Introduction
The Philippines is a global hotspot for outsourcing. With a highly educated, English-speaking workforce and labor costs that are a fraction of Western economies, it’s no surprise that companies from the US, Australia, the UK, and beyond are hiring Filipino remote workers. But how you hire those workers matters. Many foreign companies start by hiring Filipino freelancers or virtual assistants under informal contracts. This might work short-term—but it exposes you to legal, financial, and reputational risks.
Incorporating in the Philippines gives you a legal structure to streamline operations, ensure tax and labor law compliance, and unlock long-term growth. In this guide, we explain why incorporation is the smartest way for foreigners to outsource in the Philippines—and how Smartual Philippines makes it easy.
The Outsourcing Boom—and Its Risks
Remote work has made cross-border hiring easier than ever. But as your team grows, hiring workers as freelancers becomes problematic:
- No employment benefits = High turnover
- Misclassification = Legal liability for labor violations
- No tax withholding = Risks during audits
- Payment disputes = No enforceable contracts
If you want to build a reliable, committed team, you need a formal structure.
Incorporation vs. Freelance or Agency Hiring
| Criteria | Freelancers | Agencies | Incorporation |
|---|---|---|---|
| Control | Low | Medium | Full |
| Legal entity | None | Third party | Your own corp |
| Branding | Limited | Shared | 100% your brand |
| Compliance | Risky | Varies | Fully compliant |
| Long-term team building | Difficult | Moderate | Ideal |
Incorporating gives you direct hiring power and complete operational control.
Key Benefits of Incorporating in the Philippines
1. Legally Hire Full-Time Filipino Employees
With a domestic corporation or branch office, you can issue employment contracts and register your workers with:
- Social Security System (SSS)
- PhilHealth
- Pag-IBIG Fund
- Bureau of Internal Revenue (BIR)
This builds trust with your team and ensures full compliance.
2. Tax Efficiency and Local Invoicing
Foreign clients prefer working with incorporated entities. Once you’re registered with the BIR, you can:
- Issue official receipts
- Claim VAT input taxes
- Deduct legitimate business expenses
You can also reduce your tax burden by availing of incentives under PEZA, BOI, or CREATE Act programs.
3. Establish Local Banking and Infrastructure
Only registered corporations can:
- Open a Philippine bank account
- Lease office space
- Hire through job portals
- Subscribe to utilities and government services
This infrastructure allows you to scale your Philippine operations quickly.
4. Build a Professional Employer Brand
Operating under a corporation shows professionalism and long-term commitment to Filipino workers. You gain:
- Better candidate conversion
- Lower attrition
- Enhanced trust in the local market
Best Entity Types for Foreigners
Foreigners have multiple options for incorporating in the Philippines:
A. Domestic Corporation
- Most common setup for foreign investors
- Can be 100% foreign-owned depending on activity (check Negative List)
- Minimum paid-up capital: PHP 5,000 (or higher based on activity)
B. Branch Office
- Extension of a foreign company
- Requires a minimum inward remittance of USD 200,000
- Can engage in income-generating activities
C. Representative Office
- Cannot earn income in the Philippines
- Ideal for support or marketing offices
- USD 30,000 minimum capital requirement
Smartual can help you determine the best structure based on your goals.
Incorporation Process for Foreigners
Smartual Philippines handles the full process for you:
- Name Reservation – Via SEC
- Drafting Articles of Incorporation and Bylaws
- Opening a Treasurer-in-Trust Fund (TITF)
- SEC Registration
- BIR Registration and Book of Accounts
- SSS, PhilHealth, Pag-IBIG, and LGU Permits
We also assist with:
- Work visas for foreign directors
- Local nominee services if needed
- Annual reporting and compliance
Timelines: Incorporation usually takes 2–4 weeks, depending on complexity and documentation.
Common Use Cases for Foreign Incorporation
Foreigners typically incorporate in the Philippines to:
- Hire Filipino remote staff directly
- Build dedicated offshore teams
- Manage customer support or admin operations
- Set up e-commerce fulfillment hubs
- Launch fintech or BPO companies
Alternatives to Incorporation: Employer of Record (EOR)
If you’re not ready to incorporate, Smartual also offers Employer of Record (EOR) services. With an EOR, we hire your Filipino team under our local entity and manage:
- Contracts
- Payroll and benefits
- Tax withholding
- Statutory compliance
This is ideal for:
- Testing the Philippine market
- Hiring 1–5 staff
- Avoiding the overhead of running a corporation
You can always transition from EOR to your own corporation later.
Cost of Incorporation
Costs vary based on structure and business type, but generally include:
- SEC filing and documentary fees
- Notarial and legal drafting costs
- Initial capital deposit
- Business permits and BIR registration
Expect a ballpark range of PHP 50,000 to PHP 150,000 for complete setup, depending on complexity. Smartual provides transparent, all-in packages.
Why Choose Smartual Philippines
Smartual is your one-stop partner for outsourcing and company formation in the Philippines. We’re not just a filing service—we’re legal and tax professionals who ensure:
- Strategic structure selection
- Fast-tracked registration
- End-to-end compliance
- Bilingual client support
- Flat-rate pricing with no hidden fees
FAQs
Q: Can I own 100% of a corporation in the Philippines as a foreigner? A: Yes, depending on the business activity. Many BPO, export, and software businesses are 100% open to foreign ownership.
Q: Do I need a Filipino partner? A: Only if your business activity is restricted under the Foreign Investment Negative List. We can advise and offer nominee services.
Q: Can I run the company from abroad? A: Yes. As long as local compliance is handled, you don’t need to be physically present.
Q: How do I pay my Filipino employees? A: You can run local payroll and deposit into their local accounts once your business is set up—or use Smartual’s EOR service while you’re incorporating.
Ready to Incorporate in the Philippines?
If you’re serious about building a long-term outsourcing operation, incorporating in the Philippines is your best move. It gives you the legal framework, operational control, and brand integrity you need to scale confidently.
Contact Smartual Philippines via support@smartual.ph for a free incorporation consultation and quote.
