The Philippines and Japan are expected to sign a new double taxation convention (DTC) on the sidelines of President Ferdinand R. Marcos Jr.’s ongoing state visit to Tokyo.

Manila Bulletin learned on Wednesday, May 27, that the Philippine-Japan DTC will possibly be signed before the end of the President’s engagements in Tokyo on Friday, May 29.

It appears that this DTC may be the only agreement signed between Philippine and Japanese officials during the state visit.

The development comes after Finance Secretary Frederick D. Go met with Japanese Ambassador to the Philippines Endo Kazuya last week to discuss the continued strengthening of bilateral economic cooperation.

According to the DOF, both countries “reaffirmed their commitment to the timely implementation of Japan-supported flagship infrastructure projects aimed at generating quality jobs, enhancing connectivity, and supporting the Philippines’ long-term growth.”

A double taxation agreement (DTA) or DTC is a treaty between two countries designed to prevent the same income from being taxed twice, while also providing clearer tax rules for cross-border investments and business activities.

Recall that in January, the Philippine and Japanese governments reached an agreement in principle on a new DTC that would replace the outdated 1980 framework, which was partially amended in 2008.

The new tax treaty is expected to boost cross-border economic activity and encourage more investments between the two countries.

“As one of the Philippines’ most vital and enduring economic partners, the negotiation with Japan underscores our countries’ mutual commitment to strengthening partnership by providing a clear, modern, and equitable tax treaty framework,” Go earlier said.

The DOF had said that the updated DTC is designed to respond to the modern global business environment, particularly issues involving the digitalization of the economy and increased capital mobility.

DOF Undersecretary Rolando Ligon earlier underscored the need to align the treaty with current international tax standards.

“Through these renegotiations, we seek to align our [DTC] with contemporary international standards, promote certainty and fairness for taxpayers, and reinforce our shared commitment to combating tax evasion and avoidance,” Ligon had said.

Back in February, Embassy of Japan in the Philippines minister for economic affairs Naobumi Yakota expressed optimism that the revised DTC would encourage further Japanese investments in the country.

“I sincerely hope that the amendment to the tax treaty will be concluded at an early stage and that this year will truly become one of significant progress in our bilateral relationship,” Yokota was quoted by the DOF as saying.

Overall, the new DTC will introduce updated provisions that ensure fairness as well as prevent tax evasion, according to the DOF.

Once finalized, the DTC will still need to undergo internal approval procedures, including approval by the Japanese Diet.

It will take effect 30 days after the exchange of diplomatic notes confirming the completion of all legal requirements.

At present, the Philippines has DTAs with Australia, Austria, Bahrain, Bangladesh, Belgium, Brazil, Brunei Darussalam, Canada, China, Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, Kuwait, Malaysia, Mexico, Netherlands, New Zealand, Nigeria, Norway, Pakistan, Poland, Qatar, Romania, Russia, Singapore, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Turkey, the United Arab Emirates (UAE), the United Kingdom (UK), the United States (US), and Vietnam.