How to Set Up a Regional Headquarters (RHQ) in the Philippines — 2024 Guide
Updated: August 6, 2024
The Philippines presents a compelling economic landscape for foreign corporations due to its blend of Western and Eastern cultures, serving as a gateway to the thriving Asia-Pacific market. Considering the array of incentives, including tax benefits, establishing a Regional Headquarters (RHQ) in the Philippines could significantly benefit your business. This article will discuss more about setting up an RHQ in the country.
- What is a Regional Headquarters?
- What is the Paid up Capital of a Regional Headquarters?
- What are the Advantages of Setting Up a Regional Headquarters in the Philippines?
- How long will it take to register a Regional Headquarters in the Philippines?
- Frequently Asked Questions
Regional Headquarters (RHQ) in the Philippines
A Regional Headquarters (RHQ) in the Philippines acts as the central administrative hub for a foreign corporation expanding in the Asia-Pacific region. This entity facilitates international trade but cannot conduct operations or generate income within the Philippines. The RHQ supervises the global subsidiaries, affiliates, and branches of the parent company, operating under the same legal framework as the parent company and focusing on coordination, administration, business planning, and communication management.
Typically, RHQs are set up by multinational companies seeking to leverage the cost-efficient Filipino workforce and capitalize on the diverse tax incentives provided by the country to streamline operational expenses.
Paid-Up Capital of a Regional Headquarters in the Philippines
In order to sustain its operational expenses, the parent company is mandated to remit a minimum of $50,000 as paid-up capital for the establishment of the Regional Headquarters in the Philippines. This financial requirement ensures the RHQ’s financial viability and compliance with regulatory standards, enabling it to effectively carry out its supervisory and coordination functions within the global business network.
Advantages of Setting Up a Regional Headquarters in the Philippines
Setting up a Regional Headquarters (RHQ) in the Philippines offers compelling advantages for multinational corporations keen on expanding their reach in the Asia-Pacific region. Here are some key benefits:
- Business Environment. The Philippines offers a favorable business landscape with supportive policies and regulations, positioning it as an enticing destination for establishing regional headquarters and conducting global business operations.
- Tax Incentives. The Philippines offers a range of tax incentives and advantages for RHQs, incentivizing foreign investment and cultivating a favorable financial environment for multinational corporations.
- Skilled Workforce. The availability of a skilled and adept workforce in the Philippines enables companies to harness diverse talent pools, fostering innovation and productivity within the RHQ environment.
- Cost-Effective Operations. The Philippines provides a business environment that is cost-effective, with competitive labor costs, empowering companies to optimize operational expenses and improve cost efficiencies.
Timeline of Registering a Regional Headquarters in the Philippines
When initiating the registration of a Regional Headquarters (RHQ) in the Philippines, the process generally encompasses a series of fundamental steps:
- Document Preparation. Gather all necessary paperwork, which should include a Authenticated certification from the Philippine Embassy or the Philippine Commercial Office or from the equivalent office of the Philippine Department of Trade and Industry (“DTI”) in the applicant’s home country, stating that said foreign firm is an entity engaged in international trade with affiliates, subsidiaries or branch offices in the Asia Pacific and other foreign markets; and in case the certification is issued by the equivalent office of the Philippine DTI, the same shall be authenticated by the Philippine Consulate/Embassy, as well as a Certificate from the Principal Officer of the foreign corporation authorizing the establishment of the RHQ.
- Minimum Capital Requirements. Make sure to comply with the standard paid-up capital requirement, typically established at US$50,000 for setting up an RHQ.
- BOI. Secure endorsement from the Philippines Board of Investments (BOI).
- SEC Registration. Complete the registration of your RHQ with the Securities and Exchange Commission (SEC) in the Philippines by submitting the necessary documentary requirements.
- Registered Office Address. Securing a registered office address in the Philippines for the RHQ is essential.
- Timeline. Timelines may vary, typically ranging between three (3) to five (5) months from the submission of complete requirements. Various factors affect the duration, such as document preparation, submission, processing times, and any additional requirements.
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Frequently Asked Questions
What is the difference between an RHQ and an ROHQ?
The key distinction between an RHQ and an ROHQ lies in their permitted functions. An ROHQ can earn income in the Philippines by providing qualifying services1 to its global affiliates, branches, and subsidiaries. On the other hand, an RHQ cannot generate income locally and is limited to acting as a supervision and coordination center.
1These activities, termed as “qualifying services”, include the following: (1) general administration and planning; (2) business planning and coordination; (3) sourcing/procurement of raw materials and components; (4) corporate finance advisory services; (5) marketing control and sales promotion; ( 6) training and personnel management; (7) logistics services; (8) research and development services, and product development; (9) technical support and maintenance; (10) data processing and communication; and (11) business development.
What are the tax incentives an RHQ can avail of in the Philippines?
There are a number of tax incentives for RHQs in the Philippines. These include:
- Tax and duty-free importation
- Exemption from all local taxes, charges, and fees
Expatriates are also offered the following non-tax incentives:
- Multiple entry visas for expatriates, including their partner and unmarried children under the age of 21
- Exemption from most fees (except reasonable admin costs)
- Exemption for securing the Alien Certification of Registration
- Non-immigrant visa will be fast-tracked and processed within 72 hours by the Bureau of Immigration
- Reduced tax rate of 15% on salaries and annuities
- Travel tax exemption
- Tax and duty-free importation of used household and personal items
What is the timeline in setting-up an RHQ?
Timelines typically range between three (3) to five (5) months, influenced by factors like document preparation, submission, processing times, and additional requirements.