Guidance on filing of requests for confirmation, tax treaty relief applications and tax sparing applications

The Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular (RMC) 20-2022 to guide taxpayers in filing their Requests for Confirmation (RFC), Tax Treaty Applications (TTRA) and Tax Sparing Applications (TSA).

The RMC clarified that for taxpayers who were already issued a Certificate of Entitlement of Treaty Benefit (COE), the tenor thereof which allows the ruling to be applied to future income payments, will no longer be required to file an RFC or TTRA every time there is an income of similar nature paid to the same nonresident. In applying the confirmed treaty benefit to future income payments, the income payor or withholding agent shall always abide by the requisites mentioned in the COE. Thus, if the COE mentions tax residency as a requisite for continuous enjoyment of treaty benefits, the income payor must require the nonresident to submit first a Tax Residency Certificate (TRC) for such relevant year before making any payment. Such rule also applies to a COE for the reduced dividend rate issued by the BIR for TSA.

During a tax audit, the income payor shall submit or present a copy of the duly issued COE and proof of satisfaction of the requisites cited therein. On the other hand, the tax auditor shall ensure the authenticity of the submitted documents.

For business profits, income from services (dependent or independent), capital gains, income derived by teachers, and such other income from non-recurring transactions, the RFCs or TTRAs shall still be filed following the procedures and requirements laid down in Revenue Memorandum Order (RMO) No. 14-2021, as amended by RMC No.77-2021.

For long-term contracts of services which require annual updating, requirements for submission have been laid down by the RMC, such as the following:

1. TRC of the nonresident for the relevant year;

2. Sworn certification (annexed to the issuance) which states the following:

a. The services provided by the foreign enterprise;

b. The place of performance of such service;

c. individuals who rendered the services on behalf of the foreign enterprise, their positions/designations and professional background; and

d. duration of stay in the Philippines of the said individuals.

3. Certified true copy of the employees’ passports or a certification duly issued by the Bureau of Immigration stating their dates of arrival in, and departure from the Philippines;

4. Certificate of completion of the project duly signed by the income recipient and duly accepted by the domestic income payor, if applicable;

5. Invoice(s) duly issued by the income recipient in accordance with the invoicing requirements of the country of residence, if applicable; and

6. Bank documents/certificate of deposit/telegraphic transfer/telex/money transfer evidencing the payment/remittance of income, if applicable.

Please be guided accordingly.

Source:

P&A Grant Thornton 

Certified Public Accountants

As published in SunStar Cebu, dated 11 March 2022