DTI to ask for prospective implementation of tax on ROHQ

MANILA, Philippines -  The Department of Trade and Industry (DTI) may ask the Department of Finance (DOF) to reconsider the planned removal of the 15-percent preferential income tax rate for individuals currently employed in the regional operating headquarters (ROHQ) of multinational companies under the proposed tax reform bill, a move expected to discourage multinational companies from setting up offices in the country and resulting in job losses.

“We’ll run the numbers. We’ll study what if we make it prospective. That’s what we’re looking at, but I’m not saying we’ll do it. I told my undersecretaries to discuss with the DOF its impact, if making it prospective is workable,” Trade Secretary Ramon Lopez said.

By prospective, Lopez said those currently enjoying the preferential income tax rate will remain in “status quo so that there will be no diminution.”

Only those incoming workers, meanwhile, will be covered by the planned removal of the preferential income tax rate.

“But again, this is still under study and we have yet to submit the proposal. It is still in discussions unofficially,” Lopez said.

Alien individuals and their Filipino counterparts currently employed by ROHQ enjoy a preferential tax rate of 15 percent on salaries, annuities and other compensation.

The American Chamber of Commerce of the Philippines had earlier warned about the potential impact of the removal of the preferential taxes.

The group’s senior advisor John Forbes told The STAR regional headquarters of multinational companies in the Philippines may shut down or relocate to other countries once the proposed changes in the ROHQ tax rate are implemented under the first package of the tax reform program.

“AmCham is nevertheless concerned about the changes in the ROHQ tax rate. Already other countries are approaching our members to relocate because they offer incentives which will be removed by the House-passed bill,” he said.

“We expect attrition over time if the current incentives are removed, as they are in the House bill. If the Philippines cannot maintain a competitive environment, then over time some ROHQ firms may close. We hope the Senate will stand in the way of these jobs being lost by Filipinos,” Forbes said.

Lopez, however, said he is okay with the removal of the preferential income tax rate.

“As a policy, I am in support of that because that is small compared with all these benefits in infra and all that. That to me is a bigger gain. You need revenue so if you ask me now, I’m okay as it is. It’s just that some sectors are asking to look into this,” he said.

“We are now at the stage that there is a lot of reasons to locate here. It is not only for that incentive why they are locating here. Because of our growth, the economy is robust, I think it will have a natural attraction for them to not only invest but to locate here,” Lopez added.