Tax Digest
Volume 10,
Series 60
Outright Preferential Tax Rates for Dividends, Interests and Royalties, Approved!

The BIR finally released the awaited simplified procedure in claiming tax treaty benefits for some income of nonresident earners. The BIR adopted the self-assessment system and automatic withholding of taxes on income of nonresidents, deriving certain income from sources within the Philippines, based on applicable tax treaties, which is subsequently subject to post validation. It covers payments for the following in the table below:

Income Payments Nonresident Alien not Engaged in Trade or Business (NANETB) Nonresident Foreign Corporation (NRFC)
Interest Yes Yes
Royalties Yes Yes
Dividends Yes Separate Issuance

Under this new RMO, tax treaty relief application shall no longer be filed with the International Tax Affairs Division (ITAD) – In lieu of this, the BIR created the Certificate of Residency for Tax Treaty Relief (CORTT) form, which the non-resident income earner needs to complete and submit to the withholding agent, for an outright application of the treaty provision. This CORTT form serve as a proof of residency of the non-resident, which qualifies him to the benefit of the treaty. Failure to submit CORTT form, means the income earner waives its right on the tax treaty relief.

The withholding agent is thereby mandated to submit a copy if the duly completed CORTT form to RDO 39, within 30 days from the date of income payment. Withholding agent are also reminded to provide information on payments to non-residents through filing of BIR Form No. 1601-F and BIR Form No. 1604-CF.

It must be noted, that should the BIR subsequently finds out, that such income payments do not qualify for the treaty provision, taxpayer’s may subject to penalties based on the Tax Code. For dividend income purpose, the CORTT form shall be valid for 2-years.

Finally, for those who have already apply for a TTRAs on the concern income earned in this order they shall be allowed to use the preferential tax rates invoked based on the existing tax treaties of the Philippines, but will be subjected for compliance check.

Revenue Memorandum Order No. 8-2017
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