RMO No. 46-2020: Prescribes the guidelines and procedures for the availment of the reduced rate of 15% on intercompany dividends paid by a domestic corporation to a non-resident foreign corporation pursuant to Section 28 (B)(5)(b) of the NIRC of 1997, as amended

Key points

1. Scope of the reduced rate. The 15% rate may apply to cash and property dividends declared by all corporations, whatever their Corporate Income Tax regime, including regular rate of 30%, other rates, Income Tax Holiday or special regimes.
2. Outright remittance. The paying corporation may remit dividends and apply 15% without first getting a BIR ruling. It must determine whether the NRFC’s country of domicile allows a deemed paid tax credit equal to the 15% waived or exempts the dividends from tax. Apostille Convention members may submit an apostilled copy of the foreign law.
3. Request for confirmation. Within ninety (90) days from remittance, or from the foreign tax authority’s determination, whichever is later, the NRFC or its representative files a request with the International Tax Affairs Division (ITAD). Holders of Philippine Depository Receipts may also be entitled, subject to conditions in the Order.
4. Certification, denial and appeal. The BIR issues a certification signed by the Assistant Commissioner for Legal Service in place of a ruling. A denial comes by a BIR ruling with factual and legal bases and may lead to a deficiency assessment for the 15% differential plus penalties. Unfavorable rulings are appealable to the Department of Finance within thirty (30) days from receipt.
5. Treaty rate and documents. The NRFC may use the Tax Code rate whether or not a treaty exists. If not entitled, the treaty rate applies automatically if the NRFC proves treaty entitlement. The documentary requirements accompany the first application in a taxable year, and the BIR may require originals or additional documents.

Who is affected

• Domestic corporations paying dividends to non-resident foreign corporations
• Non-resident foreign corporations
• Holders of Philippine Depository Receipts

Deadlines and effectivity

• Request for confirmation within 90 days from remittance or foreign determination, whichever is later
• Appeal to the Department of Finance within 30 days from receipt of unfavorable ruling