By Bernie Cahiles-Magkilat
Fifteen regional operating headquarters (ROHQS) have left the Philippines following the “aggressive” interpretation of the Bureau of Internal Revenue on their preferential tax rate under the TRAIN Law.
Celeste Ilagan, executive director of the Philippine Association of Multinational Companies Regional Headquarters Inc. (PAMURI), quoted the Board of Investments that 10-15 ROHQs plus a couple of new entrants have left after the TRAIN Law. Some of them went back to Singapore, North America and in their other centers globally, making it easier for them to move work from one center to another.
According to Ilagan, the whole ROHQ membership of PAMURI is 25,000 member employees working with different firms from US and European MNCs. PAMURI has 75 company members although the BOI has registered more than 200.
“This came from BOI but I don’t know if they did exit interviews but this happened after the TRAIN Law was passed,” she said. ROHQs lost their 15 preferential tax on their highly specialized workers.
“We should not have lost the incentive even with the President’s veto but the BIR interpreted it differently,” Ilagan said.
She explained that ROHQs were hit by the TRAIN Law when one of their incentives was removed because of the aggressive interpretation of the BIR.
ROHQs have three incentives – 15 percent preferential tax rate on their highly specialized employees, exemption from local taxes and 10 percent CIT. They lost the preferential tax rate under the TRAIN Law. Once the CITIRA is passed ROHQs are also going to lose the two remaining incentives.
PAMURI did a survey on their members, which said they would make an evaluation. Therefore, she said, if these changes would make significant impact on their cost structure then these firms will have to decide.
Their position now is to retain the exemption from local business tax and a 10 year transition into the CIT regime from the current 10 percent CIT.