QuestionsQuestions (Republic Act No. 8751)
Under RA 8756, a Multinational Company is a foreign company or group of foreign companies with business establishments in two or more countries. An RHQ is an office that serves as a supervisory/communications/coordinating center for affiliates in the Asia-Pacific and other foreign markets and does not earn income in the Philippines. A ROHQ is a foreign business entity allowed to derive income in the Philippines by performing qualifying services to its affiliates/subsidiaries/branches in the Philippines and other foreign markets.
A foreign business entity may establish an RHQ in the Philippines by securing a license from the Securities and Exchange Commission (SEC) upon the favorable recommendation of the Board of Investments (BOI).
Minimum requirements include: (a) a certification from the Philippine consulate/embassy or authenticated certification from the Department of Trade and Industry or equivalent abroad that the firm is engaged in international trade in the region; (b) an authenticated certification by the principal officer authorized by the board, stating permitted activities, prohibition on Philippine income/management and solicitation, and notice of closure/suspension at least 15 days before; (c) an undertaking to remit at least USD 50,000 annually, with proof of inward remittance within 30 days from registration and proof annually; and (d) that violations of the Code/rules/terms or existing laws are grounds for cancellation.
RHQ activities must be limited to supervising, communicating, and coordinating its affiliates/subsidiaries/branches in the region. RHQ must not derive income from Philippine sources, must not participate in management of its Philippine subsidiaries/branches, and must not solicit or market goods and services in any manner for its mother company/branches/affiliates/subsidiaries/any other company.
The ROHQ must undertake to initially remit not less than USD 200,000 (or equivalent) and submit a certificate of inward remittance from a local bank to SEC within 30 days from receipt of the certificate of registration.
Qualifying services include: 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/product development; technical support and maintenance; data processing and communication; and business development. ROHQs are prohibited from offering qualifying services to non-affiliates (only affiliates/branches/subsidiaries as declared in registration).
They must notify BOI and SEC (and BSP for ROHQ banking/financial context) at least 15 days before the decision to close down or suspend operations is effected.
Foreign personnel of RHQ/ROHQ (plus spouses and unmarried children under 21 accompanying them or following to join) may be issued a multiple entry special visa within 72 hours upon submission of required documents. It is valid for 3 years, and stay is coterminous with visa validity, extendible for 3 years with certifications to BI regarding license validity and tax withholding/payment.
Aliens employed by RHQ/ROHQ are subject to withholding tax of 15% on gross income received as salaries, wages, annuities, compensations, remuneration, and emoluments for each taxable year. The same 15% treatment applies to Filipinos in the same positions, but Filipinos may opt for regular tax rates under the NIRC (as amended).
RHQ that does not earn or derive income from the Philippines is not subject to income tax. ROHQ is taxed at 10% of taxable income (with PH-source income remitted taxed under branch profit remittance rules). For VAT: RHQ is exempt; sale/lease of goods/property and services to RHQ are subject to 0% VAT. ROHQ is subject to 10% VAT.
They are exempt from all kinds of local taxes, fees, or charges imposed by local government units, except real property tax on land improvements and equipment.
RHQ and ROHQ may import training materials and equipment needed and used solely for their functions, subject to prior approval of BOI (if not locally available). Selling/disposition within two years after importation requires BOI prior approval and prior payment of the waived taxes and duties.
A regional warehouse may act as a supply depot for storage/safekeeping and related allowed manipulation like packing/labeling/cutting/altering to customer specifications and packaging into kits for transactions and sales made by its head office/parent. It must not directly engage in trade, solicit business, promote any sale, or enter into contracts for sale/disposition in the Philippines, except it may withdraw imported goods for delivery to an authorized Philippine distributor under conditions.
The delivery is treated as a sale made by the headquarters (not by the warehouse), reflected in a separate book of accounts, and governed by VAT rules under the NIRC. The income from such sale is treated as income derived from sources within the Philippines and subject to corporate income tax of a resident foreign corporation under the NIRC.
If goods are withdrawn/released contrary to guidelines, they may be forfeited. If items are sold/bartered/hired/used for purposes other than intended without prior compliance with guidelines and without prior payment of duties/taxes that would have been due, the importation constitutes a fraudulent practice against customs revenue punishable under the Tariff and Customs Code (Section 3602 as amended).
Articles may remain in the regional warehouses for two (2) years from transfer. Extensions of one (1) additional year may be granted by BOI approval upon payment of corresponding storage fees for each extension until re-export.