MANILA: Thousands of Filipinos in Cambodia may soon experience financial relief under the newly signed Double Taxation Avoidance Agreement (DTAA), which was discussed during a Senate Committee on Foreign Relations hearing on Thursday (March 12).
A DTAA is a tax treaty between two countries that aims to prevent the same income or gains from being taxed twice. It also sets the rules on how the two countries impose taxes on each other.
The hearing, presided over by committee chair Sen. Erwin Tulfo, focused on the urgent need to ratify the treaty to protect Filipinos from being taxed twice on the same source of income.
According to the Department of Finance (DOF), around 7,000 Filipinos and 13 Filipino companies in Cambodia are currently taxed at the full rate due to the absence of a DTAA.
With the treaty in place, tax payments made by Filipinos in Cambodia are expected to decrease.
“We have workers who are not OFWs but they do provide services in Cambodia, what will happen is… instead of them being taxed at 20 percent, Cambodia can only tax them up to 10 percent,” DOF Dir. Euvimil Asuncion told Tulfo.
As for Philippine companies in Cambodia, Asuncion explained: “As long as they are not residents there, they will be protected by the treaty because they will not be subject to double taxation in both the Philippines and Cambodia because of the tax credit.”
She added that when Philippine companies in Cambodia pay their interest income tax, Cambodia may only impose up 15 percent, while the rest of the taxes will be paid in the Philippines.
In the same hearing, the Department of Trade and Industry (DTI), the Department of Foreign Affairs (DFA) and the Bureau of Internal Revenue (BIR) also expounded on the benefits of the DTAA in other aspects.
The BIR pointed out that the DTAA may allow for a “predictable investment regime” between the two countries.
“We’ll be able to use it to entice and encourage investments because there will already be transparency and clarity in terms of taxation if in case they will engage in business activities and establish here in the country,” DTI Board of Investments Dir. Elyjean Portoza said.
This was echoed by DTI Export Marketing Bureau Dir. Bianca Sykimte, saying, “[The DTAA] really provides a stable rules-based framework that encourages market entry and strengthens the confidence in doing business abroad.”
DFA also highlighted regional investments, noting the country’s commitment to the Association of Southeast Asian Nations’ Forum on Taxation.
“This helps remove one of the possible barriers to the influx of investments from Cambodia and our other partners. One of those is uncertainty. When there’s more certainty on how they will be taxed, it might help promote better trade relations with the affected countries,” DFA Assistant Dir. Catherine Sy explained.
In the same breath, Sy put forward the treaty’s role on a global scale, by way of commitment to avoiding tax loopholes.
“If there is more certainty, we can avoid those or deter those who would take advantage of the uncertainty to avoid paying taxes,” Sy added.
The initial negotiations for the tax treaty between the two countries was made in 2018 in Manila. According to the DOF, Cambodia agreed to several of the Philippines provisions on the DTAA in 2020.
It was not until 2025 when President Ferdinand Marcos Jr. and Cambodian Prime Minister Samdech Moha Borvor Thipadei Hun Manet signed a pact to remove double taxation on income tax.
According to the DOF, Cambodia has informed the government agency last week that it has “completed the internal procedures necessary” to enforce the agreement. - Philippine Daily Inquirer/ANN
