RMC No. 24-2026: When Cross-Border Services Are Subject to Philippine Income Tax
Revenue Memorandum Circular (RMC) No. 24-2026, issued by the Bureau of Internal Revenue (BIR) on March 30, 2026, clarifies that cross-border services listed in RMC Nos. 5-2024 and 38-2024 are not automatically subject to Philippine income tax just because they are labeled “cross-border.” The general situs rule remains that service income is taxed where the service is performed; the Supreme Court’s Aces Philippines doctrine expands that analysis to where the benefit is received or the service is completed — but a Revenue Officer must still prove four essential elements before assessing.
This guide walks through those elements, the taxpayer’s foreign-source documentation list, and a worked remittance example. Related digital-services context (VAT, not income tax) sits in VAT on Digital Services: RA 12023 and RR No. 3-2025 and RMC No. 59-2026.
Track Cross-Border Remittances and Withholding FREE →What does RMC No. 24-2026 clarify about cross-border services? #
RMC No. 24-2026 is a clarifying circular on how RMC Nos. 5-2024 and 38-2024 apply to payments for offshore services — it does not replace those circulars, and it does not create a new automatic tax. According to the BIR digest of RMC No. 24-2026 and contemporaneous summaries from Forvis Mazars and Reyes Tacandong, the listed categories in RMC No. 5-2024 (consulting, IT outsourcing, financial services, telecommunications, engineering and construction, education and training, tourism and hospitality, among others) are not taxable in the Philippines solely by reason of that classification.
The digest restates the general situs rule: income from services is taxed where the service is performed. Aces Philippines Cellular Satellite Corp. v. Commissioner of Internal Revenue expands the analysis so that the place where the benefit is received or the service is completed can also fix Philippine taxability — but only when the facts support it. Secondary firm alerts dated April 2026 (including Forvis Mazars) emphasize the same point: classification as “cross-border” is not enough for an assessment.
When can a Revenue Officer assess Philippine income tax? #
Before assessing Philippine income tax on a cross-border service payment, the Revenue Officer must establish four elements under Section 228 of the National Internal Revenue Code (NIRC), as clarified by RMC No. 24-2026. Tax assessments must specify the law and facts on which they rest. The circular requires the officer to clearly explain:
| Element | What the RO must show |
|---|---|
| A. Parties | Payor is a Philippine resident individual or domestic corporation doing business; payee is a nonresident service provider |
| B. Activity / economic benefit | The specific activity is integral to completion or delivery of the nonresident’s service and resulted in actual payment or accrual constituting economic benefit to the nonresident |
| C. Situs | The situs of the income-producing activity is within the Philippines |
| D. No exemption | No applicable income tax exemption under a tax treaty or domestic law |
Element B excludes, for this purpose: (a) passive income; (b) income from sale of goods; and (c) pass-through payments in favor of another nonresident for services rendered outside the Philippines. The digest ties Element B to the Aces gateway fact pattern — income accrued only when the Philippine gateway completed delivery of the satellite airtime service to the local subscriber.
The evaluation must look at the entire service agreement, not isolate one Philippine touchpoint as the sole income-producing act — consistent with Article 1233 of the Civil Code on complete delivery of an obligation.
Who bears the burden of proving foreign-source income? #
The taxpayer bears the burden of proving that income was derived from sources outside the Philippines and is therefore not subject to Philippine income tax, as the Supreme Court emphasized in Aces Philippines and as RMC No. 24-2026 restates. The circular lists documents the taxpayer may present, as applicable:
- A sworn statement by the individual payor or authorized company representative detailing the parties, circumstances, and nature of the services
- Service contracts, master service agreements, statements of work, purchase orders, billing statements, invoices, or relevant email correspondence
- A Tax Residency Certificate from the nonresident’s residence jurisdiction
- SEC Certification of Non-Registration of the nonresident foreign corporation (NRFC) in the Philippines
- Proof of organization or registration abroad (e.g., articles of incorporation or business registration)
- Proof of outward remittance of payment
- A copy of any BIR Ruling confirming foreign-source treatment, if one exists
- A BIR Certificate of Entitlement to Treaty Benefit, if a tax treaty applies and entitlement has been confirmed
- Other relevant documents proving the income is not from Philippine sources
Physical submissions may use certified photocopies under Revenue Memorandum Order (RMO) No. 1-2026 (certified as true and faithful reproductions by the taxpayer or authorized representative). The BIR may still require originals for verification within the authorized audit scope; foreign-issued papers may also need apostille or embassy authentication when other rules require it for those documents.
A prior confirmatory BIR ruling is not a condition precedent for the applicable tax treatment, and the lack of a ruling does not by itself prejudice the taxpayer if competent evidence establishes the legal and factual bases during assessment. The taxpayer may still request a ruling confirming non-taxability under the Tax Code or a treaty.
Worked example: offshore IT consultant vs. PH-gateway completion #
Scenario A — work performed entirely abroad (foreign-source documentation focus). Manila Softworks Inc., a domestic corporation, pays CloudForge Pte. Ltd. (Singapore) ₱1,200,000 in Q2 2026 for custom software development. All coding, testing, and delivery occur on CloudForge’s Singapore servers; Manila Softworks receives finished binaries by download. No Philippine gateway, onshore staff, or local completion step is required for CloudForge to earn the fee.
Under RMC No. 24-2026, the payment is not automatically Philippine-taxable merely because IT outsourcing appears on the RMC No. 5-2024 list. Manila Softworks should retain: the master services agreement and SOW; invoices; a sworn statement describing that all work was performed abroad; CloudForge’s Singapore tax residency certificate; SEC certification of non-registration; proof of remittance; and any other papers showing no Philippine income-producing activity. If a Revenue Officer later assesses, the officer must still prove Elements A–D — not rely on the service category alone.
Scenario B — Aces-style completion via a Philippine gateway. Same ₱1,200,000 fee, but the contract requires CloudForge’s service to complete only when Manila Softworks’ Philippine routing gateway accepts and delivers the processed data packets to local end users, and CloudForge’s right to invoice accrues only upon that Philippine completion. That fact pattern tracks the Aces Philippines completion/benefit analysis highlighted in the RMC No. 24-2026 digest: a Philippine activity integral to delivery can fix situs inside the Philippines even if other work occurs abroad — if Elements A–D are established and no treaty/domestic exemption applies.
For how passive income (interest, royalties, dividends) is withheld when it is Philippine-source final tax, see Withholding Tax on Interest, Royalties, and Dividends.
Frequently asked questions #
What is RMC No. 24-2026? #
Revenue Memorandum Circular No. 24-2026, issued by the BIR on March 30, 2026, clarifies the application of RMC Nos. 5-2024 and 38-2024 on the tax treatment of cross-border services, stating that listed services are not automatically subject to Philippine income tax solely because they are classified as cross-border.
Are cross-border services automatically taxable in the Philippines under RMC No. 24-2026? #
No. Under RMC No. 24-2026, the cross-border services listed in RMC No. 5-2024 are not automatically subject to Philippine income tax solely by reason of their classification as cross-border services. The general rule remains that income from services is taxed where the service is performed, subject to the Aces Philippines expansion for place of benefit or completion.
What four elements must a Revenue Officer establish before assessing Philippine tax on a cross-border service? #
Under RMC No. 24-2026, the Revenue Officer must clearly explain: (A) a Philippine-resident payor and a nonresident payee; (B) an activity integral to completion or delivery that produced economic benefit to the nonresident; (C) that the situs of the income-producing activity is within the Philippines; and (D) that no applicable income tax exemption under a tax treaty or domestic law applies.
Is a confirmatory BIR ruling required before treating offshore service income as foreign-source? #
No. RMC No. 24-2026 states that a prior confirmatory BIR ruling is not a condition precedent for the applicable tax treatment, and the lack of a ruling does not by itself prejudice the taxpayer’s entitlement if the legal and factual bases are duly established by competent evidence during assessment.
What documents can a taxpayer use to prove foreign-source income under RMC No. 24-2026? #
RMC No. 24-2026 lists documents the taxpayer may present, including a sworn statement describing the services, contracts and invoices, a tax residency certificate, SEC certification of non-registration of the NRFC, proof of foreign organization, proof of outward remittance, a BIR ruling or treaty entitlement certificate if any, and other relevant proof that the income is not from Philippine sources.
Summary #
RMC No. 24-2026 stops automatic taxation of listed cross-border services: category alone is not enough; the Revenue Officer must prove parties, integral Philippine completion with economic benefit, Philippine situs, and no exemption — while the taxpayer keeps the foreign-source file (items a–i in the digest) ready for audit. Pair this circular with your remittance and withholding calendar, and contrast income-tax situs questions with the separate VAT rules in RR No. 3-2025 and RMC No. 59-2026.