By Aubrey Rose A. Inosante, Reporter

NEGOTIATIONS between the Philippines and Hong Kong on a double taxation agreement (DTA) are expected to close in October, the Bureau of Internal Revenue (BIR) said.

“It looks like the negotiations will move quickly. We’re optimistic that by October, most of the substantial parts will be completed, and the next step will be the signing,” BIR Commissioner Romeo D. Lumagui, Jr. told BusinessWorld on June 11.

The agreement aims to eliminate double taxation on income earned in the two countries.

The first round of negotiations for the Comprehensive Avoidance of Double Taxation Agreement was conducted from May 21 to 23 in Hong Kong.

The BIR said the inaugural round of negotiations saw both sides engage in “constructive discussions and exchange views on key provisions of the proposed treaty.”

These included mechanisms to prevent double taxation, tax relief measures, and frameworks for mutual cooperation between the two tax authorities, it added.

“The discussion went fairly well. The main issue is really just understanding where each country is coming from,” Mr. Lumagui said. 

“Of course, Hong Kong has a different tax regime, and the Philippines has its own — that’s all. We’re also looking at what we can offer and what needs to be done — so far, we’ve been able to reach agreements smoothly.” 

The Philippines has around 44 double taxation agreements with various countries, including the United States, the United Kingdom, Spain, South Korea, Japan, Germany, China, Canada, Australia.

The Philippines and Cambodia signed a DTA last February, after three rounds of negotiations.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies urged the BIR to find balance in attracting investment, protecting the tax base, and aligning with global standards on tax transparency when negotiating the agreement.

“BIR should prioritize safeguarding Philippine taxing rights while promoting cross-border trade and investment,” Mr. Rivera told BusinessWorld on Thursday. 

He also cited the strong anti-abuse and information exchange provisions to prevent tax evasion, fair allocation of taxing rights on income like dividends and royalties as key areas of priority in drafting the DTA.

Mr. Rivera said the deal should also include “updated rules on digital services and permanent establishments; clear dispute resolution mechanisms; and safeguards to protect overseas Filipino workers and micro, small, and medium enterprises from double taxation.”

TAX AMNESTY DEADLINE
Meanwhile, the BIR moved the deadline for the filing, approval and payment of estate tax amnesty application to June 16.

“Again, the deadline is June 14, which falls on a Saturday. Since it’s a Saturday, we’re moving it to the next working day, which is Monday. So, the deadline for filing and payment of the estate tax application will be June 16,” Mr. Lumagui told reporters on June 11.

The BIR also extended the banking hours of Authorized Agent Banks up to 5 p.m. for the availment of the estate tax amnesty.

Under the Republic Act No. 11956, the law extended the period for availing estate tax amnesty for another two years or until June 14, 2025, from the previous deadline of June 15, 2023.

This grants beneficiaries, transferees, or legal heirs sufficient time to settle taxes on inherited assets, particularly for estates of individuals who passed away on or before May 31, 2022.

For those applying, the BIR said one must have a duly accomplished and sworn Estate Tax Amnesty Return and Acceptance Payment Form with proof of payment, together with the complete documentary requirements, in triplicate copies.

“Failure to submit the same is tantamount to non-availment of the Estate Tax Amnesty and any payment made may be applied against the total regular estate tax due inclusive of penalties,” it said.

Mr. Lumagui said the process still cannot be done online unlike the annual income tax return filings.

“We need to ensure that all the requirements for availing of the estate tax amnesty are met. This isn’t like regular tax filings. That’s why the process is manual — because the documents need to be thoroughly evaluated for completeness,” he said. 

An 6% estate tax amnesty rate will be imposed on each decedent’s total net taxable estate at the time of death without penalties at every stage of transfer of property, the BIR said.

Last year, the Department of Finance proposed to raise the estate tax rate to 10% from 2025 to 2030, as part of its Government Revenues Optimization through Wealth Tax Harmonization (GROWTH) bill. It also proposed to revert the rate to 6% starting in 2031.

The proposal to replace the Capital Markets Efficiency Promotion Act with GROWTH bill was later withdrawn in April.