Double Taxation Agreement Uk Philippines
Posted On 6. Juli 2023
Double taxation agreement UK Philippines: An overview
Double taxation is a term that refers to the practice of taxing the same income twice in two different countries. To avoid such a scenario, countries enter into bilateral treaties known as double taxation agreements (DTAs), which aim to eliminate double taxation and promote cross-border trade and investment.
The UK and the Philippines have a DTA in place that was signed on December 20, 1976, and came into effect on December 17, 1977. The agreement aims to prevent double taxation on income and capital gains and to eliminate tax evasion or avoidance.
The DTA covers taxes on income, including employment income, business profits, and dividends, among others. Under the agreement, residents of one country who receive income from the other country are entitled to a credit against their home country`s tax for the tax paid in the source country.
For instance, if a resident of the Philippines earns income in the UK and is subject to tax on that income in both countries, the resident can claim a credit for the UK tax paid against their Philippines tax liability. This ensures that the same income is not taxed twice, and double taxation is avoided.
The agreement also provides for reduced withholding tax rates on dividends, interest, and royalties paid by one country to residents of the other country. For example, the Philippines applies a withholding tax rate of 15% on dividends paid to non-residents. However, under the DTA, the UK residents will only be subject to a maximum withholding tax rate of 10% on dividends paid by Philippine companies.
Furthermore, the DTA provides for the exchange of information between the tax authorities of the two countries. This helps to prevent tax evasion or avoidance and ensures that taxes are properly paid.
In conclusion, the double taxation agreement between the UK and the Philippines is instrumental in promoting cross-border investment and trade by ensuring that taxpayers are not subject to double taxation. By reducing withholding tax rates and promoting the exchange of information, the agreement serves to enhance the economic relations between the two countries.