The $200,000 Capital Threshold and the Export Exemption

Under the Foreign Investments Act of 1991 (Republic Act No. 7042, as amended by RA 11647), foreign investors seeking 100% ownership of a Domestic Market Enterprise (DME) must contribute a minimum paid-in capital of US$200,000. While RA 11647 allows this requirement to be reduced to US$100,000 for companies that utilize DOST-certified advanced technology, qualify as startup enablers, or employ at least 15 direct Filipino workers, the capital threshold remains a substantial obstacle for overseas SMEs and service providers.

Foreign businesses providing services to overseas clients can bypass the US$200,000 paid-in capital requirement completely by qualifying as an Export Enterprise.

What Qualifies as an Export Service Enterprise?

Section 3 of the Foreign Investments Act defines an Export Enterprise as a company that exports at least 60% of its total output or gross sales revenue to customers located outside the Philippines.

For modern service-based industries—such as software engineering, IT consulting, digital marketing, customer support, and offshore back-office operations—qualification depends on revenue source:

Domestic Market Enterprise: Generates more than 40% of its total gross service revenue from clients located inside the Philippines.
Export Service Enterprise: Generates 60% or more of its total gross service revenue from foreign buyers located outside the country.

Because Export Enterprises draw capital into the Philippines rather than competing for domestic market revenues, the law exempts them from the US$200,000 minimum equity rule. Instead, foreign export firms are subject to general Securities and Exchange Commission (SEC) capital requirements under the Revised Corporation Code, allowing incorporation with standard operational capital.

Structural Comparison: Domestic Market vs. Export Enterprise

Operational Feature	Domestic Market Enterprise (DME)	Export Service Enterprise
Foreign Ownership Ceiling	Up to 100% (outside the Foreign Investment Negative List)	Up to 100%
Minimum Paid-In Capital	US$200,000 (or US$100,000 if qualified under RA 11647)	Exempt from US$200,000 threshold (Standard SEC capital)
Revenue Source Requirement	Serves domestic clients (> 40% local revenue)	60% or more of total revenue from foreign clients
Monitoring Agencies	Securities and Exchange Commission (SEC)	SEC and Board of Investments (BOI)
Primary Target Market	Local B2B, retail, local consultancy	IT-BPO, SaaS, KPO, offshore back-office operations

4-Step Registration Process for Foreign Export Firms

Entity Incorporation via SEC eSPARC: Register a domestic corporation with foreign equity. The primary purpose clause in the Articles of Incorporation must explicitly state that services are rendered to overseas clients.
BOI Export Compliance Registration: Under RA 11647, foreign-owned export enterprises must register with the Board of Investments (BOI) to record their export commitment and submit annual compliance reports.
BIR Tax and Invoicing Setup: Register with the Bureau of Internal Revenue (BIR). Cross-border service contracts must be properly structured to support foreign billing and qualify for 0% Value-Added Tax (VAT) zero-rating where applicable.
Local Government Licensing: Secure the local Mayor’s Permit and Barangay Clearance from the LGU where the operational or virtual office is registered.

Compliance and Risk Management

Sustaining Export Enterprise status requires ongoing operational adherence:

Annual Export Ratio Verification: Corporations must submit audited financial statements and foreign earnings documentation to the SEC and BOI annually to verify that the 60% foreign revenue threshold is met.
Consequences of Non-Compliance: If foreign export sales drop below 60%, the BOI notifies the SEC, and the firm will be ordered to cap its domestic sales at 40% of total revenue. Failure to comply or inject the required US$200,000 capital can result in administrative penalties or cancellation of SEC registration.
FIA vs. PEZA/BOI Incentive Thresholds: While a 60% export threshold waives the US$200,000 equity requirement under the Foreign Investments Act, obtaining fiscal incentives (such as PEZA or BOI Income Tax Holidays and VAT exemptions under the CREATE Act framework) requires foreign-owned locators to export at least 70% of total output.

Ready to Establish Your Export Service Enterprise in the Philippines?

Navigating foreign equity classifications, SEC eSPARC registrations, and BOI export reporting requires precise legal and operational setup. Dayanan Consulting provides end-to-end corporate formation, tax compliance, and regulatory licensing tailored specifically for foreign investors.

Book a Free Corporate Equity & Market Entry Consultation with Dayanan Consulting Today

One Person Corporation in the Philippines

For nearly four decades, the Philippine entrepreneurial journey was limited by a 39-year-old Corporation Code that barred the “company of one”. To gain corporate protection, solo founders had to recruit “dummy” incorporators—usually friends or relatives—just to meet the mandatory five-person threshold.

The enactment of Republic Act No. 11232, also known as the Revised Corporation Code (RCC), changed everything by democratizing corporate protection. By introducing the One Person Corporation (OPC), the law finally recognized that a single individual can build a scalable, protected business without a crowded board.

Here are five crucial truths you need to know about setting up an OPC.

1. Your Personal Assets Finally Have a Legal “Shield”

Transitioning from a sole proprietorship to an OPC is a powerful exercise in risk management.

In a sole proprietorship, you and the business are legally indistinguishable.
If the business defaults on a loan or loses a lawsuit, your personal home, car, and savings are at risk.

An OPC changes this by granting your business a Separate Juridical Personality. This creates a legal “shield” where your liability is limited to your invested capital. The law explicitly states: “An OPC is a legal entity distinct from its single stockholder. This allows the corporation to enter into contracts, acquire assets, and engage in legal actions under its corporate name.”.

By creating this legal distinction, you ensure business debts do not become personal tragedies. This status forms the foundation of a modern, “lean” risk profile.

2. You Don’t “Convert” to an OPC—You Start Over

A common trap for established business owners is thinking they can seamlessly “convert” a Department of Trade and Industry (DTI) registration into an OPC. From a legal standpoint, this is a “rebirth,” not a conversion.

Technically, a sole proprietorship cannot be directly transformed.
Strategically, you must maintain your DTI registration until the SEC process is finalized to ensure business continuity.
You must register a new entity via the SEC eSPARC system and execute a Deed of Assignment to transfer assets and liabilities.
The SEC requires the Latest Audited Financial Statements (AFS) of your sole proprietorship to allow this transfer.
Only after the OPC is fully operational should you retire the old DTI registration.

3. The “Buddy System” for Solo Founders (Nominees)

The OPC is designed for solo stockholders, but it is legally built for Perpetual Existence. To ensure the business survives beyond your lifespan, the law requires a “safety net” featuring a Nominee and an Alternate Nominee. These individuals step in to manage the business if you pass away or become incapacitated.

Furthermore, the law requires three distinct corporate roles:

President/Director: You. (Either Filipino/Foreigner)
Corporate Secretary: This cannot be you; they must be a Filipino citizen and a resident of the Philippines.
Treasurer: You can assume this role, but you must post a surety bond that scales with your Authorized Capital Stock (ACS). For instance, if your ACS is PHP 1,000,000, your surety bond coverage must be PHP 1,000,000. This bond must be renewed every two years.

4. The US$200,000 Doorway for Foreign Founders

For foreign tech founders and investors, the OPC is an excellent vehicle for 100% ownership, provided they comply with the Foreign Investments Act (FIA).

For domestic-market enterprises with more than 40% foreign equity, the FIA generally requires a US$200,000 minimum paid-in capital. However, foreign founders can look for two strategic loopholes for a leaner entry:

The Tech/Employment Carve-out: The requirement drops to US$100,000 if you use SEC-certified advanced technology or employ at least 50 direct Filipino employees.
The Export Loophole: If the OPC is an Export Enterprise (selling more than 60% of its output abroad), the US$200,000 minimum generally does not apply.

5. Professionalism is a “Subscription” to Credibility

In business, compliance is the subscription fee for credibility. While sole proprietorships are informal, an OPC is a regulated entity that builds trust with banks through a mandatory paper trail.

Fortunately, there is a “lean” advantage during setup: per Section 7 of SEC Memo 7-2019, an OPC is not required to submit and file Bylaws. The SEC eSPARC (Electronic Simplified Processing of Application for Registration of Company) system also reduces friction by allowing the digital uploading of authenticated or notarized documents.

However, you must be aware of critical restrictions:

The Professional Ban: Natural persons licensed to practice a profession (like lawyers, doctors, or CPAs) cannot organize as an OPC to practice that profession.
Sector Exclusions: Banks, insurance companies, pre-need firms, and public companies cannot adopt the OPC structure.

To maintain your standing, you must commit to annual reportorial requirements, including Audited Financial Statements (AFS), the General Information Sheet (GIS), and mandatory disclosures of “self-dealings” between you and your corporation.

The Future of the “Company of One”

The One Person Corporation is more than a registration type ; it is a tool that allows solo founders to operate with the legal gravity of a conglomerate. By leveraging the eSPARC system and the Revised Corporation Code, you can build a business with Perpetual Existence that survives long after you step away.

FAQs

Can I convert my DTI sole proprietorship to an OPC? No, a sole proprietorship cannot be directly transformed into an OPC. You must register a new entity through the SEC eSPARC system and execute a Deed of Assignment to transfer your assets.

Do I need a Corporate Secretary for an OPC? Yes. While you are the sole stockholder, the law requires you to appoint a Corporate Secretary who is a Filipino citizen and a resident of the Philippines. You cannot act as your own Corporate Secretary.

Can I be the Treasurer of my own OPC? Yes, you can act as the Treasurer of your OPC. However, if you appoint yourself, you are legally required to post a surety bond that matches your Authorized Capital Stock (ACS), which must be renewed every two years.

Can foreigners own an OPC in the Philippines? Yes, foreign nationals can own 100% of an OPC. However, for domestic-market enterprises, the Foreign Investments Act generally requires a minimum paid-in capital of US$200,000.

Do One Person Corporations need to submit Bylaws? No. According to Section 7 of SEC Memo 7-2019, an OPC is not required to submit and file Bylaws, which reduces administrative friction during setup.

Can licensed professionals form an OPC? No. Natural persons who are licensed to practice a profession, such as doctors, lawyers, or CPAs, cannot organize as an OPC for the purpose of practicing their profession.

Get Expert Guidance on Your OPC Registration

Transitioning from a sole proprietorship or starting a new One Person Corporation involves navigating specific legal hurdles—from the SEC eSPARC registration to securing the mandatory surety bond for Treasurers. Don’t let administrative friction or compliance “subscription fees” slow down your vision.

Whether you are a local entrepreneur seeking a personal asset shield or a foreign founder looking to navigate the US$200,000 entry requirement, our team is here to help you build a business designed for perpetual existence.

Connect With Our Strategy Team

Inquiry Type	Best For…
OPC Setup & SEC Filing	New founders ready to use the eSPARC system.
Asset Transfer Consultation	Business owners executing a Deed of Assignment from a DTI registration.
Foreign Investment Strategy	Foreigners navigating the FIA and capital requirements.
Compliance & Reportorials	Annual GIS, AFS, and disclosure management

How Exporting Services Exempts Foreign Firms from $200k Capital Requirements