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The Philippines, formally the Republic of the Philippines (Filipino: Republika ng Pilipinas), is a Southeast Asian archipelago. It is located in the western Pacific Ocean and comprises of about 7,641 islands divided into three major geographical divisions from north to south: Luzon, Visayas, and Mindanao. The Philippines is surrounded to the west by the South China Sea, to the east by the Philippine Sea, and to the southwest by the Celebes Sea. Taiwan to the north, Japan to the northeast, Palau to the east and southeast, Indonesia to the south, Malaysia to the southwest, Vietnam to the west, and China to the northwest share marine boundaries. The Philippines has a land area of 300,000 km2 (120,000 sq mi) and a population of roughly 109 million people as of 2021, making it the world's thirteenth-most populated nation. The Philippines has a wide range of nationalities and civilizations spread over its islands. The capital of the nation is Manila, and the biggest city is Quezon City; both are located within the Metro Manila metropolitan region.
The archipelago's first occupants, the Negritos, were followed by subsequent waves of Austronesian peoples. Adoption of animism, Hinduism, and Islam resulted in the formation of island-kingdoms known as Kedatuans, Rajahnates, and Sultanates. The arrival of Ferdinand Magellan, a Portuguese explorer who led a ship to Spain, signaled the start of Spanish colonialism. Ruy López de Villalobos, a Spanish adventurer, called the archipelago Las Islas Filipinas in honor of Philip II of Spain in 1543. Beginning in 1565, Spanish colonisation via Mexico resulted in the Philippines being a part of the Spanish Empire for more than 300 years. Catholicism became the dominant religion during this period, and Manila became the western center of trans-Pacific commerce. The Philippine Revolution started in 1896, and it got linked with the Spanish–American War in 1898. The region was surrendered to the United States by Spain, while Filipino revolutionaries formed the First Philippine Republic. The succeeding Philippine–American War resulted in the US gaining control of the area, which they retained until the Japanese invasion of the islands during World War II. The Philippines gained independence in 1946, after their liberation. Since then, the unitary sovereign state has had a turbulent relationship with democracy, including the toppling of a dictatorship via the People Power Revolution.
The Philippines is a growing market and a newly industrialized nation whose economy is shifting away from agriculture and toward services and industry. It is a founding member of the United Nations, World Trade Organization, ASEAN, the Asia-Pacific Economic Cooperation conference, and the East Asia Summit. The Philippines' location on the Pacific Ring of Fire, near to the equator, renders it vulnerable to earthquakes and typhoons. The nation possesses a diverse range of natural resources and a high degree of biodiversity.
Employees who have worked for at least a year are entitled to five days of vacation. These days can be used as vacation or sick time. Employees who do not utilize their leave at the end of the year may be paid for the days they did not utilize.
There are 21 holidays in all, with 9 of them being non-working holidays.
Employees who have worked for at least a year are entitled to five days of vacation. These days can be used as vacation or sick time.
Post childbirth, the following applies:
105 days of leave if the employee has paid at least three monthly contributions within the 12-month period before the birth
mothers who gave birth to twins or triplets are not entitled to any additional maternity leave.
The mother can file her maternity benefits for up to 10 years.
In the event of a miscarriage, the following applies:
60 days of leave
The employee has paid at least three monthly contributions within the 12-month period before the miscarriage
The leave will be paid by the employer who can later request reimbursement from Social Security.
For the first four deliveries of the lawful spouse with whom they are cohabiting, all married male employees in the commercial and public sectors are entitled to seven days of full pay.
Single parents are entitled to an additional 7 days of paid leave each year as a single parent.
An employee may be terminated for legitimate and allowed reasons in accordance with the Labor Code, as well as for any major violation of corporate rules and regulations, or for the commission of additional infractions or violations of the Code of Conduct.
Employees must give at least 30 days notice.
A probationary period may not exceed six months in duration. After the probationary period expires, the employment contract is considered permanent.
Severance pay or separation pay shall be paid only if the employee was terminated (not resigned) by the employer for authorized reasons. Each year, the employee may receive up to one month's salary multiplied by their length of service.
The standard workweek is forty hours spread over five days. Young workers under the age of 15 have a maximum workweek of 20 hours, while those between the ages of 15 and 18 have a maximum workweek of 40 hours. They are unable to work in the evening.
Individuals performing supervisory or managerial duties are expressly excluded from overtime pay. On normal days, all hours worked in excess of the standard eight hours must be compensated with a daily salary plus a minimum of 25% additional pay.
On special holidays, all hours worked in excess of the standard eight hours per day must be compensated with the daily salary plus a minimum of 30% additional pay. On legal holidays, any hours worked in excess of the standard eight hours per day must be compensated with double the daily wage.
The minimum wage for workers in the agricultural sector is 500.00 PHP per day, while in the non-agriculture sector it is 537.00 PHP per day.
The Philippines has mandatory universal healthcare that is financed by payroll taxes and the general budget. There is also the option of paying for private health care. The private healthcare system serves 30% of the population.
Offering extra incentives may aid in attracting and retaining important personnel. The following are some common extra perks provided by certain companies in the Philippines
Allowances: Some companies offer allowance for things such as housing, transportation, and medical allowances. If an allowance can be classified as a cost of living allowance it is tax deductible. All other allowances will be taxed.
Supplementary Insurances: supplementary life, disability, and health insurance are often provided by employers and are recommended.
Domestic corporations are taxed on their global revenue. A foreign company, on the other hand, is solely taxed on revenue earned in the Philippines.
In general, the tax rate on net income from all sources is fixed at 25%.
Domestic companies with total assets of less than P100 million and total net taxable income of less than P5 million are subject to a 20% tax on net income from all sources.
The Philippines taxes its residents on their global earnings. Non-resident citizens and foreigners, whether or not living in the Philippines, are solely taxed on income earned inside the country.
The tax rates levied on the income of foreigners, whether resident or not, are determined by the nature of their earnings (i.e. compensation income, income subject to final tax, or other income).
For resident aliens and non-resident aliens doing business and receiving compensation income, the tax rates are as follows.
For a taxable income between PHP 0 to PHP 250,000, the tax rate is 0.
For a taxable income between PHP 250,000 to PHP 400,000, the tax rate is set at 20 percent.
For a taxable income between PHP 400,000 to PHP 800,000, the tax rate is set at 25 percent.
For a taxable income between PHP 800,000 to PHP 2,000,000, the tax rate is set at 30 percent.
For a taxable income between PHP 2,000,000 to PHP 8,000,000, the tax rate is set at 32 percent.
For a taxable income over PHP 8,000,000, the tax rate is set at 35 percent.
VAT is levied on almost all sales of services and imports, as well as the sale, barter, exchange, or lease of commodities or assets (tangible or intangible). The tax is based on the gross selling price of commodities or properties sold, or the gross revenues from the sale of services, and is calculated at a uniform rate of 12%. The value utilized by the Bureau of Customs (BOC) in calculating tariff and customs duties, plus customs duties, excise taxes, if applicable, and other charges, is the foundation of the tax on importation of goods. When the BOC uses volume or quantity valuation, the VAT basis is the landed cost plus any excise taxes.
Certain transactions are zero-rated or VAT-free. VAT-registered individuals' export sales are zero-rated. Certain VAT-exempt sales of services, such as those supplied by financial intermediaries, are subject to percentage taxes depending on gross sales, receipts, or income.
The Bureau of Immigration (BI) requires all foreigners traveling to work in the Philippines to get a work visa.
Work visas/permits are provided according on the individual's circumstances, talents, and job type. To complete this application, the following paperwork must be referenced/completed/returned to the government authorities.
If you are applying for a work visa, the following documents need to be completed:
9(g) Pre-Arranged Employee Commercial Visa;
9(g) Pre-Arranged Employee Non-Commercial Visa;
Special Non-Immigrant Visa or 47(A)(2); and
Special Non-Immigrant Visa under EO 226, as amended by RA 8756 (ROHQ).
If you are applying for a work permit, the following documents need to be completed:
Special Work Permit (SWP);
Provisional Work Permit (PWP); and
Alien Employment Permit (AEP).
Written employment contracts are required. Contracts often contain the following information:
The parties' names, job titles, descriptions, and status
Most full-time workers are regarded indefinite, however, project-based personnel are considered fixed term. Background checks and investigations are not governed by legislation, however they must not break any data privacy regulations.
There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.
Before you begin the process of establishing a subsidiary in the Philippines, you should examine many aspects that may influence where you base your firm and the sort of corporation you choose to create.
First, consider the sort of company you run and the industry in which you operate, any current trade agreements or ties you wish to maintain, and the nationality of your personnel. Then, evaluate local practices that may affect how your organization runs. Before deciding where to incorporate, you should consider everything from the English level to the value of group participation.
You have the choice of incorporating as a company, a branch office, a regional headquarters/regional operating headquarters (RHQ/ROHQ), or a foreign partnership. The procedure for establishing a subsidiary varies based on the kind of structure you choose. To form a company in the Philippines, you must first:
1. Verify and reserve the name of your firm with the Securities and Exchange Commission (SEC)
2. Make a deposit at the bank with your paid-in minimum capital.
3. At the notary, get your treasurer's affidavit and articles of incorporation notarized.
4. After registering your firm with the SEC, get your pre-registered Taxpayer Identification Number (TIN).
5. Obtain barangay clearance.
6. Get your community tax certificate (CTC) and pay your yearly community tax at the City Treasurer's Office (CTO).
7. Obtain a business license from the BPLO.
8. Purchase unique accounting books from a bookshop in the Philippines.
The complete procedure takes around 29 days and costs about PHP 7,630. If you decide to establish this form of Philippines subsidiary, you should plan for the time and money required to complete the procedure.
Subsidiary regulations in the Philippines may be complicated and vary depending on the kind of business you pick. A foreign investor may form a totally owned domestic company in the nation for a corporation. If the company's operation is subject to foreign equity constraints, the foreign investor must establish a domestic corporation with a qualified joint venture partner from the Philippines.
If you decide to set up a subsidiary on your own rather than using Philippines subsidiary outsourcing services, you need contact a lawyer or consultant who is familiar with the country's regulations. You may also teach an employee to understand the requirements from beginning to end, but this will take time away from the employee's regular duties.