class cities;
  2. Five Hundred Thousand (PHP500,000.00)    : Second class and other cities;
  3. Two Hundred Fifty Thousand (PHP 250,000.00)   : Municipalities.

Evaluation Guideposts – The number of branches, agencies, extension offices or units to be established shall depend upon the capacity of the company to conduct expanded operations and/or upon the capacity of the area wherein the proposed branch, extension office, agency or unit will be established to absorb new entities engaged in financing, as may be determined by the SEC.

For a financing company granted with special rights and powers mentioned in Rights and Powers hereof additional capital required shall be based on letter (c) above or on the capitalization requirement under the rules and regulations promulgated by the appropriate government agency, whichever is higher.

Corporate Name
The corporate name of financing companies shall contain the term”Finance Company,” “Financing Company,” Finance and Leasing Company” and “Leasing Company”.

Size of Loan and Interest
A financing company may give loans in such amounts and reasonable interest rates and charges as may be agreed upon between the lending company and the debtor: Provided, That the agreement shall be in compliance with the provisions of Republic Act No. 3765, otherwise known as the “Truth in Lending Act” and Republic Act 7394, otherwise known as the “Consumer Act of the Philippines”. As of August 19, 2013 there are no usury laws which limit the interest rate a lending investor my charge loan recipients. The Supreme Court has reduced the interest rate, in some cases as being excessive, iniquitous, unconscionable and exorbitant, hence, contrary to morals (“contra bonos mores”), if not against the law.
In accordance with the Truth in Lending Act and prior to the consummation of the transaction, a financing company shall furnish each debtor a disclosure statement, setting forth, to the extent applicable, the following information:

  1. The principal amount of loan;
  2. Rate of interest of the loan;

iii. Service or processing fee, if any;

  1. Amortization schedule;
  2. Any penalty charge for late amortization payment;

Sec. 5. Limitation on purchase discounts, lease rentals, fees, service and other charges. — The Monetary Board of the Bangko Sentral ng Pilipinas is hereby empowered to prescribe, in consultation with financing companies and the Securities and Exchange Commission, the maximum rate or rates of purchase discounts, lease rentals, fees, service and other charges of financing companies, and to change, eliminate or grant exemptions from or suspend the effectivity of such rules whenever warranted by prevailing economic and social conditions.”

Requirements for Securing an Authority to Operate a Financing Company from the SEC (Secondary License)

  1. Cover Sheet
  2. Application Form
  3. Information Sheet
  4. Personal Information Sheet of Directors and Officers
  5. Valid NBI Clearance of each FILIPINO Director and Officer
  6. Foreign Directors and Officers:
    a.   Photocopy of
    ● Alien Certificate of Registration, or
    ● Immigration Certificate of Registration
    b.   Photocopy of Passport
    ● Showing valid visa or stay in the Philippines
    C.  Clearance from Bureau of Immigration
    * All photocopies shall be verified against the original
  7. Clearance from Bangko Sentral ng Pilipinas
    ● If applicant is a subsidiary or affiliate of a bank and/or non-bank financial
    institution with quasi banking license
  8. Manual on Corporate Governance
    ● If foreign participation in voting stock is more than 40%; or
    ● If total assets is PHP50M or more; or
    ● If commercial paper issuer, either exempt or registered
  9. Manual on Anti-Money Laundering
    ● If foreign participation in voting stock is more than 40%; or
    ● If total assets is PHP10M or more; or
  10. Board Resolution on the Adoption of the Manuals
    ● Certified by the Corporate Secretary
  11. Format of disclosure Statement on Loan/Credit Transactions
    ● Indicating the name of the company
  12. Notarized Bank Certificate of Deposit of the Paid Up Capital
  13. All documents required for incorporation

SEC Licensing Fees (for secondary license):

  1. Initial Application Fees shall be paid to SEC at the time of filing of application

1) Head Office –
A fee of 1/8 of 1% of the paid-up capital of the financing company + LRF of 1% (minimum of P10.00) shall be paid for the issuance of a Certificate of Authority to Operate as a Financing Company.
2) Branch, extension office, unit or satellite office
A fee of 1/8 of 1% of the minimum assigned capital + LRF of 1% (minimum of P10.00) of the branch, extension office, unit or satellite office shall likewise be paid for the issuance of an original Certificate of Authority.

  1. Annual fee –

An annual fee shall be paid not later than forty five (45) days before the anniversary date of the CA.

  1. Head Office – Annual Information Statement Filing fee of P10,000 + 1% LRF

Annual fee of 1/8 of 1% of the paid-up capital of the financing company + LRF of 1% (minimum of P10.00)

  1. Branch Office – Annual Information Statement Filing fee of P10,000 + 1% LRF

Annual fee of 1/8 of 1% of the minimum assigned capital of the financing company + LRF of 1% (minimum of P10.00)

Commencement of Operations
A corporation/company that has been duly registered and granted a Certificate of Authority to Operate as a Financing Company shall commence operations within one hundred twenty (120) days from date of grant of such authority. Failure to commence operations within said period shall be a ground for the suspension of its CA.

Section 9 – Loans and Investments
Unless otherwise authorized by the Commission:

  1. The total investment of a financing company in real estate and in shares of stock in a real estate development corporation and other real estate based projects shall not at any time exceed twenty-five (25%) of its net worth.
  1. More than fifty (50%) percent of the funds of a financing company shall be used or invested in financing company activities; Provided, that in the computation of the amount of funds used or invested in financing company activities, investments in government securities with maturity of not more than one (1) year and special savings deposits shall be taken into consideration;

Reportorial Requirements

  1. General Information Sheet (GIS) – Within thirty (30) days from annual stockholders meeting, as stated in its SEC approved bylaws.
  2. Audited Financial Statements prepared by an external auditor accredited by the SEC
    for fiscal year ending December 31: on or before April 15. After April 15, based on advisory to be issued by SEC, for fiscal year other than December 31: within One Hundred Twenty (120) days from end of fiscal year, as stated in its SEC approved by-laws.
  3. Special Form of Financial Statements – 30 days from the due date of Audited Financial Statements
  4. Annual Information Statement – Every 30th day of January for Commercial Paper Issuer
  5. Semi-Annual Financial Statements
    –    1st Semester:  45 days from cut-off (Cut off: June 30)
  • 2nd Semester: 45 days from cut-off (Cut off: December 31)
  1. AMLA Compliance Form – if authorized to issue Securities

The above stated information is gathered from the SEC and other laws enforce at the time of compilation, it is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.

SEC Reduced Requirements for Financing and Lending Companies

Securities and Exchange Commission



SEC Reduced Requirements for Financing and Lending Companies

Notice is hereby given that pursuant to SEC Resolution No. 544, series of 2016, the Commission En Banc has resolved to approve the Company Registration and Monitoring Department’s [CRMD] rationalization of documentary requirements for application for Certificate of Authority to Operate as a Financing Company / Lending Company.

The CRMD has modified the Application Form, Company’s Information Sheet and Personal Information Sheet to consolidate some of the documents. Further, the following are no longer required for registration of financing and lending companies: (1) local police clearance; (2) certificate of good moral character; (3) work permit from the Department of Labor and Employment for foreign directors and officers; and (4) location map and copy of the lease contract or title of the building / unit where the company is located.

Copies of the Checklist of Requirements and the revised Forms are available at the CRMD – Licensing Unit (LU) at the 3rd Floor, SEC Building, EDSA, Mandaluyong City and maybe downloaded at the SEC website. For inquiries, please call 584 – 7187 and look for the LU Officer of the day.

Starting a Philippine Business as a Foreigner

Philippines Business Registration
Philippines Business Registration

It doesn’t not matter whether you’re a foreigner or a Filipino, it really is difficult to start a business in the Philippines.

Tips for foreigners who want to register a company in the Philippines

Do your homework! There are many restrictions on foreign equity ownership of businesses in the Philippines. The percentage of foreign ownership will also dictate the allowed number of foreign directors and officers of the company.

There are exceptions; up to forty percent Foreign ownership of educational institutions is allowed as stated in the 1987 Constitution and in the Foreign Invest Negative List; but Presidential Decree No. 176 issued in 1973 disallows any foreigner from being a director or officer of an educational institution.

The Philippines Foreign Investment List (which is revised every few years) states the restrictions on foreign ownership but does not provide any information on other restrictions which may apply to your business, such as the number of allowed foreign directors, officers, residency obligations, secondary licenses or the minimum paid-in capital requirements for certain industries.

Obtaining the necessary and correct information to register and run a business in the Philippines is a difficult task and entails inquiring with multiple government agencies with some giving outdated facts.

Anti Dummy Law

To avoid foreign ownership regulations many people try to find schemes to circumvent the Philippines Foreign Investment Act. All these schemes using nominee shareholders (anti-dummy law) or misstating the primary purpose of the business in the articles of incorporation are illegal.

Registering a Business on Your Own – Unless you’re a frequent visitor to Philippine government agencies, there is no way to be sure that the forms you downloaded from their website are current and that application processes and fees haven’t changed. The multiple visits to the SEC and frustrations will make you regret not having hired a Philippine business consultant to guide you and process your documents.

Local Business Permits

Once a business has been licensed to transact business in the Philippines by the SEC, the company must still register with the local municipality where its principal office is located (Mayors’ Permit), BIR, SSS, HDMF and PhilHealth.
The new Unified Registration Record (URR) touted by the SEC as incorporation made easier and faster does not simplify registration with any government entity as a business will still need to go each and every government office to register and process application forms. Only the government will benefit from the URR as they will use it to insure compliance in filings and payments of fees and taxes.

All businesses registered in the Philippines must comply with BIR (Bureau of Internal Revenue) regulations and file monthly, quarterly and annual reports as well as an audited financial statement. Bookkeeping may only be computerized by submitting a special request with the BIR.

Payroll is quite complicated in the Philippines and it’s essential to have an extensive knowledge of taxation and labor laws to correctly compute it.

Starting a Philippine business, contact Dayanan now, to discover how we can remove the annoyances and exasperation of doing business in the Philippines.

Steps in Registering Your Corporation with the BIR

BIR RegistrationThe Bureau of Internal Revenue (BIR) is the Philippines’ primary taxation agency. It is authorized to assess and collect taxes from all income-generating entities in the country.

Before any business can commence operations, they are required to register with the BIR or be penalized in accordance with Philippine law.

Here are the steps to registering your corporation with the BIR:

1. Fill out the required application forms, specifically,

• BIR Form 1903, or the Application for Registration for Corporations/Partnerships;
• BIR Form 0605, i.e., the Payment Form, for tax type RF (i.e., registration fee); and
• BIR Form 2000, for documentary stamp tax.

2. Submit the required documents at the revenue district office (RDO) in charge of the area where your office is located. These documents include

• your filled-out BIR Form 1903;
• your SEC certificate;
• your business/mayor’s permit; and
• your contract of lease.

You may also be asked for a sketch of your head office location.

Note that in some RDOs, you will need to bring your original business permit plus a photocopy of the same, while in others, even just the official receipts (OR) of the payments you made for your business permit application will suffice.

You may also be asked for a sketch of your head office location.
Note that in some RDOs, you will need to bring your original business permit plus a photocopy of the same, while in others, even just the official receipts (OR) of the payments you made for your business permit application will suffice.

3. Pay the annual registration fee. This is a fixed cost of ₱500 every year.

You will also need to pay for documentary stamps; the BIR will advise you on the exact amount you will need to pay for that.

In some places, RDOs will accept these payments onsite; in others, you will be asked to make the payments at the nearest authorized agent bank (AAB).

Each RDO has a list of its own AABs – but not all AABs actually do accept BIR payments.

4. Attend the BIR seminar. Some days after you submit your application requirements, your Certificate of Registration (COR) will be ready for pickup. Before the RDO will release this certificate, you or your authorized representative will need to attend a 1–2 hour seminar about your tax duties, the different kinds of taxes you need to file and pay, and the various tax deadlines. CORs will be given out after the seminar.

5. Register your accounting system. With your COR on hand, you are practically done registering your business.

The next step is to register your accounting system using the BIR Form 1900 (Application for Authority to Use Computerized Accounting System or Components thereof/Loose-Leaf Books of Accounts).

Or if you will be using manual books of accounts fill out BIR Form 1905.

6. Get your receipts and invoices printed. This involves another application process, and it should be done promptly because you need to begin issuing ORs and sales invoices (SI) within 30 calendar days from the date of registration indicated in your COR.

To get BIR-authorized ORs and SIs, you need to apply for an Authority to Print receipts using the BIR Form 1906. Submit this to your RDO along with a clear sample of the receipts you intend to get printed.

ORs and SIs must be printed by BIR-authorized printers only. These receipts will be valid for a period  five years from the date of printing, after which any unused ones will need to be destroyed and you will need to obtain a new authority to print.

The BIR registration is the last step in legalizing your corporation’s business presence in the Philippines. Your next steps – registrations with the Department of Labor and Employment, etc. – will come when you are hiring your first employees.


Steps in Securing Your Corporation’s Business Permit at the City Hall

Philippines Business PermitOnce you’ve obtained your Securities and Exchange Commission (SEC) certificate of incorporation and your barangay permit, the next step in registering your Philippine-based corporation is to get a business permit – also called the mayor’s permit – from city hall.

The process of business permit application tends to vary among localities. In some places, the actual processing time can be as short as one hour, but the queues can be long, especially in January, when all businesses flock to the city hall for their annual permit renewal.

And then, there are localities where the process is more convoluted – but still navigable.


The basic documents necessary for business permit application are your

• SEC registration;
• barangay clearance;
• your community tax certificate, which you can get at the city hall; and
• your office lease contract.

Now depending on where your company office is located, you may also be required to present your homeowner’s clearance, business insurance, etc. The city hall will inform you of these additional requirements.


1. Get an application form at the city hall’s Business Permits and Licensing Office, and fill it out.

2. Submit your application form for the computation of your basic fees and the encoding of your data. The fees are based on your stated business capitalization and size of your office.

Now you will pay the fees, or you may be instructed to visit other offices first and get your required clearances.

Be sure to have your application printout photocopied. If you’ve already paid for something, photocopy the official receipt as well before going to the next step.

3. Make the rounds to secure other necessary clearances. You’ll need to visit

• the engineering office for your certificate of occupancy or building permit,
• the city planning and development council for your location clearance,
• the health center for your sanitary permit, and
• the fire department for your fire safety clearance.

Some of these offices may require additional fees and inspections. They may also issue you a temporary clearance, pending on-site investigation, just so you can finish your registration at the city hall. If that is the case, you will need to secure the actual clearances within 90 days after registration.

5. Submit your papers (clearances, receipts, and application printout) back at the city hall. You will be informed when to return to claim your permit. This could be within the day, but in some cases, it will be after a few days or even a few weeks. Make sure to get a contact number so you can call ahead and confirm that your permit is indeed ready before you return to claim it.

With your business permit (or at least, your official receipt) on hand, you may now proceed to the Bureau of Internal Revenue (BIR) for the last step in your business registration process.

Avoid the hassle of multiple visits and long lines at city hall. Hire Dayanan Business Consultancy to obtain your permits from city hall for you.

Steps in Registering Your Corporation in the Philippines: A Brief Overview

Philippines Business RegistrationOnce you have decided that the Philippines is a good place for setting up business, it’s time to begin the process of registering your corporation.

Here are the steps to registering a corporation in the Philippines:

1. Register your company name with the Philippine Securities and Exchange Commission (SEC) . This is the government agency under whose jurisdiction falls all corporations, associations, and partnerships established in the country.

SEC registration involves at least 5 steps, which begin with the online verification and reservation of the company’s proposed name, and ends with your claiming your SEC license/certificate in person at the SEC office.

2. Get clearance from the barangay hall. A barangay is a Filipino local government unit usually composed of several villages. Several barangays make up a municipality.

To get barangay clearance, go to the barangay hall of the area where you intend to put up your main office. Submit your SEC certificate, site map of your company’s intended location, your approved articles of incorporation and bylaws, and your application form. Then, pay the application fee, and receive your signed barangay certificate that very same day or next day.

3. Secure your municipal permit. Municipal permit application can be complex for two reasons: (1) municipalities vary widely in their requirements, and (2) before you can get your municipal permit, you will need to get supporting certificates from other government agencies outside the municipal hall, like the Bureau of Fire Protection, the municipal health center, etc.

Once you have secured all of your required certificates, bring them back to the municipal hall, pay the fees stated in your application form, then wait a week or two (or more) for your certificates to be ready.

4. Register with the Bureau of Internal Revenue (BIR). The BIR is the last stop in your business registration process. Armed with all the papers and certificates you have so far secured from the SEC, barangay hall, and municipal hall, plus all the other requirements you submitted to be able to secure those permits, go to the BIR revenue district office (RDO) in charge of the area where your business is located.

You may or may not need all the paper you bring with you. Like the municipal halls, RDOs can vary slightly in their requirements for registration.

At the RDO, fill out BIR forms 1903 (Application for Registration for Corporations) and 0605 (payment form for the registration fee).

Submit your application form and all required supporting documents, pay the registration fee and documentary stamps, and you’re done for the day. The BIR will tell you when you should call back to confirm whether your certificate of registration (COR) is ready.

Once your COR has been issued, you have 30 days to have your official receipts and sales invoices printed.

6. Register with the Social Security System (SSS), Home Development Mutual Fund (HDMF), Philippine Health Insurance Company (Philhealth), and the Philippine Department of Labor and Employment (DOLE). Registration with the DOLE becomes mandatory when you have 5 or more employees in your payroll. On the other hand, companies with even just one employee are required to register as employer with the SSS, HDMF, and Philhealth, so that their employee/s may enjoy the benefits of these agencies.

At present, the Philippine government is revising SOPs and putting up infrastructure and to speed up and simplify the system of business registration in the country.

Frustration among registrants is usually caused by the lack of communication from the involved government offices. For instance, it is not uncommon for registrants to discover that the requirements for business permit that are published in a municipality’s website are not complete, and the registrant ends up having to go back and forth to complete the required documents. Many a registrant has also experienced falling in line at a certain window, following instructions indicated by a flowchart posted on the wall, only to find out half an hour later that the flowchart is inaccurate and they are in the wrong queue.

Dayanan Business Consultancy is well versed in the ins and outs of the Philippine business registration process. We’ll be happy to guide you in every step of your company registration in the Philippines. Call us now to learn more about our services.

Understanding the Philippines Local Government Unit System for Foreign Businesses Operators

The Barangay

So you want to do business in the Philippines, but you don’t know how to get a business license in the Philippines or deal with the government.

Any foreigner wanting to do business in the Philippines needs to understand the legal process and national and municipal requirements particular to the country. There are reams of information available online and on Philippine Government web sites. Moreover, hiring a local business consultant will help you navigate through the red tape.

There is one part of setting up a business in the Philippines that is not discussed too often in detail by Business Consultancies – and that is – the Barangay.

The barangay is the smallest administrative sub-division in the Philippines. It is the basic unit of government, and under the administrative supervision of cities and municipalities.

Makati Barangays
The 33 Makati Barangays

Consider the Barangay as a village within a city. Generally, small, with as little as 15 families and covering just a couple of city blocks, the largest barangay in the Philippines covers 524 hectares and has over 245,000 residents. As of 2014, there are 42,028 barangays in the Philippines.

Why Should I Care?

It is somewhat important to understand this part of Filipino life because after all is said and done getting a business established in the Philippines, the Barangay is where the business will be operating. You are essentially a guest in their house.


The Chief Executive of the village is The Punong Barangay, properly addressed as Kapitan, also known as the Barangay Captain or Barangay Chairman. Think of them as the chief of the village. It is a good idea to get to know them somewhat. Barangays are permitted to accept donations from businesses, so helping the Barangay to build a basketball court can be great for public relations.

The Sangguniang Barangay (the Barangay Council) has seven Councilors (Barangay Kagawad) and the chairman of Youth Council or Sangguniang Kabataan (SK), for eight Sangguniang Barangay Councilors.

Elections for the Barangay Captain and the councilors take place every three years. The non-partisan barangay elections tend to be taken quite seriously as the posts are highly coveted.

The Barangay Hall – Your Community Center

Barangay Hall
Barangay Hall


The barangay hall is seat of local government and is the center for many community activities. They usually have a basketball court or at least one somewhere nearby, as this is one of the favorite pastimes of the Filipinos, along with cockfighting. Depending on the size of the barangay, they have a number of unarmed police officers called Tanod that take care of law and order issues within the neighborhood.


Funding the Barangay

The Barangay is funded by revenues collected from local and external sources. Local sources include tax revenues from the Real Property Tax (RPT), taxes on businesses, and non-tax revenues from fees and charges. They also receive a share of taxes collected nationwide by the Bureau of Internal Revenue – The Internal Revenue Allotment (IRA).

Local Revenues

Real Property Tax

The barangays get a percentage of the RPT collected by the municipality where they are located. Real property includes all forms of land, buildings, improvements, and machinery. Exemptions exist for properties owned by government, charitable, institutions, churches, and cooperatives. Companies that supply water and electric power are also not subject to taxes as well as equipment used for pollution control and environmental protection.

Non-Tax Revenues

Barangays can collect fees for:

•    Barangay Clearance to start a business
•    Fines  for the violation of barangay ordinances (not to exceed P 1,000)
•    Use of barangay property or facilities
•    Commercial breeding of fighting cocks and on cockpits and cockfights
•    Places of recreation with admission fees
•    Outdoor advertisements such as billboards, signboards, neon signs and others

They may also collect fees for the use of any system funded and constructed by the barangay:

•    Public roads
•    Piers or wharfs
•    Waterways
•    Bridges
•    Ferry’s
•    Telecommunications  Systems

They may also obtain revenue from:

•    Operation of public utilities and barangay enterprises such as markets and slaughterhouses
•    Proceeds from the sale or lease of barangay property or from loans and grants secured by the barangay

Internal Revenue Allotment

The IRA is a 20% share of taxes collected 3 years earlier by the Bureau of Internal Revenue. The Internal Revenue Allotment (IRA) that each barangay receives is calculated by a formula of 60 percent (60%) population and 40 percent (40%) equal sharing. In 2014, they will share an IRA of P68.3 billion, a P7.8 billion increase from 2013s P60.5 billion IRA.

In addition to the IRA, the General Appropriations Act provides another source of revenue called the ALGU (Allocation to Local Governments). These are “special shares of local government units in the proceeds of national taxes” and include revenues such as:

•    Tobacco excise taxes
•    Proceeds from natural wealth such as mining sites and power sources
•    Gross income taxes paid by establishments within economic zones in their areas
•    Value-added taxes
•    Special privilege taxes
•    Share of budget of Metropolitan Manila Development Authority

Katarungang – Filipino for Justice

The Barangay has a Justice System or Katarungang Pambarangay. The barangay captain heads a committee called the “Lupon Tagapamayapa” (Justice of the peace) to mediate and settle disputes at the Barangay level. They do not have judicial powers as a court does, but rather attempt to resolve issues so the parties can avoid going to court.

If your company has a complaint against some other business or persons, such as for example – they are building a fence or other structure on what you consider your property, you may take it to the Justice of the Peace of the Barangay.

When the chairperson of the committee, usually the Kapitan, receives a complaint, Barangay law requires him to inform the parties and set a meeting for mediation the following day. If after 15 days there is no resolution, than a more formal hearing involving the pangkat or body, must be set. If there is still no end to the dispute in another 15 days, then the complainant may file the case in the regional trial court.

Obtaining Barangay Clearance

In order to set up any business in the Philippines, you will need Barangay Clearance from the Barangay where your business will be located.

Required documents to obtain Barangay Clearance:

1.    Application form
2.    SEC Certificate of Incorporation and approved articles of incorporation and bylaws
3.    Location plan/site map and contract of lease.

Fees will vary in each Barangay since they have the discretion to impose their own fees and charges as long as these fees are reasonable, and within the limits set by the Local Government Code and city ordinances.

If you are interested in starting a business in the Philippines and want help from professionals, contact the DBC Team now for a free consultation. We have extensive experience with dealing with barangays and going through the process of establishing businesses in the Philippines.

Philippines SEC Name Reservation

The first step in registering a business in the Philippines is to reserve a name by either visiting the SEC or through their online reservation system

First time of users of the system will need to signup as a new user. Once you have an account you will be able to verify and reserve proposed company names.

The 8 Steps to Philippines SEC Name Reservation

Step 1. Accept Terms and Conditions

click Accept

Step 2. Select Type of Company

The choices are:

SEC Name Reservation Philippines

  1. Stock Corporation
  2. Non-stock Corporation
  3. General Partnership
  4. Limited Partnership
  5. Professional Partnership
  6. Foreign Stock
  7. Foreign Non-Stock
  8. Foreign Partnership

Step 3. Select Type of Industry
This list displays the industries that require endorsement from other government agencies. Select the industry listed to classify your company. If your company’s classification does not fall under any of the listed industries, click Continue.

(for industries that do not require endorsement from other government agencies see below)

Select the type of industry listed to classify your company. If the list indicates that there is more than one page, click Next or Last to view the other industries. You may select the page number from the dropdown box and click Go To Page to view your selected industry page. You may enter a keyword in the Search Industry field below and click Search to look-up for industries to match your keyword.

(you may have to drill down the industry by clicking 5 or 6 times to get to the next step)

Step 4. Verify Company Name
Enter your Proposed Company Name at the field provided. Then select the appropriate Company Suffix of your Company Name by clicking on the drop-down box below. The Company Suffix you selected should not be included at the Proposed Company Name you entered. To verify Proposed Company Name, click Continue. To go back to the previous page, click Back.

For a domestic corporation you have the following choices: Inc., Incorporated, Corp., Corporation.

If the system accepts the name you will see the following:

– Checking your proposed name against:
>> Offensive words … PASSED
>> Internationally known foreign corporations … PASSED
>> Registered names … PASSED
>> Reserved names … PASSED
>> Company-owned words … PASSED
>> Restricted words in accordance to existing laws … PASSED

–    Proposed Company Name is Available!

Step 5. New User Profile

Provide information for the following Profile details. Click Continue to complete your other Profile details. To return to the previous page, click Back.

Step 6. Reserve Company Name

Select the duration of reservation and method of payment for your company name. Enter the name of the person who is reserving the current company name on the Reserved By field.

SEC Teller or UnionBank Teller payments should be in the form of Cash, Cashier Checks, Manager Checks or Certified Checks.

Funds Transfer payments require you to have a UnionBank account. If you do not have a UnionBank account, open one at the nearest UnionBank branch. To use the funds transfer facility, enroll first by clicking the UnionBank Funds Transfer Enrollment link below. If you are already enrolled, click Continue button to proceed.

A name can be reserved for a maximum of 90 days. Extensions are possible.
The cost is PHP40 per 30 days. It is best to pay the reservation fee at the SEC Teller as the bank API is not always able to update the SEC Name Reservation Database.

Step 7. Review Reservation Summary

Make sure that your Reservation Details are correct. Click Submit to finalize the reservation. If you want to make changes, click Back.

Step 8. Print Reservation Notice

It’s important to keep the original printout as you will have to present it to the SEC.


You may also reserve Doing Business As names as they will also need to be indicated in the Articles.

Foreign companies may be required to make three name reservations.

Ex: Head office; name Abcxyz Limited – Abcxyz Limited Manila Branch – Abcxyz Limited under the name Abcxyz Limited Manila Branch.

Business Registration Cost Philippines Corporation

Business Registration Cost Philippines

The cost for a business registering a corporation in the Philippines is based on the amount of authorized capital. Depending on the nature of the business and the percentage of foreign ownership there may be a minimum paid-in capital requirement.

Schedule of fees and charges for registration of a new corporation:N

Articles of Incorporation:

SEC fees for the registration of the articles of incorporation are calculated based on the amount of authorized capital. The minimum fees are based on an authorized capital of PHP 400,000.00.

1/5 of 1% of the authorized capital stock or the subscription price of the subscribed capital stock whichever is higher but not less than PHP 1,000.00 .

By-laws: PHP1,010.00

Legal Research Fee (LRF):

1% but not less than PHP10.00 on the Articles of Incorporation and By-laws fees

Application Under Foreign Investments Act (FIA):

PHP3,000.00 required for corporations which have more than 40% foreign ownership.

Stock and Transfer Book:

Purchase and registration PHP470.00


PHP 150.00 per document

Example Business Registration Cost Philippines:

A corporation with an authorized capital of PHP400,000 and more than 40% foreign ownership and one name reserved for 60 days.

Articles of IncorporationPHP 2,000.00
By-lawsPHP 1,010.00
Foreign Investment Act ApplicationPHP 3,000.00
Legal Research FeePHP 20.00
Stock & Transfer BookPHP 470.00
NotarialPHP 900.00
TotalPHP 7,400.00

Updated February 7, 2019

Software Development or Web Development Company Registration in the Philippines

software development company philippines

There are more than 500 software development companies in the Philippines according to the PSIA.  Their clients are from North America, Asia and Europe. These companies are expected to reach at least $1.16 billion in revenue by the end of 2013, which mainly comes from the outsourcing of software development, web development and IT operations.  Metro Manila and Cebu City are now in top ten list of outsourcing destinations.

To attract foreign companies to set up software development businesses, the Government of the Philippines has put in place fiscal, and non fiscal tax incentives. Companies can apply with the Board of Investments (BOI) or with the Philippine Economic Zone Authority (PEZA) to avail of tax holidays. To qualify for incentives certain capitalization or investments may be necessary.

Business Registration

When starting a business in the Philippines, you will need to look at the advantages and disadvantages of the various legal entities that can be registered with the SEC. We suggest one the following depending on your business model: Domestic Corporation, Branch Office, RHQ or ROHQ.

There are no restrictions on foreign ownership of outsourcing companies and BPOs as they fall under the category of export enterprises which must derive a minimum of 70% of their revenue from overseas and be paid in foreign currency.

Why Start a Software Development Company in the Philippines.

The main advantage of opening a software development company in the Philippines is the savings. The majority of the saving will be on labor costs. Salaries of developers in the Philippines can be as low as 25% of a similarly skilled programmer in Europe or North America. Another savings is the package given to your expat manager, the cost of living in the Philippines is one of the lowest in Asia.

DBC will assist you in choosing the legal entity which best suits your business model to register with the SEC, as well as advising you on compensation, payroll and bookkeeping.

Don’t want to setup your own company but still want to save on software development? Let us put you in touch with quality software development and web development companies.