pinoytaxation.com » incorporation

What you should know about ROHQ?

pinoytaxation — Fri, 21 Aug 2009 07:10:02 +0000

Regional Operating Headquarters (ROHQ) (Section 2(3), RA No. 8756) means a foreign business entity which is allowed to derive income in the Philippines by performing the following qualifying services to its affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific Region and in other foreign markets:

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
logistic services
research and development services and product development
technical support and maintenance
data processing and communication, and,
business development

Being a special entity allowed in the Philippines with certain incentives and preivileges, ROHQ’s business activities are subject to the following limitations:

a. Shall offer its services only to its affiliates, branches or subsidiaries, as declared in its registration with the Securities and Exchange Commission (SEC).

b. It shall not directly and indirectly solicit or market goods and services whether on behalf of their mother company, branches, affiliates, subsidiaries or any other company.

c. It cannot directly or indirectly engage in the sale and distribution of goods and services of its mother company, branches, affiliates, subsidiaries or any other company.

Capitalization requirements. The ROHQ is required to initially remit into the country within 30 days from receipt of the Certificate of Registration with SEC through BOI such amount as may be necessary to cover its operations in the Philippines but which amount will not be less than US$200,000 or its equivalent in other currencies. This should be evidenced by a Certificate of Inward Remittance issued by the depository branch.

Taxation and Other incentives includes the following:

ROHQ

a. 10% income tax on taxable net income instead of the 30%/25% on income;

b. 12% value-added tax;

c. 15% branch profit remittance tax;

d. Tax and duty free importation of training materials and equipment, and importation of motor vehicles; and

e. Exemption from all kinds of local taxes, fees, or charges.

Expatriates

a. Multiple entry visa to expats, their spouse and children under certain conditions;

b. Travel tax exemption of expats and their dependents upon certification of the BOI;

c. Tax and duty free importation of personal and household effects ;

d. 15% withholding tax on compensation of managerial and technical alien employees instead of the 25% or 5-32%. Apply also to Filipino citizens holding the same positions.

Licensing. In order to operate and ROHQ in the Philippines, it is required to secure a License with the securities and Exchange Commission (SEC). For the purpose, endorsement by the Board of Investments (BOI) shall be submitted to the SEC along with the other requirements. Likewise, registration with the BIR, and other government agencies are required for the ROHQ.

b. 15% imposable to expats, when applicable?

c. License of Philippine Brach, how secured?

d. How to register a Domestic Company in the Philippines?

Suggested Reading:

a. Republic Act No. 8756 amending Executive Order No. 226;

b. Revenue memorandum Circular No. 41-2009;

License of Phil. Branch, how secured?

pinoytaxation — Sun, 09 Aug 2009 06:58:15 +0000

A BRANCH is a local operation in the Philippines of the foreign parent company abroad. It is a mere extension of the parent’s legal entity abroad and as such, liabilities in the Philippines incurred by the branch accrues to the parent so that in case of financial insufficiency, the parent abroad may be required to make good of the deficiency. Its capitalization shall depend on the nature of operations in the Philippines, whether on a local market requiring at least US$200,000 or on export of at least 60% of its produce, in which case, the US$200,000 may not apply and may capitalize based on an amount it may sustain operations, but may not be less than PhP5,000. Tax implications are almost similar to that of a domestic corporation in the Philippines, and taxes applies only to the operations of the branch in the country.

Before it can do any legitimate operations in the Philippines, it needs to secure a license to do business in the Philippines with the Securities and Exchange Commission (SEC). Upon such license, it will be authorized to conduct business similar to a corporation and with such powers and attributes provided by law. It is likewise required to secure a Mayor’s permit with the local government (LGU) of location and register with other government bodies like, Bureau of Internal Revenue (BIR), Social Security System (SSS), Home Development Mutual Fund (HDMF 0r Pag-ibig), and Philippine Health insurance Corporation (PHIC).

If you intend to register one, hereunder are the basic steps and requirements with the SEC:

a. After deciding establishing one, you may contact a Filipino residing in the country to act as a Resident Agent who shall be authorized to receive summons and communications relative to any legal process with the SEC and other government agencies in the Philippines in behalf of the corporation;

b. Make available the following documents:

Consularized copy of the board resolution authorizing the establishment of the branch in the Philippines, appointing a resident agent, and authorizing the opening of a treasurer’s in trust account for the capitalization;
Copy of the audited financial statements of the preceding year certified by an independent certified public accountant in the home country; and,
Consularized copy of the Articles of Incorporation/Registration of the parent company abroad certified by the issuing agency abroad and with English translation if in non-English language.

c. Check availability of name with the SEC system. Name is usually the name abroad with the added phrase “Philippine Branch” and shall be reserved with the SEC reservation system upon payment of PhP30.00 per month;

b. Fill out an Application form, SEC Form No. F-103. Resident agent may fill out and sign this document, otherwise, a Resident Agent will have to execute a confirmation of its appointment as Resident Agent;

c. Open a treasurer’s in trust account (TITF) with the depository bank of choice. The resident agent or any other person duly authorized in the Board resolution above may be appointed as treasurer. TITF account can only be deposited but could not be withhdrawn except upon approval of the branch application.

d. Inwardly remit the required capitalization to the TITF account and secure with the bank, Certificate of Inward Remittance and the Certificate of Bank Deposit.

e. Collage all the above requirements and reproduce at least six (6) sets for the SEC.

f. Present the papers to the SEC for pre-evaluation. Upon finding the documents in order, then the SEC will issue a Payment Assessment Form (PAF) for the filing fee. Payment of the fee and receiving the sets marks the formal filing of the application.

g. Within a period of five (5) to ten (10) days, the approval of the application will be released and the Philippine Branch is now registered with the Philippines thereby allowing the branch to do business in the Philippines. If the operations would require a secondary license, then such license shall be required before the actual operations.

After securing the License to do Business in the Philippines, TITF account may now be regularized or withdrawn and be maintained another bank of choice. Registration with the BIR, LGU, and SSS may proceed. Other applications may be dealt with upon actual employment of at least one (1) employee. By virtue of the registrations, reportorial requirements will be required and they will be advised during the registration process.

“Taxes affect lives, care for taxes and save lives”

Related Articles:

a. How to register a corporation?;
b. What are the registrable entities in Philippines?

How to register a corporation?

pinoytaxation — Sat, 08 Aug 2009 06:26:17 +0000

Background

In the Philippines, a corporation is its version of a limited liability company (LLC) in Europe. Stockholders or investors are, generally, liable only to the extent of their shareholdings, save under certain exceptions like in piercing the veil of corporate entity under certain instances. Securities and Exchange Commission (SEC) is the government agency lodged with the registration and regulation of these entities.

Domestic company or domestic corporation refer to those that are registered and existing under the law of the Philippines. Its registration with the SEC is normally affected by the nature of its activity it intends to operate as it would dictate the amount of required minimum capitalization, extent of foreign equity participation, and other documentary requirements. For simplicity, this article is premised on the setting-up of a company that intends engage primarily on local sales in the Philippines.

Requirements

First and foremost is the conceptualization of the corporation by the incorporators, say, what business to undertake, where, how will it operate, how is the capitalization and how much will each contribute. It is required that at least five (5) to fifteen (15) natural persons, majority of which are residents of the Philippines, can incorporate a corporation. Upon that concept, they check on the intended name with the SEC name reservation system (with corp., corporation, inc., or incorporated) to check its availability. Name should not be deceptively or confusingly similar to an existing registered corporation or protected name, and should not be that prohibited to be used. Upon availability of the name and its successful reservation, the incorporators will then proceed with the following documentary requirements:

a. Articles of Incorporation in accordance with the Corporation Code of the Philippines;
b. By-laws, also in accordance with the Corporation Code of the Philippines;
c. Treasurer’s Affidavit on the requirement that at least 25% of the authorized capital must be subscribed and that at least 25% of the same shall be paid-up;
d. Bank Certification for the treasurer’s-in-trust (TITF) account required to be opened with he bank of choice for the paid-up capitalization. The above (a) to (c) documents, some bank forms, and Treasurer’s identification cards and picture is necessary for the TITF. Also, TITF account will not be withdrawn until after the corporation is registered, but could be allowed for deposits.
e. Joint Undertaking to change name in accordance with SEC format and terminologies;
f. Authorization to SEC and BSP to inquire into bank deposit for the verification of the paid-up capitalization in a depository bank;
g. Affidavit of corrections, for the necessary corrections in the process;
h. Coversheet in accordance with SEC format; and
i. Endorsement from other government regulatory agencies for specific industries like, power, drugs and medicine, and the similar agencies requiring secondary license.

The above requirements are sensitive and must be made in accordance with law, SEC rules and regulations. SEC requires at least sic (6) sets of the above documents. As a guide and easy reference, SEC employees cooperative is making available a set of the above documents, except for the Bank Certification, Name reservation, and Endorsement for a minimal amount in Pesos. For the purpose, promoters may be hired as they are knowledgeable and more particular with the requirements of the law and SEC regulations, like lawyers, corporate practitioners and experienced professionals in the fields like CPA’s in direct interaction with SEC.

SEC Procedures

Upon completion, the above documents and papers are then submitted to SEC-Corporation and Partnership Registration Department (CPRD) for evaluation of the completeness and compliance with laws and SEC rules. Comments, if any, may require revisions, while, if found in order, then the CPRD will prepare a Payment Assessment Form (PAF) with the details of application fees of approximately 1/5 of 1% of authorized capitalization. Upon payment with the Cashier, SEC Receiving Unit will formally stamped received the application and at least one (1) receiving copy will be furnished to the applicant.

From such filing, the CPRD will again re-evaluation the application papers and documents and will undergo the review process. If found in order, then approval will follow within approximately four (4) to seven (7) working days from date of receipt of the application. Comments, if any in the re-evaluation and review process, may require revisions and clarifications, and must be complied for the process to proceed. Date of approval of the application marks the birth of the corporation and acquisition of juridical entity for all intents and purposes, and Certificate of Incorporation with Bureau of Internal Revenue (BIR) Tax Identification Number (TIN) will then be issued.

Post SEC registration

Upon issuance of the Certificate of Incorporation, the Company will then proceed with the registration of its Stock and transfer Book (for stock corporation), or Membership Book (for non-stock corporations). Likewise, it shall proceed with the formal registration with the BIR, the local government units for the Mayor’s Permit to operate a business, and registration with other agencies.

If it is a stock corporation, then, documentary stamp tax (DST) at the rate of P1.00 per P200 par value, or fractional part thereof, shall be paid not later than the fifth (5th) day of the month following the month of approval of the SEC. Failure to pay would entail penalties, e.g surcharge of 25% based on the basic amount of tax due, 20% interest, and compromise penalty based on scale of the basic amount of tax.

Reportorial requirements

Documentary requirements does not end up on the above. During the corporation’s existence, reportorial requirements of the SEC, BIR, and other agencies are required to be file on a timely and continuous manner. Again penalties in accordance with the agency’s regulations will be imposed for failure to do so.