(Revenue Memorandum Order No. 14-2021 issued on March 31, 2021 and
Revenue Memorandum Circular No. 77-2021 issued on June 15, 2021)
This Tax Alert is issued to remind all concerned taxpayers of the April 30, 2023 deadline for the application of request for confirmation (RFC), tax treaty relief application (TTRA) and updating of long-term contracts covering income payments to non-residents during the calendar year ended December 31, 2022.
What income payments are covered?
A request for confirmation (RFC) or tax treaty relief application (TTRA) shall be filed for all income (e.g. royalties, interests, dividends, business profits, capital gains) derived by non-residents from Philippine sources that may be entitled to relief from double taxation under relevant tax treaties.
Who shall file?
The RFC shall be filed by withholding agents (Philippine payor) to the Bureau of Internal Revenue (BIR) International Tax Affairs Division (ITAD) if the tax treaty rates have been applied.
One consolidated RFC per non-resident income recipient, regardless of the number and type of income payments made during the year, shall be filed.
Are long-term contracts required to be updated annually?
For long-term contracts involving the payment of interest, royalties and other types of income where the condition for entitlement to treaty benefits is not dependent on a time threshold, annual updating is not mandatory. However, the withholding agent should ensure that the non-resident continues to be a resident of the same country for the whole duration of the contract by requesting an updated Tax Residency Certificate (TRC) from the non-resident.
In the case of long-term contract of services where the existence of a PE in the Philippines is dependent on time threshold (e.g., days of physical presence of the nonresident company's employees in the Philippines within a twelve-month period or calendar year or taxable year), the annual updating is mandatory. For contract of services, the Certificate of Entitlement to Treaty Benefit (COE) shall be limited to a particular period of engagement.
When is the deadline?
The deadline for application of the RFC, TTRA and updating of long-term contracts is the last day of the fourth month following the close of the taxable year when the income is paid or becomes payable, whichever comes first. For calendar year ended December 31, 2022, the income payee or the non-residents can file the RFC or TTRA from January 1, 2023 until April 30, 2023.