PRESCRIBING INCENTIVES FOR THE ESTABLISHMENT OF REGIONAL OR AREA HEADQUARTERS OF MULTINATIONAL COMPANIES IN THE PHILIPPINES.

• Number: Presidential Decree No. 218
• Sections: 12

Preamble

WHEREAS, it would be desirable to make of the Philippines

the business and financial capital of Southeast Asia, thereby hastening the

economic and social development of the Philippines, which objective can be

accomplished by attracting the regional or area headquarters of multinational

companies to base their offices in the Philippines;

WHEREAS, the said headquarters do not earn or derive any

income from the host country and all their expenses are financed by their head

offices or parent companies; and

WHEREAS, the attainment of the aforesaid goal will mean

additional foreign exchange receipts to the Philippines, a boost to air travel,

new construction and real estate development, new job opportunities, increase in

local tourism and potential investors;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers in me vested by the Constitution as

Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to

Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated

September 22, 1972, as amended, do hereby order and decree as follows:

Section 1

SECTION 1. Foreign personnel of regional or area

headquarters of multinational companies, their respective spouses, and unmarried

children under twenty-one years of age if accompanying them or if following to

join them after their admission into the Philippines as non-immigrant shall be

issued a multiple entry special visa, valid for a period of one year to enter

the Philippines: Provided, That a responsible officer of the applicant

company submits a certificate to the effect that the person who seeks entry into

the Philippines is an executive of the applicant company and will work

exclusively for applicant's regional or area headquarters which is duly licensed

to operate in the Philippines; and that he will receive a salary and will be

paid by the headquarters in the Philippines an amount equivalent to at least

twelve thousand United States dollars, or its equivalent in other foreign

currencies, per annum.

The admission and stay shall be co-terminus with the validity of the multiple

entry special visa. The stay, however, is extendible yearly upon submission to

the Commission on Immigration and Deportation of a sworn certification by a

responsible officer of the regional or area headquarters: that its license to

operate remains valid and subsisting; that he has been paid in the Philippines

from the date of original admission, the equivalent of at least one thousand

United States dollars per month, or its equivalent in other foreign currencies;

and that the regional or area headquarters has withheld the tax due on said

compensation and the same has been paid to the Bureau of Internal Revenue.

Non-immigrants who have been admitted under the multiple entry special visa,

as well as their respective spouses and dependents, shall be exempt from: the

payment of all fees due under the immigration and alien registration laws;

securing alien certificates of registration; and obtaining emigration clearance

certificates, and all types of clearances required by any government department

or agency, except that upon final departure from the Philippines the employer of

the said non-immigrants shall so advise in writing the Commission on Immigration

and Deportation at least five (5) working days prior to the non-immigrant's

departure, and the finally departing non-immigrant employee shall be required to

submit to the said office a tax clearance from the Bureau of Internal

Revenue.

Section 2

SEC. 2. Section 22 of Commonwealth Act Numbered 466, as

amended, is hereby amended to include an additional Subsection (c) to read as

follows:

"(c) Aliens employed by regional or area headquarters or multinational

corporations. There shall be levied, collected and paid for each taxable year

upon the gross income received by every alien individual employed by regional or

area headquarters established in the Philippines by multinational corporations

as salaries, wages, annuities, compensations, remunerations and emoluments from

such regional or area headquarters a tax equal to fifteen per centum of such

gross income."

Section 3

SEC. 3. Section 24(b) (1) of Commonwealth Act Numbered 466,

as amended, is hereby amended to include an additional proviso to read as

follows:

"(b) Tax on foreign corporations. (1) Non-resident corporations.

"Provided, finally, That regional or area headquarters established

in the Philippines by multinational corporations and which, headquarters do not

earn or derive income from the Philippines and which act as supervisory,

communications and coordinating centers for their affiliates, subsidiaries or

branches in the Asia-Pacific Region shall not be subject to

tax."

Section 4

SEC. 4. In the case of aliens employed by regional or area

headquarters established in the Philippines by multinational corporations, there

shall be deducted and withheld at the source in the same manner and conditions

as that provided under Supplement A — Withholding on Wages of

Commonwealth Act No. 466, as amended, on the gross salaries, wages, annuities,

compensations, remunerations and emoluments from such regional headquarters a

tax equal to fifteen per centum of the gross thereof.

Section 5

SEC. 5. Section 191 of Commonwealth Act Numbered 466, as

amended, is hereby amended as follows:

"SEC. 191. Contractors, proprietors or operators of

dockyards and others. — A contractor's tax of three per centum of the gross

receipts is hereby imposed on the following:

X X X

"The term 'independent contractor' shall not include regional or area

headquarters established in the Philippines by multinational corporations,

including their alien executives, and which headquarters do not earn or derive

income from the Philippines and which act as supervisory, communications and

coordinating centers for their affiliates, subsidiaries or branches in the

Asia-Pacific Region."

Section 6

SEC. 6. The alien executives of the regional or area

headquarters of multinational companies shall enjoy the privileges extended to

foreigners coming to settle in the Philippines for the first time as

provided for under Section 105(h) of the Tariff and Customs Code, as

amended.

Section 7

SEC. 7. The regional or area headquarters of multinational

companies shall be exempt from all forms of local licenses, fees, dues, imposts,

or any other local taxes or burdens.

Section 8

SEC. 8. Any foreign business entity formed, organized or

existing under any laws other than those of the Philippines whose purpose, as

expressed in its organizational documents or by resolution of its Board of

Directors or its equivalent, is to supervise, superintend, inspect or coordinate

its own affiliates, subsidiaries or branches in the Asia-Pacific Region may

establish a regional or area headquarters in the Philippines, after securing a

license therefor from the Securities and Exchange Commission, upon the Favorable

recommendation of the Secretary of Trade.

The Securities and Exchange Commission shall, within thirty (30) days from

the effectivity of this Decree, issue the implementing rules and regulations.

The following minimum requirements shall, however, be complied; with by the said

foreign entity:

A certification from the Philippine Commercial Attache or in the absence of

such an official, a Philippine Consul in the foreign firm's home country that

said foreign firm is an entity engaged in international trade with affiliates,

subsidiaries, or branch offices in the Asia-Pacific Region.

A certification from a principal officer of the foreign entity to the effect

that the said foreign entity has been authorized by its board of directors or

governing body to establish its regional headquarters in the Philippines,

specifying that:

(1) The activities of the regional headquarters shall be limited to acting as

a supervisory, communications and coordinating center for its affiliates

subsidiaries and branches of the region;

(2) The headquarters will not derive

any income from sources within the Philippines and will not participate in any

manner in the management of any subsidiary or branch office it might have in the

Philippines;

An undertaking that the multinational company will remit into the country

such amount as may be necessary to cover its operations in the Philippines but

which amount will not be less than fifty thousand United States dollars or its

equivalent m other foreign currencies annually. Within thirty (30) days from

receipt of Certificate of Registration from the Securities and Exchange

Commission the multinational company will submit to the Securities and Exchange

Commission, the certificate of inward remittance from a local bank showing that

it has remitted to the Philippines the amount of at least thirty thousand United

States dollars or its equivalent in other foreign currencies and converted the

same to Philippine currency. Annually, within thirty days from the anniversary

date of the multinational company's registration as a regional or area

headquarters with the Securities and Exchange Commission, it will submit proof

to the Securities and Exchange Commission of inward remittance amounting to at

least fifty thousand United States dollars or its equivalent in other foreign

currencies during the past year.

Any willful violation by the regional or area headquarters of a

multinational company of any of the provisions of this Decree, or its

implementing rules and regulations, or other terms and conditions of its

registration, or any provision of existing laws shall constitute a sufficient

cause for the cancellation of its license or registration.

Section 9

SEC. 9. The regional or area headquarters of multinational

companies shall be exempt from the provisions of Republic Act No. 5455.

Section 10

SEC. 10. Any provision of existing general or special laws

inconsistent with the provisions of this Decree shall be considered modified,

amended, or repealed accordingly.

Section 11

SEC. 11. This Decree shall take effect immediately.

Done in the City of Manila, this 16th day of June, in the year of Our Lord,

nineteen hundred and seventy-three.

(Sgd.) FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.) ROBERTO V. REYES

Assistant Executive Secretary