BIR amends tax exemption rules for foreign dividend recipients

THE Bureau of Internal Revenue (BIR) said it amended the tax exemption eligibility rules for recipients of foreign dividends.

In Revenue Regulations (RR) No. 5-2023, which amends RR No. 5-2021, the BIR said the RR deals with documents domestic corporations need to submit to be exempt.

The requirements include a sworn statement accompanying the annual income tax return (AITR) filed during the taxable year in which the foreign dividends were received.

It also requires a sworn declaration as an attachment to the AITR in the year immediately following the year of receipt of foreign dividends.

“Compliance with the above requirements is sufficient in order to avail of the income tax exemption. However, in case of partial or non-utilization of the foreign-sourced dividends, the domestic corporation shall pay the corresponding income tax due thereon, inclusive of surcharge, interest, and penalties, by amending the AITR filed for the particular period,” according to the RR.

“In the event that the amendment is already prohibited due to the existence of audit, the income tax shall be paid using payment form (BIR Form 0605),” it added.

The previous regulations required domestic corporations to submit the sworn statement within 30 days from the actual receipt of the remitted dividends.

They were also required to attach to the audited financial statement an “independent auditor sworn certification” in the year of the receipt of the dividend.

“In addition, a disclosure of the dividends in the said audited financial statement which shall be attached to the AITR to be filed in the year of receipt, as well as the amount of dividend deemed exempt from income tax shall be declared in reconciliation part of the said AITR,” according to the previous regulations. — Luisa Maria Jacinta C. Jocson