I.

Definition of Regional Operating Headquarters

“The term 'regional operating headquarters' shall mean a branch established in the Philippines
by multinational companies which are engaged in any of the following services: 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
communications; and business development.” (Section 22(EE) of the NIRC)

II. Income Tax Liability of Regional Operating Headquarters under the NIRC

Tax on Branch Profits Remittances. - Any profit remitted by a branch to its head office shall be
subject to a tax of fifteen (15%) which shall be based on the total profits applied or earmarked
for remittance without any deduction for the tax component thereof (except those activities
which are registered with the Philippine Economic Zone Authority). The tax shall be collected
and paid in the same manner as provided in Sections 57 and 58 of this Code: Provided, that
interests, dividends, rents, royalties, including remuneration for technical services, salaries,
wages premiums, annuities, emoluments or other fixed or determinable annual, periodic or
casual gains, profits, income and capital gains received by a foreign corporation during each
taxable year from all sources within the Philippines shall not be treated as branch profits unless
the same are effectively connected with the conduct of its trade or business in the Philippines.
[Section 28 (A)(5) NIRC)]

Tax Rate of Regional or Area Headquarters and Regional Operating Headquarters of

Multinational Companies.

Regional operating headquarters as defined in Section 22(EE) shall pay a tax of ten percent
(10%) of their taxable income. [Section 28 (A)(6)(b) NIRC)]

III. Tax Incentives to Regional Operating Headquarters under the Omnibus Investments
Code of 1987 as amended.

a) Preferential Rate of 10% on Taxable Income

Corporate Income Tax Incentive to Regional or Area Headquarters and Regional Operating
Headquarters. - Regional or area headquarters established in the Philippines by multinational
companies and which headquarters do not earn or derive income from the Philippines and which
act as supervisory, communications and coordinating centers for their affiliates, subsidiaries, or
branches in the Asia-Pacific Region and other foreign markets shall not be subject to income tax.
Regional operating headquarters shall be subject to a tax rate of ten percent (10%) of their
taxable income as provided for under the National Internal Revenue Code, as amended by
Republic Act No. 8424: Provided,  That any income derived from Philippine sources by the
ROHQ when remitted to the parent company shall be subject to the tax on branch profit
remittances as provided for in Section 28(a)(5) of the National Internal Revenue Code. [Art.64
Chapter IV, E.O. 226, as amended by RA 8756]
b) Exemption from All Kinds of Local Taxes, Fees or Charges

Exemption From All Kinds of Local Taxes, Fees, or Charges. - The regional or area headquarters
and regional operating headquarters of multinational companies shall be exempt from all kinds
of local taxes, fees, or charges imposed by a local government unit except real property tax on
land improvements and equipment. [Art.66 Chapter IV, E.O. 226, as amended by RA 8756].

c) Tax and Duty Free Importation of Training Materials and Equipment

Tax and Duty Free Importation of Training Materials and Equipment; Importation of Motor
Vehicles. - Regional or area headquarters and regional operating headquarters shall enjoy tax and
duty free importation of equipment and materials for training and conferences which are needed
and used solely for their functions as regional or area headquarters or regional operating
headquarters and which are not locally available subject to the prior approval of the Board of
Investments.

"The sale or disposition of equipment within two (2) years after importation, entered tax and
duty free, shall require prior approval of the Board of Investments and prior payment of
applicable taxes and duties waived in favor of RHQ/ROHQ.

"Regional or area headquarters and regional operating headquarters shall be entitled to the
importation of new motor vehicles subject to the payment of the corresponding taxes and duties.
[Art.67, Chapter IV, E.O. 226, as amended by RA 8756].

Tax Treaty with Singapore (entered December 11, 2000, Manila Philippines)

Article 7

BUSINESS PROFITS

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the
enterprise carries on business in the other Contracting State through a permanent establishment
situated therein. If the enterprise carries on or has carried on business as aforesaid, the profits of the
enterprise may be taxed in the other State but only so much of them as is attributable to that
permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on

business in the other Contracting State through a permanent establishment situated therein, there
shall be attributed to that permanent establishment profits which it might be expected to make if it
were a distinct and separate enterprise engaged in the same or similar activities under the same or
similar conditions and dealing wholly independently with the enterprise of which it is a permanent
establishment.

However, insofar as it has been customary in a Contracting State to determine the profits to be
attributed to a permanent establishment on the basis of an apportionment of the total profits of the
enterprise to its various parts, nothing in this paragraph shall preclude that Contracting State from
determining the profits to be taxed by such an apportionment as may be customary; the method of
apportionment adopted shall, however, be such that the result shall be in accordance with the
principles embodied in this Article.

3. In the determination of the profits of a permanent establishment, there shall be allowed as

deductions expenses which are incurred for the purposes of the permanent establishment including
executive and general administrative expenses so incurred, whether included in the State in which the
permanent establishment is situated or elsewhere.

4. Notwithstanding the provisions of paragraph 3, no deduction shall be allowed in respect of

amounts paid or charged (other than reimbursement of actual expenses) by the permanent
establishment to the head office of the enterprise or any of its other offices, by way of:

a) royalties, fees or other similar payments in return for the use of patents or other rights;

b) commission for specific services performed or for management; and

c) interest on money lent to the permanent establishment, except in the case of banking institution.

5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise.

6. Where profits include items of income which are dealt with separately in other Articles of this
Convention, then the provisions of those Articles shall not be affected by the provisions of this
Article.