Regional Headquarters and ROHQ in the Philippines: A Guide for Foreign Groups

A foreign group that wants a Philippine base for supervising or servicing its Asia-Pacific affiliates has two main structures under Republic Act No. 8756: a Regional or Area Headquarters (RHQ), which acts as a supervisory, communications, and coordination center and cannot earn income in the Philippines, or a Regional Operating Headquarters (ROHQ), which may derive income by performing qualifying services for its own affiliates, subsidiaries, or branches. Both require a license from the Securities and Exchange Commission (SEC) upon the favorable recommendation of the Board of Investments (BOI). The steps below follow the statutory requirements.

RHQ or ROHQ: choosing the right structure

Under Section 2 of Republic Act No. 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 whose purpose is to act as an administrative branch of a multinational company engaged in international trade, principally serving as a supervision, communications, and coordination center for its subsidiaries, branches, or affiliates in the Asia-Pacific Region and other foreign markets. It does not earn or derive income in the Philippines.

An ROHQ, by contrast, is a foreign business entity allowed to derive income in the Philippines by performing qualifying services to its affiliates, subsidiaries, or branches in the Philippines, the Asia-Pacific Region, and other foreign markets. If the group needs a Philippine base that can bill for services, the ROHQ is the appropriate vehicle; if the office will only supervise and coordinate, the RHQ is sufficient.

Who issues the license

Under Article 58 (for RHQs) and Article 59 (for ROHQs) of the Omnibus Investments Code, as amended by Republic Act No. 8756, the foreign entity secures a license from the SEC upon the favorable recommendation of the BOI. ROHQs of non-banking and non-financial institutions need the SEC license only. ROHQs of banking and financial institutions must secure licenses from both the SEC and the Bangko Sentral ng Pilipinas, likewise upon the BOI's favorable recommendation.

The documentary requirements

Article 58 and Article 59 set out substantially the same minimum requirements for both structures:

• A certification from the Philippine Consulate or Embassy, or a duly authenticated certification from the Department of Trade and Industry or its equivalent in the foreign firm's home country, that the foreign firm is engaged in international trade with affiliates, subsidiaries, or branch offices in the Asia-Pacific Region and other foreign markets.
• A duly authenticated certification from the principal officer of the foreign entity confirming that its Board of Directors or governing body authorized the establishment of the headquarters in the Philippines.
• An undertaking to remit funds to cover Philippine operations.

For an RHQ, the certification must specify that activities are limited to acting as a supervisory, communications, and coordinating center; that the RHQ will not derive income from Philippine sources, will not participate in managing any Philippine subsidiary or branch, and will not solicit or market goods and services; and that it will notify the BOI and SEC at least fifteen (15) days before closing or suspending operations.

For an ROHQ, the certification must list the qualifying services it will perform and carry the same fifteen (15)-day notice undertaking, this time also to the Bangko Sentral ng Pilipinas where applicable.

Capital remittance requirements

The two structures carry different inward remittance thresholds.

An RHQ must undertake to remit into the country an amount necessary to cover its Philippine operations, but not less than Fifty thousand US dollars ($50,000) or its equivalent annually. Within thirty (30) days from receipt of the certificate of registration from the SEC, it must submit a certificate of inward remittance from a local bank showing the remittance and conversion to Philippine currency. The same proof must be submitted annually, within thirty (30) days from the anniversary date of registration.

An ROHQ must undertake an initial remittance of not less than Two hundred thousand US dollars ($200,000) or its equivalent. Within thirty (30) days from receipt of the certificate of registration, it must submit the corresponding certificate of inward remittance from a local bank showing conversion to Philippine currency.

Qualifying services an ROHQ may perform

Article 59 enumerates the qualifying services: general administration and planning; business planning and coordination; sourcing and procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistics services; research and development and product development; technical support and maintenance; data processing and communication; and business development.

An ROHQ is prohibited from offering these services to entities other than its affiliates, branches, or subsidiaries as declared in its SEC registration, and may not directly or indirectly solicit or market goods and services on behalf of its mother company, branches, affiliates, subsidiaries, or any other company.

Tax treatment at a glance

Under Article 64, an RHQ that does not earn or derive income from the Philippines is not subject to income tax. An ROHQ is subject to a tax rate of ten percent (10%) of its taxable income, and any income from Philippine sources remitted to the parent company is subject to the tax on branch profit remittances under Section 28(a)(5) of the National Internal Revenue Code.

The same chapter of Republic Act No. 8756 addresses value-added tax and local taxes for these headquarters, exempting the RHQ from VAT, subjecting the ROHQ to the ten percent (10%) VAT, and exempting both structures from all kinds of local taxes, fees, or charges imposed by a local government unit, except real property tax on land improvements and equipment. The precise article numbering for these two provisions is not available in the firm's library copy of the amendatory law, so they are described here in general terms rather than cited by number.

Visas and withholding tax on expatriates

Foreign personnel of an RHQ or ROHQ, their spouses, and unmarried children under twenty-one years of age may be issued a multiple entry special visa within seventy-two hours upon submission of complete documents, valid for three (3) years, under Article 60. The stay is coterminous with the visa and extendible for three years upon submission of the required sworn certification to the Bureau of Immigration.

Under Article 61, aliens employed by an RHQ or ROHQ are taxed at fifteen percent (15%) of gross income from salaries, wages, annuities, compensation, remuneration, and emoluments. The same treatment applies to Filipinos occupying the same positions, who may choose between the 15% rate and the regular rate under the National Internal Revenue Code.

Compliance and cancellation of the license

Violation of the Code, its implementing rules, the terms and conditions of registration, or any provision of existing laws is sufficient cause for cancellation of the license or registration, under both Article 58(d) for RHQs and Article 59(d) for ROHQs.

Frequently asked questions

Can an RHQ earn income in the Philippines? No. An RHQ does not earn or derive income in the Philippines and acts only as a supervisory, communications, and coordinating center. If the office needs to derive income from qualifying services, an ROHQ is the appropriate structure.

How much must an ROHQ remit to the Philippines? An ROHQ must initially remit not less than Two hundred thousand US dollars ($200,000) or its equivalent, with proof of inward remittance and conversion to Philippine currency submitted to the SEC within thirty (30) days from receipt of the certificate of registration.

Which agency licenses an ROHQ in the Philippines? An ROHQ of a non-banking and non-financial institution secures a license from the SEC upon the favorable recommendation of the BOI. If the ROHQ belongs to a banking or financial institution, licenses are required from both the SEC and the Bangko Sentral ng Pilipinas.

Practical takeaways

• Choose the structure by function: an RHQ for supervision and coordination only, an ROHQ if the Philippine office will derive income from qualifying services.
• Both structures require an SEC license on the favorable recommendation of the BOI; banking and financial ROHQs also need a BSP license.
• Prepare the consular or DTI certification and the authenticated board authorization early, as these are mandatory minimum requirements.
• Fund the entity correctly: at least $50,000 annually for an RHQ, and at least $200,000 initially for an ROHQ, with inward remittance proof filed with the SEC within thirty (30) days of registration.
• Remember the fifteen (15)-day prior notice to the BOI and SEC (and BSP, where applicable) before closing or suspending operations.

Primary sources

The rules discussed above are drawn from the following primary sources. Where the firm's library holds the document as a PDF it is embedded here in full; the rest are cited by title.

Amendments to foreign exchange regulations covering foreign investmentsOpen in Law LibraryDownload PDF

• REPUBLIC ACT NO. 11232 - AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES

• REPUBLIC ACT NO. 8756 - AN ACT PROVIDING FOR THE TERMS, CONDITIONS AND LICENSING REQUIREMENTS OF REGIONAL OR AREA HEADQUARTERS, REGIONAL OPERATING HEADQUARTERS, AND REGIONAL WAREHOUSES OF MULTINATIONAL COMPANIES, AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF EXECUTIVE ORDER NO. 226, OTHERWISE KNOWN AS THE OMNIBUS INVESTMENTS CODE OF 1987

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.