Table of Contents
- Key takeaways
- Who the capital rule applies to
- Exporting 60 per cent or more
- The other two routes
- What capital means here and how much you actually need
- How do you set up the company?
- What happens if exports fall below the threshold?
- Risks and common mistakes
- korp.ph can help
- Frequently asked questions
Key takeaways
- The USD 200,000 minimum paid-in capital applies to a domestic market enterprise more than 40% foreign owned, meaning one that sells into the Philippine market. It is not a general requirement for foreign ownership.
- A company exporting 60% or more of its output or revenue is an export enterprise and carries no minimum paid-in capital under the Foreign Investments Act. It may be up to 100% foreign owned.
- Three conditions reduce the threshold to USD 100,000: advanced technology certified by the DOST, endorsement as an innovative startup, or a majority-Filipino workforce of at least fifteen direct employees.
- A representative office requires USD 30,000 of inward remittance, but may not earn income in the Philippines.
- The Foreign Investment Negative List is a separate and prior question. No capital route opens an activity that is closed or capped.
- Authorised, subscribed and paid-in capital are three different figures. The threshold is measured on paid-in capital.
Who the capital rule applies to
The figure is real. It is in the Foreign Investments Act, and it stops a lot of foreign founders before they start. It applies to one category of company.
The Act separates foreign-owned companies into two. A domestic market enterprise sells into the Philippine market, and above 40% foreign equity it carries the USD 200,000 minimum paid-in capital. An export enterprise exports 60% or more of its output or revenue, and carries no threshold at all.
There are three routes out of the USD 200,000 figure:
RouteRequirementWho it fitsExport enterpriseNo minimum paid-in capitalCompanies invoicing customers outside the PhilippinesReduced thresholdUSD 100,000Advanced technology, endorsed startups, or 15+ Filipino employeesRepresentative officeUSD 30,000 inward remittanceLiaison and back-office functions that earn no Philippine income
Check the Negative List before any of this
The Negative List answers a prior question: whether a foreigner may enter the activity at all. It is a presidential list, issued by Executive Order on the recommendation of NEDA, naming activities where foreign equity is barred or capped at 25%, 30% or 40%. The current one is the 13th list, Executive Order 113, issued 13 April 2026, superseding the 12th from 2022. It is reissued roughly every two years, so guidance written against an earlier list may describe a cap that has been lifted or omit one that has been added.
The list governs participation; the capital thresholds govern capitalisation. No capital route opens an activity that is closed or capped. Separately, Article XII of the 1987 Constitution reserves private land and public utilities to entities at least 60% Filipino-owned. Outside those restrictions, foreign equity of up to 100% is the default position under Republic Act 7042, the Foreign Investments Act, as amended by RA 8179 and RA 11647 in 2022.
Where a cap applies rather than a prohibition, the Anti-Dummy Law also limits the management and board positions foreigners may hold, in proportion to the allowable equity.
Exporting 60 per cent or more
This is the route most foreign-owned service companies take, and the one with no capital threshold attached.
An export enterprise exports 60% or more of its output or revenue. The definition also covers traders: an enterprise that buys products in the Philippines and exports 60% or more of those purchases qualifies on the same terms. The absence of a capital floor follows from Republic Act 11232, the Revised Corporation Code, whose Section 12 provides that stock corporations "shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law." For a domestic market enterprise, the Foreign Investments Act is such a special law. For an export enterprise, it is not.
The test turns on where revenue originates, not on what the company makes or where its staff sit. A software team building for clients in Europe, a design studio serving Australia, a finance or admin back office supporting a parent company in Singapore, a consultancy invoicing in USD: in each case the work is performed in the Philippines and the invoices leave it. Service delivery centres are the clearest case, and our guide to setting up a BPO company covers location and staffing.
Because the test is commercial, the classification follows from the customer base. It is established before incorporation, not after, and it is registered and reported rather than assumed.
This is not PEZA registration
The two are frequently confused. Export enterprise status under the Foreign Investments Act governs ownership and capital. PEZA registration, or registration with another investment promotion agency, grants tax incentives: income tax holidays, the enhanced deductions regime, duty exemptions on imports, and a local tax in lieu of other local taxes, with location requirements and performance commitments attached. Our 2026 guide to economic zones covers that side. A company may hold either, both or neither.
The other two routes
The three conditions that halve the threshold
A domestic market enterprise meeting any one of these three conditions has its threshold reduced to USD 100,000:
- The enterprise involves advanced technology, certified by the Department of Science and Technology.
- It is endorsed as a startup or startup enabler under Republic Act 11337, the Innovative Startup Act.
- A majority of its direct employees are Filipino, and in no case fewer than fifteen.
Note the figure: fifteen. Material published before RA 11647 amended the Act in 2022, and material copied from it, still states fifty. For a company that intends to hire locally, this is usually the most reachable of the three.
A structure the rule does not reach
The threshold attaches to the mode of entry as well as to the activity. A representative office requires USD 30,000 of inward remittance rather than USD 200,000, because it is not permitted to earn income in the Philippines: it deals with the parent company's clients, handles liaison and back-office work, and is funded from abroad. Where the Philippine operation is genuinely a cost centre, this is the cheapest lawful entry.
A branch office is treated differently again. A branch serving the domestic market carries a USD 200,000 inward remittance requirement, so it is no relief. A branch of an export enterprise is not subject to that figure. Branches also carry a securities deposit with the SEC that a subsidiary does not. Our comparison of the foreign-owned domestic corporation and the branch office sets out the trade-offs, and the corporate structures guide covers the entity types in full.
What capital means here and how much you actually need
Two separate questions sit behind the word capital: which figure the threshold measures, and how much money the business requires.
Authorised, subscribed and paid-in capital
Authorised capital stock is the ceiling written into the articles of incorporation: what the company may issue. Subscribed capital is what shareholders have formally committed to take up. Paid-in capital is the money actually in the company, and it is the figure the Foreign Investments Act threshold is measured against, including additional paid-in capital above par value. A large authorised capital satisfies nothing on its own.
Raising authorised capital later requires, under Section 37 of the Revised Corporation Code, a majority vote of the board and two-thirds of the outstanding capital stock, prior SEC approval, and a sworn statement from the treasurer showing that at least 25% of the increase has been subscribed and at least 25% of that subscription paid in cash or property. Setting the authorised capital with headroom at incorporation avoids that exercise.
The working capital requirement is a separate calculation
Avoiding the threshold is not a reason to underfund the company. A new company incurs cost before it can invoice: BIR registration, permits, office deposits, the first payroll, and the period before the corporate bank account is open.
In practice, foreign-owned companies incorporated through korp.ph capitalise between PHP 200,000 and PHP 1,000,000 of paid-in capital. A two-person consultancy sits at the lower end; a services company hiring ten people in its first year sits at the upper end or above it. Where the initial capital is set below the working capital requirement, the company has to raise capital again, which is a stockholders' resolution and an SEC filing rather than a transfer. For registration costs as distinct from capital, see what it costs to set up a foreign-owned corporation.
How do you set up the company?
Four stages. The capital route affects ownership and funding, not the filings.
1. SEC incorporation
Structure, ownership split, officers and capital figure, then the filing. Domestic stock corporations can go through OneSEC on the SEC eSPARC portal, which issues a digital certificate of incorporation on the day of filing. The regular track takes longer and requires signed and notarised hard copies, authenticated if executed abroad.
The corporate secretary must be a Filipino citizen and a resident, and the treasurer must be a resident of the Philippines. There is no resident director requirement. Where nobody in the group can fill the role, the corporate secretary function can be outsourced. Beneficial owners are declared through the SEC HARBOR registry on incorporation: any natural person holding 20% or more, or otherwise exercising effective control.
2. Secondary registrations with the BIR and the LGU
Registration with the Bureau of Internal Revenue for the tax type, books of account and invoicing, and with the local government for barangay clearance and the mayor's business permit, renewed within the first twenty days of January each year. The company is not operational until both are complete.
3. Employer registration where applicable
SSS, PhilHealth and Pag-IBIG, before the first payroll. This stage does not apply until the company hires.
4. Corporate bank account
Most banks require the SEC and BIR documents in hand before opening an account. Our guide to opening a corporate bank account sets out the requirements, with a walk-through of the UnionBank corporate account and, for companies invoicing abroad, how Wise handles cross-border payments.
The annual cycle then begins: a General Information Sheet within 30 days of the annual stockholders' meeting, audited financial statements on the SEC schedule, and BIR filings.
What happens if exports fall below the threshold?
The export route is not a one-time stamp. An export enterprise that no longer meets the threshold can be directed to take corrective measures, and continued non-compliance can lead to cancellation of registration. Where the company is moving to the Philippine market deliberately, the conversion is handled in advance and runs on the ordinary corporate timetable.
Check the Negative List against the new activity. Selling into the Philippine market is not always classified as the same activity as exporting the same service, and caps that did not apply to the export activity may apply to the domestic one.
Establish the capital gap. The requirement becomes USD 200,000 of paid-in capital, or USD 100,000 where one of the three conditions is met. The comparison is against paid-in capital, not authorised capital.
Fund it, and amend where required. Where the authorised capital stock has room, shareholders subscribe and pay in the difference. Where it does not, the authorised capital is increased under Section 37: majority board vote, two-thirds of the outstanding capital stock, the treasurer's sworn statement, and prior SEC approval. This step accounts for most of the elapsed time.
Update the registrations and the incentives. Where the primary purpose in the articles no longer describes the activity, the articles are amended, which also requires two-thirds of the outstanding capital stock and takes effect on SEC approval. Where the company holds PEZA or other agency incentives, those attach to a registered export activity and are taken up with the agency directly.
Risks and common mistakes
Assuming the 60/40 rule applies. For activities outside the Constitution's reservations and the Negative List, it does not.
Using a nominee to work around a restriction. Nominee and dummy arrangements are prohibited under the Anti-Dummy Law, Commonwealth Act 108. The liability rests with the shareholder, not with whoever recommended the arrangement.
Treating the export ratio as fixed. It is maintained and reported.
Confusing authorised capital with paid-in capital. The threshold is measured on what is actually paid in.
Working from an outdated Negative List. The current list is the 13th, from April 2026.
Choosing a representative office to save capital, then earning income through it. A representative office may not derive income in the Philippines. Where the plan involves invoicing local customers, it is the wrong structure.
korp.ph can help
korp.ph handles incorporation for Filipino, foreign and mixed ownership, together with BIR registration, business permits and the corporate secretary and compliance services a Philippine company has to keep running.
Where the revenue will originate outside the Philippines, get started and the platform sets out incorporation step by step. To have the capital route confirmed before a figure is fixed, talk to an expert.
Frequently asked questions
How can a foreign company avoid the USD 200,000 minimum capital in the Philippines?
By qualifying as an export enterprise, which exports 60% or more of its output or revenue and carries no threshold under the Foreign Investments Act. A domestic market enterprise may instead reduce the figure to USD 100,000 through advanced technology certified by the DOST, endorsement as an innovative startup, or employing a majority of Filipinos with a minimum of fifteen. A representative office requires only USD 30,000 of inward remittance but may not earn Philippine income.
Can a foreigner own 100% of a Philippine corporation?
In most activities, yes. Foreign equity of up to 100% is allowed unless the Constitution, a specific law or the Foreign Investment Negative List restricts the activity. Private land and public utilities remain at 60/40.
How is the 60% export threshold measured?
On output or revenue. A manufacturer or service enterprise qualifies by exporting 60% or more of its output; a trader qualifies by exporting 60% or more of what it buys domestically. The ratio is maintained and reported, not met only at incorporation.
What is the difference between authorised, subscribed and paid-in capital?
Authorised capital stock is the ceiling in the articles of incorporation. Subscribed capital is what shareholders have committed to take up. Paid-in capital is the money actually in the company, and it is the figure the Foreign Investments Act threshold is measured against.
Do I need a Filipino partner to incorporate in the Philippines?
Not for most activities. A corporate secretary who is a Filipino citizen and resident is required, and a treasurer who is a resident, but those are officer roles rather than ownership.
Is export enterprise status the same as PEZA registration?
No. Export enterprise status governs ownership and minimum capital. PEZA registration grants tax incentives and carries its own location and performance conditions. A company may hold either, both or neither.
How long does it take to incorporate in the Philippines?
A domestic stock corporation filed through OneSEC can receive its digital certificate of incorporation on the day of filing. Full operational status follows the BIR and local government registrations, and applications carrying foreign equity generally take longer than those without.
