RMC No. 24-2026: Clarifying the Application of Revenue Memorandum Circular Nos. 5- 2024 and 38-2024 on the Tax Treatment of Cross-Border Services

Key points

1. Not automatic taxation. Cross-border services listed in RMC No. 5-2024 are not automatically subject to Philippine Income Tax just because they are classed as cross-border services.
2. Situs of services. The general rule is that income is taxed where the service is performed. The Aces Philippines case adds the place where the benefit is received or the service is completed.
3. Burden on the Revenue Officer. A Revenue Officer relying on Aces Philippines must show the income source is in the Philippines by examining the cross-border agreement as a whole, under Section 228 of the Tax Code. Four elements must be explained: a Philippine-resident or domestic payor and a non-resident payee; a specific activity integral to the service that produced payment or accrual; a Philippine situs for the income-producing activity; and no income tax exemption under treaties or domestic law. The income does not include passive income, sale of goods, or pass-through payments to another non-resident for services outside the Philippines.
4. Burden on the taxpayer. The taxpayer must prove the income came from sources outside the Philippines. Evidence may include a sworn statement, service contracts and invoices, a Tax Residency Certificate, an SEC Certification of Non-Registration, proof of the provider’s registration, proof of outward remittance, a BIR Ruling, or a BIR Certificate of Entitlement to Treaty Benefit.
5. Documents and rulings. Under RMO No. 1-2026, photocopies certified as true reproductions are accepted, with foreign documents authenticated or apostilled. A prior confirmatory BIR ruling is not a condition for the tax treatment, but the taxpayer may request a ruling confirming non-taxability.

Who is affected

• Philippine payors of non-resident service providers
• Non-resident service providers
• Revenue Officers

Deadlines and effectivity

• Issued: March 30, 2026