Controversial new source rules for cross-border services

IN its Revenue Memorandum Circular (RMC) 5-2024, the Bureau of Internal Revenue (BIR) is espousing new rules regarding the situs or source of income.

RMC 5-2024 sprung from the Supreme Court decision in Aces Philippines Cellular Satellite Corp. v Commissioner of Internal Revenue, GR 226680, Aug. 20, 2022 (Aces case), involving payment of satellite airtime fees. The Supreme Court held in the Aces case that the airtime fees paid by a domestic company to a foreign company are Philippine-sourced income because the income-generating activity takes place not during the act of transmission but only upon the receipt of calls routed by the satellite through gateways in the Philippines.