Trade dep’t sees tax deal with Cambodia boosting service exporters’ competitiveness

THE Department of Trade and Industry (DTI) said a tax treaty with Cambodia is expected to boost the competitiveness of the service sector by removing the burden double taxation.

“This agreement establishes a stable, rules-based framework that encourages market entry and strengthens business confidence abroad,” Bianca Pearl R. Sykimte, the export marketing bureau director, told a Senate hearing.

The Senate Foreign Relations Committee is evaluating the Philippines and Cambodia Double Taxation Agreement (DTA), which seeks to eliminate double taxation on income, ease tax burdens, and increase investment.

“This makes our service fees and contracts more affordable, boosting the competitiveness of our service providers,” she added.

Senator Erwin T. Tulfo, who heads the committee, said the chamber must first determine the potential benefits for the agreement before sponsoring the treaty at the Senate Plenary level.

“I want to know, what exactly, we get out of this,” he said.

Ms. Sykimte said the agreement means Philippine information technology outsourcing companies providing software support to Cambodian clients will now have to pay only a 10% withholding tax on technical services.

She added that engineering and construction companies will not be considered a taxable permanent establishment unless the project lasts for more than six months, “reducing tax exposure for short-term projects.”

Creative industries and franchises licensing or expanding to Cambodia would have to pay only 15% on their royalties.

(This will make) our intellectual property licensing and brand expansion more financially viable,” Ms. Sykimte added.

Finance Assistant Secretary Euvimil Nina R. Asuncion said the agreement will also ease the income tax burden of overseas Filipino workers stationed in Cambodia.

“Instead of Cambodia taxing them up to 20%, they can now only tax them up to 10%,” she added noting that tax breaks also include Filipinos rendering technical services.

There are about 7,000 Filipino workers in Cambodia, and at least 13 companies operating there.

Manila and Phnom Penh signed the agreement in February last year to reduce fiscal barriers and stimulate bilateral trade and investment. — Adrian H. Halili