Revised guidelines and procedures for availing tax treaty benefits

(Revenue Memorandum Order No. 14-2021 issued on March 31, 2021)

This Tax Alert is issued to inform all concerned on the revised procedures and documentary requirements for availing treaty benefits by non-resident taxpayers.

The revised procedures shall apply to all income derived by nonresidents from Philippine sources that may be entitled to relief from double taxation under relevant tax treaties. Hence, the submission of Certificate of Residence for Treaty Relief (CORTT) Form for dividends, interest and royalties shall be discontinued. 

Below are the revised procedures and guidelines in availing tax treaty benefits:

  • The withholding agent/income payor may rely on the submitted BIR Form No. 0901 (Application Form for Treaty Purposes), Tax Residency Certificate (TRC) duly issued by the foreign tax authority, and the relevant provision of the tax treaty on whether to apply the treaty rates. Therefore, nonresident taxpayers intending to avail of treaty benefits must submit said documents to the withholding agent/income payor prior to the first payment of income.
  • If the withholding agent applied the treaty rates, he shall file with International Tax Affairs Division (ITAD) a request for confirmation on the correctness of the withholding tax rates applied on the income. The request for confirmation shall be filed any time after the payment of withholding tax but shall not later than the last day of the fourth (4th) month following the close of each taxable year.
  • On the other hand, if the regular rates have been imposed on the income, the non-resident shall file a Tax Treaty Relief Application (TTRA) with ITAD to prove its entitlement to treaty benefits. Failure to prove the same may result in the confirmation of the tax rate previously applied on the income, and in the eventual denial of the TTRA.
  • One TTRA or request for confirmation shall be filed for each transaction except for long-term contracts covering more than one year, where an annual updating of the request for confirmation/TTRA shall be made until the termination of the contract.
  • Each request for confirmation and TTRA shall be supported by the documentary requirements as enumerated in the RMO. All documents executed in a foreign country must either be authenticated by the Philippine Embassy stationed therein or apostilled, as applicable.
  • The BIR will issue a ruling/certificate denying or granting the request for confirmation or TTRA.

-If the BIR denies the request and determines that the withholding tax rate applied is lower than the rate that should have been applied on the income pursuant to the tax treaty, or that the nonresident taxpayer is not entitled to treaty benefits, the withholding agent shall pay the deficiency tax plus penalties.I

- If the withholding tax rate applied is higher than the rate that should have been applied, the taxpayer may apply for a refund of excess withholding tax.

- For the non-resident taxpayer whose income has been subjected to regular rates, a claim for refund may be subsequently filed. A duly accomplished BIR Form No. 1913 shall be filed together with the letter-request.

  • In processing requests for confirmation and TTRA, the BIR may likewise determine whether the subject transaction is subject to other internal revenue taxes under the Tax Code.
  • New TTRAs shall be processed within four (4) months from the submission of complete documents or as soon as practicable provided that the ITAD has addressed all its backlogs.
  • All adverse rulings are appealable to the Department of Finance within thirty (30) days from receipt thereof pursuant to existing rules and regulations.
  • Taxpayers with pending TTRAs for income earned in 2020 and prior years, including those with Notice of Archiving, are given three (3) months from receipt of a Final Notice to Submit Additional Documents (Final Notice), or from the effectivity of RMO, whichever is later, to submit the lacking documents. Taxpayers who were issued a Notice of Archiving will no longer receive a Final Notice. Failure to submit documents would result to automatic denial of the TTRA.
  • Previously submitted CORTT forms shall still be forwarded to the concerned RDOs for compliance check.
  • Any violation of the revised procedures per RMO shall be subject to penalties under Section 250 (P1,000 to P25,000) and 255 (fine and imprisonment) of the Tax Code. Failure to supply correct and accurate information may be charged crime of perjury in addition to payment of deficiency taxes and penalties.