Subsidiary

Definition A subsidiary is a juridical entity that has been organized in accordance with Philippine laws, the majority of the outstanding of which is owned by the foreign company.

Regular Branch Office Representative Office

Regional Operating Headquarters (ROHQ)

Regional or Area Headquarters

(RHQ/AHQ)

A branch office is merely A representative office is an A RHQ/AHQ is a branch an extension of the head extension of the head officeA ROHQ is a branch office office of a multinational office of the foreign of the foreign companyof a multinational company company which acts as a company. which deals directly with thewhich is allowed to derive supervisory, clients of its parent companyincome in the Philippines by communications and performing qualifying in the Philippines, but may coordinating center for its not derive income from theservices to its head office, head office, affiliates, affiliates, subsidiaries or Philippines. subsidiaries, or branches in branches in the Philippines, the Asia-Pacific Region and and other markets. other foreign markets.

Personality

Separate legal personality distinct from that of its parent company or principal stockholder.

No separate legal No separate legal personality being an personality being an No separate legal No separate legal extension of the head office extension of the head office personality, being a type of personality, being a type of (foreign company) (foreign company) branch office. branch office.

Authorized Activities

Those stated in the principal Those undertaken by the Only the specific qualifying Only supervisory, purpose of its Articles of head office which have It undertakes activities suchservices enumerated in the communications and Incorporation, except those been authorized under its as informationOmnibus Investments Code coordinating functions for its listed in the Foreign license to do business in the dissemination, and authorized under its head office, affiliates, Investments Negative List Philippines, except those communication center,license to do business in the subsidiaries, or branches in or FINL (a list of areas of listed in the FINL. the Asia-Pacific Region. promotion of the company'sPhilippines, except those activity where foreign If among the authorizedproducts, as well as qualitylisted in the FINL. equity participation is activities, may directly sellcontrol. It cannot participate in any limited to certain maximum and distribute the goods and Among the qualifyingmanner in the management levels specified therein). services of its head office or services enumerated in theof the subsidiary or branch If among the authorized any other company. Omnibus Investment Codeoffice it has in the activities, may directly sell are: Philippines, if any. and distribute the goods and services of its parent - Sourcing/ procurement of company/ principal raw materials and

Documentary Stamp Taxes (DST) upon registration

Subject to DST on the original issuance of certificates of stock at the rate of P1.00 for every P200 or fractional part of the par value of the shares of the outstanding shares of stock.

Not subject to DST because Not subject to DST because Not subject to DST because Not subject to DST because it does not issue shares of it does not issue shares of it does not issue shares of it does not issue shares of stock. stock. stock. stock.

Treatment of Liabilities

Liabilities, if any, are its Liabilities, if any, are Liabilities, if any, are Liabilities, if any, are Liabilities, if any, are own and not of its parent considered liabilities of the considered liabilities of the considered liabilities of the considered liabilities of the company or principal head office. head office. head office. head office. stockholder. Subject to certain conditions, overhead expenses of the Head Office may be allocated to the branch office. Subject to certain conditions, overhead expenses of the Head Office may be allocated to the representative office. Subject to certain conditions, overhead expenses of the Head Office may be allocated to the ROHQ. Subject to certain conditions, overhead expenses of the Head Office may be allocated to the RHQ/AHQ. Not subject to income tax as no income is derived from sources in the Philippines Not subject to IAET as no income is derived from sources in the Philippines.

Allocation of Not entitled Parent Company/ Head Office expenses

Taxation of Income

35% corporate income tax on its worldwide income.

35% corporate income tax Not subject to income tax as 10% corporate income tax on income derived from no is income derived from on income derived from Philippines sources only. sources in the Philippines. Philippine sources only. Not subject to IAET. Not subject to IAET as no Not subject to IAET. income is derived from sources in the Philippines.

Improperly Accumulated Earnings Tax (IAET) equivalent to 10% of the improperly accumulated taxable income or profits permitted to accumulate instead of divided or distributed to stockholders

Subject to the IAET equivalent to 10% of the improperly accumulated taxable income, except if a PEZA-registered company or a publicly held company.

Minimum Corporate Income Subject to MCIT, except if a Subject to MCIT, except if Not subject to MCIT as noSubject to MCIT, except if Not subject to MCIT as no Tax (MCIT) PEZA-registered company PEZA-registered income is derived fromPEZA-registered income is derived from equivalent to 2% sources in the Philippines. sources in the Philippines. of gross income beginning on the 4th taxable year immediately following the year in which such corporation commenced its business operations, when the MCIT is greater than the corporate income tax Dividends Tax/ A branch (except if PEZABranch Profit Cash and/or property registered) is subject to Remittance Tax dividends paid by a branch profit remittance tax subsidiary to a non-resident of 15% based on the total profits applied or foreign corporation shall earmarked for remittance generally be subject to a final withholding tax of 32% without any deduction for which tax may be reduced the tax component thereof, which tax may be reduced depending on tax treaties between the Philippines and depending on tax treaties the residence of the parent between the Philippines and the residence of the parent company/primary company/primary stockholder stockholder Not subject to tax on dividends or branch profit remittance because there are no retained earnings from which dividends may be declared or profit from which remittance to the head office may be made as there is no income derived from sources in the Philippines. A ROHQ (except if PEZAregistered) is subject to branch profit remittance tax of 15% based on the total profits applied or earmarked for remittance without any deduction for the tax component thereof, which tax may be reduced depending on tax treaties between the Philippines and the residence of the parent company/primary stockholder Not subject to tax on dividends or branch profit remittance because there are no retained earnings from which dividends may be declared or profit from which remittance to the head office may be made as there is no income derived from sources in the Philippines.

Deposit with the Not required to deposit Required to initially deposit Not required to deposit Not required to deposit Not required to deposit SEC securities. with the SEC for the benefit securities. securities. securities. of present and future creditors, acceptable securities with market value equivalent to at least P100,000, plus an annual additional deposit of 2% of the amount by which the branch offices gross income for the taxable year exceeds P5 Million. Registration for May qualify for registrationNot qualified to register withNot qualified to register withNot qualified to register withNot qualified to register with BOI Incentives with the Board ofthe BOI. the BOI. the BOI for purposes ofthe BOI. Investments (BOI) for availing incentives purposes of availing of (however, note that the incentives. application for ROHQ is filed with the BOI and endorsed to the SEC for approval). Registration for If qualified, may PEZA Incentives registered with PEZA. beIf qualified, may registered with PEZA. beNot qualified to register withIf qualified, may PEZA. registered with PEZA. beNot qualified to register with PEZA.