PH, Japan sign updated double taxation avoidance treaty — DOF

The Philippine and Japanese governments have signed an updated treaty on the avoidance of double taxation for citizens and residents of both nations, the Department of Finance (DOF) said Friday.

In a statement, the DOF said the renegotiated Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income was signed during President Ferdinand Marcos Jr.’s State Visit to Japan.

The accord was inked in Tokyo by Japan Ambassador to the Philippines Endo Kazuya and Philippines Ambassador to Japan Mylene Garcia-Albano in the presence of Marcos and Japan Prime Minister Takaichi Sanae.

The Finance Department said the agreement serves as an important milestone, marking a significant step in strengthening economic relations between the two countries, as the Philippines and Japan commemorate 70 years of diplomatic relations.

The new treaty replaces the existing tax treaty originally concluded in 1980 and partially amended in 2008, underscoring the shared commitment of both governments to modernize their economic and fiscal cooperation frameworks, the DOF said.

The Finance Department noted that the updated treaty eliminates the risk of double taxation on income earned across both jurisdictions, thereby reducing the cost of doing business and improving tax predictability for both individuals and enterprises.

With streamlined cross-border tax treatment, the agency said the agreement is expected to create a more stable and efficient environment for trade and investment between the Philippines and Japan.

The treaty also introduces updated provisions on withholding taxes on dividends, interest, and royalties, designed to encourage greater flows of investment and technology into the Philippine economy, which are also expected to further support Japanese investments in key sectors such as advanced manufacturing, infrastructure, and digital innovation.

“This agreement reflects the Philippines’ commitment to fostering a more competitive, predictable, and investment-friendly environment that will create high-quality employment opportunities and sustained economic growth,” said Finance Secretary Frederick Go.

Japan is one of the Philippines’ top sources of foreign direct investment, with annual inflows exceeding $800 million in 2022 and in 2023, another $800 million.

The DOF said the updated tax framework is expected to further strengthen investor confidence and deepen economic engagement between the two countries.

By providing clear and predictable rules on the taxation of cross-border income, the agreement is also expected to benefit more than 245,000 Overseas Filipino Workers in Japan, the agency said.

The Finance Department said that through the modernization of its tax treaty with Japan, the Philippines reaffirms its commitment to transparency, predictability, and a rules-based global tax system.

Moreover, Department said the agreement signals the Philippines’ continued openness to investment and reinforces the country’s position as a competitive and investment-ready economy. — BAP, GMA News