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Let's Talk Tax

Tax treaty application: What’s new and what has not been retained?

On March 31, 2021, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Order (RMO) 14-2021 which outlines the new procedures for availing of relief from double taxation under relevant tax treaties on all items of income derived by nonresident taxpayers from Philippine sources.

Under the RMO, these revised guidelines take effect immediately and will supersede guidelines issued in 2017 (RMO 8-2017), 2010 (RMO 72-2010), and 2002 (RMO 20-2001).


In keeping with the government’s goal of improving efficiency and service to taxpayers, RMO 14-2021 provides that the withholding agent may rely on the submitted BIR Form No. 0901, the Tax Residency Certificate (TRC), and the relevant provisions of the applicable treaty to assess whether to apply a reduced rate or an exemption from withholding taxes. Therefore, it is important for nonresident taxpayers intending to avail of tax treaty benefits to submit the documents to each withholding agent prior to payment of income for the first time.

Failure of the taxpayer to provide the documents when requested may lead to withholding of taxes using the regular rates prescribed under the Tax Code, as amended, and not treaty rates for nonresident foreign corporations or nonresident aliens not engaged in trade or business, as the case may be.


The withholding agent shall file a request for confirmation when it applies the treaty rates on the income earned by the nonresident taxpayer. On the other hand, the taxpayer shall file a Tax Treaty Relief Application or TTRA when the regular rates have been imposed by the withholding agent.

The RMO prescribes the revised general and specific documentary requirements for each type of income. All documents executed in a foreign country, to be acceptable in the Philippines, must either be authenticated by the Philippine Embassy there or apostilled if the foreign country is a signatory to the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents.

Generally, one TTRA or request for confirmation must be filed for each transaction except for long-term contracts (e.g., contracts for services or loan agreements, license agreements, etc.) i.e., those which are effective for more than a year, where an annual updating must be made until the termination of the contract.

To ensure that the proper rate is applied until the end of the contract, the nonresident taxpayer must file an updated Application Form, a new TRC (if the validity period of the previously submitted TRC has already lapsed), and other relevant documents not later than the last day of the fourth month following the close of each taxable year.


Each request for confirmation and TTRA is to be filed with the International Tax Affairs Division (ITAD) and supported by documentary requirements. Submission to any other BIR Office is considered improperly filed.


The submission of Certificate of Residence Treaty Relief (CORTT) form that is applicable to dividends, interest, and royalties is discontinued. However, previously submitted CORTT Forms must still be forwarded to the Revenue District Office (RDO) for compliance checking.


The request for confirmation is to be filed by the withholding agent at any time after the payment of withholding tax but not later than the last day of the four-month period following the close of each taxable year.

Failure to file a request for confirmation within the prescribed period risks penalties while failure to supply correct and accurate information is punishable with the crime of perjury and with other appropriate crimes or offenses as may be warranted, in addition to the payment of deficiency taxes.

On the other hand, the filing of TTRA may be filed by the nonresident at any time after receipt of income to prove its entitlement to treaty benefits.


New TTRAs must be processed within four months from the submission of complete documents or as soon as practicable provided that the ITAD has addressed all its backlogs.

If the BIR determines that the withholding tax rate applied is lower than the rate that should have been applied on an item of income pursuant to tax treaties or that the nonresident taxpayer is not entitled to tax treaty benefits, the BIR will issue a ruling denying the request for confirmation or TTRA. Consequently, the withholding agent is to pay the deficiency tax plus penalties.

All adverse rulings, however, can be appealed to the Department of Finance (DoF) within 30 days from receipt.

On the contrary, if the withholding tax rate applied is proper or higher than the rate that should have been applied, the BIR will issue a certificate duly signed by the Assistant Commissioner for Legal Service confirming the nonresident income recipient’s entitlement to treaty benefits. In the case of higher rate, the taxpayer may apply for a refund of excess withholding tax within the two-year prescriptive period.


The nonresident taxpayer claiming refund must accomplish and file BIR Form 1913 together with a letter-request. The claim can be filed independently or simultaneously with the TTRA. For an independently filed claim, the office where it was filed is to coordinate with and refer to ITAD the resolution of the nonresident’s entitlement to treaty benefits. However, for claims simultaneously filed with the TTRA, it is the responsibility of the ITAD to endorse such claims for refund to the proper office handling tax refunds. Nonetheless, all claims for refund must be filed within the two-year prescriptive period.


Taxpayers with pending TTRAs for income earned in 2020 and prior years, including those with Notice of Archiving, are given three months from the receipt of a Final Notice to Submit Additional Documents (Final Notice), or from the effectivity of the Order, whichever is later, to submit needed documents. Taxpayers who were issued a Notice of Archiving will no longer receive a Final Notice. Failure to submit the requested documents will result in the automatic denial of the TTRA.


Notwithstanding efforts of the BIR to streamline processes, taxpayers may still find the documentation requirements for tax treaty relief application tedious. While the BIR has acknowledged the slow disposition of TTRAs because of the volume of backlogs, the limited number of personnel who are responsible for evaluating and processing TTRAs, and the need for a thorough study and evaluation of facts, taxpayers and foreign investors are hopeful that the revised guidelines will, in the long term, help promote ease of doing business in the Philippines.

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.


Grace L. Turqueza is an associate from the Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.


As published in BusinessWorld, dated 13 April 2021