Law Summary
Coverage of Tax Treaty Relief Applications
- Applies exclusively to tax treaty relief applications, including:
- Dividends
- Interests
- Royalties
- Business profits
- Gains from sale of shares
- Salaries and compensation
- Income from services (e.g., entertainment, professions)
- Profits from operation of ships and aircraft
- Other income covered by existing tax treaties
Procedures for Filing Applications
- Use BIR Forms TC-001 or TC-002.
- File applications with ITAD at least 15 days prior to the covered transaction.
- Applications must include supporting documents as per ANNEX A.
- Claims for tax refund or credit must be filed within 2 years under Section 230 of the National Internal Revenue Code.
Processing of Applications
- ITAD reviews applications to determine eligibility for relief.
- Written approval by Commissioner or authorized official is required for exemptions or beneficial rates.
- Approvals are specific to the transaction and valid for a limited time.
- Tax refund/credit claims require a memorandum decision approved by the Commissioner.
- Refund/credit processing includes verification by relevant revenue divisions (Accounting, Accounts Receivable).
- Tax credit certificates issued are for non-resident taxpayers and may be applied against future taxes.
Requirements and Responsibilities of Taxpayers
- Proof of application or approval must always accompany tax treaty benefits.
- Proof can be the BIR form receipt or written approval.
- When applicable, attach proof to the withholding tax return reflecting preferential treaty rates.
- Accredited collection banks require this proof before processing remittances to non-residents.
- All BIR audit offices must report any unapproved tax treaty availments to ITAD within 15 days.
- ITAD may notify foreign tax authorities as warranted.
Repealing Clause
- All previous revenue issuances inconsistent with this order, including RMO 2-86, are revoked or modified.
Effectivity
- The order takes effect immediately upon issuance (February 1, 1992).
Annex A: Documentary Requirements for Tax Treaty Relief Applications
- Lists specific documents required for different income types, including but not limited to:
- Detailed letters with transaction and legal justifications
- BIR application forms (TC-001 or TC-002) in triplicate
- Proof of recipient's residence (certifications from foreign tax authority or corporate documents)
- Certifications of business registration or non-registration in the Philippines
- Central Bank approvals for inward/outward remittances
- Bank drafts or payment proofs for withholding taxes
- Corporate documents such as Board resolutions, contracts, loan agreements, etc.
- Special powers of attorney authorizing representatives or withholding agents
- Requirements vary by income type (dividends, interests, royalties, gains from sale of shares, profits from shipping and aircraft, income from services).
- Applicant must provide all documents relevant to justify the treaty relief or refund claim.