For reasons relating to the exercise of management powers and the extent of liability,
among others, the corporation is generally the most preferred vehicle for investments in
the Philippines among the various forms of business organizations. Foreign investors that
wish to engage in a business thatis not subject to nationality restrictions generally choose
between establishing a Philippine subsidiary and establishing a Philippine branch
office.
4. Domestic Corporation v. Branch
Assuming that the proposed activity isnot subject to any foreign equity
limitation, a foreign investor may be set up as a domestic corporation or a branch of a
foreign corporation inthe Philippines. These two types of corporate vehicle have
their relative advantages and disadvantages relating to, among others, the extent of
liability of the parent company/head office, taxation, and the administrative costs
of maintaining the same.
If the proposed activity is subject to foreign equity limitations, a foreign investor will
have to set up a domestic corporation with a Philippine national as a joint venture
partner.
Generally, corporations that are more than 40 percent foreign-owned as well as
branches of foreign corporations that are considered domestic market enterprises
must have a paid-in capital of at least US $200,000. The paid-in capital requirement
is reduced to US $100,000 for domestic marketenterprises whose activities involve
advanced technology or which employ at least 50 direct employees.
Entities that qualify as export enterprises (enterprises that export 60 percent or
more of their output) are not subject to any minimum paid-in capital requirement.