PHL, Japan finalize amended double taxation deal

THE PHILIPPINES and Japan have finalized an amended double taxation convention (DTC) aimed at keeping bilateral economic ties aligned with the evolving global business climate, the Department of Finance (DoF) said.

The DTC was finalized after one round of formal negotiations held from Jan. 27 to Jan. 30, the DoF said in a statement on Tuesday.

The convention covers income taxation for citizens and residents of both countries. It sets how each country will levy taxes and grant credits for taxes paid, ensuring compliance with their respective tax laws.

“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 department said. “Both sides are committed to aligning the convention with current international standards, while ensuring fairness and preventing tax evasion.”

The finalized DTC will undergo approval under each country’s legal processes and take effect 30 days after the exchange of diplomatic notes confirming approval.

“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,” Finance Secretary Frederick D. Go said.

The Philippines signed a double taxation agreement with Japan that took effect in 1981 and an amending protocol in 2009.

The country has some 44 double taxation agreements with various countries, including Japan, the United States, the United Kingdom, Spain, South Korea, Germany, China, Canada, and Australia.

The DoF said the renegotiation comes as the Philippines marks its 70th anniversary of diplomatic relations with Japan this year.

Embassy of Japan in the Philippines Minister for Economic Affairs Yokota Naobumi said he expects that the amendment can result in more Japanese investments 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,” he said.

Finance Undersecretary and Head of its Revenue Operations Group (ROG) Rolando Ligon, Jr. said a careful and forward-looking review of the current agreement is needed amid the evolving tax landscape, especially amid increased digitalization and capital mobility.

“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,” he said.

On Manila’s side, the negotiation team included Finance ROG assistant secretaries Dakila Eiteen M. Napao and Euvimil Nina R. Asuncion, BIR Deputy Commissioner for Legal Larry M. Barcelo, and International Tax Affairs Division Chief Robbie M. Bañaga.

Meanwhile, the Japanese delegation was made up of Mr. Yokota, Embassy of Japan Second Secretary Narita Akihiro, 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. — Aubrey Rose A. Inosante