The Bureau of Internal Revenue (BIR) has clarified that income from cross-border services is not automatically subject to Philippine income tax, providing clearer guidance on how such transactions should be evaluated.

In Revenue Memorandum Circular (RMC) No. 24-2026, the BIR outlined the proper application of existing rules following the Supreme Court (SC) ruling in Aces Philippines Cellular Satellite Corp. v. Commissioner of Internal Revenue. The move addresses concerns over the broader interpretation of earlier issuances.

As a general rule, service income is taxed where the service is performed. While the SC allows consideration of where the benefit is received or where economic activity occurs, the BIR emphasized that taxability must still be based on the specific facts of each case.

The circular instructs revenue officers to evaluate service agreements in their entirety and avoid relying on a single activity as the basis for taxation. It also requires that assessments clearly state their legal and factual basis, in line with the Tax Code.

To support compliance, taxpayers may present documents such as service contracts, proof that services were performed abroad, and tax residency certificates during audits.

The BIR also clarified that prior rulings are not required to claim proper tax treatment, as long as taxpayers can substantiate their position.

BIR Commissioner Charlito Martin R. Mendoza said the measure aims to promote consistent and fair enforcement of tax rules while providing clearer guidance to taxpayers.