PH, Japan finalized update of tax treaty, DOF says

The Department of Finance (DOF) on Tuesday said it led formal negotiations to update the Philippines-Japan Double Taxation Convention (DTC).

The talks were held from January 27 to 30.

“As one of the Philippines’ most vital and enduring economic partners, the negotiation with Japan underscores our countries’ mutual commitment to strengthening partnership by providing a clear, modern, and equitable tax treaty framework,” said Finance Secretary Frederick Go.

The DOF said the updated DTC was finalized after a single round of formal negotiations.

The DTC covers income taxation for citizens and residents of both the Philippines and Japan.

The tax treaty defines how each nation will levy taxes and apply credits for taxes already paid, ensuring compliance with the tax laws of both countries.

The DOF said the negotiated treaty is expected to produce a balanced framework that supports cross-border economic activity and safeguards the integrity of both nations' tax systems.

The Finance Department said the DTC will be approved in line with each country’s legal processes and will take effect 30 days after the exchange of diplomatic notes confirming approval.

DOF-Revenue Operations Group (ROG) Undersecretary Rolando Ligon said that “through these renegotiations, we seek to align our Convention with contemporary international standards, promote certainty and fairness for taxpayers, and reinforce our shared commitment to combating tax evasion and avoidance.”

The renegotiation coincides with the 70th anniversary of diplomatic relations between the Philippines and Japan this year.

Japan's Minister for Economic Affairs Yokota Naobumi, likewise, expressed high expectations for the amendment’s potential to stimulate further Japanese investment in the Philippines.

"I sincerely hope that the amendment to the tax treaty will be concluded at an early stage and that this year will truly become one of significant progress in our bilateral relationship," the Japanese official said.

The Philippine negotiating team was composed of DOF ROG Assistant Secretaries Dakila Elteen Napao and Euvimil Nina Asuncion and Bureau of Internal Revenue (BIR) Deputy Commissioner for Legal Larry Barcelo and International Tax Affairs Division Chief Robbie Bañaga.  

The Japanese delegation included Economic Minister Naobumi and Embassy of Japan Second Secretary Narita Akihiro, with Ministry of Japan Tax Bureau Director for Tax Treaties and International Affairs Hisanaga Takuma, Deputy Director Nishijima Hiromitsu, Deputy Director Tanaka Kyohei, and Section Chief Kawashima Ayaka. —VBL, GMA Integrated News