The Philippines is one of the most in-demand outsourcing destinations in the world and its popularity is still growing today even in the context of the current Covid-19 pandemic.
We will explain why the country is so attractive and how you can successfully open and manage an outsourcing / support office in the Philippines. With the country’s complex tax system - and its administrative burden in general - ensuring smooth and compliant local operations for your outsourcing project in the Philippines is extremely important !
The outsourcing world is full of complicated jargon to match specific situations: Outsourcing, Business Process Outsourcing, Nearshoring, Offshoring, etc. We will keep it simple and just use Outsourcing when referring to the action of outsourcing a process or activity to a subsidiary located in the Philippines :
The Philippines: a leading outsourcing destination
The Philippines is one of the most dynamic economies in Asia. The country has a young and well-educated population, strong consumer demand and robust remittances from overseas Filipino workers.
With its singular history - in particular with Spain and more recently with the United States - the archipelago has a strong affinity to Western culture and with more than two-thirds of its 100M+ population fluent in English, it is regarded as one of the largest English-speaking countries in the world.
And of course labor cost is significantly lower than in developed economies with some businesses saving up to 70% on staff costs with an outsourcing office in the Philippines.
These are the main reasons why the Philippines has a thriving service sector and has imposed itself as a global Business Process Outsourcing (BPO) hub.
The Philippine BPO industry currently employs 1M+ people and generates around $25B in revenue, and despite the COVID-19 pandemic, the sector continues to grow, confirming the place of the Philippines as one of the BPO capitals of the world.
Setting-up an outsourcing or support office in the Philippines can definitely help you scale your organization quickly, easily and cost effectively by integrating qualified staff in the Philippines with your operations.
Setting-up an outsourcing company in the Philippines
Incorporating a company in the Philippines for the purpose of outsourcing part of your business processes is actually fairly straightforward.
Even if the Philippines controls foreign investments and a lot of industries still have heavy restrictions in terms of foreign ownership and participation (see latest Negative List here), this is not the case for outsourcing activities that can operate with 100% foreign ownership.
Also your outsourcing office will support one or multiple foreign entities, so you will be able to apply for the Export Market Enterprise status (when a company exports more than 60% of its output) and ask for an exemption to only have a minimum paid-up capital of US$100 instead of the usual minimum paid-up capital for 100% foreign companies of US$200,000.
Here is a summary of the steps to start your outsourcing or support office in the Philippines:
Articles of Incorporation (AOI) Preparation
Securities and Exchange Commission (SEC) Registration
Lease Contract (with Physical or Virtual Office) Signature
Bureau of Internal Revenue (BIR) Registration
Local Government Unit (LGU) Registration and Business Permit Processing
Corporate Bank Accounting Opening
Government Contributions (Pag-IBIG, SSS, and PhilHealth) Registration
Other options are also available with different tax incentives and specific requirements including setting-up a Representative Office, a Regional Headquarters (RHQ) or Regional Operating Headquarters (ROHQ), or setting-up a company through the Fiscal Incentives Review Board (FIRB) for example under Philippine Economic Zone Authority (PEZA). These options need to be studied with a lawyer.
Common finance mistakes to avoid with your outsourcing company in the Philippines
Here are 3 of the most common mistakes made by new players when managing an outsourcing or support office in the Philippines:
1. Overlooking the tax considerations of the foreign remittances
Proseso Consulting - Your digital accounting and finance consultant focusing on growth
For more information on how to manage and operate your outsourcing office in the Philippines or if you have any questions you may contact me directly at firstname.lastname@example.org.
Proseso Consulting provides tailored business advisory and finances managed services (bookkeeping and accounting, outsourced and automated payroll, tax and compliance, financial reporting, etc.). We are implemented in the Philippines and in France and our objective is to support the projects of ambitious companies and professionals. We are here to help you achieve your long-term business goals!
Ninoy Salmon is a seasoned business and finance professional with extensive experience working with both fast-growing startups and companies in the Philippines and around the world.
This blog article does not constitute professional or legal advice. It is only intended to provide general information on a subject.