Gov’t renegotiating 3 double tax treaties, pursuing 7 new pacts

MANILA, Philippines – The Philippines is renegotiating tax treaties with three key investment partners and pursuing new double taxation agreements with seven countries to boost foreign investments, the Department of Finance said.

Finance Secretary Frederick Go told reporters that the government is currently renegotiating its DTAs with Hong Kong and Singapore.

READ: PH, Japan update tax treaty

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Japan, which is still technically under renegotiation status, has already signed an updated agreement with the Philippines, although it still requires presidential ratification before it can take effect.

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Go added that the government is also working to secure new DTAs with seven countries.

Four—Liechtenstein, Cambodia, Laos, and Ireland—are at various stages of negotiation, processing, and signing, while the other three—Malaysia, Luxembourg, and South Korea—are still in the early stages and undergoing the process of securing authority to negotiate.

DTAs are treaties that define how each country will levy taxes and apply credits to income taxes already paid by citizens and residents of both countries. Without such agreements, investors may have to pay income taxes both in their home country and in the Philippines.

The Philippines currently has 44 DTAs in force with other countries.

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“What we’re trying to do is to create jobs for Filipinos. To create jobs for Filipinos, we need investments,” Go said.

“We have a lot of domestic investors, but I think why the Philippines has not been up to speed is because we lack foreign direct investments. So DTAs are a very essential tool to attract foreign direct investments,” he added.

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Go said securing DTAs takes years, requiring multiple legal and procedural steps before signing and ratification.

“That’s why it’s important to get this going because this really takes years. Without a very strong push, this can take a long time,” he said.

Multinational minimum tax

Another tax policy that the DOF is pushing for is the passage of the multinational minimum tax, or the Qualified Domestic Minimum Top-Up Tax (QDMTT), in Congress this year.

The QDMTT allows the Philippines collect more taxes on local income, keeping revenue at home instead of ceding taxing rights to multinationals’ home countries.

“This is something that the DOF is strongly supporting, strongly endorsing. So far, the members of Congress we have discussed this with are very supportive,” Go said.

The QDMTT aligns the Philippines’ tax rules with OECD’s Global Minimum Tax framework. It ensures that multinational enterprises (MNEs) with annual revenues of at least 750 million euros pay a minimum effective tax rate of 15 percent on income earned in each jurisdiction where they operate.

If enacted into law this year, the Philippines will be eligible to join the framework in 2027, with the first collection of taxes expected in 2028.

Asked whether the government would impose a rate higher than the minimum threshold, Go said it would stick to the 15-percent rate because it is “neutral.”

“Nobody will be hurt by this process. It’s very neutral. It’s a very neutral process,” he said.

The DOF said it is still reviewing projections and has yet to release official revenue estimates from the measure.

“We do not have a projected number right now. I have seen some estimates from the Fiscal Incentives Review Board (FIRB). I’m having them double check those numbers,” Go said.

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Earlier, the Bureau of Internal Revenue (BIR) said it had met with DOF and FIRB officials to discuss preparations for the QDMTT rollout, including compliance, reporting, audits, and institutional capacity. /pai INQ