Philippines updates procedures for claiming tax treaty benefits

Pro Tip before we start: Do you know if someone will send money to Philippines from another country, amount would be tax exempted.

Revenue Memo No. 014-21, streamlining the protocol for accessing the Philippine Tax Treaty, has been released by the Philippines Bureau of Internal Revenue on 31 March.

There has been a problem with various government departments in the Philippines applying for tax treaty advantages.

Although the tax office of the Philippines had previously restricted the time for applying for the tax treaty relief to fifteen days before any transaction, the highest court in the Philippines decided to refuse an outright replacement from a tax treaty because the period prescribed was not strictly met.

According to the High Court, the application confirms the rights of a taxpayer to tax treaty advantages and cannot unduly dismiss the privilege of taxpayers for certain benefits. The Tax Office has revised its Rules to handle tax relief applications to conform with the High Court’s understanding.

Furthermore, the tax office recognises that, despite the limitations on the amount of work, the small number of staff and the need to do a rigorous review, the taxpaying office has to ensure that taxpayers are sure of their tax processing.

Important Administrative Guidelines

The tax office of the Philippines allows non-resident taxpayers to make an application to the withholding agent and income payor before the first income payment, citing the applicable provisions of the tax treaties and a tax residence certificate.

This document is available to the withholding agent or income payor to decide if the withholding tax on income imposed by a non-resident citizen in the Philippines is applied at the reduced rate or exempted from the withholding tax.