Treatment of Alien Individuals Employed by RHQ and ROHQ, OBUs and Petroleum Service Contractors and Subcontractors

(Revenue Memorandum Circular No. 116-2019, November 06, 2019)

This Tax Alert is issued to inform all concerned on the clarifications on the treatment of alien individuals employed in the Philippines by Regional or Area Headquarters (RHQ) and Regional Operating Head Quarters (ROHQ), Offshore Banking Units (OBU) and Petroleum Service Contractors and Subcontractors.

Alien individuals employed by the abovementioned local entities are subject to the regular income tax and related administrative requirements. They may qualify for substituted filing if considered resident aliens.

On the other hand, alien individuals employed by foreign principals rendering services to the abovementioned local entities (seconded employees) are also subject to regular income tax.  The following procedures shall apply for these seconded employees:

  • Under “Current Employment Status” of the alphalist of employees, a separate description ("Seconded Employees") shall be provided. The BIR should issue an updated alphalist and Data Entry and Validation Module to reflect this.
  • Seconded employees cannot qualify for substituted filing. They shall file their annual income tax return.
  • BIR Form 2316 issued to seconded employees shall indicate the phrase “For Seconded Employee” which shall be typed or printed in bold capital letters in parenthesis under the form’s title.
  • In case of termination before end of taxable year, the annualized withholding tax should be computed and fully withheld.