NAME: Mindoro, Kristel Denise T.

BSA – 21

October 19, 2019

TAXABLE INCOME & INCOME TAX, TAX CREDIT FOR FOREIGN INCOME
TAX

Taxation of Foreign-Source Income

A resident citizen is taxable on all income derived from worldwide sources and
it is not unlikely that the foreign-source income may also be subject to taxation
in the country from which it was derived. To minimize the possibility of double
taxation, the taxpayer may avail of the benefits provided under the applicable
and effective tax treaty, which may either be in the form of tax exemption or a
preferential tax rate. The amount of income taxes paid during the taxable year
to any foreign country may be used as credits against Philippine income taxes.

Certificate of Residency

A COR shall only be issued to resident taxpayer with an existing Tax

Identification Number (TIN) who has complied with the following documentary
requirements:

For individuals

CERTIFICATE OF RESIDENCY REQUIREMENTS FOR

INDIVIDUALS1

GENERAL DOCUMENTARY REQUIREMENTS:

1. Letter-request with the following information:

a. Name of the applicant;

b. Taxable year being applied for;

1
Including partners of a General Professional Partnership (GPP)
 c. Total amount of income received or expected to be received
by the applicant;
d. Name of the non-resident income payor and its country of
residence; and
e. Reason for the request;

Note: If any of the above information is not applicable,

such fact shall be stated as well as the reason or
legal/factual basis therefor.

2. Proof of Transaction (e.g. contract, agreement, details of

pensions to be received abroad, etc.);

3. Tax Identification Number (TIN);

4. Barangay Certification stating therein the exact address

and length of residency of the applicant;

5. Certified photocopy of all the pages of applicant’s

passport showing the dates of arrival and departure of the
applicant in the Philippines (including blank pages thereof);

6. A notarized affidavit stating the length or duration of stay

of the applicant in the Philippines during the taxable year
being applied for based on the dates of arrival in and
departure from the Philippines stamped on the passport or
summary of number of days in the Philippines;

7. For pensioners, a notarized affidavit stating that he/she

has no income from sources within the Philippines, if
applicable;

8. Original Copy of Special Power of Attorney (SPA) or letter

authorizing a representative of the applicant to file and/or
claim the COR; and

9. BIR Form No. 2316, BIR Form No. 1700 (Annual Income
Tax Return for Individuals Earning Purely Compensation
Income), BIR Form No. 1701A [Annual Income Tax Return
for Individuals Earning Income PURELY from
Business/Profession (Those under the graduated income tax
rates with OSD as mode of deduction OR those who opted to
avail of the 8% flat income tax rate)] or BIR Form No. 1701A
[Annual Income Tax Return for Individuals, Estates and
 Trusts (Including those with both Business and
Compensation Income)], whichever is applicable.

ADDITIONAL REQUIREMENTS IF APPLICANT IS AN

INDIVIDUAL ENGAGED IN BUSINESS:

1. All quarterly ITRs duly filed during the year of transaction;

2. Audited Financial Statements duly filed and/or received by

the BIR and attached to the annual ITR;

3. Certified copy of Certificate of Registration (BIR Form No.

2303) or a photocopy thereof with presentation of the original
Certificate of Registration as issued by the BIR;

1. Certified copy of BIR Payment Form No. 0605 for the payment
of annual registration fee (for the current year and/or year of
transaction) or a photocopy thereof with presentation of the
original BIR Payment Form No. 0605 and its proof of
payment;

4. Certificate of Partnership Registration, if applicable.

ADDITIONAL REQUIREMENT/S IF APPLICANT IS A RESIDENT

ALIEN

1. Alien Certificate of Registration issued by the Bureau of

Immigration and any other proof of permanent residency in the
Philippines; and

2. Special Retiree’s Visa Identification Card issued by the

Philippine Retirement Authority, if any.

For Corporation

CERTIFICATE OF RESIDENCY REQUIREMENTS FOR

CORPORATIONS

A. GENERAL DOCUMENTARY REQUIREMENTS:

2. Letter-request stating the following information:

a. Name of the applicant corporation;

b. Taxable year being applied for;
c. Total amount of income received or expected to be received
by the applicant;
d. Name of the nonresident income payor and its country of
residence; and
e. Reason for the request.

Note: If any of the above information is not applicable, such

fact shall be stated as well as the reason or legal/factual
basis therefor.

3. Proof of Transaction
a. Contract/Agreement; and
b. BIR registered principal and supplementary receipts
(invoice, billing statement, statement of account,
debit/credit memo, purchase order, official receipt, job
order, etc.

4. Certified true copy of Articles of Incorporation/Articles of

Partnership issued by the Securities and Exchange
Commission (SEC);

5. Certified copy of Certificate of Registration (BIR Form No.

2303) or a photocopy thereof with presentation of the original
Certificate of Registration as issued by the BIR;

6. Certified copy of BIR Payment Form No. 0605 for the payment
of annual registration fee (for the current year and/or year of
transaction) or a photocopy thereof with presentation of the
original BIR Payment Form No. 0605 and its proof of
payment;

7. BIR Form No. 1702-RT (Annual Income Tax Return for

Corporation, Partnership and Other Non-Individual Taxpayer
Subject Only to REGULAR Income Tax Rate) or BIR Form No.
1702-MX (Annual Income Tax Return for Corporation,
Partnership and Other Non-Individual with MIXED Income
Subject to Multiple Income Tax Rates or with Income Subject to
SPECIAL/PREFERENTIAL RATE) for the immediately preceding
taxable year duly filed with, and/or received by, the BIR,
whichever is applicable;
8. All quarterly ITRs duly filed during the year of transaction;

9. Audited Financial Statements duly filed and/or received by the

BIR and attached to the annual ITR; and

10. Original Copy of Special Power of Attorney (SPA) or letter

authorizing a representative of the applicant to file and/or
claim the COR.

NOTES:

 The letter-request must be addressed to:

The Office of the Legal Service

Bureau of Internal Revenue

Attention:

Chief, International Tax Affairs Division

Room 811, NOB-BIR, Agham Road, Diliman
Quezon City 1101

 Processing time is approximately 14 working days upon

submission of COMPLETE documentary requirements.

 All submitted documents must be CERTIFIED TRUE

COPIES of the original.

 The BIR reserves its right to require the presentation of

the original copies for verification purposes or to request
additional information or any related document which
may be deemed necessary in the processing of the COR.
FOREIGN TAX CREDIT

The foreign tax credit is a tax break provided by the government to

reduce the tax liability of certain taxpayers. A tax credit is applied to the
amount of tax owed by the taxpayer after all deductions are made from his or
her taxable income, and it reduces the total tax bill of an individual.

A tax credit can be either:

 Refundable tax credit that usually results in a refund check if the tax
credit is more than the individual’s tax bill.
 Non-refundable tax credit does not result in a refund to the taxpayer as
it will only reduce the tax owed to zero.

The foreign tax credit applies to taxpayers who pay tax on their
foreign investment income to a foreign government. Generally, only income,
war profits, and excess profits taxes qualify for the credit. The credit can be
used by individuals, estates, or trusts to reduce their income tax liability. In
addition, taxpayers can carry any unused amounts forward to future tax years,
up to five years.

It is claimed on Form 1116, unless the taxpayer qualifies for the de

minimis exception, in which case, s/he can claim the tax credit for the full
amount of foreign taxes paid directly on Form 1040. The credit can only be
claimed on income that is also subject to domestic taxation.

TAXPAYERS WHO CAN AVAIL INCOME TAX CREDIT

Resident citizens of the Philippines

Domestic Corporations
Members of General Professional Partnerships (GPP)
Beneficiaries of Estates and Trust
REQUISITES

The credits for taxes paid in foreign countries shall be allowed as

deduction only if the taxpayer establishes to the satisfaction of the
Commissioner the following:

1. Total amount of income derived from sources without the Philippines.

2. Amount derived from each country, the tax