Author MRTC

Introduction

REVENUE MEMORANDUM CIRCULAR (RMC) NO. 024-2026

To better clarify the tax status of cross-border services, the Bureau of Internal Revenue (BIR) has released Revenue Memorandum Circular (RMC) No. 24-2026. In addition to ensuring agreement with relevant jurisprudence, this circular aims to resolve interpretive concerns raised by previous RMCs. This RMC issuance highlights that the location of the services’ actual performance determines whether or not service income is taxable. Additionally, it highlights that the location of the underlying economic activity determines the situs of taxes rather than the site of payment, billing, or the residence of the contracting parties.

These rules shall apply to services rendered in cross-border transactions involving resident and nonresident taxpayers, including services performed within or outside the Philippines, regardless of whether the counterparty is a foreign entity. Accordingly, the mere involvement of a foreign entity does not, in itself, preclude the imposition of Philippine taxes.

Requirements. – Taxpayers shall maintain adequate and sufficient documentation to support the proper tax treatment of cross-border services. The following documents may be required :

  1. A sworn statement executed by the individual payor or the duly authorized representative of the company, detailing the parties to the transaction, their relevant circumstances, and the nature and description of the services rendered;
  2. Copies of relevant service contracts, master service agreements, statements of work, or similar documents, such as purchase orders, billing statements, invoices, or relevant email correspondences;
  3. Tax Residency Certificate issued by the tax authority of the non-resident service provider’s residence jurisdiction;
  4. SEC Certification of Non-Registration of the non-resident foreign corporation (NRFC) in the Philippines;
  5. Proof of organization or registration of the non-resident service provider’s residence jurisdiction (e.g., Articles of Incorporation or Association, business registration, etc);
  6. Proof of outward remittance of payment;
  7. Taxpayers shall maintain a copy of a BIR ruling confirming that income is sourced outside the Philippines, with the understanding that such ruling is optional and not a prerequisite when sufficient evidence supports tax treatment;
  8. If the non-resident service provider is a resident of a jurisdiction with which the Philippines has a valid and effective double taxation agreement or tax treaty and has been confirmed to be entitled to a treaty benefit, a copy of the BIR Certificate of Entitlement to Treaty Benefit; or
  9. Other relevant documents to prove that the subject income is not from sources within the Philippines.

Note: Photocopies may be accepted provided that they are supported by Certified True Copies (CTC) duly authorized by the taxpayer’s representative.

To conclude, RMC No. 24-2026 promotes the application of the substance-over-form principle in determining the taxability of cross-border service arrangements. It underscores the importance for taxpayers to maintain robust documentation and to carefully evaluate the underlying facts and circumstances of their transactions. Overall, the issuance aims to enhance clarity, consistency, and compliance in the taxation of cross-border services.