How Can Foreign Shareholders Claim Reduced Dividend Withholding Tax in the Philippines?

A foreign corporate shareholder can reduce Philippine dividend withholding tax below the default 25 percent through one of two routes: treaty relief under a double tax agreement (DTA), or the domestic 15 percent tax-sparing rate. Under both, the Philippine subsidiary, acting as withholding agent, may apply the reduced rate at the time of payment, provided the prescribed documents are in hand beforehand. Entitlement must then be confirmed by the International Tax Affairs Division (ITAD) of the Bureau of Internal Revenue (BIR).

Which dividend withholding tax relief applies to foreign shareholders?

The appropriate relief mechanism depends on the foreign shareholder’s country of residence, ownership percentage, and eligibility under Philippine tax law.

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Contact Dezan Shira & Associates to secure the appropriate dividend withholding tax relief in the Philippines.

Under an applicable double taxation agreement (DTA), a non-resident foreign corporation (NRFC) may qualify for a reduced dividend withholding tax rate if it is a tax resident of the treaty country and satisfies the relevant beneficial ownership requirements. Some treaties offer lower rates to corporate shareholders holding a specified percentage of the Philippine subsidiary’s shares.

Alternatively, the domestic tax-sparing provision allows qualifying NRFCs to receive dividends subject to 15 percent withholding tax. This requires the shareholder’s country of residence to exempt the dividends from taxation or provide the qualifying deemed-paid tax credit under Philippine law.

A foreign shareholder resident in a treaty country may still qualify for the domestic tax-sparing rate. Where both mechanisms are available, the shareholder should compare the applicable rates and eligibility conditions before determining which provides the greater tax benefit.

What dividend withholding tax rates apply under Philippine tax treaties?

Philippine tax treaties provide different dividend withholding tax rates depending on the shareholder’s country of residence and, in some cases, its ownership percentage in the Philippine subsidiary.

The following table compares rates under selected Philippine tax treaties, covering major Asian investment jurisdictions alongside European countries and the United States.

Source: PwC Worldwide Tax Summaries, Philippines – Corporate Withholding Taxes, last reviewed August 1, 2026. Lower treaty rates are subject to the applicable ownership, beneficial ownership, and other treaty conditions.

Japan and the Philippines signed a replacement tax convention in May 2026 that introduces additional reduced dividend withholding tax rates. The table reflects the existing convention pending the new agreement’s entry into force and applicable effective date.

For foreign shareholders eligible for both treaty relief and domestic tax sparing, the more advantageous rate depends on the applicable treaty. Some treaties provide rates below 15 percent, while others offer no additional reduction compared with the domestic tax-sparing provision. Shareholders should establish which rate applies before the Philippine subsidiary distributes dividends.

How can foreign shareholders claim treaty relief 

Foreign shareholders can claim reduced dividend withholding tax under an applicable Philippine tax treaty without obtaining prior approval from the Bureau of Internal Revenue (BIR). Under RMO No. 14-2021, the Philippine subsidiary may apply the reduced rate when distributing dividends, subject to subsequent BIR confirmation.

The application process involves the following steps:

1. Prepare the supporting documents. Before the dividend payment, the foreign shareholder provides the Philippine subsidiary with BIR Form No. 0901-D, a tax residency certificate issued by its home-country tax authority, and evidence supporting its treaty entitlement. Additional documentation may include proof of shareholding, beneficial ownership, and the relevant corporate records.
2. Apply the reduced withholding tax rate. The Philippine subsidiary withholds tax at the applicable treaty rate and remits the tax to the BIR. As the withholding agent, the subsidiary remains responsible for applying the correct rate.
3. Request BIR confirmation. The Philippine subsidiary submits a Request for Confirmation (RFC) to the BIR’s International Tax Affairs Division (ITAD) no later than the last day of the fourth month following the close of the taxable year in which the dividend was paid. For a calendar-year company, this deadline is April 30 of the following year.
4. Obtain confirmation of treaty entitlement. If the BIR approves the application, it issues a Certificate of Entitlement to Treaty Benefit (COE). If the application is denied because the shareholder does not qualify or the incorrect rate was applied, the Philippine subsidiary may become liable for deficiency withholding tax, applicable surcharges, and interest.

A COE covering recurring dividend payments may also apply to subsequent distributions to the same foreign shareholder, provided the relevant treaty conditions remain satisfied. This can eliminate the need to submit a separate confirmation request for every dividend payment.

How can foreign shareholders claim the 15 percent tax-sparing rate?

Under RMO No. 46-2020, a Philippine subsidiary may apply the 15 percent tax-sparing rate when distributing dividends to a qualifying non-resident foreign corporation (NRFC), without obtaining prior BIR approval. However, the foreign shareholder must subsequently establish its entitlement to the reduced rate.

The application process involves the following steps:

1. Establish eligibility before payment. The Philippine subsidiary must obtain sufficient evidence that the foreign shareholder qualifies for tax sparing under its home-country tax laws before applying the 15 percent withholding tax rate.
2. Prepare the supporting documents. The foreign shareholder must provide evidence that its country of residence exempts the relevant dividends from taxation or grants the qualifying deemed-paid tax credit. Supporting evidence may include the applicable foreign tax legislation, corporate records, and dividend documentation. Where an exemption is conditional or partial, the evidence must demonstrate that the applicable requirements are satisfied. Foreign legal documents must also meet the BIR’s certification and authentication requirements, including apostille certification where appropriate.
3. Submit the application. Unlike treaty relief, the foreign shareholder or its authorised representative files the confirmation request with the BIR’s International Tax Affairs Division (ITAD), using BIR Form No. 0901-TS. The application must be submitted within 90 days following dividend remittance or the foreign tax authority’s determination, whichever is later.
4. Obtain BIR confirmation. If the application is approved, the BIR issues a Certificate of Entitlement to the Reduced Dividend Tax Rate, confirming the shareholder’s entitlement to the 15 percent rate.

Can foreign shareholders recover excess dividend withholding tax?

Foreign corporate shareholders that have already had 25 percent withholding tax deducted from their Philippine dividends may be eligible to recover the excess if they qualify for a lower rate under an applicable tax treaty or the domestic tax-sparing provision.

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For treaty-based claims, the foreign shareholder must establish its entitlement to the reduced rate through a Tax Treaty Relief Application (TTRA) submitted to the Bureau of Internal Revenue (BIR). A refund claim may be submitted separately or together with the TTRA, although the BIR will process the refund only after confirming treaty entitlement. Supporting documents generally include evidence of the dividend payment, the tax withheld, and the shareholder’s eligibility for the lower treaty rate.

Refund claims are generally subject to a two-year statutory deadline calculated from the relevant tax payment date. Shareholders should not assume that a pending treaty relief application extends this period. Where the excess withholding arises from a potential entitlement to the domestic 15 percent tax-sparing rate, the applicable confirmation and refund requirements must be assessed separately. 

How can Dezan Shira & Associates support your next dividend declaration? 

If your Philippine subsidiary is preparing to declare a dividend, Dezan Shira & Associates can confirm which route gives your group the lower rate, assemble and authenticate the BIR documentation, and manage the ITAD confirmation filings.  

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