Representative office

A PHILIPPINE representative office established by a foreign corporation is considered a non-resident foreign corporation not engaged in income-generating business in the Philippines if it merely acts as a liaison office promoting the company’s products and gathering/disseminating information.

As such, it is not subject to the corporate income tax. In as much as its operation is similar to regional or area headquarters of multinational corporations, the representative office is also exempt from value-added tax (VAT) directly due on the entity.

However, please note that technical service fees that will be remitted by the representative office to its parent company shall be considered royalties subject to the 30 percent corporate income tax, which should be withheld and remitted to the Bureau of Internal Revenue (BIR) by the representative office. [BIR Ruling No. DA(VAT-003) 036-2008, July 15, 2008].

Employees of the representative office shall also be subject to the regular individual income tax, or the five percent to 32 percent graduated tax rate if a resident or a non-resident alien engaged in trade or business in the Philippines, or the 25 percent final withholding tax if classified as non-resident alien not engaged in trade or business in the Philippines.

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