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Branch vs.

Subsidiary Corporation

As to Taxability
Branch

Subsidiary (Domestic Corporation)

1. Subject to income tax only on
Philippine source income

1. Subject to income tax on worldwide
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.

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 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

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

Hence. As to its Capitalization Branch As a 100% foreign-owned entity.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. However. However.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. a branch must have a capital of at least US$200. the company can be registered with as little as P5. 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. as it is considered an Export Enterprise under the Foreign Investments Act. Hence. as it is considered an Export Enterprise under the Foreign Investments Act.000 – P50.000 to open a corporate bank account.000 paid up capital.000 plus an annual additional deposit Subsidiary (Domestic Corporation) Subsidiaries are not required to deposit securities with the SEC.000 to open a corporate bank account. most banks require P25. most banks require P25.000 paid up capital.not regarded as the liabilities of the parent company. acceptable securities with market value equivalent to at least P100. the branch can be registered with as little as P5. 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 – P50. 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. nationalities. 5. the SEC registration fees shall be calculated on the basis of its converted equivalent in Philippine pesos. the SEC registration fees may be calculated as the peso equivalent of the following: o Filing Fee (US$200. As to the capital stock requirement and since the foreign equity will exceed 40%. For this purpose. it must be registered with the SEC. 4. 3. The Articles of Incorporation must provide the specific purpose or purposes for which the corporation is being formed.000 assigned capital. Fill up and file the SEC Form 103 (Application of a Foreign Corporation) to Establish a Branch Office in the Philippines). 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. 2. If this is signed outside of the Philippines. This application may be signed by any person authorized by the applicant’s Board of Directors. For the registration of a branch with a US$200. addresses.000 x 1%)=US$2. the applicant must submit a Certificate of Inward remittance issued by a Philippine bank on the remittance of at least US$200. A corporate name which must not be similar to existing names already registered with the SEC. it must be authenticated by the nearest Philippine Embassy or Consulate.00 or a total of US$2.of 2% of the amount by which the branch office’s gross income exceeds five (5) million pesos As to Registration Requirements Branch A branch is required to obtain a license to do business here in the Philippines with the Securities and Exchange Commission (SEC).000 + Legal Research fee (US$2.000 as provided under the Foreign Investments Act unless export oriented. it must have a minimum paid up capital of US$200. For an initial assigned capital of US$200.020.. 2. Under the . (this will not apply to export oriented Subsidiary (Domestic Corporation) For the establishment of a subsidiary in the Philippines.000 net of bank charges to your Philippine account.000 x 1%) =US$20. The SEC will require the following from the applicant: 1. Pay the SEC filing and legal research fees. passport numbers of the incorporators. Provide the names. This license shall be issued by the SEC upon compliance with the following requirements: 1.

Pay the filing fee for the registration which will be approximately 0.000 which should be remitted separately from the registration fees.2% of the subsidiary’s authorized capital stock.000 with the SEC which may be withdrawn upon cessation of the Philippine branch’s operations Corporation Code of the Philippines. . o Submission of the Articles of Incorporation. 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. plus 1% of such SEC fee for the SEC legal research fees and P210. 4.businesses) 3. 5. the branch office is required to deposit marketable securities worth at least P100. The US$200. 6. Provide the name of the Treasurerin-Trust appointed by the subscribers.000 shall be remitted directly to the Treasurer-in-Trust account opened for and on behalf of the branch office. 7. Remit the initial assigned capital of US$200. Within sixty (60) days after obtaining the license to operate. by-laws or similar document authenticated by the Philippine Embassy or Philippine Consulate.00 for the registration of the subsidiary’s by-laws. Submission of the latest audited financial statements. Such financial statements must be authenticated by the Philippine Embassy or Consulate of the place of execution thereof.