Reimbursements among multinational enterprises: Taxable?

WITH the issuance of Revenue Memorandum Circular (RMC) 5-2024, as clarified by RMC 38-2024, on the taxation of cross-border services, another topic tackled by the said RMCs equally merits discussion: the taxation of reimbursements among multinational enterprises.

RMC 5-2024 provides that reimbursable or allocable expenses charged by a foreign corporation to Philippine counterparts are considered “income because it represents a financial gain or savings” to the foreign corporation being reimbursed. The RMC states that the reimbursement will result in the foreign corporation’s receipt of additional funds, which can be used for other purposes or retained as profit and, thus, should be viewed as a form of income to the foreign corporation.