Singapore and the Philippines are close geographical neighbours; they have enjoyed strong bilateral economic relations since the formal re-establishment of diplomatic relations between the countries in 1969. An important step in the creation of comprehensive economic cooperation was reached in 1998, when the two countries signed the Memorandum of Understanding on the Philippines-Singapore Action Plan. The implementation of the action plan has made Singapore the fifth largest export market for the Philippines in the world and ASEAN`s largest. Lion City is the seventh largest import supplier to the Philippines. It is also the Philippines` largest international investor, with investment commitments totalling $3.48 billion, or 45.2% of total foreign commitments in 2019. These figures show that bilateral economic relations between countries are deep and lasting. In the first half of 2019, CSCCI signed an agreement with the Makati Business Club during the visit of the House delegation. The agreement aims to promote closer trade relations between Singapore and Philippine companies. This deep economic integration between the two countries is the result of bilateral agreements aimed at improving and improving trade transactions between the two markets.
This article describes such an important agreement between Singapore and the Philippines – the prevention of the Double Taxation Convention (DBA) – which reduces the tax burden on parties carrying out transactions covering both countries. If you are considering joining a business in Singapore and doing business with the Philippines, this guide will help you understand the tax treatment of different sources of income related to the Philippines for your business. Dividends paid by the Philippine company to non-residents are generally subject to a 30% withholding tax. In the case of a Singapore beneficiary, the rate is reduced to 15 or 25 per cent, in accordance with the above-mentioned DBA provisions. These dividends are likely to be exempt from Singapore tax in the case of a beneficiary of a business. And if the beneficiary is an individual, these dividends are also excluded. Taxes covered by the agreement include corporate and income tax in both countries (Philippine and Singapore tax). Singapore levies a 15 per cent withholding tax on all interest paid to non-residents.
Interest paid by a Singapore company to the Philippine beneficiary is taxed at 15% in Singapore.