Clarifications on taxing cross-border Services in the Philippines (BIR RMC No. 024-2026)

On 30 March 2026, the Bureau of Internal Revenue issued Revenue Memorandum Circular (RMC) No. 024-2026 clarifying the application of RMC Nos. 5-2024 and 38-2024 on the tax treatment of cross-border services. This new RMC was issued to ensure alignment with statutory and jurisprudential standards and provide certainty to both revenue officers and taxpayers.

Under RMC 24-2026, it was stated that the cross-border services listed in RMC 5-2024 (consulting services, IT outsourcing, financial services telecommunications, engineering and construction, education and training, tourism and hospitality) are not automatically subject to Philippine income tax solely by reason of their classification as cross-border services. 

When can a cross-border service transaction be subject to Philippine income tax?

During a tax audit, a revenue examiner must clearly explain the existence of the following elements before a cross-border service transaction may be deemed subject to Philippine income taxes, to wit:

1. The parties involved are (a) a payor who is a Philippine resident individual or domestic corporation doing business, and (b) a payee who is a non-resident service provider;
2. The specific activity or service:
   1. Is integral to the completion or delivery of the non-resident service provider’s service; and,
   2. Resulted in actual payment or accrual thereof, constituting economic benefit for the non-resident provider;
3. The situs of the income producing activity is within the Philippines; and
4. There is no applicable income tax exemption under tax treaties or domestic law.

What are the requirements to prove that a cross-border service transaction should not be subject to Philippine income tax?

On the other hand, during tax audit, the taxpayer may present the following documents during being audited to prove that the income payment made to a non-resident provider was not from sources within the Philippines and should not be subject to income tax: 

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. If the subject income has been confirmed to be from sources outside the Philippines  through a BIR Ruling, a copy of such BIR Ruling;
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 prove that the subject income is not from sources within the Philippines.