best law firms in the philippines | law firms in makati

best lawyers in the philippines

tax lawyer philippines

labor lawyer philippines

immigration attorney philippines

corporate attorney

legal services philippines
special power of attorney philippines


By Nica Marsha Gasapo on July 1, 2021

In an effort to rationalize the procedures and requirements for the availment of tax treaty benefits, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Order (RMO) 14-2021 prescribing for updated procedures on availing tax treaty benefits for non-resident foreign income earners.

To recall, RMO 14-2021 provides that taxpayers who intend to avail of the preferred tax rates pursuant to a tax treaty must observe the following procedures: the withholding agent shall apply the preferred tax rates pursuant to a tax treaty upon the payment of withholding tax when it becomes due and demandable; a request for confirmation on the propriety of the withholding tax rates applied on that item of income must be filed with the International Tax Affairs Division of the BIR at any time after the payment of withholding tax but in no case be later than the last day of the fourth month following the close of each taxable year; and the BIR shall either deny or confirm the withholding tax rate applied by the withholding agent. If the BIR affirms the rate used by the withholding agent, a certificate confirming the entitlement to tax treaty benefits will be issued.

Furthermore, under RMO 14-2021, the local withholding tax agent/income payor may rely on the following: BIR Form 0901 filled out by the non-resident foreign income earner; a copy of the tax residency certificate duly issued by the foreign tax authority to the non-resident foreign income earner; and a copy of the relevant provision of the applicable tax treaty. RMO 14-2021 emphasizes that the failure of the non-resident foreign income earner to provide the said documentary requirements may lead to withholding using the regular rates prescribed under the National Internal Revenue Code, as amended (Tax Code).

Recently, the BIR issued Revenue Memorandum Circular (RMC) 77-2021, seeking to clarify certain provisions of RMO 14-2021 and frequently asked questions regarding the new procedures and guidelines set forth under RMO 14-20.

As with RMO 14-2021, RMC 77-2021 stresses the importance of the submission of the tax residency certificate issued by the competent tax authority of the non-resident foreign income earner. RMC 77-2021 provides that the benefit of a tax treaty shall not extend to a taxpayer who fails to submit such duly-issued tax residency certificate. The BIR states that such failure will result in the denial of the non-resident foreign income earner’s claim for treaty benefits.

According to RMC 77-2021, the denial on the ground of residency will not contravene the Supreme Court ruling in Deutsche Bank AG Manila Branch vs Commissioner of Internal Revenue (GR 188550, Aug. 19, 2013) (Deutsche Bank case). In the Deutsche Bank case, the Supreme Court confirmed that there is no need for a prior tax treaty relief application for the availment of the treaty benefits. The BIR, in RMC 77-2021, explains that RMO 14-2021 seeks to ensure that the relief granted under tax treaties are given to entities who are actually entitled thereto and who can establish his/her/its tax residency in a contracting state.

Moreover, RMC 77-2021 provides that if the non-resident foreign income earner submitted to the income payor (the withholding agent) a tax residency certificate and the appropriate BIR Form 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 duly established. Otherwise, the regular rates imposed under the Tax Code should be applied. The use of the word “may,” however, indicates that the withholding agent can refuse to apply the treaty rate, and this could give rise to enforcement issues of the circular.

RMC 77-2021 further clarifies that if the non-resident foreign income earner has income payments in 2020 and prior years but no tax treaty relief application or Certificate of Residence for Tax Treaty (CORTT) Relief Form was filed previously, the withholding agent has until the last working day of this year to file with the BIR a request for confirmation with complete documentary requirements. Failure to file the same within the prescribed deadline would be subject to the provisions of Sections 250 and 255 of the Tax Code (on the filing of appropriate returns and information). A penalty of P1,000 shall also be imposed for failure to file a CORTT Form for dividends, interests and royalties paid for the period starting from the effectivity of RMO 8-2017 and until Dec. 31, 2020.

All the above shows that while the new procedure seems to make it easier for a non-resident taxpayer to avail of tax treaty benefit or preferences, there are still submissions which are required, and filing deadlines which should be observed.

Nica Marsha V. Gasapo is a junior associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at or visit MTF website at

Copyright © 2021 | MTF Counsel | Powered by: iManila