Japan-Philippines Relations
Signing of the New Tax Convention between Japan and the Republic of the Philippines
May 28, 2026
On May 28, “Convention between Japan and the Republic of the Philippines for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance” (hereinafter referred to as the New Convention) was signed in Tokyo by H.E. Mr. ENDO Kazuya, Ambassador Extraordinary and Plenipotentiary of Japan to the Republic of the Philippines and H.E. Mylene J. Garcia=Albano, Ambassador Extraordinary and Plenipotentiary of the Republic of the Philippines to Japan in the presence of Ms. TAKAICHI Sanae, Prime Minister of Japan and H.E. Ferdinand R. Marcos Jr, President of the Republic of the Philippines.
- The New Convention wholly amends the existing Convention, which entered into force in 1980 and was partially amended in 2008, by revising the taxation on business profits and investment income, introducing measures for prevention of abuse of the New Convention, arbitration proceedings in mutual agreement procedures and assistance in the collection of tax claims, and reinforcing the exchange of information concerning tax matters. It is expected that, while eliminating double taxation and preventing international tax evasion and tax avoidance, the New Convention promotes further mutual investments and economic exchanges between the two countries.
- The following are the key points of the New Convention.
- (1) Taxation on Business Profits
Where an enterprise of one of the two countries has in the other country a permanent establishment (such as a branch) through which the enterprise carries on business, only the profits attributable to the permanent establishment may be taxed in that other country. The profits attributable to a permanent establishment will be calculated by comprehensively recognising internal dealings between its head office and branches and by strictly applying the arm’s length principle. - (2) Taxation on Investment Income
Taxation on investment income (dividends, interest and royalties) in the source country will be subjected to the maximum rates or exempted as follows:
- (1) Taxation on Business Profits
| Existing Convention | New Convention | |
|---|---|---|
| Dividends | 10% (holding for 6 months at least 10% of voting power)
|
5% (holding for 6 months at least 90% of:
|
| Interest | Exempted (received by the Governments, etc.)
|
Exempted (received by the Governments, etc.)
|
| Royalties | 15% (cinematograph films, etc.)
|
10% |
- (3) Mutual Agreement Procedure and Arbitration Proceedings
The New Convention provides for a resolution by mutual agreement between the tax authorities of the two countries with regard to taxation not in accordance with the provisions of the New Convention. In addition, where such taxation has not been resolved through the consultation between the tax authorities of the two countries within two years, the unresolved issue will be submitted to arbitration. - (4) Exchange of Information and Assistance in Collection of Tax Claims.
In order to effectively prevent international tax evasion and tax avoidance, the scope of taxes and cases subject to the exchange of information concerning tax matters between the two countries is expanded and the mutual assistance in the collection of tax claims between the two countries are introduced. - (5) Prevention of Abuse of the New Convention
In order to prevent abuse of benefits under the New Convention, any benefit under the New Convention will not be granted if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction.
- After the approval in accordance with the domestic procedures of the two countries (in Japan, approval by the Diet is necessary), the New Convention will enter into force on the thirtieth day after the date of exchange of diplomatic notes indicating such approval and will have effect:
- (a) in Japan:
- (i) with respect to taxes levied on the basis of a taxable year, for taxes for any taxable years beginning on or after the first day of January in the calendar year next following that in which the New Convention enters into force;
- (ii) with respect to taxes levied not on the basis of a taxable year, for taxes levied on or after the first day of January in the calendar year next following that in which the New Convention enters into force;
- (b) in the Republic of the Philippines:
- (i) with respect to taxes withheld at source, for taxable amount derived on or after the first day of January in the calendar year next following that in which the New Convention enters into force;
- (ii) with respect to other taxes, for income and other taxable objects arising on or after the first day of January in the calendar year next following that in which the New Convention enters into force.
- (c) The provisions concerning the arbitration will have effect:
- (i) with respect to cases presented pursuant to the provisions concerning the mutual agreement procedure on or after the date to be agreed between the Governments of the two countries through an exchange of diplomatic notes;
- (ii) with respect to cases presented pursuant to the provisions concerning the mutual agreement procedure before that date. In this case, no unresolved issues shall be submitted to arbitration before two years have elapsed from that date.
- (d) The provisions concerning the exchange of information and the assistance in the collection of taxes will have effect from the following dates without regard to the date on which the taxes are levied or the taxable year to which the taxes relate:
- (i) with respect to the provisions of the exchange of information, the date of entry into force of the New Convention;
- (ii) with respect to the provisions of the assistance in the collection of taxes, the date to be agreed between the Governments of the two countries through an exchange of diplomatic notes.
- (a) in Japan:
(Reference)
“Convention between Japan and the Republic of the Philippines for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance”（Japanese (PDF)
/ English (PDF)）