Be Guided: "Residents" Only

Be Guided: "Residents" Only

By: Ivy Dianne M. Galzote


The discourse on double taxation is never new. It has always been and will always be part of an employee mobility or business expansion. Hence, the double tax treaty agreements (DTA) were put into place to avoid imposing tax on the same income or property and to encourage foreign trade and investment. These DTAs not only help define ambiguous taxation rules or set conditions on certain treaty concepts, it also comes with benefits that taxpayers can claim and enjoy (e.g. tax exemption). 

be guided residents only

The enjoyment of benefits provided for in the DTAs are now being strictly regulated to avoid taxpayers from availing unintended tax treaty benefits. On October 22, 2019, the Bureau of Internal Revenue (BIR) has released Revenue Memorandum Order (RMO) No. 51-2019 dated 08 July 2019 prescribing the guidelines and procedures for the processing and issuance of a Tax Residency Certificate (TRC). Aside from regulating the issuance of TRCs, the Bureau deems it necessary to issue the said RMO to also prevent any misuse or abuse of TRCs.

The RMO made it clear that only residents of a Contracting State who are subject to Philippine tax based on worldwide income are entitled to claim the treaty benefits for which a TRC is secured. Accordingly, only resident citizens and domestic corporations are considered “residents of a Contracting State” for purposes of claiming treaty benefits in the Philippines because only them are subject to tax on their worldwide income. On the other hand, resident aliens and resident foreign corporations although treated as residents for domestic tax purposes, are not resident for TRC purposes.

The following policies were provided by the RMO for the issuance of TRCs:

1.         The International Tax Affairs Division (ITAD) shall be in charge of receiving and processing of all applications for the issuance of TRCs.

2.         All applicants engaged in trade or business or practice of profession must be registered with the Bureau of Internal Revenue under a regular Tax Identification Number (“TIN”).

3.         TRCs are issued based on tax residency in the Philippines of the applicant. The burden of proving the fact of residency, pursuant to effective and applicable tax treaties, rests upon the applicant.

4.         The Bureau has designed its own TRC to eliminate or minimize any attempt to conceal the real nature and amount of income earned abroad, and for this reason, ITAD shall no longer sign the TRC forms of foreign jurisdictions.

5.         ITAD will no longer accept TRC applications of resident aliens, including pensioners, and resident foreign corporations (e.g. regional operating headquarters, regional or area headquarters).

6.         Proper linkage between the assessment offices of the BIR and ITAD shall be established. ITAD shall act as repository of documents substantiating the foreign-sourced income of Philippine taxpayers and shall furnish the appropriate Revenue District Office (RDO) or Large Taxpayers Division (LTD) of all documents submitted by the applicant. Following the procedures for conducting tax investigation, the RDO or LTD shall assess deficiency tax and enforce the collection thereof including penalties, if applicable.

The ITAD will process a TRC application within 14 working days from the submission of the complete documents. The documentary requirements are enumerated in Annex B and Annex C of the RMO. These include a letter request, TIN, proof of transaction, Articles of Incorporation, income tax returns, barangay certification and audited financial statements.

A letter of denial shall be issued if, based on the submitted documents, either the taxpayer is not entitled to the treaty benefit or has submitted fake documents. Unless and until the taxpayer declares the real nature of transaction abroad and submits authentic documents, the Bureau will be constrained to issue a denial.

The BIR may have been lenient in the issuance of TRCs in the past but due to the continuous in flock of foreign nationals and foreign corporations that do business in the Philippines, the BIR is now stringent in implementing the policies and guidelines mentioned in the RMO. Through this issuance, the BIR aims to award treaty benefits to qualified applicants, based on its interpretation. 

Ivy Dianne M. Galzote is an Assistant Manager from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email or

© 2024 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.


For more detail about the structure of the KPMG global organization please visit

Connect with us