Business Compliance Checklist for Foreign Founders in the Philippines

A Step-by-Step Guide to Staying Legal and Operational in the Philippines

Starting a business in the Philippines is a strategic move for many foreign entrepreneurs—especially in cities like Cebu, where the tech scene, English fluency, and affordable labor combine to create a fertile startup environment. But starting is only half the battle. To operate legally and sustainably, compliance is key.

Failure to comply with local laws can lead to fines, business closure, visa problems, and reputational damage. Whether you’re setting up a digital agency, SaaS startup, restaurant, or education platform, this detailed guide will walk you through the essential compliance steps—from registration to ongoing obligations.

1. Entity Formation: Choose Your Structure

Foreigners can’t just open shop under their own name in the Philippines. You must form a legal entity recognized by the government.

Common Structures for Foreign Founders:

• Domestic Corporation (most common)

• Branch Office (extension of a foreign company)

• Representative Office (non-revenue generating)

• Partnership (only with Filipino majority ownership)

Most startups opt for a Domestic Corporation with 100% foreign ownership, if allowed by the Foreign Investment Negative List (FINL).

2. SEC Registration (Securities and Exchange Commission)

Step 1: Name Reservation
Use SEC’s Company Registration System (CRS) to check availability and reserve your business name.

Step 2: Prepare Documents

• Articles of Incorporation

• By-laws

• Treasurer’s Affidavit

• Proof of inward remittance (if foreign-owned)

Step 3: Capital Requirements

• ₱5,000 minimum for Filipino-owned

• ₱200,000 USD equivalent for foreign-owned (can be reduced to ₱100,000 with special conditions like employing 50+ Filipinos or exporting 60% of output)

Step 4: Submit & Pay Fees
Fees vary by capital size; registration takes 1–3 weeks depending on completeness.

Step 5: Receive SEC Certificate of Incorporation
This document proves your business is legally recognized.

3. Local Government Registration (LGU)

Once SEC registration is complete, register your business with the city or municipal hall where you operate (e.g., Cebu City Hall).

Key Requirements:

• Barangay Clearance

• Mayor’s Permit

• Business Permit

• Sanitary Permit

• Fire Safety Inspection Certificate

• Lease contract or land title

️ Permits must be renewed annually in January. Late renewal comes with penalties.

4. BIR Registration (Bureau of Internal Revenue)

You must register with the BIR within 30 days after SEC registration or receiving your LGU permit.

Steps:

1. File BIR Form 1903 (Corporations)

2. Pay ₱500 Annual Registration Fee (Form 0605)

3. Buy & register Books of Account

4. Apply for Authority to Print (ATP) or use Computerized Accounting System (CAS)

5. Get your Certificate of Registration (COR or BIR 2303)

6. Display the COR at your office

Failing to register or display the COR can result in closure orders.

5. Open a Corporate Bank Account

Most banks require:

• SEC Certificate

• COR from BIR

• Mayor’s Permit

• Articles of Incorporation

• Board Resolution to open the account

• Valid IDs of signatories

Recommended banks for foreign startups:

• BPI

• UnionBank (supports digital onboarding)

• BDO

• Security Bank

6. Register for Social Security, Health & Housing

Once you hire employees (even just one), you must register as an employer with:

All employers must contribute a matching share on top of employee contributions.

7. Tax Compliance Requirements

Philippine tax compliance is monthly, quarterly, and annual.

7.1 Key Taxes for Corporations:

Corporations with less than ₱5M net income and less than ₱100M assets enjoy a 20% corporate income tax under the CREATE law.

8. Employment Compliance

Foreign founders hiring in the Philippines must comply with local labor laws:

8.1 Employment Contracts

Must include salary, duties, benefits, work hours, probation period (max 6 months), termination clauses, and confidentiality terms.

8.2 Government Contributions

Deduct employee share, remit employer share, and file monthly/quarterly reports to:

• SSS

• PhilHealth

• Pag-IBIG

• BIR (for withholding taxes)

8.3 Minimum Wage & Benefits

• Varies by region (e.g., Cebu: ₱435–₱468/day)

• Include 13th-month pay, holiday pay, and leave benefits

8.4 Dismissal Rules

Strictly regulated. Termination must be backed by due process or valid reason. Illegal dismissal can lead to penalties or reinstatement orders.

9. Immigration and Work Visa Compliance

As a foreign founder, you must legally reside and work in the Philippines. Tourist visas are not valid for employment or business operations.

Options:

• 9(g) Pre-Arranged Employment Visa – Requires sponsorship from your company

• 47(a)(2) Visa – For startups endorsed by BOI or PEZA

• Special Resident Retiree Visa (SRRV) – For older founders

• Special Investor’s Resident Visa (SIRV) – For investors with substantial capital

Consult with an immigration lawyer or visa consultant to ensure the right permit is secured.

10. Data Privacy Compliance

If your startup collects or processes user data (especially through apps or websites), you must comply with the Data Privacy Act of 2012 and register with the National Privacy Commission (NPC).

Requirements include:

• Appointing a Data Protection Officer (DPO)

• Conducting Privacy Impact Assessments

• Drafting a Privacy Manual & Privacy Policy

• Registering with the NPC if processing sensitive or large-scale personal data

11. IP and Contract Compliance

Ensure your business protects its intellectual assets:

• Register trademarks with IPOPHL

• Draft NDAs, service agreements, contractor contracts with IP assignment clauses

• Review website terms & privacy policies for compliance

Investors and partners will ask if your IP is truly owned by the company.

12. Annual Reports & Renewal

Foreign-owned corporations must submit:

• General Information Sheet (GIS) – Submitted to SEC annually

• Audited Financial Statements (AFS) – Submitted to SEC and BIR

• Annual Income Tax Return (1702-RT) – By April 15

• Mayor’s Permit Renewal – Every January

Non-compliance with reports leads to fines or revocation of licenses.

13. Special Compliance Notes for PEZA/BOI Registered Entities

If your startup is registered with PEZA or the Board of Investments, you’re eligible for tax holidays and customs perks—but must meet strict reporting standards.

• Performance Reports

• Annual Renewal of Certification

• Export Compliance or Headcount Targets

• Physical Inspections

14. Hiring a Local Compliance Team or Consultant

Don’t go it alone. Foreign founders are encouraged to hire or outsource:

• Corporate Secretary – Manages SEC filings

• CPA or Tax Agent – Handles tax filing and audit prep

• HR Officer – For payroll and employment rules

• Legal Counsel – For contract and regulatory issues

Working with professionals helps avoid costly mistakes and ensures smooth scaling.

15. Sample Compliance Timeline (First 12 Months)

Conclusion: Stay Compliant, Scale Confidently

Launching a business in the Philippines as a foreign founder is entirely possible—and potentially very rewarding—but only if you treat compliance not as a burden but as a foundational asset.

With the right legal entity, permits, taxes, and employment processes in place, you’ll build investor confidence, retain talent, and protect your long-term viability.

When in doubt, work with local experts, stay ahead of deadlines, and use this checklist regularly to stay on track. In the Philippines, being compliant isn’t just about following rules—it’s a competitive advantage.