By: Garry S. Pagaspas
Under Section 2(3) of Republic Act No. 8756, Regional Operating Headquarters (ROHQ) is defined as a foreign business entity which is allowed to derive income in the Philippines by performing the following qualifying services to its affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific Region and in other foreign markets:
An ROHQ is actually a foreign corporation that is licensed to do business in the Philippines to strictly engage in the above specific and limited services. It shall offer its services only to its affiliates, branches or subsidiaries, as declared in its registration with the SEC. It shall not directly and indirectly solicit or market goods and services whether on behalf of their mother company, branches, affiliates, subsidiaries or any other company. In same manner, it cannot directly or indirectly engage in the sale and distribution of goods and services of its mother company, branches, affiliates, subsidiaries or any other company.
How Tax Savings Operates
The above strict and limited operations of an ROHQ has a tax purpose. To my mind, tax savings is the end view of the restrictions and hereunder are the material tax considerations for the use of ROHQ:
Other tax implications of ROHQ would be similar to the rest. It is subject to 12% VAT for services rendered in the Philippines, and zero-rating for services to related party clients abroad under certain conditions.
ROHQ Registration in the Philippines
After having learned of the above tax savings and advantages, your next move is to make a complete registration of an ROHQ in the Philippines. Since ROHQ is a foreign corporation licensed to do business in the Philippines, you need to choose a parent company with affiliates, subsidiaries or branch office in the Asia pacific region. Some uses a Hong Kong company, or a Singaporean company for ease of set-up perhaps. But you can use one from other foreign countries of choice. Hereunder are the common registration requirements:
Upon approval and release of the License to Do Business in the Philippines by the SEC, registration with the following agencies would follow:
The above discussion would mean that if the intended market of services of the proposed entity are related parties abroad, ROHQ is a good choice because of its income producing nature from its services and the tax perks attached to it. Process may take a while, approximately thirty (30) days from date of SEC approval and release of License to do Business.
(Garry S. Pagaspas is a Resource Speaker with Tax and Accounting Center, Inc. He is a Certified Public Accountant and a degree holder in Bachelor of Laws engaged in active tax practice for more than seven (7) years now and a professor of taxation for more than four (4) years now. He had assisted various taxpayers in ensuring tax compliance and tax management resulting to tax savings rendering tax studies, opinions, consultancies and other related services. He has likewise assisted a number of investors in the Philippine structure and in the complete registration of the same with the various government agencies in the Philippines. For comments, you may please send mail at email@example.com.)
Disclaimer: This article is for general conceptual guidance only and is neither an expert opinion, nor a substitute for an expert opinion in itself. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances.
Corporate Registrations. We could assist you in the complete registration of your ROHQ or other legal business entity – ordinary corporation, license to do business for foreign corporations, foundations, non-stock and non-profit corporations. We already have established and registered a number of corporations – local and foreign with the Securities and Exchange Commission and other government agencies.
Tax Management and Compliance Consultancies. With our tax services, we can assist you ensure tax compliance and in the management of such continuing compliance. Proper compliance would bring about tax savings form avoiding being penalized to tax minimization strategies. Likewise, we could assist you in securing a BIR ruling confirming the applicable tax exemptions.
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