Running a business in the Philippines (bonus: vs. Thailand for those who have experienced both)

[Modern Coding]

Greetings,

 

 

Small IT business owner here in Thailand: I am thinking about running one in the Philippines too.

 

A visit there is planned of course, but I am already collecting valuable information and experience on the field.

 

If you have registered and are running a business in the Philippines, would you mind sharing your experience as a foreign business owner? Some questions that are coming to my mind are:

 

• how easy/hard is the incorporation?
• how is the bureaucracy?
• how about taxes? Tax filling, corporate tax,...
• how about some fancy rules when hiring or firing people?
• do you need to have a minimum amount of employees like it is the case in Thailand, or can you start solo first?
• do you need a local partner as it is the case in most other ASEAN nations?
• what rules do apply when hiring non-Filipino people? Do different rules apply between ASEAN and non-ASEAN people?
• how much is the required start capital?
• what are the very important things you need to know and that are specific to the Philippines?
• what are some unexpected things that would have never come to your mind and that you wish someone had warned you about before?

 

 

Bonus question for people who have the experience running a business in Thailand and in the Philippines: how do you compare both countries?

 

Thanks in advance.

[ChaiyaTH]

From experience with hiring filipino's and running a local IT office there with a client of mine; he left within a year. Best chance for IT is Vietnam.

[RuamRudy]

Having owned a business in both countries, the biggest difference for me (the Thai company is kaput, the Filipino company is now in its 10th year) is the workforce. Filipinos are much more Western in outlook, and the almost universal ability to speak English with staff and clients is a huge advantage over Thailand.

 

From my experience, incorporation is fairly straightforward - you can hire a lawyer to do it for you. You can incorporate for 200k php or more. 

You must have local partners who notionally own 60% of the shares although it's common for internal agreements to overwrite that.

Hiring is easy; firing must be done in accordance with labour laws, which are generally generous to the employee.

I am not sure about minimum staff numbers - we started with 3 locals on the books from day 1.

 

I think a good bookkeeper is key from the start. Initially things were a bit slack from the government but since ding dong took over from Du30 most government agencies have really sharpened up their acts, especially the BIR.

 

[Modern Coding]

49 minutes ago, ChaiyaTH said:

From experience with hiring filipino's and running a local IT office there with a client of mine; he left within a year. Best chance for IT is Vietnam.

Thank you for your reply.

I have also lived in Vietnam and while it was pleasant there, there are some reasons why I prefer to go there just for leisure or to meet old friends.

[Modern Coding]

44 minutes ago, RuamRudy said:

Having owned a business in both countries, the biggest difference for me (the Thai company is kaput, the Filipino company is now in its 10th year) is the workforce. Filipinos are much more Western in outlook, and the almost universal ability to speak English with staff and clients is a huge advantage over Thailand.

 

From my experience, incorporation is fairly straightforward - you can hire a lawyer to do it for you. You can incorporate for 200k php or more. 

You must have local partners who notionally own 60% of the shares although it's common for internal agreements to overwrite that.

Hiring is easy; firing must be done in accordance with labour laws, which are generally generous to the employee.

I am not sure about minimum staff numbers - we started with 3 locals on the books from day 1.

 

I think a good bookkeeper is key from the start. Initially things were a bit slack from the government but since ding dong took over from Du30 most government agencies have really sharpened up their acts, especially the BIR.

 

 

Thank you for sharing your experience. And congrats for your 10-year company time!

200k PHP (~ < USD 3,600) vs 2,000k THB (~ > USD 55,000)? Are you sure you didn't forget a couple of zeroes? If so, this is very advantageous.

You are right about lawyer & accountant; here in Thailand, I have always gone through the attorney agency for incorporation & bookkeeping.

About hiring / firing, seems to be a little bit easier in the Philippines...

Seems to be a little bit easier in PH than in TH, am I right?

[RuamRudy]

1 hour ago, Modern Coding said:

 

Thank you for sharing your experience. And congrats for your 10-year company time!

200k PHP (~ < USD 3,600) vs 2,000k THB (~ > USD 55,000)? Are you sure you didn't forget a couple of zeroes? If so, this is very advantageous.

You are right about lawyer & accountant; here in Thailand, I have always gone through the attorney agency for incorporation & bookkeeping.

About hiring / firing, seems to be a little bit easier in the Philippines...

Seems to be a little bit easier in PH than in TH, am I right?

 

Thanks for the congrats - it was touch and go, a few times...

 

No, 200k was our starting capitalisation. However we needed to capitalise further as we grew. We are currently a 10M company.

 

I think the real difference is the language, and the fact that the government works in English too. This makes things much more transparent and accessible.

 

Don't get my wrong - bureaucracy is still a challenge. We import groceries and dealing with the FDA is always frustrating; with every shipment we are forced to jump through multiple hoops by the bureau of customs; even banking is a pain compared to Western practices. But nonetheless, I can keep abreast with it all rather than rely on staff to translate for me.

[RuamRudy]

I had a further recollection on the capitalisation issue - we made a mistake in capitalising so low at the outset.

When we eventually had to recapitalise, we needed to show 10M in the bank for, I think, 40 days. That was a huge sum for us which we simply didn't have so we had to borrow at an exorbitant interest rate for those 40 days. 

The moral of the story - don't start out cheap if you think you are going to grow.

[Modern Coding]

52 minutes ago, RuamRudy said:

I had a further recollection on the capitalisation issue - we made a mistake in capitalising so low at the outset.

When we eventually had to recapitalise, we needed to show 10M in the bank for, I think, 40 days. That was a huge sum for us which we simply didn't have so we had to borrow at an exorbitant interest rate for those 40 days. 

The moral of the story - don't start out cheap if you think you are going to grow.

Thank you for this precision.

I have read the hurdles you have with import-export.

Fortunately, I don't have this issue, since I import nothing but export app development services, so just need decent internet.

One more question: any kind of best city, where to run such a business? And cities that are not recommended? Besides personal preferences, which cities are great to be an IT entrepreneur? Manila, Angeles, Cebu, Davao, etc... ?

[ozimoron]

There's a saying in the Philippines about making a small fortune.

 

I have run a factory on the Clark SEZ. My advice is don't. I also did soem work training staff for an IT company (call center) on the base.

 

The factory left the base because the bribes on the base were more than the taxes.

[save the frogs]

Also, what about feeling safe as a foreign business owner in Philippines who is known to be generating a lot of income? 

[ozimoron]

5 minutes ago, save the frogs said:

Also, what about feeling safe as a foreign business owner in Philippines who is known to be generating a lot of income? 

 

Most wealthy foreigners in PI live in gated communities. That's not the case in Thailand.

[RuamRudy]

23 hours ago, Modern Coding said:

Thank you for this precision.

I have read the hurdles you have with import-export.

Fortunately, I don't have this issue, since I import nothing but export app development services, so just need decent internet.

One more question: any kind of best city, where to run such a business? And cities that are not recommended? Besides personal preferences, which cities are great to be an IT entrepreneur? Manila, Angeles, Cebu, Davao, etc... ?

 

I don't have experience of living or working anywhere but Manila, but in my line of business that's where we need to be.

Salaries are naturally higher in Manila, and the minimum wage is also higher there than the rest of the country.

[RuamRudy]

22 hours ago, save the frogs said:

Also, what about feeling safe as a foreign business owner in Philippines who is known to be generating a lot of income? 

 

Haha, I will tell you once I start to generate a lot of income. For now, any would-be robber would be sorely disappointed with my lack of liquidity.

[Modern Coding]

On 11/12/2023 at 8:03 PM, ozimoron said:

 

Most wealthy foreigners in PI live in gated communities. That's not the case in Thailand.

 

Exactly like in Phnom Penh.

 

However: wealthy does not mean business owner. You can be wealthy if you are a well-paid expat paid by a big corporation. In that case, you are EARNING A LIVING, and the highest risk is maybe being

robbed.

 

When you run a business, it is a different story: you are not earning a living but MAKING MONEY! And people are particularly jealous of people MAKING MONEY, even if that money is very little...

 

In Thailand, there have been enough stories of people who were making money and who ended up in jail, because some jealous nationals secretly introduced some powder inside the premises and then called the police! I guess the question would be: do we hear such stories in the Philippines as well?

[RuamRudy]

6 hours ago, Modern Coding said:

 

Exactly like in Phnom Penh.

 

However: wealthy does not mean business owner. You can be wealthy if you are a well-paid expat paid by a big corporation. In that case, you are EARNING A LIVING, and the highest risk is maybe being

robbed.

 

When you run a business, it is a different story: you are not earning a living but MAKING MONEY! And people are particularly jealous of people MAKING MONEY, even if that money is very little...

 

In Thailand, there have been enough stories of people who were making money and who ended up in jail, because some jealous nationals secretly introduced some powder inside the premises and then called the police! I guess the question would be: do we hear such stories in the Philippines as well?

 

The highest profile case I remember was of the South Korean business who was kidnapped by the police. It was a grim story that didn't end well for him but I recall that he was involved in some murky business himself.

 

https://en.wikipedia.org/wiki/Kidnapping_and_killing_of_Jee_Ick-Joo?wprov=sfla1

 

Personally, I have never had and issues in the 10 years I have lived in Manila. I don't live in a gated community although I do live in BGC, probably the most modern and safest part of the metro, and I don't venture too deep into the more salubrious parts of town and I drive a Kia...

[Modern Coding]

5 hours ago, RuamRudy said:

 

The highest profile case I remember was of the South Korean business who was kidnapped by the police. It was a grim story that didn't end well for him but I recall that he was involved in some murky business himself.

 

https://en.wikipedia.org/wiki/Kidnapping_and_killing_of_Jee_Ick-Joo?wprov=sfla1

 

Personally, I have never had and issues in the 10 years I have lived in Manila. I don't live in a gated community although I do live in BGC, probably the most modern and safest part of the metro, and I don't venture too deep into the more salubrious parts of town and I drive a Kia...

 

This does not wonder me much: in Southeast-Asia, South Korean nationals are often involved in not recommendable businesses.

 

Best example is Bùi Viện, the Saigonese Walking Street in Vietnam, where South Koreans have their own "comfort women" businesses and are regularly involved in fights, to the point that some of my Vietnamese friends told me to avoid that area when I was living in Saigon.

 

It seems that South Koreans have the tendency to hand over the stick to get beaten!

[n00dle]

5 minutes ago, Dendimerk said:

For one, this CRM and project management combined offers an all-around solution for managing both processes. This becomes especially valuable when dealing with the complexities of operating in a foreign country like the Philippines.
Using its functionality, you can effectively handle customer interactions, track leads, and nurture client relationships. Hope you'll find it helpful.

subtle, nobody knows you are shilling your business, you are just that good.

[cheskakim]

I’ve run a business in the Philippines, and while there are similarities to Thailand, there are some key differences. Incorporation is fairly straightforward, but expect some bureaucracy. The process can take time, and you will need to register with several government agencies. Taxes are something to keep an eye on—corporate tax rates are around 25%, and you’ll need to stay on top of tax filing deadlines. Hiring and firing employees isn’t too complicated, but labor laws do tend to favor workers, so be careful about contracts. You don’t need a minimum number of employees to start, and while a local partner isn’t always required, some industries may still have restrictions on foreign ownership.

 

For comparing business environments between Thailand and the Philippines, the Philippines generally has more English-speaking talent, which can make communication easier. However, bureaucracy can sometimes feel slower in the Philippines compared to Thailand.

 

On the tech side, I’ve used Google Cloud Pricing for hosting and found it quite affordable. For example, a small Compute Engine instance starts at $0.0475 per hour, and they offer discounts for sustained use, which helps keep costs down.