RMC No. 24-2026 was issued to clarify the proper application of RMC Nos. 5-2024 and 38-2024, and to ensure alignment with the statutory and jurisprudential standards, and provide certainty to both revenue officers and taxpayers.

The circular aims to address concerns during tax evaluations and assessments involving cross-border services have been undertaken beyond the contemplation of, and in a manner inconsistent with, the framework set forth under the governing jurisprudence.

KEY CLARIFICATIONS:

1. Cross-border services are not automatically taxable in the Philippines (Q&A No. 1 of RMC No. 24-2026)

RMC 24-2026 emphasizes that merely being classified as “cross-border services” listed in
RMC 5-2024 are not automatically subject a transaction to Philippine income tax.

The general rule remains that income from services is taxed where the service is performed.

However, the Aces Philippines case expands the situs rule for taxation of services by including the place where the benefit is received or where the service is completed may also determine taxability in the Philippines.

Revenue Officers invoking the rule under the Aces Philippines case as a basis for their assessment must establish that the source of income within the Philippines.

2. Revenue Officers must establish four (4) essential elements before assessing tax (Q&A No. 2 of RMC No. 24-2026)

In determining source of income, it requires an examination of the entire cross-border service agreement as a whole, and must not isolate or compartmentalize a single activity as the sole income-producing act.

To conclude that income from a cross-border service is taxable in the Philippines, the BIR must factually prove the following essential elements:

1. The parties include a Philippine payor and a non-resident service provider.
2. The specific activity or service is:
   • integral to the completion or delivery of the non-resident’s service; and
   • resulted in a payment or accrual that created economic benefit for the non-resident.
3. The situs of the income-producing activity is within the Philippines; and
4. There is no applicable exemption under law or treaty.

3. Taxpayers must present evidence to prove the income is from sources outside the Philippines (Q&A No. 3 of RMC No. 24-2026)

RMC 24-2026 reiterates that the burden of proof lies with the taxpayer. Acceptable documents include, as applicable:

• Sworn statement detailing the parties to the transaction, relevant circumstances, and the nature and description of the services rendered;
• Service contracts, statements of work, invoices;
• Tax Residence Certificate (TRC) of the non-resident service provider;
• SEC Certification of Non-Registration of the NRFC;
• Proof of organization or registration of the non-resident service provider;
• Proof of outward remittance payment;
• BIR ruling, if available;
• BIR Certificate of Entitlement to Treaty Benefit, if available; or
• Other relevant documents to prove that the subject income is not from sources within the Philippines.

The BIR may accept certified photocopies, following RMO 1-2026. The BIR may require the presentation of original documents for verification purposes.

4. A BIR confirmatory ruling is not a condition precedent for the application of the applicable tax treatment (Q&A No. 4 of RMC No. 24-2026)

The absence of a ruling does not prejudice the taxpayer if evidence supports the tax treatment provided that the legal and factual bases for the same are duly established competent evidence during the assessment process.

Nevertheless, taxpayers may still request a ruling for confirmation following existing rules and procedures.

For any assistance or inquiry, you may contact us through the contact details below:

• +632.8982.9100
• info@reyestacandong.com