BIR of the Philippines issued Revenue Memorandum Circular (RMC) No. 24-2026 on 30 March 2026 to clarify the tax treatment of cross-border services and the application of earlier guidance on sourcing rules. The circular confirms that taxability depends on specific conditions and evidentiary requirements rather than classification alone.
The Bureau of Internal Revenue (BIR) of the Philippines issued Revenue Memorandum Circular (RMC) No. 24-2026 on 30 March 2026 to clarify the application of RMC Nos. 5-2024 and 38-2024 on the taxation of cross-border services. The circular aligns previous issuances with the Supreme Court ruling in the Aces Philippines case and provides guidance on when such services become subject to Philippine income tax and withholding tax.
RMC No. 24-2026 clarifies that cross-border services are not automatically subject to Philippine income tax or withholding tax. The mere classification of a transaction as a cross-border service does not alone trigger tax liability. The general rule remains that income from services is taxed where the services are performed. However, the “situs” rule is expanded to include where the benefit is received or where the service is completed in the Philippines, with emphasis on the inflow of wealth or economic benefits.
To establish taxability, a Revenue Officer must demonstrate four essential elements: the parties involved, where the payor is a Philippine resident or domestic corporation and the payee is a non-resident service provider; the specific activity resulting in an economic benefit; the situs of the income-producing activity within the Philippines; and the absence of applicable income tax exemptions under domestic law or international tax treaties.
The circular also clarifies that the burden of proof lies with the taxpayer to show that income paid to a nonresident is sourced outside the Philippines and is therefore not subject to tax. Supporting documentation may include service contracts, invoices, proof of payment, sworn statements, certifications of tax residency and non-registration in the Philippines, SEC Certifications of Non-Registration, and financial proof such as outward remittance records. Certified photocopies are allowed subject to verification by the BIR.
RMC No. 24-2026 further states that obtaining a confirmatory ruling from the Bureau of Internal Revenue (BIR) is not a condition precedent for applying a specific tax treatment. Taxpayers may rely on competent evidence during assessment to support non-taxability, although they retain the option to request a ruling if needed.
