Setting up a Business in the Philippines

By Bernadette Reyes

Prospective investors may be overwhelmed at first as the list found on websites about how to put up a business in the Philippines runs long. In fact, in a survey conducted by the World Bank, the Philippine government has an 11-step procedure to putting up a business operation whereas in other Asian countries businesses have to comply with only two major steps. However, the government is trying to shift gears by simplifying the procedure in order to lure in more people to put up their own business in the country.

The first step among the basic requirement is to register a business name. A Sole Proprietorship or a business structure owned by an individual only needs to apply for a Business Name and be registered with the Department of Trade and Industry- National Capital Region (DTI-NCR). In the provinces, application may be filed with the extension offices of the DTI. For partnership or those businesses owned by two or more partners a business name should also be registered with the DTI. However, a partnership with more than PHP3,000 capital must register with Securities and Exchange Commission (SEC). Corporations on the other hand are required to register at the SEC.

Application fee for business name registration is pegged at PHP315 for single proprietorship and PHP515 for partnerships and corporations. Business name registration fee and filing fee are charged PHP300 and PHP500, respectively.

After these general registration requirements have been met, securing permits and utility connections are next in line. Tax Identification Number (TIN) should be obtained at the Bureau of Internal Revenue (BIR). Upon securing your TIN, you may proceed with obtaining a business permit to operate from the City Hall/Municipal Offices in the localities where the business will be set up. For businesses located in Metro Manila, locational clearances/business permits are necessary and should be obtained from the Metro Manila Development Authority (MMDA). Note that securing permits in cities and municipalities is considered as the hardest part in the business application process.  Once the permit to operate has been secured, a business employer must get a number from the Social Security System (SSS) office.

To cap the list, apply for water services from the Maynilad Water Company or Manila Water Company for firms located in Metro Manila and Local Water Utilities Administration (LWUA) for firms located outside Metro Manila. Also apply for electric and telephone services connection and you are ready to get the ball rolling. Meralco provides electricity connection for the most part of the country. The Philippine Long Distance Telephone Co. (PLDT), Bayantel, Digitel, Smart and Globelines are some of the well-known companies providing telephone connection services.

Once these requirements have been met, business owners just have to comply with reportorial requirements, pay tax dues regularly and renew expired contracts and permits to keep the business.

While the steps in setting up a business in the Philippines are not easy as ABC, the Philippine government is putting conscious effort to provide leeways and and short-cut the procedures to encourage investments. It has recently allowed post registration requirements wherein businesses may start operation as soon as it has secured the permit to operate but with the commitment to accomplish other requirements in the next two months in order to continue doing business. While the government has become lenient in allowing this type of set-up, it monitors strict compliance of the post registration requirements. Failure of any business to comply with the other requirements would also mean forfeiture of the permit to operate and therefore the business must be closed down. This type of set up is available in some of the key cities in the Philippines including Quezon City, Manila and Makati.

The government has also identified Economic Zones or ecozones which are being developed as independent community with minimum government interference. It administers its own economic, financial, industrial, and tourism development without help from the national government. Ecozones provide adequate facilities to establish linkages with surrounding communities and other entities within the community. As an incentive, companies in the Special Economic Zones are subject to only 5% overall tax rates.

According to DTI, businesses involved in trading such as retail stores are the easiest to get the process done. However, those which involve the use of hazardous chemicals are the hardest to put up, as these type of businesses would require special permits from various agencies such as the Department of Health (DOH) and Department of Environment and Natural Resources (DENR).

For businesses involved in export will need clearances and permits prior to every shipment. While this may seem arduous especially for those with frequent shipments, the government encourages this type of business venture since the Philippines is the most strategic location for firms that want access to the large ASEAN market and its vast trade opportunities. The Philippines has enhanced and primed up various areas for investors and offers a dynamic consumer market accustomed to an array of product choices created by a competitive domestic economy.

But more than the setting up profitable businesses, doing business in the Philippines will further contribute to economic development. The Philippine government is providing an environment conducive to entrepreneurship and micro, small and medium enterprises (SMEs) in the country. In fact, the SME sector has been the backbone of the local economy and served as an important ingredient in the economic and export success of such economies as Japan, Hong Kong and Taiwan. In the Philippines, SME comprises about 99.6% of all registered firms nationwide, employs 69.9% of the labor force, and contributes 32% to the economy.

So the next time you contemplate on setting up a business in the Philippines, consider that on top of generating profits, your decision could help improve the economy, generate more jobs for the unemployed and  ultimately help in alleviating poverty.