RHQ vs ROHQ Taxation in the Philippines: BIR Rules and Registration Under the CREATE Act

A Regional or Area Headquarters (RHQ) cannot earn Philippine income by law, so it stays exempt from Philippine income tax and VAT; a Regional Operating Headquarters (ROHQ) can earn fees for services to regional affiliates, so it pays tax on that income. Since the CREATE Act (Republic Act No. 11534) took effect, an ROHQ no longer enjoys the old 10% preferential rate — it now pays the regular 25% corporate income tax, the same rate as an ordinary foreign corporation branch. Both entity types must still register with the BIR, secure a TIN, and withhold tax on employee compensation.

What is an RHQ, and why is it exempt from tax? #

An RHQ is an administrative branch office that a multinational company sets up in the Philippines purely to supervise, coordinate, and communicate with its affiliates, subsidiaries, and branches in the Asia-Pacific region and other markets — it is legally barred from earning or deriving income here. Because it has no Philippine income to tax, Republic Act No. 8756 (1999) exempts it outright from income tax and value-added tax on its own operations, and from local business taxes except real property tax on land, improvements, and equipment it owns.

The exemption is not a discretionary incentive — it follows directly from the entity’s structure. RA 8756 states the rule plainly:

“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.”

The same law zero-rates sales and services made to an RHQ, so a Philippine supplier invoicing an RHQ can apply the 0% VAT rate instead of the standard 12%, subject to the usual substantiation rules. An RHQ is funded entirely by inward remittances from its head office — it never issues a service invoice to an affiliate.

What is an ROHQ, and how does it earn taxable income? #

An ROHQ is the income-earning counterpart to the RHQ: it is a branch that a multinational sets up to perform “qualifying services” for its affiliates, subsidiaries, or branches — general administration and planning, sourcing and procurement, treasury and finance advisory, personnel management, logistics, R&D, data processing, and similar back-office functions — and it charges those affiliates a fee for the work. Because it earns Philippine-sourced service income, an ROHQ is a taxpayer in the full sense: it computes and pays corporate income tax, charges VAT on its qualifying services, and remains liable for the branch profit remittance tax (BPRT) when it sends profits back to its foreign head office, much like the branch structures compared in PEZA vs. BOI incentives under the CREATE Act.

An ROHQ cannot offer these services to unrelated third parties — doing so outside the affiliate group would take it outside its ROHQ registration and expose it to broader compliance issues with the BIR and SEC.

RHQ vs ROHQ: side-by-side comparison #

Both entities register the same way with the SEC and BIR, and both are still resident foreign corporation branches for legal-personality purposes — neither becomes a separate domestic corporation, and neither qualifies for the reduced 20% MSME corporate rate available to small domestic corporations discussed in corporate income tax rates under the CREATE Act, since that reduced rate is limited to domestic corporations meeting income and asset thresholds.

How the CREATE Act changed ROHQ taxation #

Before 2022, an ROHQ paid a flat 10% preferential income tax on its taxable income under the old Section 28(A)(6) of the National Internal Revenue Code, a rate carried over from RA 8756 and reinforced by RA 9337. The CREATE Act (Republic Act No. 11534), signed into law on March 26, 2021, restructured the corporate income tax and incentive system nationwide, and one of its changes was to eliminate the ROHQ’s separate preferential rate. Existing ROHQs were allowed to continue availing of the 10% rate only through December 31, 2021; from January 1, 2022 onward, ROHQs pay the regular corporate income tax rate — 25% of net taxable income — or the minimum corporate income tax on gross income, whichever is higher, exactly like any other resident foreign corporation branch operating in the Philippines. The BIR implemented this transition through Revenue Regulations No. 5-2021, which operationalized the CREATE Act’s corporate tax provisions.

This was a deliberate policy choice, not an oversight: the CREATE Act lowered the general corporate rate (from 30% to 25%, or 20% for qualifying MSMEs) while removing narrow sector-specific preferences like the ROHQ rate, shifting special treatment toward time-bound registered incentives rather than a permanent flat rate in the tax code.

Worked example: an ROHQ’s tax bill before and after CREATE #

A worked comparison shows the size of the shift. Suppose an ROHQ provides regional data-processing services to its Asia-Pacific affiliates and earns ₱40,000,000 in service fees for the year, with ₱15,000,000 in allowable deductions (salaries, rent, IT costs, and other ordinary business expenses).

• Net taxable income: ₱40,000,000 − ₱15,000,000 = ₱25,000,000
• Tax under the current 25% RCIT: ₱25,000,000 × 25% = ₱6,250,000
• Minimum corporate income tax check: 2% of ₱40,000,000 gross income = ₱800,000, which is lower than the RCIT, so the ROHQ pays the ₱6,250,000 RCIT amount
• Tax under the old 10% preferential rate (pre-2022): ₱25,000,000 × 10% = ₱2,500,000
• Additional tax from the CREATE Act change: ₱6,250,000 − ₱2,500,000 = ₱3,750,000, a 150% increase in income tax liability on the same taxable income

On top of the ₱6,250,000 RCIT, the same ROHQ would owe 12% VAT on its qualifying service fees where applicable, and 15% BPRT — computed under rules similar to those explained in branch profit remittance tax (BPRT) in the Philippines — on whatever after-tax profit it actually remits to its foreign head office.

How to register an RHQ or ROHQ with the SEC and BIR #

Registration for either entity type follows the same general sequence: secure a Board of Investments (BOI) endorsement, obtain an SEC license to establish a branch, then complete BIR registration before commencing operations. In practice this means:

1. Apply for BOI endorsement. The multinational applies to the Board of Investments for endorsement as an RHQ or ROHQ, confirming the entity meets the activity restrictions for its category.
2. Secure an SEC license. With the BOI endorsement, the head office applies to the Securities and Exchange Commission for a license to establish a branch in the Philippines as an RHQ or ROHQ, appointing a resident agent — an individual or domestic corporation authorized to receive summons and legal notices on the branch’s behalf.
3. Remit and certify inward capital. The head office remits the required minimum capital — US$50,000 for an RHQ, US$200,000 for an ROHQ — to a Philippine bank, which issues a certificate of inward remittance for SEC filing, and continues remitting on an annual basis afterward.
4. Register with the BIR. Using BIR Form 1903 (Application for Registration for Corporations/Partnerships), the branch secures a Tax Identification Number (TIN) and Certificate of Registration (BIR Form 2303), registers its books of accounts, and secures authority to print or use its official receipts and invoices — an ROHQ needs this to issue billing to its affiliates; an RHQ needs it mainly for its administrative records.
5. Register as a withholding agent. Both entity types employ local and expatriate staff, so both must register as withholding agents and withhold tax on compensation under the regular graduated income tax rates — the special 15% preferential rate once available to RHQ/ROHQ expatriate employees was effectively withdrawn for new registrations by the TRAIN Law (Republic Act No. 10963) starting January 1, 2018.
6. File and pay on the applicable cycle. An RHQ still files income tax returns reporting zero taxable income (it must document, not merely assume, its exempt status); an ROHQ files quarterly and annual income tax returns, VAT returns, and BPRT returns on the applicable deadlines.

Frequently asked questions #

What is the difference between an RHQ and an ROHQ in the Philippines? #

A Regional or Area Headquarters (RHQ) is an administrative branch of a multinational company that performs only supervisory, communications, and coordinating functions for regional affiliates and is not allowed to earn or derive income from the Philippines. A Regional Operating Headquarters (ROHQ) is allowed to earn income by performing qualifying services, such as general administration, business planning, data processing, or research and development, for its affiliates, subsidiaries, or branches.

Is an RHQ subject to Philippine income tax? #

No. Under Republic Act No. 8756, a Regional or Area Headquarters that does not earn or derive income from the Philippines and functions only as a supervisory, communications, and coordinating center for its regional affiliates is not subject to Philippine income tax.

What income tax rate does an ROHQ pay now that the CREATE Act removed the 10% preferential rate? #

An ROHQ now pays the regular corporate income tax rate of 25% of net taxable income, or the 2% minimum corporate income tax on gross income if higher, the same as an ordinary resident foreign corporation branch. The 10% preferential rate under the old law ended for existing ROHQs on December 31, 2021, with the 25% rate applying beginning January 1, 2022 under Republic Act No. 11534, the CREATE Act.

How much capital must an RHQ or ROHQ remit into the Philippines to register? #

An RHQ must show an initial inward remittance of at least US$50,000 to cover its operating expenses, remitted annually thereafter. An ROHQ must show an initial inward remittance of at least US$200,000, also on an annual basis, certified by a local bank as required for SEC licensing.

Does an ROHQ pay VAT and branch profit remittance tax? #

Yes. An ROHQ’s fees for qualifying services rendered in the Philippines are generally subject to 12% value-added tax, and profits it remits to its foreign head office are subject to the 15% branch profit remittance tax under Section 28(A) of the National Internal Revenue Code, unless a specific exemption applies.

Summary #

An RHQ and an ROHQ look similar on an organization chart — both are branch offices of a multinational serving regional affiliates — but the BIR treats them very differently because only one is legally allowed to earn Philippine income. An RHQ stays exempt from income tax and VAT under RA 8756 because it cannot bill affiliates for services; an ROHQ can, and since the CREATE Act took effect on January 1, 2022, it pays the regular 25% corporate income tax (or 2% MCIT if higher) instead of the old 10% preferential rate, plus 12% VAT on its service fees and 15% BPRT on profits it sends home. Both still need a BOI endorsement, an SEC branch license with a resident agent, a minimum certified inward remittance, and full BIR registration — TIN, Certificate of Registration, books of accounts, and withholding agent status — before they can legally operate.