THE country is updating its double tax agreements (DTAs) with key partner countries and negotiating new tax treaties with seven other economies to attract more foreign investment.
DTAs are treaties that prevent individuals and businesses from being taxed twice on the same income when they operate in more than one country. Under these arrangements, taxes paid by investors in the Philippines can be credited against their tax liabilities in their home countries.
“We have three DTAs [with Japan, Singapore and Hong Kong] under the renegotiation category,” Finance Secretary Frederick Go told reporters on Tuesday, adding that new tax treaties with Liechtenstein, Cambodia, Laos and Ireland, ware at various stages of negotiation, processing and signing, while those of Malaysia, Luxembourg and South Korea are in the earlier stages of the process.
“So, [we have] 10 [DTAs] in total,” Go noted. “What we’re trying to do is to create jobs for Filipinos, [and to do so], we need investments.”
But while domestic investments remain important, the country has lagged behind some of its regional peers in attracting foreign capital, Go admitted, stressing that “DTAs are an essential tool to attract foreign direct investments.”
Without a DTA, investors may be required to pay income taxes in the Philippines and in their home countries, doubling the cost of doing business, Go said.
He pointed out the lengthy and complex process involved in finalizing international agreements, and that securing authority to negotiate can take considerable time.
“That’s why it’s important to get this going because this takes years. Without a very strong push, this can take a long time,” Go said, adding that he’s committed to make the 10 DTAs happen.