Considering the recent developments in the taxation landscape and the Philippines’ wide network of bilateral tax treaties for transactions with foreign entities, it has become apparent that one of the government’s objectives is to improve efficiency and services to taxpayers. In fact, on June 25, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 77-2021, which clarifies the revised guidelines and procedures for availing of tax treaty benefits provided under Revenue Memorandum Order (RMO) No. 14-2021.

RMO No. 14-2021 earlier provided that a request for confirmation (RFC) or tax treaty relief application (TTRA) applies to all income derived by nonresidents from Philippine sources that may be entitled to relief from double taxation under relevant tax treaties. Taxpayers are to discontinue submitting the Certificate of Residence for Tax Treaty Relief (CORTT) Form for dividends, interest, and royalties effective immediately after the issuance of RMO No. 14-2021 on March 31. These revised guidelines superseded those that were issued in 2017 (RMO 8-2017), 2010 (RMO 72-2010), and 2002 (RMO 20-2001).

Who may avail of the treaty benefits?

Only persons, natural or juridical, who are residents of one or both contracting states may avail of treaty benefits. To establish the fact of residency in a contracting state, the nonresident income recipient should submit a Tax Residency Certificate (TRC) duly issued by the tax authority of the country of residence. The best proof of residency is the TRC duly issued by competent authority of the treaty partner. Failure to submit the same would result in the denial of the nonresident’s claim.


Rulings involving the application and interpretation of tax treaties should originate from the International Tax Affairs Division (ITAD) of the BIR. Therefore, the RFC of the income payor and TTRA of the nonresident or an authorized representative with a Special Power of Attorney is to be filed with the ITAD.

Applications with incomplete documents will no longer be accepted. In case an application with incomplete documents was inadvertently accepted, the filer is to be duly notified of the result of the evaluation and the docket fee returned immediately.


RMC No. 77-2021 clarifies that the nonresident taxpayer is to submit to the income payor its TRC and the appropriate BIR Form No. 0901 prior to income payment if it intends to avail of tax treaty benefits. Otherwise, the income payor as the withholding agent is to subject income payments to regular tax rates imposed under the Tax Code, as amended.


The withholding agent/income payor is to file with the ITAD an RFC for both instances:

a. When treaty rates have been applied by the withholding agent on the income earned by the nonresident; and

b. When the income of the nonresident was not subjected to tax in the Philippines.

Nonresidents are not required to resubmit a TRC to the income payor every time the former earns an income. Only one original and authenticated TRC is to be submitted yearly. Alternatively, a certified true copy of the original may be submitted to other income payors, provided that a notation as to whom the original document was previously submitted is reflected.

The same rule also applies to the proof of establishment or incorporation, Certificate of Non-Registration or License to Do Business in the Philippines duly issued by the SEC (Securities and Exchange Commission), and Certificate of Business Registration/Presence duly issued by the Department of Trade and Industry (DTI).


The revised prescribed dates within which to file the RFC, with complete documentary requirements, are as follows:

a. Capital Gains: At any time after the transaction but not be later than the last day of the fourth month following the close of the taxable year when the income is paid or when the transaction is consummated.

b. Other types of Income: At any time after the close of the taxable year but not later than the last day of the fourth month following the close of such taxable year when the income is paid or becomes payable, or when the expense/asset is accrued or recorded in the books, whichever comes first.

Only one consolidated RFC per nonresident income recipient, regardless of the number and type of income payments made during the year, is to be filed. The RMC further clarified that there will be no automatic denial for failure to file the RFC or TTRA within the prescribed period. However, a penalty for late filing will be imposed.


On the other hand, a TTRA is to be filed by the nonresident taxpayer or its authorized representative when a treaty rate is not applied and the regular rates have been imposed on an income. A claim for refund at any time after the payment of the withholding tax if the regular rate under the Tax Code was applied is also to be filed.


Annual updating is not necessary for long-term contracts involving the payment of interests and royalties and other types of income where the condition for entitlement to treaty benefits is not dependent on time threshold. In the case of long-term contract of services where the existence of a permanent establishment (PE) in the Philippines is dependent on time threshold, annual updating is mandatory.

The withholding agent should ensure that the nonresident continues to be a resident of the same country for the duration of the contract by requiring the nonresident to have an updated TRC. In case of audit, the withholding agent is required to prove that the facts and circumstances did not change at any time after the issuance of the Certificate of Entitlement (CoE).


A withholding agent may still file an RFC until the last working day this year for nonresident taxpayer’s income in 2020 and transactions made in prior years that were subjected to treaty rates but with no TTRA or a CORTT Form application. Failure to file within the prescribed deadline triggers administrative penalties under Sections 250 and 255 of the Tax Code. Moreover, a penalty of P1,000 per failure to file a CORTT Form for dividends, interests, and royalties paid after the effectivity of RMO No. 8-2017 until December 31, 2020 is to be imposed.


All taxpayers with pending TTRAs before the effectivity of RMO 14-2021 are given three months from receiving a “Final Notice to Submit Additional Documents” to comply; otherwise, the TTRAs are deemed automatically denied. Unlike RMO 14, 2021, RMC 77-2021 provides that those who have been notified that their application has been archived will no longer receive a final notice. However, they are obliged to submit the required documents indicated in the previous notices within four months from the effectivity of the new RMO.


The transfer pricing documentation (TPD) is considered the best proof of arm’s length transfer prices for interest imposed on a loan or debt-claims between related parties. In case the full TPD is not available, the nonresident may prove, through its Transfer Pricing Policy for Intercompany Loans or any equivalent transfer pricing study, that the interest rate imposed on the loan or debt-claim is arm’s length.


For capital gains, an audited interim financial statement (FS) is to be used to compute the real property interest of the issuing domestic corporation at the time of the transaction. Alternatively, the following may be submitted: 1) unaudited interim FS and 2) lapsing schedule as of the date of transfer or alienation of property.

In meritorious cases, the nonresident or withholding agent may be granted an extension within which to submit the required documents but in no case may it exceed 30 days.

If the RFC or TTRA is approved, the BIR will issue a CoE instead of the usual BIR Ruling. The CoE will still contain the material facts of the case and a ruling confirming the nonresident’s entitlement to treaty benefits. However, an RFC needs to be filed again by the withholding agent if there are material changes in the facts or circumstances upon which the previous ruling was based in the succeeding year.

With the issuance of RMC 77-2021, it is important that taxpayers continuously familiarize themselves with what is new and what the superseded policies and guidelines are. A sufficient understanding of the application of the provisions of tax treaties definitely provides an advantage in availing of the preferential tax rates on income payments.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.


As published in BusinessWorld, dated 06 June 2021