AVAILMENT OF TREATY BENEFITS
What are the types of Philippine income that may be subject to a preferential tax treaty rate and/or tax exemption under the valid and effective Philippine Double Tax Agreements (DTAs)?
a. Preferential rates:
- Profits of shipping and air transport in international traffic; and
- Branch profit remittances.
- Business profits;
- Capital gains;
- Income from employment;
- Income from independent professional services;
- Income of athletes and performers supported by public funds;
- Income from government service;
- Income of visiting teachers and researchers;
- Allowances and remuneration of visiting students and trainees; and
- Other income.
Who may avail of treaty benefits?
Only persons, natural or juridical, who are residents of one or both of the Contracting States may avail of the benefits provided under the tax treaties. 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.
To date, the Philippines has concluded tax treaties with 43 countries.
In withholding taxes, what treaty rate should be applied by the income payor on the income of the nonresident alien not engaged in trade or business or nonresident foreign corporation?
If the nonresident submitted to the income payor a TRC and the appropriate BIR Form No. 0901 prior to the payment of income, the income payor may apply the provisions of the applicable treaty; provided that all the conditions for the availment thereof, other than residency, have been satisfied. Otherwise, the regular rates imposed under the Tax Code should be applied.
If the nonresident’s income was not subjected to tax in the Philippines in accordance with the relevant tax treaty, what shall the nonresident do to avail of treaty benefits?
The nonresident, or its authorized representative, should file a tax treaty relief application (TTRA) with complete documentary requirements and a claim for refund at any time after the payment of the withholding tax if the regular rate under the Tax Code was applied on the income instead of the treaty rates.
If the income payor applied the treaty rate on the nonresident's income, does the nonresident have to file a TTRA?
No. When an item of income was subjected to taxation in accordance with the provisions of the relevant tax treaty, the withholding agent/income payor shall file with ITAD a request for confirmation (RFC) that the tax treatment of such income was proper.
When and how should the request for confirmation be filed?
Depending on the type of income, the request for confirmation with complete documentary requirements shall be filed by the withholding agent, domestic or foreign, on or before the dates prescribed below:
|Type of Income
|Date of Filing
|At any time after the transaction but shall 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
|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.
One consolidated request for confirmation per nonresident income recipient, regardless of the number and type of income payments made during the year, shall be filed. The case folder shall, however, be pre-arranged by the filer per type of income following the sequence of documents as stated in the list of requirements.
Pursuant to Revenue Memorandum Circular No. 20-2022, however, taxpayers who were already issued with COEs, the tenor thereof allows the ruling to be applied to subsequent or future income payments, shall no longer file an RFC or TTRA every time an income of similar nature is paid to the same nonresident. In applying the confirmed treaty benefit to future income payments, the income payor or withholding agent shall always be guided by the requisites mentioned in the COE.
What are the requirements to be submitted when filing a TTRA or RFC?
- The non-resident individual or corporation must first secure a Taxpayer Identification Number (TIN) from Revenue District Office (RDO) No. 39- South Quezon City;
- Duly accomplished TTRA BIR Form No. 0901
- General and Specific Documentary Requirements enumerated under RMO No. 14-2021.
Checklist of Requirements:
- Business profits
- Air and shipping transport
- Branch profit remittances
- Capital gains
- Independent personal services
- Dependent personal services
- Teachers, etc.
- Entertainers, etc.
- Other income
BIR Forms to be accomplished:
- Capital Gains (BIR Form No. 0901-C)
- Dividends (BIR Form No. 0901-D
- Interest (BIR Form No. 0901-I)
- Other income (BIR Form No. 0901-O)
- Business Profits (BIR Form No. 0901-P)
- Profit Remittances (BIR Form No. 0901-PR)
- Royalties (BIR Form No. 0901-R)
- Independent Personal Services (BIR Form No. 0901-S1)
- Dependent Personal Services (BIR Form No. 0901-S2)
- Professors, Teachers, Students, Apprentices (BIR Form No. 0901-S3)
- Entertainers, Artists, Sportspersons (BIR Form No. 0901-S4)
- Income from Air and Shipping Transport (BIR Form No. 0901-T)
Will ITAD still accept Certificate of Residence for Tax Treaty Relief (CORTT) Forms for dividends, interests and royalties?
The submission of CORTT Forms was automatically discontinued upon the effectivity of Revenue Memorandum Order (RMO) No. 14-2021.
Where to apply TTRA or RFC?
All TTRAs or RFCs shall only be submitted to the International Tax Affairs Division (ITAD).