Earlier this year, the Bureau of Internal Revenue (BIR) launched D.A.R.E.S., its five-point reform and legacy agenda. DARES stands for Digital and Data Transformation, Audit Reform and Accountability, Revenue Collection and Base Protection, Employee Empowerment and Welfare Promotion and Service Excellence and Stakeholder Engagement. This is in line with the government’s directive towards nation-building and ensuring that the reforms are being done to improve its revenue collection efforts. During the launching, the Secretary of Finance emphasized the government’s thrust towards improving the ease of doing business in the Philippines, among others. Relevant to this, the BIR issued Revenue Memorandum Order (RMO) 1-2026, the updated audit framework which aims to strengthen transparency, accountability, and due process, and lastly, institutionalise stronger system-based and control-driven audits.
In line with the digital transformation agenda, I would like to particularly highlight the RMO’s mandatory use of standardised audit checklist, which should serve as a uniform reference for identifying, requesting, receiving, and evaluating documents necessary for audit. As a tax practitioner, I have several experiences wherein a taxpayer with a pending application with the BIR for tax exemption under a treaty is being assessed for tax deficiency for the tax type subject of its application for exemption.
The Tax Treaty Relief Application (TTRA)/Request for Confirmation (RFC) connection
While the above-mentioned RMO demonstrate the BIR’s thrust towards more efficient administration of tax collection, there is still room to improve one notable process relevant to tax assessment, the Tax Treaty Relief Application (TTRA)/Request for Confirmation (RFC). This process relates to the confirmation that certain income is exempt from tax and consequently from withholding or that certain incomes are subject to lower withholding rates as provided in a tax treaty. The usual challenge for taxpayers arises when the BIR audit includes findings related to an item subject of a pending application for tax treaty relief or request for confirmation with the BIR, and then the taxpayer is unable to provide a certificate of entitlement (COE) to the treaty.
To recall, the BIR issued RMO No. 14-2021, RMC 77-2021 and RMC 20-2022, which streamlined the requirements for taxpayers availing the benefits of the applicable treaty. Five (5) years later, it appears that securing a ruling for TTRA or RFC is still challenging as taxpayers deal with two major points. First, securing TTRA or RFC still takes years to process. Second, the strict documentary requirements provided under RMO 14-2021, RMC 77-2021 and RMC 20-2022, especially related to authentication and requests for alternative documents, lead to delays that expose the taxpayers to possible tax deficiency assessment.
Timeline for issuance of rulings
If the BIR has not yet released the ruling or COE, then the taxpayer received the electronic Letter of Authority (eLOA), the tendency is for the BIR to assess the taxpayer with final withholding income tax and/or final withholding Value Added Tax (VAT) for certain incomes such as business profits, capital gains, interest, royalties, and dividends. This scenario often leads to confusion, especially among foreign investors who are used to doing business with our neighbouring Asian countries. The confusion stems from the fact that they have already submitted and completed the TTRA or RFC application to BIR, yet, when they are subjected to audit, they are required to submit the same set of documents. Moreover, there are instances where the lack of ruling or COE will be the basis for the examiners to insist that the taxpayer is liable for withholding tax since the BIR has not yet issued one.
While it is truly understandable that the average timeline for securing the COE is due to the volume of applications for rulings, perhaps the BIR could revisit the possibility of going digital for TTRA and RFC applications. The BIR’s launching of its platforms, such as the ORUS and VDS portals, appears to be efficient. The Securities and Exchange Commission (SEC) has been beefing up its online portals, such as online registration with SEC Zero and the e-amend portal, making registration and amendment processes faster and more efficient, which could attract investors as well. With these recent developments, exploring the possibility of submission of documents for TTRA and RFC applications through an online portal could be more efficient, minimising delay in review of documents and ultimately leading to faster acceptance and processing of TTRA or RFC application.
Revisiting TTRA/RFC documentary requirements
Speaking of documentation, the BIR could also revisit the possibility of keeping up with the technology, especially in terms of requiring specific documentary requirements for TTRA/RFC applications. RMO 14-2021, RMO 77-2021 and RMC 20-2022 have strict documentary requirements, and in instances where the specific document is not available, taxpayers are left to rely on the interpretation of the BIR officers in terms of alternative documents.
To illustrate, one of the requirements in applying for RFC is to submit contracts signed by the authorised signatories of the contracting parties. In addition to the actual contract, which must be authenticated/apostilled if executed abroad, the BIR would require a board resolution or secretary’s certificate showing that the authorised signatory was authorised by the board. Rightfully so, authority to sign must be established. However, in this digital age, the contracts are usually signed electronically; hence, there are contracts wherein the actual signature of the signatory is not visible. Further, for some multinationals and groups of companies, contracts are system-generated, which no longer contain signatures of authorised signatories as these contracts are merely downloaded in their platform or website; thus, complying with the BIR’s documentary requirements becomes a challenge for applicants. There were also instances that, due to data privacy, required documents from non-residents could not be complied with. Moreover, due to digitalisation, many services are now rendered through digital platforms hosted abroad, and requiring a certificate of completion from the non-residents now becomes onerous.
In these instances, where providing the applicants with alternative documents is susceptible to various interpretations, the applicant is left to rely on the discretion of the evaluator. This could sometimes contribute to delays as various examiners/evaluators provide different options as well. Hence, these factors, among others, could eventually contribute to the taxpayer’s exposure to a heightened tax audit risk despite the pending application for RFC or TTRA.
The digitalization of TTRA and RFC applications would enable the BIR to immediately review the documents submitted via the portal and in case of BIR audits, the BIR will be able to easily retrieve files for cross referencing purposes. Internally, the digitalization will help the BIR to have a repository of all applications, preserve the records, and allow smooth transition of files in case of personnel movement. Thus, enabling the BIR to focus more on its other collection efforts. Clearly, digitalization will simplify the process for both the government and the taxpayers.
The April 30 deadline for filing TTRA/RFCs for the transactions covered under a calendar year is approaching, and taxpayers are contemplating again if it is worthwhile filing the application now or just wait for the BIR audit, as they will be constrained to provide the same supporting documents anyway, given the lengthy and unpredictable processing time. Maybe it is high time for the BIR to revisit its current TTRA/RFC regulations to align with the Bureau’s current effort for a more transparent, structured, and efficient tax assessment framework. Businesses are veering away from the traditional ways of executing contracts due to digitalisation and effectively changing the tax landscape. Simplifying documentary requirements which are easy to comply with and appropriate to the evolving digital world of business would surely attract more investors and help our economy.
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 03 February 2026
