Business RegistrationTax Incentives for RHQs and ROHQs Under the CREATE MORE Act

The Philippines has become an attractive hub for multinational corporations seeking to establish Regional Headquarters (RHQs) and Regional Operating Headquarters (ROHQs). These business structures have historically benefited from attractive tax incentives and additional advantages. However, the CREATE Act and CREATE MORE have introduced revised regulations, transforming the framework for granting incentives.

Below, we’ll explain what RHQs and ROHQs are, how the CREATE Act and CREATE MORE reshape the incentive framework, and the new way to apply for these benefits.

What Are RHQs and ROHQs?

Multinational companies in the Philippines establish Regional Headquarters (RHQs) and Regional Operating Headquarters (ROHQs) to support their affiliates, subsidiaries, and branches in the Asia-Pacific region. While they are both registered with the SEC and serve a similar purpose, there are some notable differences:

• Regional Headquarters (RHQs): Non-income-generating entities that oversee and coordinate subsidiaries or affiliates, providing administrative, management, or support services like planning, research, or marketing.
• Regional Operating Headquarters (ROHQs): Income-generating entities that perform business activities such as logistics, technical support, or other services for global affiliates. However, ROHQs cannot provide services to unaffiliated Filipino entities.

RHQs and ROHQs are designed for multinational corporations to support their affiliates, subsidiaries, and branches across the region. Still, they are restricted from directly selling or providing services to most local Filipinos. You must register a domestic or foreign corporation to engage in such activities.

Tax Incentives Under Old Laws

Before the CREATE Act of 2021, RHQs and ROHQs benefited from various tax incentives under the National Internal Revenue Code and related regulations. These incentives were designed to attract multinational corporations:

• Income Tax Benefits: RHQs were generally exempt from income tax due to their non-income-generating nature, though certain incomes of resident foreign corporations were taxed at 10%. ROHQs enjoyed a preferential 10% corporate income tax (CIT) rate, significantly lower than the standard 30% rate.
• VAT and Duty Exemptions: Both entities benefited from value-added tax (VAT) exemptions on specific transactions and duty-free importation of equipment essential for their operations.
• Duty-free importation of training materials, equipment, and certain motor vehicles (with BOI approval)

New Rules Under CREATE Act and CREATE MORE

The CREATE Act of 2021 and the CREATE MORE Act of 2024 have transformed the tax incentive system for Registered Business Enterprises (RBEs), and the impact has been especially significant for ROHQs. Under CREATE, the long-standing 10% preferential income tax rate for ROHQs was abolished, requiring them to pay the regular corporate income tax (RCIT). With CREATE MORE, ROHQs can only gain access to new incentives if they register a separate RBE for qualifying income-generating activities.

Key incentive reforms include:

• Removal of blanket incentives – Incentives are no longer automatically granted by law but are performance-based, targeted, and time-bound.
• Income Tax Holiday (ITH) and Special Corporate Income Tax (SCIT) – Qualified RBEs can avail themselves of ITH for a set number of years, followed by SCIT or enhanced deductions, depending on location and activity.
• Enhanced Deductions under CREATE MORE – RBEs may claim up to 200% deduction on training expenses and 150% deduction on R&D costs, among other benefits.
• Leveling the playing field – Both foreign and local investors are now subject to the same rationalized incentive system.

For RHQs and ROHQs, any income-generating or qualifying activities must be registered separately as RBEs to benefit from CREATE/CREATE MORE.

This RBE typically operates as either a domestic corporation or a branch of a foreign company, focusing on income-generating or export-driven activities. Meanwhile, the RHQ or ROHQ retains its specialized role in regional coordination or support. Many multinationals strategically maintain both:

• An RHQ or ROHQ to manage administrative or regional oversight tasks.
• A separate RBE to access incentives linked to revenue-generating operations.

This dual-structure approach empowers companies to optimize tax advantages while maintaining a regional hub in the Philippines.

Eligibility Criteria for CREATE MORE Tax Incentives

To qualify for CREATE MORE incentives, RHQs and ROHQs must register an RBE with an IPA, such as PEZA or BOI, as a separate legal entity and meet specific criteria outlined in the Strategic Investment Priority Plan (SIPP). Key requirements for applying for incentives as an RBE include:

• Export Commitment: Export-oriented RBE must derive at least 70% of its output from exports.
• Approved Activities: Activities must align with priority sectors like IT-BPM, manufacturing, or renewable energy.
• Location for PEZA: RBEs seeking PEZA incentives must operate within designated economic zones.
• Compliance: RBEs must maintain export ratios, submit regular performance reports, and adhere to IPA guidelines.

High-value projects with over PHP 15 billion in capital or USD 100 million in export sales may qualify for extended incentives.

Documentary Requirements for RBEs Applying for Tax Incentives

Applying for CREATE MORE incentives requires submitting comprehensive documentation to the relevant IPA. Common requirements include:

• Completed application forms (e.g., BOI Form 501 or PEZA application forms).
• SEC registration documents, including Articles of Incorporation and By-Laws.
• Project feasibility study detailing the proposed activity, investment size, and economic impact.
• Financial statements and proof of export activities (for ROHQs).
• Board resolution authorizing the application.
• Proof of compliance with environmental, labor, and other regulations.

Based on the IPA or project specifics, additional documents, such as a sustainability plan for high-value projects, may be required.

Applying for Tax Incentives as an RBE with PEZA or BOI

After registering an RBE as a separate legal entity, you must also register with PEZA or BOI, following a structured application process to secure benefits such as Income Tax Holidays or reduced tax rates.

1. Select an IPA: Based on the RBE’s operational model, choose PEZA for ecozone-based operations or BOI for location-flexible projects.
2. Prepare Documentation: Submit SEC registration, a project feasibility study, financial statements, and other required documents (e.g., BOI Form 501 or PEZA application forms).
3. File Application: Apply with PEZA or BOI, paying applicable fees, and await evaluation, which may include site inspections.
4. Secure Approval: Upon approval, you will receive a Certificate of Registration (CoR) within approximately 20 working days outlining the incentive terms.
5. Maintain Compliance: To retain incentives, meet export targets, submit annual performance reports, and adhere to IPA regulations.

Once registered with PEZA or BOI, your RBE should focus on income-generating or export-oriented activities to access tax incentives. Meanwhile, your RHQ or ROHQ should concentrate on providing regional oversight or support services.

Final Thoughts

The CREATE and CREATE MORE Acts revolutionize the tax incentive framework for multinational corporations in the Philippines. Notably, ROHQs no longer benefit from the preferential 10% income tax rate. RHQs and ROHQs should establish a separate Registered Business Enterprise (RBE) to access incentives. Under the CREATE MORE Act, RHQs and ROHQs should concentrate on supporting regional affiliates, while the RBE focuses on income-generating or export-driven activities. This dual-structure strategy optimizes tax benefits while maintaining a regional hub in the Philippines.

Are You Registering a RGQ, ROHQ, or RBE in the Philippines?

Incorporating an RHQ, ROHQ, or RBE in the Philippines requires careful preparation and strict compliance with the SEC and other government agencies. The process can be complex and time-consuming, from drafting incorporation papers to securing permits and registering with tax and social agencies. 

Thankfully, the Business Registration Philippines team provides comprehensive support for your business registration, so you don’t have to stress over the paperwork. 

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