Philippines Tax Treaties with other countries

The Philippines has signed Double Taxation Agreements (DTA) with about 43 countries.
If tax obligations in DTA do not exist in the Philippines or the DTA rate is higher than the local rate, local laws shall be prevailed.
If the withholding agent applied the regular (non-treaty) rates and the nonresident would like to get a refund of excess taxes withheld, the nonresident must file a Tax Relief Applications (TTRAs), commonly known as BIR Forms 1901, with the International Tax Affairs Division (ITAD) any time after the receipt of the income.
After obtaining a certificate confirm the entitlement of tax treaty benefits, the nonresident may claim a refund by filing BIR Form No. 1913 (with its request letter) within 2 years from withholding tax payment date.

Singapore Tax Treaties with Taiwan
Singapore 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

We set up below judgment criteria on Treaty application:

Scenario:
If you are not a Philippines legal resident, and if your resident country has DTA with the Philippines, and if you are without PE (Permanent Establishment), please go to Section Ａ.
If you are not a Philippines legal resident, and if your resident country has DTA with the Philippines, and if you are with PE (Permanent Establishment), please go to Section Ｂ.
If you are not a Philippines legal resident, and if your resident country has no DTA with the Philippines, please go to SectionＣ.

Section A:
Scenario:

If you are not a Philippines legal resident, and if your resident country has DTA with the Philippines, and if you are without PE (Permanent Establishment), it will be redeemed as “non-Philippines Domestic Sourced Income”.
That means the Philippines will levy zero-tax.
However, you still need to send the zero-tax application to the Philippines Tax Bureau for being approved.
Below, we will let you understand through Q&A

DTA-Q-10:
菲律宾的哪些外國法律居民公司可以依DTA申請沒有常設機構(PE)下零稅率?
In the Philippines, which foreign legal resident company can apply for zero tax rate without PE under DTA?

DTA-A-10:
The Philippines has signed DTAs with the following 43 countries:

DTA-Q-20:
為什麼在DTA下該國外資沒有常設機構 (PE)之外資所得，可以享受零稅率?
Why does the Country’s foreign capital without a permanent establishment (PE) in the Philippines, under the DTA enjoy a zero tax rate?

DTA-A-20:
It follows Article 5 and Articles 7 in the DTA Treaty. The article defines if a foreign entity having PE in the Philippines.
Article 7 regulates if no PE, non-Philippines domestic sourced income will not be levied tax in the Philippines.

DTA-Q-30:
哪些情況被視為沒有PE，外資在該國設立子公司會被視為外資的在該國的子公司嗎?
Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in the Philippines be regarded as a foreign-funded subsidiary in the Philippines?

DTA-A-30:
According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in the Philippines will not be treated as PE because it is a separate legal entity.
That means if a Philippines Subsidiary pays service fee to a non-Philippines Parent Company through a service contract signed between a subsidiary and non -Philippines Parent company as an investor, 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 Philippines Tax Bureau.
Please see the Philippines Transfer Pricing webpage.

DTA-Q-40:
外資在菲律宾設立分公司或辦事處，可否適用沒有PE下的零稅率?
If a foreign company establishes a branch or office in the Philippines, can the zero-tax rate without PE be applied?

DTA-A-40:
According to DTA Article 5 item 2, If a foreign company sets up a branch or office in the Philippines, then will be considered as Philippines domestic Income.
But According to DTA Article 5 item 4, if an Office is only doing a preparatory or auxiliary activity, will apply a zero-tax rate.

DTA-Q-50:
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?

DTA-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.
*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.

Section B:

Scenario:
If you are not a Philippines legal resident, and if your resident country has DTA with the Philippines, and if you are with PE (Permanent Establishment), 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.
Below, we will let you understand through Q&A.

DTA-Q-60:
被視為菲律宾來源所得的判定要素?
What are the factors that are deemed to be the country’s domestic source income?

DTA-A-60:
Non-resident companies are taxed on Philippine-source income.
The following items are deemed income from sources within the Philippines:

1. Interest derived from sources within the Philippines.
2. Dividends from a domestic corporation.
3. Compensation for labor or personal services performed in the Philippines
4. Rentals and Royalties from property located in the Philippines for the right to use in the Philippines, or technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial, or commercial undertaking, venture, project or scheme.
5. Gains, profits, and income from the sale of real property located in the Philippines.

DTA-Q-70:
DTA第五條及第七條優先於菲律宾來源所得的判定要素?
Do Article 5 and Article 7 in the DTA take precedence over the Philippine’s determination factors on Philippine’s domestic sourced income?

DTA-A-70:
When DTA is applied, in the event of a different PE definition between Philippines domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail the domestic regulations.
When DTA is applied, if a foreign company is defined as without PE (Permanent Establishment) in the Philippines, then will be considered non-Philippines domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.
In this scenario, please see section A.

DTA-Q-80:
當非菲律宾稅務居民有菲律宾來源所得，不考慮DTA 情況下，菲律宾稅法扣繳稅率多少?
When non-tax residents of the Philippines having Philippines domestic sourced income, what is the withholding tax rate according to the Philippines’ tax regulations excluding DTA?

DTA-A-80:
Corporations engaged in business are required to withhold the appropriate tax on income payments to non-residents, generally at the rate of 25% in the case of payment to non-resident foreign corporations.

Withholding Tax Rate
These are general rates and applicable to concerning countries with whom Philippines does not have a Double Taxation Agreement (DTA).
Business Profits – 25% (Note 1)
Dividend – 15%
Interest (loan) – 20%
Royalties fee – 25%
Technical services – 25% (Note 1)
Professional services – 25% (Note 1)

Notes:

1. Payments for services are subject to the 25% withholding tax where the services are performed in the Philippines.
   Services performed outside the Philippines are not subject to the withholding tax.

DTA-Q-90:
If DTA Tax Rate is higher than the Philippines’ tax rate, apply which tax rate?

DTA-A-90
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.

DTA-Q-A0:
當非菲律宾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 non-tax residents of the Philippines having Philippines domestic sourced income, what is the Philippines’ application procedure based on the DTA preferential tax rate?

DTA-A-A0:
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 nonresident, the former shall file with ITAD a request for confirmation.

Section C:

DTA-Q-B0:
As an investor, if your country has not signed DTA with the Philippines, what kinds of tax rates when you have Philippines relevant income?

DTA-A-Q0:
If you are not a Philippines legal resident, and if your resident country has no DTA with the Philippines,
Whether you are with PE or without PE, all kinds of income will be levied according to Philippines domestic sourced income.
Besides, it will be levied by Philippines Tax Rates.
Corporations engaged in business are required to withhold the appropriate tax on income payments to non-residents, generally at the rate of 25% in the case of payment to non-resident foreign corporations.

Withholding Tax Rate

These are general rates and applicable to concerning countries with whom the Philippines does not have a Double Taxation Agreement (DTA).
Business Profits – 25% (Note 1)
Dividend – 15%
Interest (loan) – 20%
Royalties fee – 25%
Technical services – 25% (Note 1)
Professional services – 25% (Note 1)

Notes:

1. Payments for services are subject to the 25% withholding tax where the services are performed in the Philippines. Services performed outside the Philippines are not subject to the withholding tax.

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 in working hours in 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 speak in 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

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