Corporations from other parts of the world who are interested in setting up a communications center to supervise or coordinate with their subsidiaries, affiliates, and branches worldwide can set up an RHQ or Regional Headquarters in the Philippines. You can seek guidance from tax services in Manila to facilitate the process.
RHQs are not separate legal entities from their parent company. They cannot get their income from any sources to and from the Philippines. It is the head office that will incur any liabilities. RHQs can source raw materials, train employees, market products, and conduct research and development projects in the country.
Take note though that there are certain restrictions that come with it. Like ROHQs or Regional Operating Headquarters, Regional Headquarters or RHQs can only be set up by foreign corporations that have subsidiaries, affiliates, or branches worldwide. Learn more about what it takes to register your RHQ in the Philippines.
What are the requirements to set up an RHQ?
According to tax and accounting services in the Philippines, here’s what you need to do:
Appoint a Resident Agent
You need to appoint a resident agent who will be responsible for receiving the summons and legal proceedings served to or against the RHQ. You can choose someone who lives in the Philippines or choose any legal domestic corporation doing legal business in the Philippines. For instance, a tax and audit services in the Philippines can help with business registration and set up.
Get Proof of Official Business Address
You need to secure and show proof of your official business address before you start the registration process. You also need to show your lease contract to BIR or Bureau of Internal Revenue and LGUs or Local Government Units to comply with this requirement. You can also opt to rent a virtual office to serve as your business address for the meantime and transfer to a physical office after you have finished the registration.
Minimum Capital Requirement
You must have at least US$50,000, which is the minimum capital for setting up an RHQ in the country. The parent company will need to remit that amount annually to support the operating expenses of the RHQ.
Are there any restrictions or incentives?
When you set up an RHQ in the Philippines, certain restrictions and incentives apply. Notably, these may change based on the updates on the tax codes from the BIR. Thus, It’s a good ideas to work with a firm specializing in accounting services in the Philippines so you can keep abreast of timely information.
To date, an RHQ is not allowed to offer qualifying services to other entities aside from its parent company’s branches, affiliates, and subsidiaries. It is strictly prohibited to solicit or market goods and offer services on behalf of its parent company, affiliates, subsidiaries, or branches. The parent company is also not allowed to sell or market products through the RHQ.
Incentives Available for RHQs
An RHQ is a non-income generating entity which means that it is exempted from paying income taxes and VAT. An RHQ can avail of tax incentives like importation, local fees, and employee compensation from the BOI or the Board of Investments. What are these tax incentives?
- Exempted from paying all local taxes, charges, or fees imposed by the LGU except real property and land improvements and equipment
- Importation of equipment and materials that are not locally available for conferences and training are tax and duty-free
- Disposed Equipment within 2 years after importation (subject to paying taxes and duties)
- Importing brand new motor vehicles (subject to paying taxes and duties)
For Foreign Individuals:
- 15% Preferential tax rate on salaries, annuities, and other kinds of compensation applicable for expatriates
- Exempted from Travel Tax
- Multiple Entry Visa
- Importation of used household goods and personal effects are tax and duty-free
Registration Requirements and Timeline
- Application Form
- Name Verification Slip
- Certificate from the Philippine Embassy or Philippine Commercial Office or any equivalent office of the Philippine Department of Trade and Industry (DTI) in the country where the Parent Company is located to verify that the corporation is involved in international trade with branches, subsidiaries, or affiliates around the world. If the certification was issued by an equivalent of DTI, it should also be authenticated by the Philippine Embassy.
- Certificate from the Principal Officer of the foreign corporation to verify that the establishment of the RHQ in the Philippines was authorized.
- Proof of the US$50,000 Inward Remittance to serve as capital and support for operating expenses
- If applicable, clearance or endorsement from appropriate government agencies
- Board of Investments Endorsement
- Latest Authenticated Financial Statements to show the head office’s financial solvency
It usually takes 6 to 10 weeks to register an RHQ given that all required documents were submitted early and if there are no processing delays from the government. If you need assistance, call our team. We’re a one-stop shop that can help you handle everything you need.