The governments of the Philippines and Japan have signed a renegotiated decades old tax treaty to boost investments and strengthen economic cooperation between the two countries.
The updated agreement on Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income was signed during President Ferdinand R. Marcos Jr.’s official State Visit to Japan, and serves as an important milestone as the Philippines and Japan commemorate 70 years of diplomatic relations.
It replaces the existing tax treaty originally concluded in 1980 and partially amended in 2008, underscoring the shared commitment of both governments to modernize their economic and fiscal cooperation frameworks.
The updated treaty eliminates the risk of double taxation on income earned across both jurisdictions, thereby reducing the cost of doing business and improving tax predictability for both individuals and enterprises. By streamlining cross-border tax treatment, the agreement is expected to create a more stable and efficient environment for trade and investment between the Philippines and Japan.
It also introduces updated provisions on withholding taxes on dividends, interest, and royalties, designed to encourage greater flows of investment and technology into the Philippine economy. These changes are expected to further support Japanese investments in key sectors such as advanced manufacturing, infrastructure, and digital innovation.
“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 D. Go said.
Japan remains one of the Philippines’ top sources of foreign direct investment, with annual inflows exceeding USD 800 million in both 2022 and 2023. The updated tax framework is expected to further strengthen investor confidence and deepen economic engagement between the two countries.
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
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 agreement signals continued openness to investment and reinforces the country’s position as a competitive and investment-ready economy.
