Reasons to Establish a Business in the Philippines

The Philippines is a prime outsourcing investment option. Its working population is proficient in English and have technical skills such as in accounting and finance, IT, and sales and marketing that can assist any company. Its robust economy has made it one of the emerging markets in the world. Investors looking to register a branch office in the Philippines or other business entities will be satisfied with their return on investment once they’ve settled in the country.

What are the advantages of establishing a business entity in the Philippines?

Strategic Location for Businesses

The Philippines is in a location that is accessible to different commercial hubs in Asia such as Hong Kong, Singapore, Kuala Lumpur, Tokyo, Seoul, and others. It’s convenient to go in and out of the country while your management team visits other regional offices. The climate is warm throughout the year with a few rainy months. If you want to spend your time on one of the islands, it’s convenient to book a flight or a vehicle to popular tourist destinations in the country. It’s possible to work remotely on a tropical island.

High English Proficiency

According to Business World Online, the Philippines is in the top 25 in English proficiency out of more than 100 countries in the survey. This linguistic ability makes it easier for foreign-owned companies to set up the infrastructure of their business entity in the country. Many investors from native English-speaking countries prefer the neutral and adaptable accent of Filipinos. The latter can often pass as locals from the United States, United Kingdom, Canada, or Australia when speaking. American-owned companies will have an easy time opening a business in the country because of the cultural affinity of Filipinos to American culture.

Cost-Effective Labor

One of the main reasons companies outsource to Asia is because of the lower labor costs compared to hiring in their own countries. Depending on the industry and skills needed, salaries start from around US$400 a month with performance incentives for increases as an employee gains experience. This provides companies with extra savings they can use to reinvest in their own operations, products, services, and other projects. However, despite the low labor costs, you still get quality output from your outsourced Filipino employees.

Continuous Growth in Outsourcing

The Philippines is a preferred call center destination because of the country’s skilled workforce and their proficiency in English. Companies such as Accenture and Convergys have call centers in the country. The Business Processing Outsourcing (BPO) industry is continually growing because of its profitability in the country. According to Statista Market Insights, the projection for the BPO market is set to reach US$0.62 billion in 2023. The same source stated that forecasts for revenue annual growth rate is at 9.14%. This will lead to a market volume of US$0.96 billion by 2028.

Low Cost of Living

When you register a branch office in the Philippines, you can leverage the country’s low cost of living. The expenses for onboarding, training, and certifying employees are low. Utilities expenses and rent are also lower compared to setting up a business in the United States, United Kingdom, Australia, and other first-world countries. The contractor that foreign-owned companies partner with can take on responsibilities and tasks related to managing, training, and recruiting employees among other tasks. This enables you to focus your efforts on core projects. The savings investing in the Philippines generate boosts profits.

Skilled Workforce

One of the reasons that foreign-owned companies register a branch office in the Philippines or other entities is because of the skilled and educated workforce. You can find potential employees with hard skills for jobs related to finance and accounting, computer engineering, It, and others. It’s also easy to train and certify them when you need them to acquire new skills and experience.

Possible Tax Incentives

If you are considering setting up a business in a special economic zone, you’re entitled to fiscal and non-fiscal incentives. If your company gets a Philippine Economic Zone Authority certification, you get benefits such as income tax holidays, vat exemptions, Special Corporate Income Tax rate, enhanced deductions, long-term land lease, and others. These incentives provide you with more savings whenever you register a branch office in the Philippines or other entities.

What business entities can you register in the Philippines?

Now that you know the advantages of establishing a business presence in the country, you need to know which types you can set up.

  1. Representative Office – A foreign-owned, parent company establishes a corporation in the Philippines to handle non-transactional operations. This entity is an extension of their parent company which finances its expenses and incurs its liabilities. It cannot conduct income generating activities in the country.  
  2. Branch Office – This entity isn’t legally different from its parent company. The laws that govern it are the same ones where its parent company was created. Its head office will incur all the branch office’s liabilities. Unlike a representative office, this entity can carry out income generating activities as long as it follows the conditions established by the country’s regulations and laws. The income it derives within the country is subject to tax.
  3. Domestic Subsidiary – This type of business entity is separate from its head company. Its liabilities are distinct from those of its parent company. Its worldwide income is subject to income tax.

These are the business entities you can establish when you decide to enter the Philippines. The country provides you with opportunities to succeed with the right business model. You can leverage the country’s high proficiency in English and skilled workforce. The employees are teachable, and the outsourcing industry is still growing and profitable. You’ll see a return on investment when you take a chance on the Philippines. Comply with local laws and learn more about the requirements before investing.

When you register a branch office in the Philippines or other business entities, you’ll need assistance. Manila Bookkeepers can provide you with services related to establishing a business presence in the country. Our experienced team can guide you through the whole process from identifying the documents you need to learning more about possible tax incentives. We provide first-rate services for foreign-owned companies.

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