Doing Business in the Philippines

Though lagging behind other countries in terms of infrastructure development and transparent governance, the Philippines remains optimistic about becoming one of the fastest-growing economies in Asia.

With a 43.5 million labor force, continuous investment in infrastructure, and commitment to bolster investments by eliminating bureaucratic processes, reducing the corporate tax rate, and liberalizing areas of investment previously restricted from foreign ownership, the country is pushing to ease the means of doing business for both local and foreign investors to foster economic development.

Advantages of Setting Up Your Business in the Philippines

Investment-Friendly Regulations

The Philippine government is currently pushing for reforms in corporate governance by passing laws designed to promote a more vibrant business environment. The most notable of these reforms are the following:

• Ease of Doing Business Act (a new law that seeks to eliminate bureaucratic red tape in government transactions by automating processes for business registration, permit applications, business renewal, etc. and creating a centralized business portal as a source of information on all registered enterprises in the Philippines)
• TRAIN Law (or the Tax Reform for Acceleration and Inclusion Law, a law that lowered personal income taxes, simplified tax compliance, and increased the excise taxes of petroleum, automobiles, and sweetened beverages to boost consumer spending and ensure a steady revenue flow for the government’s “Build, Build, Build” infrastructure project)
• Revised Corporation Code (the new corporation law which amended the old Corporation Code in an effort to strengthen corporate governance standards and provide protection to minority stockholders to deter corporate abuse and fraud)

Access to Tax Incentives

The government provides tax incentive schemes to eligible enterprises as a means to encourage foreign investments in priority areas of development in the Philippines. Foreign investors can avail of special tax breaks, tax exemptions, and special visas with multiple entry privileges for foreign employees from these government agencies:

• Philippine Economic Zone Authority (PEZA)
• Board of Investments (BOI)
• Cagayan Economic Zone Authority (CEZA)
• Tourism Infrastructure and Enterprise Zone Authority (TIEZA)

Low Labor Costs

Salary rates in the Philippines are significantly cheaper compared to those of affluent Western countries. According to the latest data published by Numbeo, the average monthly net salary (after tax) in the USA is US$3,143.29 (S$4,380.58) while in the Philippines, the same is US$288.33 (S$401.83). These rates have a 90.83% difference, a huge salary gap that helps foreign enterprises substantially minimize labor costs when they set up operations in the Philippines.

Young Workforce Population

According to the Philippine Statistics Authority, the country’s current labor force size in 2019 is 43.5 million. Around 26.9% of this population is between 25 and 34 years old, the demographic of the tech-savvy millennial generation that grew up with majority of today’s advanced technology.

An Outsourcing Hub

The Philippines is one of the top outsourcing destinations in the world. Its outsourcing industry is mainly comprised of two employment models: Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO). BPOs usually consist of back-office and administrative services such as customer service, data entry, HR, and payroll. KPOs, on the other hand, include higher-end outsourcing services which include legal services, accounting, and software development.

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