Many tax exemptions have been removed:
1. On 26 March 2021, the president signed into law Republic Act No. 11534 or the CREATE Act which amends Republic Act No. 8424 or the National Internal Revenue Code of 1997, as amended:
Regional headquarters (RHQ): RHQs shall be subject to the regular corporate income tax beginning 1 January 2022.
2. On 19 December 2017 the president signed into law Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) where he vetoed the provisions granting preferential tax treatment to employees of RHQ’s, ROHQs, and OBUs who are now taxed the same as any individual deriving an income in the Philippines.
A RHQ or Regional Headquarters can only be setup and operated by a foreign corporation, which has subsidiaries, branches, affiliates and clients in the Asia-Pacific Region and other foreign markets. It is a branch of a multinational company that exists under the laws of a nation other than the Philippines..
The primary purpose of an RHQ is to act as a supervisory, communications, and coordinating center for its subsidiaries affiliates and branches in the Asia- Pacific region and is not allowed to derive income in the Philippines.
A minimum of USD50,000.00 must be remitted yearly to the Philippines RHQ to cover operational expenses.
Appointing a Local Agent is obligatory.
Documentary Requirements for RHQ registration.
– Name Verification Slip issued by the SEC
– Certification by the Philippine Consulate/Embassy or the Philippine Commercial Office or from the equivalent office of the Philippines Department of Trade and Industry (DTI) in the applicant’s home country that said foreign firm is an entity engaged in international trade with affiliates, subsidiaries or branch offices in the Asia Pacific and other foreign markets; in case the certification is issued by the equivalent of the Philippine DTI, the same shall be authenticated by the Philippines Consulate/Embassy
– A certificate from principal officer of the foreign entity that the said foreign entity has been authorized by its board of directors or governing body to establish its regional or area headquarters in the Philippines
– Endorsement by the Board of Investments (BOI)
– Bank certificate: Proof of inward remittance of USD50,000
Tax Incentives for Philippines RHQ
- Exemption from corporate income tax
- Exemption from value-added tax (0%VAT)
- Sale or lease of goods and property, and services to the RHQ shall be subjected to zero VAT
- Exemption from all kinds of local taxes, fees or charges imposed by a local government unit, except real property tax on land improvement and equipment
- Tax and duty free importation of equipment and materials for training and conferences needed and solely used for the RHQ functions, and which are not locally available, subject to prior BOI approval.
- Equipment disposed of within 2 years after importation subject to payment of taxes and duties
- Importation of brand new motor vehicle but subject to payment of taxes and duties.
For Expats and Filipinos
Withholding tax of 15% on compensation applicable to foreign executives holding managerial and technical positions.
(Revenue Regulation 11-2010)*
Non Fiscal Incentives for Expats
- Special Multiple Entry Visa
- Expatriates, including spouse and unmarried children below 21 years old will be issued this type of visa
- Multiple entry visa will be processed within 72 hours from submission of documents to the Bureau of Immigration
- Valid three (3) years extendible for another three (3) years
- Exempt from securing Alien Certificate of Registration (ACR) from the Department of Labor and Employment (DOLE)
- Tax and duty-free importation of used household goods and personal effects
- Travel tax exemption
- Personnel and their dependents
Contact Dayanan Philippines Business Consultants to find out how to setup your RHQ business in the Philippines.
Other business 100% foreign owned entities are domestic corporations, branch offices, ROHQ and representative offices.