Register a Regional Operating Headquarters (ROHQ) – Philippines
A Regional Operating Headquarters (ROHQ) is an extension of a foreign corporation allowed to derive income in the Philippines by performing qualifying services to its head office, affiliates, subsidiaries or branches in the Asia-Pacific (APAC) region and other foreign markets.
It can only be set up and operated by a foreign corporation that has subsidiaries, branches, affiliates or clients in the Asia-Pacific (APAC) region and other foreign markets.
The laws that govern its formation, existence, and dissolution are the laws of the country where its parent company was organized or established. Hence, it does not have a separate legal personality and any liabilities that it will incur are considered liabilities of the head office of its parent company.
An ROHQ is allowed to derive income from the qualifying services it renders in the Philippines, which could be any of the following:
- General administration and planning;
- Business planning and coordination;
- Sourcing/procurement of raw materials and components;
- Corporate finance advisory services;
- Marketing control and sales promotion;
- Training and personnel management;
- Logistics services;
- Research and development services, and product development;
- Technical support and maintenance;
- Data processing and communication; and
- Business development.
On the one hand, it is prohibited from offering these services to entities other than its affiliates, branches or subsidiaries – as declared in its registration with the Securities and Exchange Commission (SEC). It is also not allowed to directly or indirectly solicit or market goods and services on behalf of its parent company, branches, affiliates, subsidiaries or any other business entity it is connected to.
The parent company is required to deposit an initial inward remittance of US$200,000.00 as capitalization and annual support for its operating expenses.
Subject to certain conditions, overhead expenses of the head office may be allocated to the ROHQ in the Philippines.
ROHQs are often set up by multinational corporations that intend to separate their operations to minimize operational costs and take advantage of a huge, cost-effective labor pool and attractive tax incentives from an emerging market like the Philippines.
Incentives for ROHQs in the Philippines
Philippine ROHQs can avail of the following incentives:
- Exemption from all kinds of local taxes, fees or charges (except real property tax on land improvements and equipment)
- Tax and duty-free importation of equipment and materials for training and conferences
- Equipment and training materials not locally available
- Equipment disposed within two (2) years after importation (subject to payment of taxes and duties)
- Importation of brand new motor vehicles (subject to payment of taxes and duties)
Non-Fiscal Incentives for Expatriates
- Multiple Entry Visa
- For expatriates, including their spouse and unmarried children below the age of twenty-one (21)
- Exemption from payment of fees except for reasonable administrative costs
- Exemption from securing Alien Certificate of Registration
- Non-immigrant visa will be processed within seventy-two (72) hours upon submission of requirements to the Bureau of Immigration (BI)
- Preferential tax rate of 15% on salaries, annuities, and other types of compensation applicable for Expatriates-This is no longer applicable starting January 1, 2018 due to the TRAIN LAW. All RHQ, ROHQ, OBU, etc employees holding managerial, executive, or technical positions earning P975,000 or more per annum, etc. are no longer subject to 15% flat compensation tax. They shall be subjected the the graduated rates based on RR 1-2018.
- Travel tax exemption
- Tax and duty-free importation of used household goods and personal effects
Registration Requirements for Philippine ROHQs
Foreign corporations are only allowed to set up a Regional Operating Headquarters in the Philippines after securing a License to Do Business in the Philippines from the Securities and Exchange Commission (SEC). To secure a License to Do Business, a foreign corporation needs to provide the following documentary requirements:
- Name verification slip;
- Certification by the Philippine Consulate/Embassy or the Philippine Commercial Office or from the equivalent office of the Philippine Department of Trade and Industry (DTI) in the company’s country of origin verifying that said foreign corporation is engaged in international trade with subsidiaries, branches or affiliates in the Asia-Pacific (APAC) region and other foreign markets; and in case the certification is issued by the equivalent of the DTI, the same shall be authenticated by the Philippine Consulate/Embassy;
- Certification from the Principal Officer of the foreign corporation verifying that it was authorized by its Board of Directors or governing body to establish an ROHQ in the Philippines;
- Proof of inward remittance of US$200,000.00 as initial capitalization;
- Registration Data Sheet;
- Endorsement or clearance from appropriate government agencies (if applicable);
- Endorsement from the Board of Investments (BOI); and
- Latest authenticated financial statements showing the solvency of the head office.
As income-generating business entities, ROHQs are subject to 10% income tax rate on their sources of income in the Philippines.
They are also subject to 15% branch profit remittance tax on their income remittances to their parent companies abroad based on the total profits applied or allocated for remittance without any deduction for the tax component – which can be reduced depending on applicable tax treaties between the Philippines and the country of residence of the parent company. A preferential tax rate of 10% is granted under the tax treaties that the Philippines have with countries like the Netherlands, Japan, Germany, and Austria.
ROHQs registered with the Philippine Economic Zone Authority (PEZA) are exempted from the tax on branch profit remittances.
|1. Australia||12. France||23. Netherlands||34. Sweden|
|2. Austria||13. Germany||24. New Zealand||35. Switzerland|
|3. Bahrain||14. Hungary||25. Nigeria||36. Thailand|
|4. Bangladesh||15. India||26. Norway||37. Turkey|
|5. Belgium||16. Indonesia||27. Pakistan||38. United Arab Emirates|
|6. Brazil||17. Israel||28. Poland||39. United Kingdom|
|7. Canada||18. Italy||29. Qatar||40. United States of America|
|8. China||19. Japan||30. Romania||41. Vietnam|
|9. Czech||20. Korea||31. Russia|
|10. Denmark||21. Kuwait||32. Singapore|
|11. Finland||22. Malaysia||33. Spain|