BIR Ruling No. 596-12

October 25, 2012 BIR RULING NO. 596-12 Sec. 28 (A) (6) (a); 024-12 World Vision International Unit 1504 Antel Global Corporate Centre Julia Vargas Avenue Ortigas Centre, Pasig City Attention: Ms. Evelyn S. Grande General Office Manager Gentlemen : This refers to your letter dated March 1, 2012 stating that World Vision International is registered and licensed with the Securities and Exchange Commission (SEC) under SEC Registration No. 223 with TIN 000-532-394-000 as a regional or area headquarters in the Philippines; that the World Vision International is a foreign company organized and existing under the laws of California engaged in the business to assist in the development of communities, to assist and aid the distressed and needy, to work with needy children, and in general to conduct activities of religious and charitable character which will be beneficial for those who are in need in the society, and international trade with affiliates, subsidiaries, or branch offices in the Asia-Pacific Region; that the activities of the regional or area headquarters to be established in the Philippines shall be limited to acting as supervision, communications and coordination center for its affiliates, subsidiaries or branches of the region; and that the regional headquarters will not derive any income from sources within the Philippines. Based on the foregoing representations, you now request for ruling that the World Vision International, a Regional Headquarters in the Philippines, is exempt from corporate income tax as prescribed in Section 28 (A) of the Tax Code of 1997. In reply thereto, please be informed that Section 28 (A) (6) (a) of the Tax Code of 1997, as amended, provides "SEC. 28. Rates of Income Tax on Foreign Corporations . (A) Tax on Resident Foreign Corporations . xxx xxx xxx (6) Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies. (a) Regional or area headquarters as defined in Section 22(DD) shall not be subject to income tax. cSCTEH xxx xxx xxx" Corollarily, Section 22 (DD) of the same Code defines the term "regional or area headquarters" shall mean a branch established in the Philippines by multinational companies and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets. Likewise, Article 64 of Executive Order (EO) No. 226, otherwise known as the "Omnibus Investments Code of 1987", as amended by Republic Act (RA) No. 8756, provides that regional or area headquarters established in the Philippines by multinational companies 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 and other foreign markets shall not be subject to income tax. It must be noted that for tax purposes, a regional or area headquarters, in acting as a supervisory, communications and coordinating center for its affiliates in the region, shall not render any of the following qualifying services: General administration and planning; Business planning and coordination; Sourcing/procurement of raw materials and components; Corporate finance and advisory services; Marketing control and sales promotion; Training and personnel management; Logistic services; Research and development services, and product development; Technical support and maintenance; Data processing and communication; and business development, which functions are applicable to a Regional Operating Headquarters pursuant to Section 4 (b) of the Rules and Regulations implementing RA No. 8756. EIcSDC Accordingly, World Vision International, a regional headquarters in the Philippines is not subject to income tax as long as in performing its functions and in acting as a supervisory, communications and coordinating center for its affiliates in the region, it shall not render any of the foregoing qualifying services. Otherwise, it shall be taxed as a Regional Operating Headquarters. (BIR Ruling No. 024-02 dated June 21, 2002) Further, it is understood that World Vision International's books of accounts and other pertinent records are subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether the regional headquarters is complying with the conditions under which it is granted tax exemption or tax incentives and its tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. WHEREFORE, in view of the foregoing , since as represented, World Vision International, is a regional headquarters and does not derive any income in the Philippines, it is EXEMPT from Philippine income tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue