Tax exemption rules for foreign dividends, amended by BIR

The Bureau of Internal Revenue (“BIR”) issued Revenue Regulations (“RR”) No. 5-2023, amending certain provisions of RR No. 5-2021. Particularly, RR No. 5-2023 lists the new requirements to be complied with by a domestic corporation in order to avail income tax exemption of foreign-sourced dividends.

RR No. 5-2023 requires the submission of the following documentary requirements:

1.  Annual Income Tax Return (AITR) pertaining to the taxable year in which the foreign-sourced dividends were received;

2.  Sworn Statement accompanying the AITR; and

3.  Sworn Declaration attach to the AITR pertaining to the year immediately following the year of receipt of the foreign-sourced dividends.

In case of partial or non-utilization of the foreign-sourced dividends, the domestic corporation shall pay the corresponding income tax due, inclusive of surcharge, interest and penalties, by amending the AITR filed for the particular period.  If amendment is already prohibited due to existence of an audit, the income tax shall be paid using payment form (BIR Form 0605).

RR No. 5-2023 repealed the requirements under RR No. 5-2021 for the submission within thirty (30) calendar days from actual receipt of the remitted dividends of the Sworn Statement/Affidavit, attachment of Independent Auditor Sworn Certification in the Audited Financial Statements (“AFS”), disclosure of the dividends in the AFS, and disclosure of the amount of dividend deemed exempt from income tax.