Many familiars with the terms of the tax treaties are conscious that they only extend to citizens of the States party to the Treaty. The primary documentary condition for the support of tax relief eligibility is therefore evidence of the non-resident income holders’ residence. This evidence of residence is more generally known as a Tax residence certificate (TRC), a certificate issued by the tax authority of a nation of the earner certifying that the income owner lives in that nation for the tax treaty invoked in the applicable taxation year.
To control the issuance of TRCs to avoid misuse or violence, the Bureau of Internal Revenue (BIR) released a Revenue Memorandum (RMO) no. 51-2019 on 22 October.
In retrospect, the BIR found that for purposes of the TRCs, resident aliens and resident international entities applied for taxation to keep their revenue from being taxed from another country, and that spurious arrangements with foreign income payers had been made to mask the true existence of their transactions.
The RMO aims to track the creation of a taxpayer database in the Philippines with foreign-sourced revenues, and also to ensure that such revenue is duly reported for tax purposes. Where will a request be made from TRC? The ITAD is the single approved office to accept and process TRC applications under Revenue Administrative order 1-2019 released on 25 January. These are considered not to have been filed with any office other than ITAD.
However, if, a part of the documentation is needed under RMO 51-2019, the TRC applicant must be informed and given adequate time to comply, if the ITAD Case Officer determines that additional documents are appropriate to better examine the TRC application.
The TRC shall be drawn up with the legal service Office stamp, properly signed by the Assistant Commissioner, if all conditions are in order. A loose documentary stamp must be issued by the claimant to ITAD, which the latter adds to TRC before issuing the TRC.
However, if ITAD finds, on the grounds of the applicant’s records, that a TRC question is unjustified or that the requested documents are false, it issues a letter rejection. Such refuse shall remain in effect until the claimant has declared and submitted authentic documents the actual essence of the transact abroad.