BIR RMC No. 24-2026: Payments to Foreign Service Providers
Complete guide to BIR's clarification on withholding tax for payments to foreign service providers and when services performed abroad are exempt from Philippine income tax
What you'll learn in this BIR RMC No. 24-2026 guide
This guide explains the Bureau of Internal Revenue's Revenue Memorandum Circular No. 24-2026 (issued March 30, 2026), which clarifies how withholding tax applies to payments made to foreign service providers. You'll learn when services performed abroad are exempt from Philippine income tax, what documentation you need, and how to properly structure your contracts.
For more information on BIR compliance, also see our BIR Business Registration Guide, Where to Register Your Business & BIR RDO Guide, and 5% Withholding Tax on Rental Guide.
What is BIR RMC No. 24-2026?
Revenue Memorandum Circular
Issued by the BIR on March 30, 2026, to clarify withholding tax rules for payments to foreign service providers
Key Clarification
The type of service alone does NOT automatically make it taxable in the Philippines
Location Matters
What matters is WHERE the work was performed. If the service was completed abroad, it is generally not subject to Philippine income tax
Why This Matters for Your Business
Common Foreign Services
Many businesses outsource these services overseas:
Tax Implications
Proper treatment saves you money:
The Core Principle: Location of Service
Work Performed Abroad
Service completed outside the Philippines = Not subject to PH income tax
Work Performed in PH
Service completed in the Philippines = Subject to PH income tax
Burden of Proof
Taxpayer must document where work was performed
Essential Documentation Checklist
📑 Required Documents
Proper documentation is your best defense against a BIR assessment
Service Contracts, MSAs, SOWs
Master Service Agreements and Statements of Work clearly defining scope and location
Invoices & Email Correspondence
Detailed invoices and communications showing work details and location
Sworn Statement
Notarized statement describing the transaction and confirming location of work
Tax Residency Certificate
Certificate from foreign provider's tax authority proving residency
SEC Certificate of Non-Registration
Proof that the foreign provider is not registered in the Philippines
Proof of Remittance Abroad
Bank records showing payment was sent to foreign account
BIR Certificate of Entitlement to Treaty Benefit
If applicable, certificate for tax treaty benefits (if work is partially taxable)
Document Authentication Requirements
⚠️ Important Reminder
Foreign documents must be apostilled or authenticated by the Philippine Embassy to be valid for BIR purposes
Authentication Options:
No Need for BIR Ruling
✔ You Can Apply Correct Treatment Directly
Based on RMC No. 24-2026, you no longer need to request a BIR ruling to determine the correct tax treatment. You can apply the appropriate treatment based on your documentation showing where the work was performed.
Best Practices for Contracts
💡 Contract Tips
Good contracts + clear records = your best defense against a BIR assessment
Specify Location Clearly
Explicitly state in the contract that services will be performed outside the Philippines
Include Detailed Scope of Work
Document specific deliverables and milestones that can be verified
Document Communication Channels
Keep records of all communications showing work progress and location
Request Regular Status Reports
Have providers submit periodic reports confirming work location
Common Mistakes to Avoid
Assuming Service Type Determines Taxability
Don't assume that certain services (like consulting) are automatically taxable. Location is the key factor.
Failing to Document Work Location
Without proper documentation, the BIR may assess taxes even if work was done abroad.
Not Authenticating Foreign Documents
Foreign documents without apostille or embassy authentication may be rejected by the BIR.
Waiting for a BIR Ruling
RMC No. 24-2026 allows you to apply the correct treatment based on your documentation without waiting for a ruling.
Key Takeaways
Service type alone does not automatically make it taxable in the Philippines
Where the work was performed is the determining factor for Philippine taxability
No need to request a BIR ruling—you can apply correct treatment based on your documentation
The burden of proof is on the taxpayer—maintain comprehensive records
Foreign documents must be authenticated via apostille or Philippine Embassy
Good contracts + clear records = your best defense against BIR assessment
📄 Source
BIR Revenue Memorandum Circular No. 24-2026 (March 30, 2026)
Bureau of Internal Revenue, Philippines