How Regional Operating Headquarters Work in the Philippines
The Philippines is a good place to start a business. Its laws give companies the freedom and opportunities to take roots and grow in the country. With its trade agreements with other countries, the Philippines is a fair ground for foreign companies to expand their business.
Do you want to know how foreign businesses operate in the Philippines? You’re on the right track. This article talks about how foreign companies operate in the Philippines. Here, we will understand the concept of regional operating headquarters. Lastly, we list the activities they can do and the benefits they can get when they operate in the Philippines.
What are Regional Operating Headquarters?
Foreign companies like to explore other countries to expand the reach of their products and services. By expanding internationally, they can take advantage of other countries’ resources and opportunities while earning more.
The Philippines knows this, so it gives an opening for foreign countries to invest here. That is through the Republic Act 8756 or the Omnibus Investment Code of the Philippines. This law allows multinational companies to operate with ease here in the Philippines. It helps foreign companies to expand their operations, while the country benefits through taxes and the employment of locals.
Foreign companies can operate in the Philippines through a regional operating headquarters or ROHQs. An ROHQ is like a representative entity of a foreign company here in the Philippines. It is also the physical office of a foreign company here in the country.
It is not a separate entity. Therefore, the main company still owns and owes the resources and debts of ROHQs. Further, since the company was not created in the Philippines, it still follows the foreign law that rules the main company. So, if for example the company was incorporated in Singapore, their laws also apply to the ROHQs. R.A. 8756 only gives them the rights and limitations to work in the Philippines.
Moreover, an ROHQ is allowed to work for an income in the Philippines through the rights given to it by R.A. 8756. And according to the law, regional operating headquarters can only be set up by foreign companies working within the Asia Pacific Region and in other foreign markets.
Further, it can only transact with its affiliates, subsidiaries, and branches. The law specifically forbids ROHQs to give services to entities other than those connected with their business.
ROHQ Qualifying Services
After complying with the minimum requirements and getting their certificate of registration, the law allows foreign companies the right to do specific activities. They are limited to work only with their associates, branches, and subsidiaries.
Here are the following qualifying services ROHQs perform in the Philippines.
- General administration and planning
- Business planning and coordination
- Sourcing or 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
- Business development
As they are income-generating entities in the Philippines, the government charges ROHQs a 10% income tax. Additionally, they are also subject to a 15% tax on their profit transfer from the branch to the main office. This can still be reduced depending on existing tax treaties between the Philippines and their country of origin. For example, dealings with the Netherlands, Japan, Germany, and Austria get a special tax rate of 10%
Moreover, ROHQs which are under the Philippine Economic Zone Authority (PEZA) are not subject to taxes on their branch profit transfers.
Regional operating headquarters can make use of many benefits. They are exempted from all types of local taxes, fees, and charges. Further, ROHQs do not pay any taxes for the importation of training and conference materials. They can also avail of travel tax exemption, and get free importation fees for the transfer of their household goods and personal effects to the Philippines.
Professional Company Services
Are you planning to explore making a business in the Philippines? 3E Accounting is here to assist you. We offer Philippine incorporation packages to make it easier for you to process your registration. Contact our office today to know more.