How to establish Regional Operating Headquarters in the Philippines (ROHQ)

Establishing a Regional Operating Headquarters in the Philippines can be a strategic move for foreigners looking to expand their business presence in Southeast Asia. The country offers many opportunities with its geographical location, skilled workforce, and favorable economic policies. In this article, we will explore how to establish a Regional Operating Headquarters in the Philippines.

What is a Regional Operating Headquarters (ROHQ)?

A Regional Operating Headquarters (ROHQ) is a base established by a foreign company in the Philippines to provide various services in the country and the Asia-Pacific Region. It functions under the laws of the nation where the business was first founded and is an extension of the parent firm. Accordingly, in terms of formation, existence, and dissolution, the ROHQ shall conform to US legislation if the parent business has its headquarters in the Philippines. Multinational corporations in the Philippines (MNCs) establish an ROHQ to effectively manage their local enterprises’ financial and operational aspects.

In particular, for the MNC in the Philippines, an ROHQ provides a range of services that enhance the general efficacy and prosperity of the parent firm and its agents. To establish regional operating headquarters in the Philippines, the following services are offered:

• General administration
• Business planning
• Sourcing and procurement
• Marketing and sales promotion
• Training services
• Financial advisory services
• Personnel management
• Logistics
• Research and product development
• Technical support

What are the incentives for foreign investors when establishing a Regional Operating Headquarter in the Philippines?

Foreign investors considering to establish regional operating headquarters in the Philippines can benefit from a range of incentives offered by the government. These incentives aim to attract and support foreign investments, providing favorable conditions for multinational corporations in the Philippines. Here are the incentives for foreign investors when establishing a regional operating headquarters in the Philippines:

Fiscal incentives

• Exemption from local taxes: Foreigners are exempted from all local taxes, fees, or charges, except real property tax on land improvements and equipment. 
• Tax and duty-free importation: Foreigners looking to set up Regional Operating Headquarters in the Philippines can import equipment and materials for training and conferences without paying taxes and duties.
• Disposal of equipment: Equipment can be disposed of within two years after importation, subject to payment of taxes and duties. 
• Importation of brand new motor vehicles: Foreigners can import brand new motor vehicles, subject to payment of taxes and duties. 

Non-fiscal incentives 

• Multiple-entry visa: Expatriates, along with their spouses and unmarried children below the age of twenty-one, are eligible for a multiple-entry visa. 
• Exemption from payment of fees: Expatriates are exempted from all types of local taxes, charges, or fees imposed by the Local Government Units, except for reasonable administrative costs. 
• Exemption from Alien Certificate of Registration: Expatriates are not required to secure an Alien Certificate of Registration to register Regional Operating Headquarters in the Philippines.
• Fast processing of non-immigrant visas: Non-immigrant visas for expatriates will be processed within seventy-two hours upon submission of requirements to the Bureau of Immigration (BI). 
• Preferential tax rate: Expatriates enjoy a preferential tax rate of 15% on salaries, annuities, and other types of compensation. 
• Travel tax exemption: Expatriates are exempted from paying travel tax, relieving them of additional financial burdens when traveling.
• Tax and duty-free importation of personal effects: Expatriates can import their used household goods and personal effects without paying taxes and duties.

What are the requirements and restrictions for Regional Operating Headquarters in the Philippines?

Foreign businesses looking to register a Regional Operating Headquarters in the Philippines must first secure a License to Do Business from the Securities and Exchange Commission (SEC). Below are the requirements and restrictions for Regional Operating Headquarters in the Philippines:

Requirements

• Application form: The MNC in the Philippines must complete the SEC’s application form.
• International commerce and business verification: Verifying a company’s involvement in international business and trade with branches and subsidiaries in the Asia-Pacific Region requires a certification from the Philippine Department of Trade and Industry (DTI), the Philippine Commercial Office, or the Philippine Consulate/Embassy in the company’s home country.
• Verification from the international company: Get a certification from the foreign company’s principal officer attesting that the Board of Directors or the governing body has approved the construction of an ROHQ in the Philippines.
• Evidence of inward remittance: Give evidence that your business established an ROHQ in the Philippines by paying an internal remittance of at least $200,000.
• Information sheet for registration: Complete the registration data sheet, which asks for information about the foreign business’s activities.
• Government agency endorsement or approval: Obtain endorsement or clearance, if appropriate, from any pertinent government agencies operating in your firm or industry.
• Board of Investments approval: Depending on your company’s operations and investments in the Philippines, you may need to obtain Board of Investments approval before establishing an ROHQ.
• Most recent disclosures of finances: Submit the most recent financial statements for your business to establish regional operating headquarters in the Philippines, which attest to the solvency and stability of your head office.

Restrictions

• Offering qualifying services: ROHQs are prohibited from offering qualifying services to entities other than their parent company’s branches, affiliates, and subsidiaries.
• Soliciting or marketing goods and services: It is strictly prohibited for ROHQs to solicit or market goods and services on behalf of their parent company, affiliates, subsidiaries, or branches.
• Taxation: ROHQs are subject to the following taxes: 10% on taxable income, 10% value-added tax, and 15% branch profit remittance tax on income remittances to the parent company.

How to establish a Regional Operating Headquarters in the Philippines: Step-by-step guide

Understanding the process of establishing a Regional Operating Headquarters in the Philippines is crucial as it allows for proper planning, identifying challenges and risks, ensuring compliance with laws and regulations, and making informed business decisions. Here are four steps on how to set up a Regional Operating Headquarters in the Philippines:

Step 1: Appoint a trusted local agent

It is crucial to appoint a reliable local agent to establish a Regional Operating Headquarters in the Philippines. This agent will represent the ROHQ and handle any court summons or legal proceedings served against the Philippine-registered ROHQ. 

Step 2: Establish an official business address

Before registering your company, you must have a registered office address in the intended operating location. Present your Contract of Lease to the Bureau of Internal Revenue (BIR) and local government units (LGUs). If you haven’t found a physical office, consider renting a virtual office temporarily to establish a Regional Operating Headquarters in the Philippines.

Step 3: Meet the minimum capital requirements

ROHQs must deposit a minimum of $200,000 to start a Regional Operating Headquarters in the Philippines as inward remittance for capitalization and annual operating expenses. Certain head office overhead expenses may be allocated here under specific conditions.

Step 4: Submit the required documents to the Securities and Exchange Commission (SEC)

To officially register your ROHQ, complete and submit several required documents to the SEC. These include the application form, verification of international business and trade, confirmation by the foreign company, proof of a $200,000 inward remittance, registration data sheet, clearance of endorsement from government agencies, endorsement from the Board of Investments, and latest financial statements.

What are the taxes for Regional Operating Headquarters in the Philippines?

The taxes to register Regional Operating Headquarters in the Philippines are subject to a 10% Value Added Tax (VAT) and income tax rate on their sources of income within the country. Additionally, they must pay a 15% branch profit remittance tax on income remittances to their parent companies abroad, based on the total profits allocated for remittance with no deduction for the tax component. However, this tax can be reduced to establish a Regional Operating Headquarters in the Philippines if applicable tax treaties exist between the Philippines and the parent company’s country of residence. For instance, a preferential tax rate of 10% is granted under tax treaties with countries such as the Netherlands, Japan, Germany, and Austria. ROHQs registered with the Philippine Economic Zone Authority (PEZA) receive an exemption from the tax on remittances of branch profits.

Start your Regional Operating Headquarters in the Philippines

Starting a Regional Operating Headquarters (ROHQ) in the Philippines involves navigating complex legal landscapes. Our expert legal team is skilled in handling various aspects of business setup, from incorporation to operational legalities. We offer comprehensive services tailored to ROHQ establishment.

To learn how our legal experts can assist you in starting a Regional Operating Headquarters in the Philippines, please provide your details below or contact us at [email protected].

Frequently Asked Questions (FAQs)