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Guide

Choosing a Philippine Entity: Corporation, Branch, Representative Office, Headquarters or OPC

Draft, not yet reviewed. This guide has been written but a responsible attorney has not yet reviewed its legal content. It is published here for that review. Do not rely on it.

By Jot Jacosalem · Roll No. PENDING · IBP PENDING
Last updated September 8, 2026

Most comparisons of Philippine entity types are built around capital requirements. Capital is the easiest thing to compare and the least likely to decide the question. Two other things usually do: whether the entity will earn income in the Philippines, and whether the parent is willing to be liable for what happens here.

The two questions that decide it

Will the entity earn income in the Philippines? This is the dividing line running through the whole list. A representative office and a regional headquarters are prohibited from earning income here. A branch, a subsidiary and a regional operating headquarters may. Everything about tax treatment follows from that single fact.

Does the parent want separate liability? A branch has no legal personality apart from its head office, so the parent bears the branch’s Philippine obligations without limit. A subsidiary is a separate juridical person, and the parent’s exposure is generally limited to its investment.

Answer those two and the field usually narrows to one or two options. Capital then tells you what it costs, not what to choose.

The vehicles, side by side

Vehicle Legal status May earn PH income Minimum inward remittance
Domestic corporation (subsidiary) Separate Philippine juridical person Yes None if 40% foreign or less; US$200,000 above that for a domestic market enterprise; no threshold for an export enterprise
Branch office Extension of the foreign parent; resident foreign corporation Yes US$200,000 as a domestic market enterprise, reducible to US$100,000; no threshold for an export enterprise
Representative office Extension of the parent; taxed in the same manner as an RHQ No US$30,000 initial, then whatever operating expenses require
Regional headquarters (RHQ) Extension of a multinational parent No US$50,000 annually
Regional operating headquarters (ROHQ) Extension of a multinational parent Yes, from group affiliates only Not less than US$200,000
One Person Corporation Separate Philippine juridical person Yes No minimum capital stock or paid-in capital, except under special laws

Domestic corporation

A domestic corporation is incorporated under Philippine law and is a legally independent unit from its foreign parent. It requires at least two and not more than fifteen incorporators, who may now be natural or juridical persons, and there is no minimum authorised capital stock as a general matter.

Where foreign equity exceeds 40% and the corporation is a domestic market enterprise, a minimum paid-in capital of US$200,000 applies. That reduces to US$100,000 where the enterprise involves advanced technology, is endorsed as a startup or startup enabler, or where a majority of its direct employees are Filipinos and in no case fewer than 15.

Guidance written before 2022 describes the reduced threshold as requiring advanced technology or at least 50 direct employees. Republic Act No. 11647 replaced that test. The thresholds are covered in detail in our guide to minimum capital for a foreign-owned company.

An enterprise that exports 60% or more of its goods or services is not a domestic market enterprise at all. It can be wholly foreign owned with nominal capital, provided the activity sits outside the Negative List. That single fact removes the US$200,000 question for most outsourcing, engineering support and software work, and it is the most common reason a capital-led comparison gives the wrong answer.

A domestic corporation with two or more stockholders is also the only vehicle here that can hold mixed Filipino and foreign equity, so it is the only route into an activity with a 60-40 requirement. A branch cannot cure a nationality restriction, because it is the foreign parent. Neither can an OPC, which has one stockholder and therefore cannot produce the split.

Where the parent is a foreign corporation, the paperwork is lighter than a licence application but it is not absent. The subscribing entity’s investment needs board approval and stockholder ratification, evidenced by a secretary’s certificate, and every foreign investor, natural or juridical, needs a Philippine TIN before later filings will be accepted.

Branch office

A branch carries out the business of its head office and may derive income in the Philippines. It is treated as a resident foreign corporation and pays 25% on its Philippine income, the same headline rate as a domestic corporation. It cannot use the 20% rate, which CREATE reserved for domestic corporations with net taxable income of ₱5 million or less and total assets of ₱100 million or less excluding land.

Two consequences matter more than the capital figure.

The parent is liable without limit. The branch has no separate personality, so obligations incurred here run back to the head office in full.

Remitted profits carry a 15% branch profit remittance tax, on top of income tax, though tax treaties may reduce it.

Compare that against the subsidiary rather than against nothing. Dividends paid by a domestic corporation to a non-resident foreign parent carry a 25% final withholding tax, cut to 15% under the tax sparing rule where the parent’s home country credits the difference, and lower again under many treaties. The real comparison is 15% against 15% to 25%, with treaty relief available on both sides, so repatriation cost rarely decides between the two.

For a branch operating as a domestic market enterprise, the minimum inward remittance is US$200,000, reducible to US$100,000 on the same three grounds set out above: advanced technology, startup or startup enabler endorsement, or a majority of direct employees being Filipino with a floor of 15. A branch that exports 60% or more of its goods or services is outside the threshold entirely.

Representative office

A representative office deals directly with the clients of its parent but may not derive income in the Philippines. Its permitted activities are information dissemination, promotion of the parent’s products, and quality control. It is fully subsidised by the head office, which must make an initial inward remittance of at least US$30,000 and then keep funding whatever the office costs to run. Service-provider guidance often states the US$30,000 as a fixed annual obligation. The fixed annual figure in the statute is the US$50,000 for an RHQ under RA 8756, not this one.

It cannot conclude contracts with local entities on the parent’s behalf.

The tax position was settled by the Supreme Court in 2021. In Commissioner of Internal Revenue v. Shinko Electric Industries Co., Ltd., G.R. No. 226287 (6 July 2021), the Court held that a representative office fully subsidised by its head office and not engaged in income-generating activities in the Philippines is not subject to income tax or VAT, and should be treated in the same manner as a regional headquarters rather than as a regional operating headquarters, even though the term “representative office” does not appear in the Tax Code.

The reasoning is worth understanding rather than just the result. The Court distinguished the three vehicles by whether they generate income here. A representative office and an RHQ do not. An ROHQ does, and is therefore a taxable entity. The exemption follows the activity, not the label, which means a representative office that starts behaving like a trading operation loses the basis for it.

Two practical points sit underneath the result. The Commissioner’s theory was that performing any qualifying service converts the entity into an ROHQ for tax purposes, and the Court rejected it on the evidence rather than on principle, so the exposure is real if the facts drift. What carried the evidence was concrete: every client inquiry was routed to the head office, the office signed no contracts of its own, and price, payment terms and delivery stayed with the parent. That is the standard to maintain, and it is more specific than “does not derive income”.

The exemption is also narrower than it sounds. A representative office still registers with the BIR, files returns, withholds on employee compensation and on its local purchases, and pays local business taxes and the mayor’s permit. Passive income such as bank interest remains subject to final withholding tax. Shinko itself treats that passive income as consistent with the exemption rather than as a breach of it.

Regional headquarters and regional operating headquarters

Both are creatures of Republic Act No. 8756 and are open only to multinational companies.

An RHQ acts as a supervisory, communications and coordinating centre for the group’s subsidiaries, affiliates and branches in the Asia-Pacific region. It may not derive income in the Philippines, may not participate in any manner in the management of a Philippine subsidiary or branch, and may not solicit or market goods or services for anyone in the group. Required remittance is at least US$50,000 annually.

An ROHQ provides qualifying services to the group’s affiliates, subsidiaries and branches. Those services include sourcing and procurement, corporate finance advisory, marketing control and sales promotion, training and personnel management, logistics and data processing. It may derive income from those affiliates, but is prohibited from directly or indirectly marketing the goods and services of the parent and its affiliates, and generally does not serve third parties. Required remittance is not less than US$200,000.

What changed for the ROHQ

The ROHQ was for many years attractive because of a 10% preferential income tax rate. That preferential rate ended under the CREATE Act, and an ROHQ is now taxed at the regular corporate rate. Two changes travel with the rate. An ROHQ is now exposed to the minimum corporate income tax, which the 10% regime excluded it from, and it can now elect the optional standard deduction, which it previously could not. The vehicle that made sense largely because of its tax treatment now competes on its merits, and for many groups a branch or a subsidiary does the same work with fewer restrictions.

Fiscal and non-fiscal incentives remain available to RHQs and ROHQs under the Omnibus Investments Code. The income tax preference going does not mean every incentive went with it, and the two are frequently conflated. One preference that did go is the 15% rate on managerial and technical employees of RHQs and ROHQs, which was vetoed out of the TRAIN Law for anyone registered from 1 January 2018. Those employees are taxed at ordinary rates.

One Person Corporation

The Revised Corporation Code permits a corporation with a single stockholder, who may be a natural person, a trust or an estate. A foreign natural person may form one, subject to the ownership rules that apply to any Philippine corporation.

The last two points are the ones that matter in practice. An OPC suits an individual foreign founder. It does not suit a corporate group looking for a simplified subsidiary.

Costs that comparison tables leave out

The inward remittance figures are the headline. Three other items change the real cost of entry and rarely appear in a comparison.

The security deposit falls on the branch alone. A branch office must post a security deposit with the SEC, raised by the Revised Corporation Code from ₱100,000 to ₱500,000, within 60 days of the licence being issued, plus additional securities equal to 2% of gross income above ₱10 million. SEC Memorandum Circular No. 17, series of 2019 excludes representative offices, RHQs and ROHQs from the requirement, along with foreign banks, insurers and non-stock corporations. A domestic corporation posts nothing. This is one of the few entry costs that runs in favour of the non-income vehicles, and it is routinely reported as applying to all of them.

The licensing route differs. A branch, representative office, RHQ and ROHQ each need a Licence to Do Business from the SEC, which requires apostilled parent constitutional documents, a certificate of good standing, audited financial statements and a resident agent. A subsidiary needs a Certificate of Incorporation, and while it avoids the licence file, a foreign corporate subscriber still supplies an authenticated board approval and secretary’s certificate, and foreign equity above 40% brings its own SEC form and proof of inward remittance.

Exit runs through the BIR either way. Both routes stall on tax clearance, and a branch adds a withdrawal application, publication and the release of its security deposit. What differs is exposure rather than paperwork: closing a branch does not close the parent’s liability for what the branch did here. Where an investor expects to test a market and possibly withdraw, that is worth modelling at the outset rather than at the end.

Working through the choice

  1. Will the Philippine entity earn income here? If no, a representative office or an RHQ fits, and the tax position is favourable. If yes, continue.
  2. Is the activity on the Negative List? Check the current one. The 13th Regular Foreign Investment Negative List took effect in May 2026 and superseded the 2022 list, and guidance written against the old version is now wrong in places. Our guide to foreign ownership limits under the 13th Negative List sets out the entries. If the activity requires Filipino equity, a domestic corporation with two or more stockholders is the only route. A branch is the foreign parent and cannot satisfy a nationality requirement, and an OPC cannot produce the split.
  3. Does the parent accept unlimited liability for Philippine obligations? If no, a subsidiary rather than a branch.
  4. Will the entity serve only group affiliates? An ROHQ is designed for that, though since the loss of its preferential rate it should be compared against a branch on its restrictions rather than assumed.
  5. Is there a single individual owner? An OPC removes the second incorporator and the by-laws requirement. It is unavailable to a corporate parent.
  6. Will it export 60% or more? If yes, the capital thresholds largely fall away and the choice turns on liability and on whether the activity qualifies for BOI or PEZA registration, which often matters more than the vehicle itself.
  7. Then work out the capital. Not before.

This guide covers the vehicles a foreign investor usually chooses between. It does not cover partnerships or sole proprietorships, which are rarely suitable for foreign capital, and it does not cover BOI or PEZA registration, which sits on top of whichever vehicle is chosen and frequently drives the economics more than the vehicle does.

Whichever vehicle is chosen, it cannot acquire private land. Premises are a separate question, and one with its own ceiling. See our guide to how long a foreigner can lease land.

This guide is one of the foreign investment guides, which are read in order there and dated against the instruments they rest on.

This guide sits under the firm's foreign investment and market entry practice.

Primary sources

Speaking to the firm. If you would like this reviewed, contact the firm to arrange an initial consultation. A conflicts check comes first. Do not send documents or details you consider confidential until the firm has checked whether it is able to act and has agreed in writing to act for you.

This guide states the law as at the date above. It is general information about Philippine law and not legal advice, and reading it does not create a lawyer-client relationship.