Philippines TAX TREATIES with China

Email: mnl4ww@evershinecpa.com
or
Contact by Viber or Skype during working hours of the Philippines time zone.
For Philippines going-out cases, the coordinator window will be:
Manila Branch of Evershine BPO Service Corp. in Taiwan
Project Manager Meiling Wu, who speaks both English and Tagalog.
Viber: +886966173105
Skype: wumeiling25

CN-Q-10:
中國母公司在菲律宾 是否可以依DTA申請沒有常設機構(PE)下零稅率?
China Parent Company, can apply for zero tax rate without PE under DTA in the Philippines?

CN-A-10:
Yes.
China has DTA with the Philippines, and if China Legal Resident company is without PE (Permanent Establishment), it will be redeemed as “non-Philippines Domestic Sourced Income”.
That means the Philippines will levy zero-tax.
However, the China Legal Resident company still needs to send the zero-tax application to the Philippines Tax Bureau for being approval.
That means if a Philippines Subsidiary pay service fee to a non-Philippines Parent Company through a service contract signed between a subsidiary and non -Philippines Parent company.
as an investor, a non-Philippines Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by the Philippines Tax Bureau.

CN-Q-20:
中國母公司在菲律宾設立了菲律宾子公司， 中國母公司替子公司服務收入能否申請零稅率?
When China Parent Company as an Investor, set up a Philippines subsidiary, and provide services from China to Philippines Subsidiary, can apply for zero tax rate without PE under DTA in Philippines?

CN-A-20:
According to DTA Article 5 item 7, A Philippines subsidiary will not be treated as PE of China Parent company as an investor because it is a separate legal entity.
That means if a Philippines Subsidiary pay service fee to China Parent Company through service contract signed between subsidiary and China Parent company
as an investor, China Parent Company can apply zero tax.
As for if the paid amount is reasonable, it will get involved TP (Transfer Pricing) judgment by Philippines Tax Bureau.

CN-Q-30:  

菲律宾依DTA沒有PE下零稅率申請的程序為何?
What is the procedure for the Philippines to apply for zero tax rate under DTA without PE?

CN-A-30:

Refer to the below website for procedures to apply for withholding tax exemption for business profits:
https://www.bir.gov.ph/index.php/international-tax-matters/taxation-of-non-residents.html

Generally, the documents required to submit to International Tax Affairs Division (ITAD) are as follow:
*Non-resident corporation must first secure a Taxpayer Identification Number (TIN) from Revenue District Office (RDO).
* BIR Form No. 0901-P (for Business Profits)
* Tax Residency Certificate (TRC) issued by the tax authority of the foreign country where the recipient is a resident.
*A No PE declaration letter
* Contract duly executed by the parties or their authorized representatives.
* Special Power of Attorney authorizing the signatory to the contract to sign on behalf of the principal.
* Invoice duly issued by the income recipient in accordance with the invoicing requirements of the country of residence.

CN-Q-40:
中國母公司有菲律宾來源所得的各項所得扣繳稅率為何?
When China Resident company having Philippines domestic sourced income, what are the withholding tax rates for various incomes in the Philippines?

CN-A-40:
China has DTA with the Philippines, and if you are with PE (Permanent Establishment) in the Philippines, your income will be considered as Philippines domestic sourced income.
As for levying Tax Rate, please be aware:
if Philippines Tax rate > DTA Rate, adopt DTA Rate; if Philippines Tax rate < DTA Rate, adopt Philippines Rate.
If DTA is applied, the DTA rates between China and the Philippines are as below:

*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.
*No tax is imposed on dividends paid to nonresident corporations under Philippines domestic law.

CN-Q-50
當中國稅務居民有菲律宾來源所得，依DTA優惠稅率申請的程序為何?
When China Tax Resident having Philippines domestic sourced income, what is Philippines’s application procedure based on the DTA preferential tax rate?

CN-A-50:

Refer to the below website for procedures to apply for withholding tax exemption for business profits:
https://www.bir.gov.ph/index.php/international-tax-matters/taxation-of-non-residents.html

Generally, the documents required to submit to International Tax Affairs Division (ITAD) are as follow:
*Non-resident corporation must first secure a Taxpayer Identification Number (TIN) from Revenue District Office (RDO).
* BIR Form No. 0901-P (for Business Profits)
* Tax Residency Certificate (TRC) issued by the tax authority of the foreign country where the recipient is a resident.
* Contract duly executed by the parties or their authorized representatives.
* Special Power of Attorney authorizing the signatory to the contract to sign on behalf of the principal.
* Invoice duly issued by the income recipient in accordance with the invoicing requirements of the country of residence.
* Bank documents/ telegraphic transfer evidencing the payment.
* Proof of payment of withholding tax.
* When the treaty rates have been applied by the withholding agent on the income earned by the non-resident, the former shall file with ITAD a request for confirmation.

Summary of TAX TREATY between Philippines and CHINA

The Government of the Republic of the Philippines and The Government of the People’s Republic of China concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 18 November 1999 and take effects from 23 March 2001.

Permanent Establishment

Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:
*A place of management
*A branch
*An office
*A factory
*A workshop
*The furnishing of consultancy services through employees or other personnel for periods aggregating more than 6 months.

Withholding Tax

*Article 7 of DTA between Philippines and China explained, the Philippines may not tax payments on business profits rendered by China corporations unless it is attributable to the permanent establishment situated in the relevant territory.

*In Article 10, dividends paid by a Philippines Resident enterprise to China Resident enterprise, the tax charged shall not exceed 10% if China enterprise holds directly at least 10% of the capital of Philippines enterprise. In other cases, tax charged shall not exceed 15%.

*Article 11 states that where the beneficial owner of the interest (exclude exempted interest) is a non-resident, shall be taxed in the territory in which it arises at the rate not exceeding 10% of the gross interest.

*Article 12 states that 10% rate applies to royalties for the use of, right to use, patent, trademark, design or model, plan, secret formula, or process, use of industrial, commercial, or scientific equipment, information concerning industrial, commercial, or scientific experience.
15% rate applies to royalties for the use of, or right to use, any copyright of literary, artistic, or scientific work.

*Technical services rendered are covered by the business profits article. Philippines corporations may not tax payments for technical services rendered by a China enterprise unless it is attributable to PE.
Technical services rendered in an independent capacity should be covered in Article 14 (see professional services) instead.

*A professional service provided by individuals of an independent character as explained in Article 14. Philippines corporations may not tax payments for professional service rendered by a China resident unless the China resident has a fixed place or stay in Philippines for 183 days or more.
An independent profession includes physicians, lawyers, engineers, architects, dentists, and accountants.

Elimination of Double Taxation

Article 23 of the DTA states that double taxation shall be eliminated by allowing tax credit against the Philippines’ tax of tax payable in any country other than the Philippines.
In other words, the amount of income taxes paid during the taxable year to any foreign country may be used as credits against Philippine income taxes.

Exchange of Information

Article 26 states that the competent authorities of the territories shall exchange such information (including documents or certified copies of the documents) relevant to the provision of this Agreement.

Please be aware below Warning:
The above contents are digested by Evershine R&D and Education Center in October 2021.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Manila Evershine BPO Service Limited Corp.
E-mail: mnl4ww@evershinecpa.com
or
Contact by Viber or Skype during working hours of the Philippines time zone.
For Philippines going-out cases, the coordinator window will be:
Manila Branch of Evershine BPO Service Corp. in Taiwan
Project Manager Meiling Wu, who speaks both English and Tagalog.
Viber: +886966173105
Skype: wumeiling25

or
For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System,
please send an email to HQ4mnl@evershinecpa.com
Dale Chen, Principal Partner/CPA in Taiwan+China+UK will be accountable for your case.
Email address:dalechen@evershinecpa.com
linkedin address:Dale Chen

Additional Information

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(version: 2024/07)
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