[Latest Edition] A Complete Guide to Applying for the Japan-Philippines Tax Treaty

When a Japanese parent company that is a non-resident of the Philippines receives Philippine-sourced income from a Philippine subsidiary, that income is subject to taxation in the Philippines, and withholding is carried out by the Philippine entity. At the same time, the same income is also subject to taxation in Japan, resulting in double taxation between the two countries. To eliminate such double taxation, a tax treaty between Japan and the Philippines has been concluded, and by filing a Tax Treaty Relief Application (TTRA) for the withholding tax imposed by the Philippine entity, a reduction or exemption may be granted.

The purpose of this article is to understand the correct method of applying and implementing the Japan-Philippines tax treaty based on the latest BIR circular.

The tax treaty between Japan and the Philippines is an important framework for preventing double taxation, but errors in the application or incomplete documentation can lead to rejection of the application or additional taxation. In particular, since the system reform in 2021, the application forms and deadlines have changed drastically. The old “CORTT form” has been abolished, and now the RFC or TTRA system is the standard.

Major Changes Since 2021

• The CORTT (Certificate of Residence for Tax Treaty Relief) system has been abolished.
  • Applications are now made through “RFC” or “TTRA.”
• Deadlines and submission offices have been clarified.
  • Submit to the ITAD (International Tax Affairs Division) after payment.
• The deadline is the last day of the fourth month after the end of the taxable year (usually April 30).
  • Late submission carries the risk of rejection.
• Whether reapplication is required depends on the tenor stated in the COE (Certificate of Entitlement).
  • If the tenor specifies “applicable to future similar payments,” no reapplication is required for payments under the same contract (RMC 20-2022).

There are still many Japanese companies that continue to process under the old system without knowing about these changes. Going forward, the standard process will be “RFC/TTRA + annual renewal + tenor confirmation.”

Basics of the Japan-Philippines Tax Treaty (What is subject to reduction or exemption)

Purpose and structure of the tax treaty

The Japan-Philippines Tax Treaty aims to prevent double taxation between Japan and the Philippines, while promoting investment and ensuring tax stability.
The treaty’s provisions are broadly divided into: “Scope of Application (Articles 1–4),” “Allocation of Taxing Rights (Articles 5–22),” and “Mutual Agreement and Exchange of Information (Articles 23–27).” Of these, the provisions most relevant for businesses in practice concern dividends, interest, royalties, business profits, and income from the provision of services.

Representative types of income covered

Income Category	Normal Tax Rate (Domestic)	After Treaty Application (Reduction)
Dividends	25%	10% (or 15%)
Interest	20%	10%
Royalties	25%	10%
Service Income	25%	Generally Exempt (if no PE)

By applying the tax treaty in this way, it is possible to reduce the tax rate by up to half or more.
However, to receive the benefits, it is essential to complete the correct procedures (RFC/TTRA) within the deadline.

Prerequisites for treaty application

• Being a resident of the other country (on the Japan side, proven by a TRC issued by the National Tax Agency)
• Being the beneficial owner (the actual beneficiary)
• The nature of the income corresponds to the treaty-covered types
• Submitting the application with the correct form (BIR Form 0901 series) and attached documents

This concludes the overview of the treaty.
Next, let’s look at the background and structure of the new procedures introduced since 2021.

Procedural Changes Since 2021 (Understanding RMO 14-2021)

Overview of RMO 14-2021

In August 2021, the BIR issued Revenue Memorandum Order (RMO) No. 14-2021, completely revising the existing TTRA system.
The purpose was to “streamline treaty benefit applications and eliminate duplication.”
As a result, application documents, submission offices, deadlines, and review processes were clearly standardized.

Differences between RFC and TTRA

Category	RFC (Request for Confirmation)	TTRA (Tax Treaty Relief Application
Application Target	When withholding is based on treaty rates	When withholding is based on domestic tax rates (refund purpose)
Submitter	Philippine Payer (Withholding Agent)	Income recipient (Japan side)
Deadline	Last day of the 4th month after the fiscal year-end	No limit (but earlier submission is preferred)
Submission Office	BIR International Tax Affairs Division (ITAD)	Same as above

Since this RMO, all treaty applications must be processed through ITAD.
Submissions to the former RDO offices or CORTT submissions are invalid.

Key points of RMC 77-2021 and RMC 20-2022

• RMC 77-2021 outlined the rules for selecting the form number (BIR Form 0901 series) and provided FAQs.
• RMC 20-2022 clarified that for “the same contract and same type of payment,” if the tenor of the COE (Certificate of Entitlement) includes future applicability, reapplication is not required.

Checking the need for reapplication based on the tenor

The tenor refers to the “scope of validity statement” written on the certificate issued by the BIR.
If the COE explicitly states, “This certificate also applies to future payments under the same contract,” subsequent applications can be omitted.
Conversely, if it states, “Limited to this payment only,” an application is required each time.
Whether reapplication is necessary depends on the wording of the tenor.

Overall Application Flow (Who submits what and when)

Step 1 | Preparation before payment (document collection)

1. Obtain a TRC (Tax Residency Certificate) on the Japan side.
2. Select the appropriate BIR Form 0901 according to the income category (e.g., 0901-D for dividends, 0901-I for interest, 0901-R for royalties, etc.)
3. The accounting personnel on the Philippine side verify the treaty provisions, tax rates, and beneficial owner information

Step 2 | Determination at the time of payment

At the time of payment, decide whether to apply the treaty rate.
If withholding at the treaty rate, prepare the documents and submit the RFC afterward.
If withholding tax is paid at the regular domestic rate, apply for a refund later by submitting a TTRA.

Step 3 | Post-payment application (submission of RFC/TTRA)

• RFC: Submit to ITAD after payment, by the last day of the fourth month following the end of the taxable year.
• TTRA: Can be submitted at any time, but earlier submission is preferable.

Step 4 | Review and receipt of COE

The BIR ITAD reviews the submitted documents, and if there are no issues, issues a COE (Certificate of Entitlement).
The COE specifies the “applicable period” and whether it can be applied to future payments (tenor).
Depending on its content, it may be applied directly to payments in subsequent years.

Common Mistakes and Prevention Measures (To avoid rejection or delay)

1. Expiration of TRC validity

A TRC (Certificate of Residency in Japan) is generally valid only for the year of issuance.
If it spans multiple years, a newly issued certificate must be submitted; otherwise, it may be considered invalid.

2. Incorrect selection on BIR Form 0901

Cases where the payment type and the selected form do not match occur frequently.
RMC 77-2021 includes a selection checklist in its Annex, so be sure to refer to it.

3. Overlooking the RFC submission deadline

The RFC deadline is not “after payment” but “four months after the end of the fiscal year.”
Japanese companies with an April fiscal year often miss this deadline, causing expiration.
It is advisable to set an internal earlier deadline or consult your accounting firm in advance.

4. Inconsistency in documentation

If the TIN or amount does not match among the contract, remittance evidence, TRC, and forms, there is a risk of denial.
Implement a double-check system within the company.

[Supplement] 2013 — Background of the Deutsche Bank Ruling (Retroactivity / Flexible Deadlines)

A major development affecting the operation of the Japan-Philippines Tax Treaty was the 2013 Supreme Court ruling, “Deutsche Bank AG Manila Branch v. Commissioner of Internal Revenue (CIR).”

At the time, the memorandum (RMO 1-2000) required that a TTRA be submitted and approved before payment to receive treaty benefits. However, Deutsche Bank Manila Branch submitted the application after payment, so the BIR refused to apply the treaty and withheld 25% tax. The bank filed a lawsuit challenging this decision.

The Supreme Court ruled that rights under a tax treaty are international obligations that take precedence over mere administrative procedures, and it was incorrect for the BIR to deny treaty benefits solely because the TTRA was submitted late.

This ruling established the principle that “pre-submission is not an absolute requirement,” significantly protecting the rights of taxpayers.

Following this ruling, the BIR reviewed the procedural system and ultimately introduced the current dual RFC/TTRA system under RMO 14-2021. This created a flexible framework allowing post-payment confirmation applications (RFC).

This case marked a turning point, establishing the principle that “treaty benefits are rights, not bound by deadlines.”

The current EOPT procedures and ITAD review processes are, in fact, based on the philosophy of this ruling.

Summary (Key points and practical actions from this article)

Applying the Japan-Philippines Tax Treaty offers significant benefits in terms of reduced tax rates, but accuracy in the procedures is crucial.
Since the 2021 system reforms (RMO 14-2021),

The four core points of the current rules are:

• Abolition of CORTT
• Dual RFC/TTRA system
• Clear submission deadline (4 months after fiscal year-end)
• Reapplication can be omitted based on the tenor

💡 Practical 3-Step Summary
1. Prepare TRC and BIR Form 0901 before payment.
2. Submit RFC (or TTRA) within 4 months after payment.
3. Check the tenor of the received COE and determine whether reapplication is needed next time.

By correctly understanding BIR memoranda and completing procedures within deadlines, you can legally reduce tax burdens and avoid future BIR audit risks.
While the system is being updated as needed, managing it based on RMO 14-2021 and RMC 20-2022 is currently the optimal approach.

✅ Key Points of This Article

• Application of the Japan-Philippines Tax Treaty is based on “RFC/TTRA + TRC + BIR Form 0901”
• Current rules are RMO 14-2021, RMC 77-2021, and RMC 20-2022
• Submission deadline is “4 months after fiscal year-end (usually 4/30)”
• Reapplication requirement is determined by the tenor of the COE

In TTRA applications, it is necessary to organize extensive documentation based on the transactions and relevant provisions supporting treaty application, and certification or apostille by the Philippine Embassy may be required, creating a certain burden on the Japan side. Additionally, it may be necessary to provide supplementary information to assist BIR ITAD’s review.

Given the complex procedures and the risk of differing interpretations of applicable tax rates, it is advisable to start the process early.

Our company also handles RFC/TTRA application services, so please feel free to contact us.