Philippines Bureau of Internal Revenue simplified the procedure for claiming tax treaty benefits for dividend, interest and royalty income of non-resident income earners through Revenue Memorandum Order 8-2017.

Following the lead of President Rodrigo Duterte in making government services more effective and efficient, the Philippine Bureau of Internal Revenue simplified the procedure for claiming tax treaty benefits for dividend, interest and royalty income of non-resident income earners.

Before, the procedure for claiming tax treaty benefits for dividend, interest, and royalty income – as set on Revenue Memorandum Order 72-2010 (RMO 72-2010) - required the submission of many documents; one set of general documents (e.g. proof of residency and articles of incorporation, among others), and a set of documents specific to dividend income, interest and royalty. Last March, the Bureau amended the procedure through the Revenue Memorandum Order 8-2017 (RMO 8-2017).

The new procedure

The RMO 8-2017 makes life easier for non-resident corporations earning dividend, interest and royalty income sourced from the Philippines, by setting a simpler process that involves less documents.

As described in the Memorandum, the changes include the creation of a new Certificate of Residence for Tax Treaty Relief (CORTT) Form - which must be submitted by non-residents instead of the old mandatory tax treaty relief applications (TTRA) – and the enhancement of BIR Forms 1601-F and 1604-CF, used to disclose the income derived from non-residents. Also, the procedure requires a compliance check of the tax treaty relief provision and the tax obligations of the withholding agent/income payer, and a post-reporting validation of the final withholding tax payments on income of the non-residents deriving dividends, interest and royalty income in the Philippines.

If non-residents fail to submit a CORTT Form to the withholding agent/income payer, it will mean that there is no interest in claiming any tax treaty relief and the income will be subject to the normal rate provided under the Tax Code.

This more streamlined procedure not only makes the process of availing preferential tax treaty rates of dividends, interest and royalty income a much more bearable exercise, but it means the Philippines is giving a step towards reducing red tape.

Our experts are optimistic that these changes will spread to other aspects of tax administrative regulations.