RMC No. 77-2021: Clarifies certain provisions of Revenue Memorandum Order No. 14-2021

Summary

RMC No. 77-2021 clarifies provisions of RMO No. 14-2021 on tax treaty relief applications (TTRA) and requests for confirmation (RFC) filed with the International Tax Affairs Division (ITAD).

Key points

1. Proof of residency. Only residents of one or both Contracting States may avail of treaty benefits, and the nonresident must submit a Tax Residency Certificate (TRC) from the tax authority of the country of residence. Without it, the claim is denied, and this does not contravene Deutsche Bank AG Manila Branch vs. Commissioner of Internal Revenue (G.R. No. 188550, August 19, 2013), whose issue was failure to file a TTRA within the 15-day period under RMO No. 1-2000.
2. Applying treaty rates. If the nonresident gave the income payor a TRC and the appropriate BIR Form No. 0901 before payment, the payor may apply the treaty in withholding, provided all other conditions are met. Otherwise the regular Tax Code rates apply, and the nonresident may file a TTRA with a refund claim after payment.
3. Request for confirmation. The income payor files one consolidated RFC per nonresident income recipient per year with ITAD, and may authorize another person to file by Special Power of Attorney (SPA). For capital gains, the deadline is not later than the last day of the fourth month following the close of the taxable year when the income is paid or the transaction is consummated. For other income, it is the last day of the fourth month following the close of the taxable year.
4. Documents. The nonresident submits one original and authenticated TRC to each income payor per year, or a certified true copy to other payors if the original is unavailable, with a notation. Incomplete applications are no longer accepted, filers other than the nonresident or withholding agent must present a notarized SPA, and dividend filings must add a certified true copy of the audited financial statements as of the taxable year before the declaration date.
5. Long-term contracts. For contracts where treaty entitlement does not depend on a time threshold, such as interests and royalties, annual updating is not mandatory and the BIR issues a one-time certification presumed valid for the contract’s duration. Where the existence of a Permanent Establishment depends on a time threshold, annual updating is mandatory and the Certificate of Entitlement to Treaty Benefit (COE) covers only the engagement period.
6. Late filing and transition. A late RFC is not automatically denied but carries a late-filing penalty, and an extension of no more than thirty (30) days may be granted in meritorious cases. Pending TTRAs get a Final Notice with three (3) months to comply, archived applications have four (4) months from effectivity of the new RMO, and for 2020 and prior years without a TTRA or CORTT Form the withholding agent has until the last working day of 2021 to file an RFC.

Who is affected

• Nonresident income recipients
• Withholding agents and income payors
• Foreign enterprises with a permanent establishment in the Philippines

Deadlines and effectivity

• RFC for capital gains: not later than the last day of the fourth month following the close of the taxable year
• Extension for late filing: no more than thirty (30) days
• Pending TTRAs: three (3) months from the Final Notice
• Past years without TTRA or CORTT Form: until the last working day of 2021

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.