THE Philippines expects stronger trade and investment ties with Japan following the signing of a renegotiated double taxation agreement that updates cross-border rules and provides greater certainty for businesses and workers.
The 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 updated agreement replaces a treaty originally concluded in 1980 and partially amended in 2008, the Department of Finance said, reflecting both countries’ commitment to modernizing their economic and fiscal cooperation frameworks.
The Philippines and Japan agreed to revise rules governing the taxation of cross-border income, including dividends, interest and royalties, with the aim of reducing the risk of double taxation and easing the cost of doing business for investors and enterprises operating in both jurisdictions.
The agreement is also expected to provide clearer tax rules for more than 245,000 overseas Filipino workers currently residing in Japan.
“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,” Finance Secretary Frederick Go said in a statement.
He noted that the treaty included revised provisions expected to encourage greater flows of Japanese investments and technology transfers into the Philippines.
Sectors expected to benefit from increased Japanese investments include advanced manufacturing, infrastructure and digital innovation.
Japan remains among the Philippines’ largest sources of foreign direct investments. Data showed annual Japanese investment inflows exceeded $800 million in both 2022 and 2023.
Apart from eliminating double taxation, the treaty contains provisions aimed at preventing fiscal evasion and promoting transparency in line with evolving international tax standards.
“Through the modernization of its tax treaty with Japan, the Philippines reaffirms its commitment to transparency, predictability, and a rules-based global tax system,” Go said.
“The agreement signals continued openness to investment and reinforces the country’s position as a competitive and investment-ready economy.”
