As globalisation accelerates and businesses search for growth, efficiency, and new markets, the Philippines has emerged as a strategic destination for Australian companies. With its English-speaking workforce, cultural compatibility, favourable tax incentives, and rapidly developing economy, the Philippines presents compelling opportunities for companies looking to establish a local presence or outsource key functions.
However, registering and operating a business in the Philippines involves navigating complex legal, tax, and employment landscapes. This guide outlines the core considerations for Australian businesses when establishing a business or subsidiary in the Philippines.
Why the Philippines? Key Market Drivers
Economic Growth: The Philippines has one of Southeast Asia’s fastest-growing economies, with GDP growth averaging 6–7% pre-COVID and a rebound forecast at 6% in 2024 (World Bank).
Young, Skilled Workforce: Over 700,000 Filipinos graduate from tertiary institutions annually, with a literacy rate of 96% and a median age of 25.7 (Philippine Statistics Authority).
English Proficiency: The Philippines ranks 20th globally in the EF English Proficiency Index (2023), making it the third-highest in Asia.
Cost Efficiency: Labour costs are significantly lower than in Australia, average salaries for IT and business services roles range from AUD 6,000–15,000 annually.
Strategic Location: Close to major Asian markets like China, Japan, and Singapore, and within four to eight hours’ flight time from Australia.
Choosing the Right Business Structure
There are several structuring options depending on your objectives:
| Structure | Description | Best For |
|---|---|---|
| Representative Office | Non-income generating; used for liaison, marketing, or support. | Market research or early-stage market entry. |
| Branch Office | An extension of the foreign parent company; can generate income. | Simple structure for trading or service provision. |
| Domestic Subsidiary | A locally incorporated company with foreign ownership. | Independent operations, tax benefits, and liability separation. |
| ROHQ (Regional Operating Headquarters) | Offers back-office support to foreign affiliates. | Shared services and outsourcing hubs. |
Ownership Caps: The Foreign Investments Negative List (FINL) restricts foreign ownership in certain sectors (e.g. media, retail under $2.5M capital). Australian investors should check if their sector is open to 100% foreign ownership.
Taxation and Incentives
Corporate Tax: Standard CIT: 25% for domestic and resident foreign corporations earning over PHP 5 million (~AUD 137,000); 20% if under.
VAT: 12% on sales of goods and services.
Withholding Tax: Dividends to Australian parent companies are taxed at 15% under the PH-AU Tax Treaty (vs 30% standard).
Investment Incentives:
CREATE Act (2021): Offers tax holidays and reduced corporate income tax rates for qualified export and domestic enterprises.
PEZA (Philippine Economic Zone Authority): Provides tax incentives including 4–7 years of income tax holidays, followed by 5% special tax on gross income.
BOI (Board of Investments): For sectors like IT, manufacturing, and renewable energy.
Proper structuring can optimise tax treatment and repatriation of profits. Many Australian firms engage local tax advisors to ensure compliance and minimise liability.
Legal and Regulatory Compliance
Registration: Must register with the SEC (Securities and Exchange Commission), BIR (Bureau of Internal Revenue), and relevant local government units.
Foreign Investment Certificate: Required for majority foreign-owned firms.
Corporate Secretary & Treasurer: Must be Filipino residents; nominee services are common.
Capital Requirements:
USD 200,000 minimum capital for foreign-owned firms
Can be reduced to USD 100,000 if the business uses advanced technology or employs at least 50 Filipino workers.
Staying compliant with local corporate, labour, and tax laws is essential to avoid penalties or disruptions.
Hiring Local Talent and Employment Considerations
Labour Force: The Philippines has over 47 million workers, including a large pool of professionals in IT, engineering, accounting, and customer service.
Labour Code: Governs employment contracts, wages, termination, and benefits.
Mandatory Benefits:
13th-month pay
SSS (Social Security System)
PhilHealth (health insurance)
Pag-IBIG Fund (housing fund)
Retirement pay (for employees with 5+ years of service)
Australian companies must carefully design employment contracts to include both mandatory provisions and appropriate local adaptations.
Contractors vs. Employees: Use of project-based or third-party contractors is common but must be structured to avoid “labour-only contracting,” which is prohibited.
Hiring Practices: Many firms engage Employer of Record (EOR) services initially to test the market before fully registering.
Commercial and Operational Risks
Bureaucracy: Registration can take 2–6 months and involve multiple agencies.
Cultural Differences: Hierarchical business culture and indirect communication may differ from Australia’s style.
IP Protection: IP enforcement is improving, but vigilance is needed. Register trademarks and NDAs are highly recommended.
Cybersecurity: Regulatory gaps and rising cybercrime highlight the importance of strong IT security policies.
Mitigation Tips:
Use local legal and tax consultants.
Invest in leadership training to bridge cultural gaps.
Ensure contracts are dual-language (English and Filipino) for enforceability.
Growth Potential and Strategic Positioning
Offshoring & BPO: Australia is the second-largest source of BPO work to the Philippines after the U.S. Over 100,000 Australians are supported by Filipino back offices.
Tech and SaaS: Australian SaaS companies are increasingly setting up dev centres or sales hubs in Manila and Cebu.
Market Entry: The Philippines is also a consumer market of 115+ million people, with a rising middle class and digital adoption.
Key Takeaways for Australian Companies
| Area | Key Considerations |
|---|---|
| Structure | Match business goals to the right entity type (subsidiary vs branch). |
| Legal | Understand foreign ownership caps, capital requirements, and reporting obligations. |
| Tax | Leverage PH-AU tax treaty and CREATE/PEZA/BOI incentives. |
| Employment | Comply with local labour laws and be mindful of cultural norms. |
| Risk | Plan for bureaucracy, IP protection, and reputational management. |
| Growth | Consider the Philippines not just for cost-savings, but as a regional growth platform. |
Conclusion
For Australian businesses, the Philippines represents both a strategic opportunity and a complex operational landscape. With the right legal, tax, and HR support, companies can build resilient, cost-effective operations while accessing a vibrant talent pool and expanding their regional footprint.
Whether entering the Philippines to support offshore delivery, explore market expansion, or access new technologies, careful planning is essential. As with any cross-border venture, due diligence, local partnerships, and legal rigour are critical to success.