How to Register Regional Operating Headquarters (ROHQ) Philippines?

By: Tax and Accounting Center Philippines

A Regional Operating Headquarters (ROHQ) in Philippine branch office is form of a resident foreign corporation in the Philippines where the legal entity of a foreign corporation is being brought into the Philippines to engage in qualifying services allowed by law only to its branches, subsidiaries, or affiliate. Below is the list of those qualifying services allowed by Philippine law to be rendered by a regional operating headquarter in Philippines to its branches, subsidiaries, or affiliates in the Asia Pacific Region or abroad:

1. general administrative and planning;
2. business planning and coordination;
3. sourcing and procurement of raw materials and components;
4. corporate finance advisory services;
5. marketing control and sales promotion;
6. training and personnel development;
7. logistics services;
8. research and development service and product development;
9. technical support and maintenance;
10. data processing and communication; and,
11.  business development.

For the purpose, a foreign corporation is required to secure a License to do Business in the Philippines for its Philippine branch operations. This structure is typical for back office of multinational companies others would term as “knowledge process outsourcing”.

A Regional Operating Headquarters (ROHQ) in the Philippines is by nature a profit oriented entity though it could only offer specific services enumerated above. Its required capitalization is US$200,000.00. For tax purposes, it is subject to the following:

•  10% income tax based on taxable net income;
• 12% value added tax on local sales;
• 15% branch profit remittance tax on repatriation of profit to parent company;
• 0% value added tax on export sales of services; and,
• 15% final withholding tax on managerial and technical expatriate employees and to Filipinos holding similar positions based on certain conditions (N.B. – Eliminated by TRAIN Law – RA No. 10963)

It is however subject to withholding taxes on its income payments and compensation, and could be passed on 12% value added tax on its purchases from VAT-registered suppliers.

To support its operations in the Philippines, it is required to inwardly remit its initial capitalization to the Philippines through the treasurer-in-trust account it could set-up for the purpose. It is likewise required to appoint a resident agent on whom summons and other legal processes against the same may be served in all actions or other legal proceedings against the Company.

Requirements for License to Do Business in Philippines

To secure Securities and Exchange Commission (SEC) approval of the License to do Business in the Philippines of a Regional Operating Headquarters Philippine, you need to have the following documentary requirements:

Basic SEC Requirements

• SEC Application Form for Regional Operating Headquarters
• Name verification slip of the company name to be used. This should be reserved manually with the Securities & Exchange Commission (SEC) for minimal fees – P40.00 for every 30 days up to a maximum of 90 days subject to renewal or online through the SEC -Register;
• Indorsement from the Board of Investments (BOI) Philippines;
• Certification from the Philippine Consulate or Embassy, or Philippine Commercial Office or from equivalent office of the Philippine Department of Trade and Industry (DTI) in the applicant’s home country that said firm is an entity engaged in international trade with affiliates, subsidiaries, or branch offices in the Asia Pacific Region and other foreign markets.
• Certified copy of the Board Resolution of the Parent company authorizing the establishment of an office in the Philippines and designating a Resident Agent who may be an Philippine resident individual or a domestic corporation;
• Latest audited financial statements of the parent company certified by an independent certified public accountant and authenticated by the Philippine consulate/embassy;
• Certified copies of the Articles of Incorporation of the parent company with an English translation, if in a foreign language;
• Certificate of Inward remittance and Certificate of Bank Deposit of the US$200,000.oo initial capitalization; and,
• Resident Agent acceptance of appointment, unless, the agent is the signatory in the application form;

SEC in the Philippines has a set of prescribed forms for some of the above documentary requirements that you may either do it yourself or secure the assistance of experienced professionals.

SEC application and approval of License to do Business in the Philippines

Initial registration papers carefully prepared for the purpose will undergo initial evaluation of the SEC, and finding the same in order will be assessed filing and other fees based on the proposed capitalization. Payment of the filing and other fees marks the formal filing of the application and normal approval procedures would immediately follow. Approval normally comes in a couple of days to about ten (10) days.

Tax Authority Registration

SEC will assign a tax identification number (TIN) upon release of the License to do Business in the Philippines and such TIN shall be formally registered with the Bureau of Internal Revenue (BIR). Certain registration fees and taxes will be paid and other registrations for books of accounts, and official receipts or invoices will follow. For tax exemptions of non-stock non-profit corporation in the Philippines, you need to secure BIR ruling with the tax authority with the Revenue District Office (RDO) of registration.

Business Permits & Licenses

For the legality of its local operations, business permit has to be secured with the local government unit of business location. Certain fees and other registrations are likewise required such as community tax certificate, barangay clearance, fire permit, occupancy permit, and the likes.

Employee safeguards registrations

Employer registration with the Social Security System (SSS), Philippine health Insurance Corporation (Philhealth), and Home Development Mutual Fund (HDMF) is likewise mandatory and will proceed independent of the above.

Complete Processing Timetable

With the improved processing system of the government agencies, complete processing of the above will take three (3) to four (4) weeks from filing with the Securities and Exchange Commission. We suggest you secure the services of professionals to assist you in the complete registration of your Philippine Company that you may be able to simply concentrate on operational matters.

Processing fees for securing license to do business

Should intend to engage the services of a professional for the assistance in securing License to Do Business in the Philippines, professional fees could vary and the range could start from US$1,000.00.

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances.