Tax Alert No. 9 [Revenue Memorandum Circular (RMC) No. 20-2022 dated 17 February 2022]

Guidance on the Filing of Requests for Confirmation, Tax Treaty Relief Applications and Tax Sparing Applications

The Commissioner of Internal Revenue has issued RMC No. 20-2022 to clarify that taxpayers who were already issued with Certificate of Entitlement (COE) for treaty or tax sparing purposes, wherein the tenor allows the ruling to be applied to subsequent or future income payments such as in the case of dividends, branch profit remittances, interest, royalties, and income from air and shipping transport, shall no longer file a Request for Confirmation (RFC) or Tax Treaty Relief Application (TTRA) everytime an income of a similar nature is paid to the same nonresident.

The salient provisions of RMC No. 20-2022 are as follows:

• In applying the confirmed treaty benefit or tax sparing application on future income payments, the income payor or withholding agent shall always be guided by the requisites mentioned in the COE.
• Thus, if the COE mentions tax residency as a requisite for continuous enjoyment of a treaty benefit for instance, the income payor must require the nonresident to submit first a Tax Residency Certificate (TRC) for such relevant year before making any payment.
• A new RFC, TTRA or tax sparing application shall only be filed if any of the requisites mentioned in the certificate is absent.
• 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.
• For annual updating that is required for long-term contracts of services, the taxpayers shall only submit the following:
  1. TRC of the nonresident for the relevant year;
  2. Sworn certification stating that the services is provided by foreign entities, place of performance by the foreign enterprise, individuals who rendered the services on behalf of the foreign enterprise, their position/designations and professional background and duration of stay in the Philippines of said individuals;
  3. Certified True Copy of their passports or a Certificate 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.