RMC No. 41-2009: Clarifies the meaning of the term “Managerial and Technical Positions” under Section 25(C) of the Tax Code of 1997, as amended

Summary

RMC No. 41-2009 clarifies the meaning of Managerial and Technical Positions under Section 25(C) of the Tax Code of 1997, as amended, which covers the 15% preferential rate for certain Filipino employees of regional headquarters.

Key points

1. Ruling revoked in part. BIR Ruling No. DA-061-04, issued for Cypress Semiconductor Philippine Headquarters, Ltd. – Regional Operating Headquarters, is revoked insofar as it is inconsistent with this Circular. That ruling had held that certain positions of Filipino personnel of multinational companies qualify as managerial and/or technical.
2. Managerial employee. Citing Philippine Appliance Corporation vs. Laguesma, a managerial employee has powers to lay down and execute management policies or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees. The test is whether the authority requires independent judgment and is not merely routinary or clerical, and the job title does not decide status.
3. Elements of a managerial employee. All must concur: the primary duty is work directly related to management policies, he customarily and regularly uses discretion and independent judgment, he regularly and directly assists in management, and he does not devote 20% of his time to other work. Employees who only carry out approved policies with little or no discretion are not managerial.
4. Technical position. The term is limited to positions that are highly technical in nature or where no Filipinos are competent, able and willing to perform the services for which aliens are desired.
5. Who gets the option. Only Filipinos in managerial and highly technical positions as defined, similar to the positions of aliens employed by regional or area headquarters and regional operating headquarters of multinational companies, may choose to be taxed at 15% of gross income or at the regular income tax rate on taxable income. This applies if the employer is governed by Book III of Executive Order No. 226, as amended by Republic Act No. 8756.

Who is affected

• Filipino employees in managerial and highly technical positions at Regional Operating Headquarters or Regional or Area Headquarters of multinational companies

Deadlines and effectivity

• Issued July 24, 2009

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.