Branch vs.

Subsidiary Corporation
As to Taxability
Branch
1.

Subject to income tax only on Philippine source income

2.

Profits remitted by the branch to its head office are subject to branch profit
remittance tax of 15% or 10% depending on certain tax treaties; however, if located
in a special economic zone then they are tax exempt.

3.

A branch office is not subject to documentary stamp tax (DST) simply because it
does not issue shares of stock

4.

Subject to certain conditions, overhead expenses of the Head Office may be
allocated to the Philippine branch office

5.

5. A branch is not liable to pay the 10% improperly accumulated earnings tax

Subsidiary (Domestic Corporation)
1.

Subject to income tax on worldwide income

2.

Dividends paid by a Philippine subsidiary to non-resident shareholders is subject
to 30% in general or 15% subject to certain conditions or preferential tax treaty rates.

3.

A subsidiary is liable to pay DST on the original issuance of shares of stock at the
rate of P2.00 for every P200.00 or fractional part of the par value of the shares of the
outstanding shares of stock

4.

The Philippine subsidiary is not entitled to the allocation of overhead expenses of
its parent company.

5.

A subsidiary is liable to pay the 10% improperly accumulated earnings tax.

As to its Nature
Branch
A branch office is merely an extension of the head office, thus its liabilities are
considered liabilities of the head office
Subsidiary (Domestic Corporation)
A subsidiary is a juridical entity separate and distinct from that of its parent company,
hence its liabilities are generally not regarded as the liabilities of the parent company.

As to its Capitalization

acceptable securities with market value equivalent to at least P100. Hence. As to the deposit requirement of securities with SEC Branch A branch is required initially to deposit with the SEC for the benefit of present and future creditors.000 to open a corporate bank account. as it is considered an Export Enterprise under the Foreign Investments Act. the company can be registered with as little as P5. However. Hence.000 – P50. However. most banks require P25.000 – P50. As to Registration Requirements Branch .Branch As a 100% foreign-owned entity. as it is considered an Export Enterprise under the Foreign Investments Act. Subsidiary (Domestic Corporation) A subsidiary with more than 40% foreign equity must also have a minimum paid up capital of at least US$200.000 plus an annual additional deposit of 2% of the amount by which the branch office’s gross income exceeds five (5) million pesos Subsidiary (Domestic Corporation) Subsidiaries are not required to deposit securities with the SEC.000 unless the company will be exporting goods or services or generating revenue from abroad amounting to more than 60% of its gross sales it can be fully foreign owned.000 unless the branch will be exporting goods or services or generating revenue from abroad amounting to more than 60% of its gross sales it can be fully foreign owned.000 paid up capital. As to the Number of Incorporators Branch A branch may be set up with only one (1) person who will act as the resident agent Subsidiary (Domestic Corporation) The establishment of a subsidiary requires at least five (5) but not more than fifteen (15) incorporators/directors (all of whom must be natural persons) majority of whom must be residents of the Philippines.000 paid up capital. a branch must have a capital of at least US$200.000 to open a corporate bank account. the branch can be registered with as little as P5. most banks require P25.

000 shall be remitted directly to the Treasurer-in-Trust account opened for and on behalf of the branch office. it must be authenticated by the nearest Philippine Embassy or Consulate. (this will not apply to export oriented businesses) 3. the SEC registration fees shall be calculated on the basis of its converted equivalent in Philippine pesos. 2. Fill up and file the SEC Form 103 (Application of a Foreign Corporation) to Establish a Branch Office in the Philippines). the SEC registration fees may be calculated as the peso equivalent of the following: o Filing Fee (US$200. Such financial statements must be authenticated by the Philippine Embassy or Consulate of the place of execution thereof. Remit the initial assigned capital of US$200. For the registration of a branch with a US$200. it must be registered with the SEC.000 with the SEC which may be withdrawn upon cessation of the Philippine branch’s operations Subsidiary (Domestic Corporation) For the establishment of a subsidiary in the Philippines. The Articles of Incorporation must provide the specific purpose or purposes for which the corporation is being formed. by-laws or similar document authenticated by the Philippine Embassy or Philippine Consulate.000 + Legal Research fee (US$2. The SEC will require the following from the applicant: 1. If this is signed outside of the Philippines..000.000 which should be remitted separately from the registration fees. 2. This license shall be issued by the SEC upon compliance with the following requirements: 1.020. The US$200. This application may be signed by any person authorized by the applicant’s Board of Directors. 4. Submission of the latest audited financial statements. 5. .000 assigned capital.A branch is required to obtain a license to do business here in the Philippines with the Securities and Exchange Commission (SEC).000 x 1%)=US$2. Pay the SEC filing and legal research fees.00 or a total of US$2. A corporate name which must not be similar to existing names already registered with the SEC. the branch office is required to deposit marketable securities worth at least P100. For an initial assigned capital of US$200. o Submission of the Articles of Incorporation.000 x 1%) =US$20. Within sixty (60) days after obtaining the license to operate.

it must have a minimum paid up capital of US$200. Pay the filing fee for the registration which will be approximately 0. a corporation must have at least five (5) but not more than fifteen (15) individual incorporators who must own at least one (1) share in the company and majority of whom must be residents of the Philippines. As to the capital stock requirement and since the foreign equity will exceed 40%. Provide the name of the subscribers to the authorized capital stock of the corporation and the number of shares and amount subscribed by each subscriber. addresses. plus 1% of such SEC fee for the SEC legal research fees and P210. nationalities.00 for the registration of the subsidiary’s by-laws. . passport numbers of the incorporators. 7.3. the applicant must submit a Certificate of Inward remittance issued by a Philippine bank on the remittance of at least US$200. 5.2% of the subsidiary’s authorized capital stock.000 as provided under the Foreign Investments Act unless export oriented. 6. 4. For this purpose. Provide the name of the Treasurer-in-Trust appointed by the subscribers.000 net of bank charges to your Philippine account. Provide the names. Under the Corporation Code of the Philippines.