Tax pact benefit claims simplified

THE BUREAU of Internal Revenue (BIR) is crafting new rules to make it easier for foreigners earning money in the Philippines to pay taxes using a “preferential” rate under existing international tax treaties.

A draft memorandum on BIR’s Web site outlines a “simplified” procedure for non- residents to claim tax treaty benefits for dividend, interest and royalty incomes earned in the Philippines.

“Instead of filing tax treaty relief applications for income earned in the Philippines, nonresidents can automatically use the preferential rate or exemption prescribed under tax treaties on these types of income by submitting to the International Tax Affairs Division (ITAD) a new Certificate of Residency (CoR) for claiming tax treaty benefits duly accomplished by the nonresident and withholding agent,” the BIR said.

The Philippines is party to 40 tax treaties forged with other countries that enable foreign nationals to avoid double taxation by claiming tax exemption or relief from paying duties here.

The new draft order seeks to amend Revenue Memorandum Order 72- 2010 issued by former BIR Commissioner Kim S. Jacinto- Henares that requires documents like a certification of dividend declarations, Board of Investments registration, copies of loan agreements and inward remittances, and royalty agreements to accompany application for tax treaty relief.

Instead, foreigners will only have to submit a CoR form to BIR’s ITAD that will be used as basis of withholding agents in applying the reduced income tax rate to non-residents. —