THE GOVERNMENT will repeal a law granting special tax rates for Regional Operating Headquarters (ROHQs), thus completing the removal of the privilege first signaled in a presidential veto of tax reform legislation.

“The intent of the veto is to repeal. It doesn’t mean they keep enjoying it. The intention of the vetoer is to repeal it,” Finance Undersecretary Antonette C. Tionko told reporters, referring to ROHQs’ 15% preferential withholding tax rate on gross income.

“It is clear to us, it’s not clear to them,” Finance Secretary Carlos G. Dominguez III added.

Ms. Tionko said that those pushing for the retention of the preferential rate are high-earning employees of ROHQs.

“It’s mostly the high earning employees of ROHQs that benefit from the 15% rate because most of them… are earning millions. So they are probably in the higher brackets, they are the ones who are insisting but most of the employees of ROHQs are not covered by the special rate,” she said.

Ms. Tionko said that “almost 90%” of the employees of ROHQs will be assessed lower withholding income tax under Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) law.

She said that only those earning P975,000 a year in income qualify for the preferential tax rate.

“The high-earning people… they enjoy lower rates. So to be fair that is the intention,” she said.

Tax experts and ROHQs sought clarification from the Bureau of Internal Revenue during public consultations for the implementing rules and regulations of the tax reform law last week.

President Rodrigo R. Duterte vetoed the TRAIN provision that allows ROHQ employees to continue to enjoy the special rate, saying the veto makes the law more fair to employees doing similar work in local firms.

Tax experts have noted that the veto did not explicitly repeal the preferential tax rate, which have caused confusion among stakeholders.

Republic Act No. 8756 defines ROHQs as “any foreign business entity formed, organized, and existing under any laws other than those of the Philippines whose purpose is to service its affiliates, subsidiaries or branches in the Philippines, Asia-Pacific Region, and other foreign markets.”

The special tax rate was intended to attract talent with technical and managerial expertise. — Elijah Joseph C. Tubayan

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