Philippines, Japan seal updated tax treaty

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May 30, 2026 | 12:00am

MANILA, Philippines — The Philippines and Japan have signed a revamped tax treaty that scraps the risk of double taxation on income earned in both countries, a move expected to cut business costs and improve tax predictability, according to the Department of Finance (DOF).

The renegotiated Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion was sealed during President Marcos’ state visit to Japan, coinciding with the 70th anniversary of the two countries’ diplomatic ties.

It replaces the existing tax treaty originally concluded in 1980 and partially amended in 2008.

“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.

The treaty introduced updated provisions on withholding taxes on dividends, interest and royalties, intended to encourage greater flows of investment and technology into the local economy.

The DOF said these changes are seen to further support Japanese investments in key sectors such as advanced manufacturing, infrastructure and digital innovation.

“By providing clear and predictable rules on the taxation of cross-border income, the agreement is also expected to benefit more than 245,000 overseas Filipino workers in Japan,” the agency said.

The new treaty eliminates the risk of double taxation on income earned in both jurisdictions, reducing the cost of doing business and improving tax predictability for individuals and enterprises.

The agreement is expected to “create a more stable and efficient environment for trade and investment between the Philippines and Japan.”

Japan is already one of the country’s top sources of foreign direct investments, with annual inflows exceeding $800 million in both 2022 and 2023.

Officials said the new framework should further boost confidence among Japanese firms and deepen economic engagement between the two countries.

”Through the modernization of its tax treaty with Japan, the Philippines reaffirms its commitment to transparency, predictability and a rules-based global tax system,” the DOF said.

With this, the Philippines signaled its openness to investment and reinforced its position as a competitive and investment-ready economy.

The Philippines currently has around 40 double taxation agreements with several countries, the Bureau of Internal Revenue website showed.