Double Tax Avoidance Agreement (DTAA) between India and Philippines

The Double Tax Avoidance Agreement or DTAA is a treaty signed between two countries to prevent double taxation of the same income in both countries. India and the Philippines signed a DTAA on 15th November 2017, which came into effect from 1st April 2019. This agreement has been signed to boost trade and investment between the two countries.

India and Philippines have a long-standing relationship that dates back to centuries. India has been exporting garments, textiles, pharmaceuticals, and IT services to the Philippines, while the Philippines has been exporting coconut oil, banana chips, and electronics to India. With the signing of DTAA, it is expected that the trade and investment between the two countries will increase significantly.

Under the DTAA, Indian companies doing business in the Philippines will be taxed only in the Philippines, and not in India. Similarly, Filipino companies doing business in India will be taxed only in India, and not in the Philippines. This will prevent double taxation of income in both countries.

The DTAA also provides for reduced tax rates on dividend, interest, and royalty income between the two countries. The tax rates on dividend income have been reduced to 10%, while the tax rates on interest income have been reduced to 12%. Further, the tax rates on royalty income have been reduced to 15%.

The DTAA also provides for a mechanism to resolve disputes between the tax authorities of both countries. This mechanism includes a mutual agreement procedure (MAP) that allows the tax authorities of both countries to resolve disputes amicably. The MAP is expected to improve transparency and reduce tax disputes between the two countries.

The signing of the DTAA between India and the Philippines is a significant step towards strengthening the economic relationship between the two countries. It is expected that this agreement will boost trade and investment between the two countries and provide a framework for resolving tax disputes. The signing of this agreement is a positive development for both Indian and Filipino companies looking to do business in each other`s countries.