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What are the types of Philippine income that may be subject to a preferential tax treaty
rate and/or tax exemption under the valid and effective Philippine Double Tax Agreements
(DTAs)?
a. Preferential rates:
Dividends;
Interests;
Royalties;
Profits of shipping and air transport in international traffic; and
Branch profit remittances.
b. Exemption:
Business profits;
Capital gains;
Income from employment;
Income from independent professional services;
Income of athletes and performers supported by public funds;
Income from government service;
Pensions;
Income of visiting teachers and researchers;
Allowances and remuneration of visiting students and trainees; and
Other income.
In withholding taxes, what treaty rate should be applied by the income payor on the
income of the nonresident alien not engaged in trade or business or nonresident foreign
corporation?
If the nonresident submitted to the income payor a TRC and the appropriate BIR Form No. 0901
prior to the payment of income, the income payor may apply the provisions of the applicable
treaty; provided that all the conditions for the availment thereof, other than residency, have been
satisfied. Otherwise, the regular rates imposed under the Tax Code should be applied.
If the nonresident’s income was not subjected to tax in the Philippines in accordance with
the relevant tax treaty, what shall the nonresident do to avail of treaty benefits?
The nonresident, or its authorized representative, should file a tax treaty relief application
(TTRA) with complete documentary requirements and a claim for refund at any time after the
payment of the withholding tax if the regular rate under the Tax Code was applied on the income
instead of the treaty rates.
If the income payor applied the treaty rate on the nonresident's income, does the
nonresident have to file a TTRA?
No. When an item of income was subjected to taxation in accordance with the provisions of the
relevant tax treaty, the withholding agent/income payor shall file with ITAD a request for
confirmation (RFC) that the tax treatment of such income was proper.
One consolidated request for confirmation per nonresident income recipient, regardless of the
number and type of income payments made during the year, shall be filed. The case folder shall,
however, be pre-arranged by the filer per type of income following the sequence of documents as
stated in the list of requirements.
Pursuant to Revenue Memorandum Circular No. 20-2022, however, taxpayers who were already
issued with COEs, the tenor thereof allows the ruling to be applied to subsequent or future
income payments, shall no longer file an RFC or TTRA every time an income of similar nature
is paid to the same nonresident. In applying the confirmed treaty benefit to future income
payments, the income payor or withholding agent shall always be guided by the requisites
mentioned in the COE.