REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE
BUREAU OF INTERNAL REVENUE
Quezon City

December 1, 2020

REVENUE MEMORANDUM ORDER NO. 43-2020

SUBJECT: Streamlining the Process of Issuing Tax Residency Certificates (TRCs),

Amending for this Purpose Pertinent Provision of Revenue Memorandum
Order (RMO) No. 51-2019

TO: All Internal Revenue Officers and Others Concerned

Section 1. Objective

When RMO No. 51-2019 took effect, the Bureau of Internal Revenue (BIR), through
the International Tax Affairs Division (ITAD), has started to implement stricter rules on the
issuance of TRCs to avoid misuse and abuse thereof as well as the claiming of unintended
treaty benefits. Towards this end, the BIR designed and issued its own TRC Form instead of
stamping the TRC Forms of its treaty partners to confirm tax residency in the Philippines. The
BIR also discontinued the issuance of TRCs to resident aliens and resident foreign corporations
since they are not subject to worldwide taxation and are not, therefore, considered residents of
the Philippines for treaty purposes.

Notably, the evaluation of TRC applications has been the subject of arguments between
the tax authority and taxpayers, especially with regard to the appreciation by the former of the
submitted proof of transaction, and time-consuming. Though pressed for time, the ITAD, the
sole office in the Bureau that processes TRCs, is still expected to meet the demand for issuance
of TRCs in a timely manner considering that the Anti-Red Tape Authority (ARTA) strictly
monitors the implementation of the Ease of Doing Business and Efficient Government Service
Delivery Act of 2018 (“Ease of Doing Business Act”) in government offices.

For the aforestated reasons, there is a need to streamline the process of issuing TRCs.

Section 2. Documentary Requirements

The following documents shall accompany each TRC application:

For individuals

1. Duly accomplished BIR Form No. 0902 [Application Form for Tax Residency
Certificate (TRC) for Treaty Purposes];
2. Certified true copy of the following proofs of income:
i. Contract duly signed by both parties, if available, or any competent proof of
transaction;
ii. BIR-registered invoice/receipt issued by the taxpayer to the income payor and
the relevant Authority to Print Receipts and/or Invoices or Permit to Use
Computerized Accounting System/Loose-leaf Receipts or Invoices/; and
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 iii. Proof of remittance if the foreign source income was already received by the
domestic taxpayer;
3. Photocopy of the passport booklet or Residency Certificate issued by the Barangay
Chairman if the applicant never left the Philippines;
4. Annual Income Tax Return for the immediately preceding year;
5. Notarized Special Power of Attorney (SPA) or authorization letter issued by the
applicant to his/her authorized representative(s), which shall expressly state the
authority to sign BIR Form No. 0902 as well as to file the TRC application.

For non-individuals

1. Duly accomplished BIR Form No. 0902, which must be signed by the taxpayer or
its authorized representative;
2. Proof of establishment in the Philippines (e.g. latest Articles of Incorporation or
Partnership);
3. Certified true copy of the following proofs of income:
i. Contract duly signed by both parties, if available, or any competent proof of
transaction;
ii. BIR-registered invoice/receipt issued by the taxpayer to the income payor and
the relevant Authority to Print Receipts and/or Invoices or Permit to Use
Computerized Accounting System/Loose-leaf Receipts or Invoices/; and
iii. Proof of remittance if the foreign source income was already received by the
domestic taxpayer;
4. List of partners if the applicant is a general professional partnership (GPP);
5. Annual Income Tax Return for the immediately preceding year;
6. Notarized Special Power of Attorney (SPA) or authorization letter issued by the
applicant to its authorized representative(s), which shall expressly state the
authority to sign BIR Form No. 0902 as well as to file the TRC application.

Section 3. Revised Guidelines and Procedures

1. Instead of a letter-request, the applicant shall submit, together with the required
attachments prescribed in the preceding section, a duly accomplished BIR Form
No. 0902, which shall be signed by the taxpayer or his/her/its authorized
representative.
2. Upon receipt of the application, the assigned case officer (CO) shall evaluate the
completeness of the application and its supporting documents.
3. The CO shall inform the applicant of any deficiency in the accompanying
requirements within three (3) working days either via registered mail or electronic
mail (e-mail).
4. All TRC applications shall be acted upon within fourteen (14) working days from
the submission of complete documentary requirements.
5. The BIR shall continue to issue its own TRC Form, which shall be signed by the
Assistant Commissioner for Legal Service only. All TRC applications filed with the
Revenue District Offices (RDOs) or Large Taxpayers Divisions (LTDs) shall be
immediately indorsed to the ITAD.

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Section 4. Processing of Third-Party Information

As the repository of information related to the foreign source income of Philippine

taxpayers, the ITAD shall, within a reasonable period of time after the close of each taxable
year or whenever necessary, convey the relevant information to the concerned RDO or LTD
that has jurisdiction over the applicant, or the National Investigation Division, as the case may
be. In turn, the investigating office shall verify whether the foreign source income was declared
by the taxpayer for tax purposes and collect deficiency taxes and penalties, if warranted.

The investigating office may likewise request for information from the foreign tax
authority, through the Exchange of Information Unit of the ITAD, to further verify the accuracy
of the declared income. If, based on the information received and/or other competent proof
obtained, the taxpayer made a false declaration under oath, the taxpayer may be charged with
the crime of perjury under Article 183 of the Revised Penal Code and with other appropriate
crimes or offenses as may be warranted under existing laws, in addition to the payment of
deficiency taxes.

To complete the process, the investigating office shall furnish the ITAD the results of
its investigation within thirty (30) calendar days from the termination thereof.

Section 5. Treatment of Foreign Tax Credits When the Taxpayer Fails to Secure a TRC

Tax treaties operate to avoid international juridical double taxation in order to

encourage foreign investments, among others. International juridical double taxation is defined
as the imposition of comparable taxes in two (or more) States on the same taxpayer in respect
of the same subject matter and for identical periods. When a State agrees to be bound by the
provisions of a treaty, it does so on the understanding that by allocating taxing rights, said State
either would lose its right to tax some items of income or may share taxing rights with the other
state. In the former, the source state does not tax the income which according to the tax treaty
shall only be taxed in the residence state (or vice versa). In the latter case, either of the
contracting states may impose tax on an item of income with or without a limit, and the country
of residence is obliged to allow as credit the taxes paid in the other state.

It bears stressing, however, that treaty benefits shall only be accorded to residents of
either or both states. The grant thereof is not automatic but is subject to presentation of proof
of residency or a TRC in a contracting state. Failure to establish the fact of residency in a
contracting state might result in the imposition of the regular tax in the state of source, i.e.,
without the benefit of the treaty.

To avoid being subjected to the regular tax imposed in the source state, Philippine
taxpayers deriving income from another contracting state are hereby advised to always secure
a TRC and present the same before the foreign tax authority to be entitled to treaty benefits.
Those who fail to secure a TRC shall not be allowed to claim foreign tax credits in excess of
the appropriate amount of tax that is supposed to be paid in the source state had the income
recipient invoked the provision/s of the treaty and proved his/her/its residency in the
Philippines. The Philippines should not be made to suffer for the failure of its tax residents to
claim treaty benefits.

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 To achieve this purpose, tax auditors shall always ensure that Philippine taxpayers are
only allowed the appropriate amount of tax credit which is equal to the amount of taxes that
would be imposed on that item of income pursuant to the treaty.

To illustrate, assume X Corporation to have derived business profits of ₱10,000,000 in

Country A, a treaty partner of the Philippines. Under Country A’s tax law, business income
derived by a nonresident is normally subject to tax at 30% while the tax treaty states that the
business profits derived by an enterprise of the Philippines without a permanent establishment
in Country A shall only be taxed in the Philippines. If X Corporation invokes the provision of
the treaty and proves its residency in the Philippines, Country A would not have the right to
tax the said business profits since under the treaty, the prior right to tax belongs to the residence
state. As a result, X Corporation must pay a tax equivalent to 30%, the corporate tax rate in
the Philippines, or ₱3,000,000 to the Philippine government only and not in Country A.

On the other hand, if X Corporation fails to prove its residency in the Philippines,
Country A would impose the regular tax rate of 30% on the said income. In this case, Country
A would then be justified in not applying the provisions of the treaty for X Corporation’s failure
to prove its entitlement thereto. Now, if X Corporation would be allowed to apply as credit
against its tax due in the Philippines the taxes paid in the source state, the Philippines, instead
of collecting, would be losing ₱3,000,000.

In such case, the tax auditor shall not allow as foreign tax credit the taxes paid in
Country A but shall instead advise X Corporation to secure a TRC and file a claim for tax
refund in Country A.

Section 6. Amendatory/Repealing Clause

The provisions of RMO No. 51-2019 that are inconsistent herewith are hereby repealed,
amended or modified accordingly.

Section 7. Effectivity

This Order shall take effect immediately.

(Original Signed)
CAESAR R. DULAY
Commissioner of Internal Revenue

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