Holding company in the Philippines: subsidiaries and dividends

Why Philippine groups use holding companies

A holding company in the Philippines refers to an SEC-registered company whose main purpose is owning shareholdings, receiving dividends and funding subsidiaries, within a framework shaped by foreign ownership restrictions and still strict bank secrecy. The large local conglomerates are organised around listed holdings controlling banks, real estate and services, and an investor's holding groups several operating subsidiaries and centralises their cash with a single bank.

The large Philippine conglomerates are organised around listed holding companies controlling banks, real estate and services. For an investor, a Philippine holding company groups several operating subsidiaries and centralises their cash with a single bank.

Dividends between Philippine companies

Dividends received by a domestic corporation from another domestic corporation are in principle exempt from income tax. This makes a Philippine holding tax-neutral on upstream dividends, subject to tax advice on the specific situation.

The 60/40 rule and land-owning companies

A company that owns land or operates in certain sectors must be at least 60 percent Filipino-owned. A foreign holding therefore cannot control such subsidiaries beyond the ceiling, and the bank examines the actual capital split.

Foreign-source dividends since CREATE

The 2021 CREATE law exempts foreign-source dividends received by a domestic corporation, subject to holding period and reinvestment conditions in the Philippines. Tracking that reinvestment requires precise bank documentation of all inbound flows.

Upstreaming dividends to a foreign parent

Dividends paid to a non-resident foreign corporation bear withholding tax, reducible by tax treaty or under the tax-sparing rule. Prior registration of the investment with the Bangko Sentral eases buying foreign currency for this repatriation.

What the bank expects from a holding

For a holding company bank account, the file includes SEC registration, the General Information Sheet with beneficial owners, the group chart, audited financial statements and board resolutions authorising intragroup loans. Intermediate holdings located in offshore jurisdictions prompt specific questions.

Lending to Philippine subsidiaries: rates, contracts and stamp tax

A holding lending to subsidiaries applies arm’s length rates and documents contracts; the BIR has transfer pricing rules. These loans also attract documentary stamp tax, which must be factored into cash flow management.

Group treasury at a large Philippine bank

BDO Unibank offers groups cash management, multiple accounts and short-term placements. For a holding controlled from abroad, the bank generally asks for identified directors in the Philippines and a finance officer reachable locally.

Transparency: a country still outside CRS

The Philippines does not yet automatically exchange financial account data under CRS but has signed a FATCA agreement. This creates no legitimate opacity: a shareholder resident in a CRS country must report holdings and income personally.

French-resident shareholders: dividends, treaty and form 3916

A French shareholder declares Philippine dividends received, applies the France–Philippines tax treaty and considers the French controlled foreign entity regime. If they hold a mandate on a Philippine account of the holding, form 3916 applies too.

Preparing the file for a holding company in the Philippines

Before contacting the bank, gather the company documents: SEC registration, articles, list of directors and a complete group chart down to the individuals. Each level of ownership must be supported by a document. A holding whose chain of shareholders stays unclear will see its file slowed down, whichever bank is chosen. This preparatory work avoids starting the exercise again at every further request from the bank.

Also prepare the board resolution authorising the account and naming the signatories, with their identity documents. If papers come from abroad, ask the bank which form of legalisation or translation it accepts. Timing varies by institution and by the complexity of the group, so allow a comfortable margin rather than expecting a fixed date. Also ask which version of the file the bank keeps on record.

Explain the expected flows in writing: dividends received from subsidiaries, intragroup loans, capital increases and upstream payments to the parent. A holding account whose purpose is stated clearly inspires more confidence than one opened without a precise plan. This short note will also serve as a reference whenever the bank queries an unusual transaction. Date the note and have a director sign it off.

Common mistakes with a Philippine holding company

The most common mistake is inconsistency between documents: the General Information Sheet filed with the SEC lists a shareholder that the group chart given to the bank does not show, or the other way round. The bank compares these papers. Update them before the appointment and explain any difference rather than hoping it goes unnoticed. This check takes little time and can save weeks of correspondence.

Another frequent mistake is to overlook the 60/40 rule for subsidiaries that own land or operate in reserved sectors. A holding controlled from abroad must be able to show how the foreign ownership ceiling is respected. Local legal advice is useful before presenting the structure to the bank, not after a refusal. Have everything reviewed by a local lawyer. Ask a lawyer to confirm the position in writing.

Finally, avoid mixing the personal funds of directors with company funds, and never leave an intragroup loan without a written contract. These habits weaken the reading of the account and can trigger repeated requests for evidence. Rigorous record keeping from the first month protects the credibility of the holding with both the bank and the tax authority. Keep a written trace of the exchanges with the bank.

Questions to ask before opening a holding company bank account

Ask the bank about the access conditions for a structure owned from abroad: physical presence of signatories, local directors required, documents needed for each indirect shareholder. Answers differ from one institution and one adviser to another. Request them in writing when the point decides the rest of your project. Banks do not all show the same tolerance on this point. Keep the replies on file.

Then ask which functions the bank offers the group: multiple accounts, available currencies, cash management, online banking with dual approval, flow reports. Compare account fees, international transfer commissions and any minimum balances. The real cost of a holding account in the Philippines depends mostly on the volume and frequency of transactions. Compare at least two offers before signing anything. Ask for examples of recent fee schedules too.

Finally, clarify how the bank handles repatriation of dividends to a foreign parent: documents requested, prior registration of the investment, usual conversion times into foreign currency. This step conditions the liquidity of the group. A bank that answers these questions clearly is often more reliable than an attractive but vague offer. Note the transfer limits that apply to the account as well.

Follow-up and reporting duties of a Philippines holding account

Once the account is open, keep a rigorous file: loan agreements, board minutes, bank statements, and evidence of dividends received and paid. These papers let you answer quickly when the bank, the BIR or an auditor asks. They also show that the flows of the holding account rest on a genuine activity of managing shareholdings. A complete file answers most of these requests without delay.

Have the tax treatment of each flow validated by a local adviser: dividends between Philippine companies, foreign-source dividends, withholding on sums paid abroad, transfer pricing on intragroup loans. Rules change and depend on the exact situation of the company, so this article is no substitute for personalised tax advice. Archive these papers for as long as local law requires. Ask your adviser to date each opinion.

Remember that the current absence of CRS exchange does not remove the duties of shareholders, who must report their holdings and income themselves in their country of residence. Check the current requirements with the bank, the SEC and the Bangko Sentral before every major operation, and keep proof of those checks. Keep these exchanges with the adviser to justify your decisions. This also protects a holding company in the Philippines against later disputes.