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Doing Offshoring Business in The Philippines Part2 (the micro areas)

The macro areas is not the only one business people has to consider in offshoring business. Basically and without a major clue, these micro areas directly affect your business in the Philippines.

Our previous article presented to you the general ideas that might have bearing as you come to decide of offshoring your qualifying services in the Philippines.

Below are the supporting ‘micro areas’ that assist you in offshoring your business’s secondary tasks.

Why micro areas?

The information below is based on the specific laws and programs of the Philippines. It is not all-encompassing, but we’ve tried to pin point the basics that you might find significant.

1. Government Regulations

The Foreign Investment Act of 1991 in the Philippines extended a 100% foreign ownership in a domestic corporation provided it is not included in the Foreign Investment Negative List— Business Process Outsourcing and Offshoring activities are not part of this. This is an act “to promote foreign investments, prescribe the procedures for registering enterprises doing business in the Philippines and for other purposes.”

On the other hand, corporations and partnerships should seek approval from Securities and Exchange Commission (SEC) while single proprietorship should register with Department of Trade and Industry (DTI). This will also entail foreign (offshoring) investors be acknowledged by Bureau of Internal Revenue (BIR), Local Government Unit (LGU), Social Security System (SSS), PhilHealth, and Home Development Mutual Fund (HDMF).

Foreigners planning to set up offshored operations in the Philippines may take the form of either a subsidiary or a branch. For branch offices, it can be treated as regional operating headquarters or ROHQ. BPOs registered as subsidiary are independent from its parent company while branch BPOs do not occur as a separate organization from the foreign head-based. ROHQ is a company branch that delivers only the qualifying services for its parent company such as business development, human resource, technical support, data processing, and administration among others. This should not and will never be engaged in marketing and selling of goods and services.

2. Labour Rules

The labour code of the Philippines is the standing law governing employment practices and labor relations in the country. It was enacted on 1974 in Labor Day by then President Ferdinand Marcos. Basically, the code slices into different sections that state all prescribe rules for employee from hiring to termination.

Regardless of employment, Philippine Labour requires all employers to pay and contribute on the SSS, PhilHealth, and HMDF of its employees. The employer shall also give 13th month pay (rank-and-file status) on or before the 24th of December provided that the employee has rendered service in the company for at least one month. The Philippines also has 15-17 holidays (regular and special non-working holidays) in a year plus a several declaration of holidays for some events such as typhoon and flooding. For this, Philippine Labour Code arranges general rules in paying employees during holidays (click the link to glimpse the payment mode during holidays).

The employers shall, likewise, extend leaves to employees who have rendered at least one year of company service. In addition, night shift differential is a compulsory amount that an employer must pay an employee who works between 10 P.M. and 6 A.M. Labour code states that “An employee shall be paid night shift differential of no less than ten per cent (10%) of his regular wage for each hour of work performed between ten o’clock in the evening and six o’clock in the morning.”

3. BPO Incentives

Philippine investment laws award incentives to offshore outsourcing activities. Choosing either Philippine Economic Zone Authority PEZA or Philippine Board of Investment BOI incentives, Offshoring companies may take benefit from payment exemptions and tax holiday incentives. However, companies opting for these incentives should first comply with the set of requirements posed by these government agencies. A PEZA incentive recipient should be located in any of the PEZA zone. A BOI incentive recipient ought to gain substantial percentage of Filipino ownership.


It’s not an easy job to put a business most especially if this will be arranged in a foreign country. Considering all areas such as the economic, political, social, and cultural stand of the Offshoring destination takes deep analyses and several attempts to make a business grow.

Philippine, though, has made offshoring business friendly for international investors. In fact, the Philippine Government and the Business Processing Association of the Philippines or BPAP joint forces to fulfil the IT-BPO Roadmap 2016. This roadmap envisions to increasing the revenue from $9 billion in 2010 to $25 billion in 2016, a 10 per cent portion of the global market. It’s a goal to develop the Philippines as a thriving offshoring hub in the global milieu.

NOTE: All information here (the micro areas) is based on the Philippine laws and programs effective as of the writing of this article. Thus, details may be amended and modified during some time by the Philippine Government.

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