Multinational Companies

Multinational Companies
Regional Operating headquarters		Regional  Headquarters
Tax rate:    10% of net income		Tax rate:   Exempt
Defined:		Defined:
·         Is a branch established in the Philippines which is engaged in any of the following qualifying services: Ø  General administration and planning. Ø  Business planning and coordination. Ø  Sourcing/procurement of raw materials and components. Ø  Corporate finance advisory services. Ø  Marketing control and sales promotion. Ø  Training and personnel management. Ø  Logistic services. Ø  Research and development services and project development. Ø  Technical support and maintenance. Ø  Data processing and communication. Ø  Business development.		·         Is a branch established in the Philippines and which headquarters do not earn or derived income from the Philippines and which act as supervisory, communications, and coordinating center for its affiliates, subsidiaries, or branches in the Asia-Pacific region and other foreign markets

OFFSHORE BANKING UNITS (Special Resident Corporation)

§  “OBU” is a branch of a foreign bank located in an offshore financial center (OFC). It may accept deposits and loans from other foreign banks and OBUs, but may not accept deposits from (or make loans to) the residents of the country in which it is located. OBUs are otherwise unrestricted in their legitimate activities, and are free from the monetary controls of the country of location.

Foreign banking institutions can establish and manage offshore banking units. Offshore banking units are allowed to provide all traditional banking services to non-residents in any currency other than Philippine national currency. Banking transactions to residents are limited and restricted.

These RESIDENT foreign corporations are subject to tax on income derived from:

1.       Foreign currency transactions with local commercial banks. -  EXEMPT

2.       Foreign currency transactions with branches of foreign banks authorized by BSP.- EXEMPT

3.       Interest income derived from foreign currency loans granted to residents.  -  10%

“1-3” were previously subject to 10% final tax.  “1 and 2” NOW are tax exempt

TAX EXEMPT TRANSACTIONS:

§  Income of NON-resident individual and Non-Resident corporations from transactions with OBUs.

Tax Base	Tax Rate
Ø  Income from foreign currency transactions with: Nonresidents OBUs in the Philippines Local commercial bank (including Phil. Branches of foreign banks)	EXEMPT FROM ALL TAXES (used to be 10% final tax) except net income from transactions specified by the Sec. of Finance.
Ø  Interest income from foreign currency loans granted to residents other than OBUs or local commercial banks	10% final tax
Ø  Any income of NON-Resident individual or corporation from OBUs	Exempt

Tax on Branch Profit Remittance (Except on activities registered with PEZA)

Tax Base	Tax Rate
Any profit remitted by a branch office to its head office.  Total profits applied or earmarked for remittance without deduction for the tax component. (Resident Corporations)	15%