Regular income tax rates for employees of RHQs, ROHQs, OBUs, and Petroleum Contractors

(BIR Tax Advisory)

This Tax Alert is issued to inform all concerned taxpayers on the BIR’s advisory on the applicable income tax rates to employees of Regional Headquarters (RHQs) and Regional Operating Headquarters (ROHQs) of multinational companies; Offshore Banking Units (OBUs); and Petroleum Service Contractors and Subcontractors.

Pursuant to the BIR’s advisory issued on January 31, 2018 and signed by Commissioner Dulay, all employees of these entities enjoying the preferential tax rate of 15% prior to 2018 are now subject to regular withholding tax on compensation. The withholding tax table as prescribed under Revenue Memorandum Circular No. 1-2018 shall be used.
We note that implementing rules and regulations of the provisions of National Internal Revenue Code and related statutes are issued through revenue regulations. Hence, we expect that the BIR shall reiterate this tax treatment of RHQs, ROHQs, OBUs, and Petroleum Contractors/Subcontractors employees in a revenue regulation.