The Department of Finance (DOF) expects an increase in foreign direct investments from Brunei Darussalam following the ratification of an agreement designed to strengthen their collaboration on tax-related issues.
On July 16, 2021, the Philippines and Brunei formally signed the Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect To Taxes on Income.
Under the agreement, business profits would be taxed only in the state where the company did business unless that company had a permanent establishment in the other state. Independent personal services, such as professional services by lawyers, engineers, architects, dentists, and accountants, shall be taxed only in the worker’s state of residence provided that he does not stay for an aggregate period of over 183 days in any 12 months.
Professors, teachers, and researchers who render services upon the invitation of any educational institution in the other contracting state are exempted from that state’s income tax.
Cross-border remittances for a student’s or a trainee’s maintenance, education, study, or training are likewise exempted from tax including grants, allowances, and awards given to them abroad.
PH, Brunei tax pact to boost foreign investments
At a glance
The Department of Finance (DOF) is expecting a rise in foreign direct investments from Brunei Darussalam after the approval of an agreement aimed at bolstering their cooperation on tax matters.
On Thursday, Dec. 13, the DOF welcomed the Senate's concurrent approval of the agreement between the Philippines and Brunei, which aims to prevent double taxation and fiscal evasion related to income taxes.
“The DTA [double taxation agreement] will further ease trade in goods and services between the Philippines and Brunei, strengthening economic cooperation and enhancing investment flows between the two countries,” the DOF said.
Singed on July 16, 2021, the Manila and Bandar Seri Begawan agreement seeks to eradicate double taxation and hinder tax evasion on income generated from cross-border transactions.
Subsequent to the signing, the agreement was submitted to the Senate for ratification.
By tackling the challenges of double taxation, the DOF said it expects to draw more foreign direct investments from Brunei and to generate higher-quality employment opportunities for Filipinos.
“The DTA will also help encourage the transfer of technology and skills between the two countries,” the DOF said.
“Further, it will strengthen the Philippines’ commitment to the ASEAN Forum on Taxation to complete a network of double taxation agreements among ASEAN countries,” it added.
Under the accord, business profits would only be taxed in the state where the company operates, unless the company had a permanent establishment in the other state.
Additionally, independent personal services, such as those provided by lawyers, engineers, architects, dentists, and accountants, would only be taxed in the worker’s state of residence, provided that the individual does not stay for more than a total of 183 days in any 12-month period.
Furthermore, professors, teachers, and researchers invited by an educational institution in the other contracting state are exempt from income tax in that state.
Cross-border remittances for a student's or a trainee's maintenance, education, study, or training, including grants, allowances, and awards given to them abroad, are likewise exempted from tax.
Senator Imee Marcos, chair of the Committee on Foreign Relations, sponsored the resolution.