Philippines-Singapore DTAA:
Tax Treaty Guide with Examples
If you're a business owner, investor, or individual earning income across Singapore and the Philippines, understanding how to avoid being taxed twice on the same income is crucial. That’s where the Double Taxation Avoidance Agreement (DTAA) between these two countries comes in.
This guide offers a clear and practical overview of the Singapore–Philippines DTAA, explaining how taxing rights are allocated between the two countries and what relief is available to residents. We’ll walk you through the key provisions that apply to business profits, dividends, interest, royalties, capital gains, and other common cross-border income streams. Furthermore, we have included many examples to show how the DTAA rules apply in difference situations.
For a step-by-step overview of setting up a business in Singapore, check out our Singapore Company Registration Guide, created specifically for founders who want to understand the process, requirements, and strategic considerations from day one
This article covers the following topics of the Singapore-Philippines DTAA:
- Purpose & Scope of the Agreement
- Key Terms
- Tax on Business Profits
- Tax on Dividends
- Tax on Interest Income
- Tax on Royalties
- Tax on Personal Services
- Tax on Director Fee
- Elimination of Double Taxation
and
Philippines-Singapore DTAA: Purpose & Scope
The Singapore-Philippines DTAA prevents double taxation and allocates taxing rights between the two countries in a fair and transparent manner. By doing so, the DTAA ensures that businesses and individuals who operate in both Singapore and the Philippines are not taxed twice on the same income.
Who Is Covered
The scope of the agreement covers a wide range of income types, including business profits, dividends, interest, royalties, capital gains, income from employment, directorships, pensions, and other personal services, and miscellaneous income not specifically covered elsewhere in the agreement.
Who is Covered
This DTAA applies to all persons who are tax residents of either Singapore or the Philippines. It is relevant to both individuals and entities who have income sourced from or connected with these two countries.
Readers who would like to better understand how Singapore’s tax system works can explore our in-depth guides on the Singapore Tax System, Corporate Tax, and Personal Tax - written for global entrepreneurs seeking a quick and clear understanding.
Philippines-Singapore DTAA: Key Terms Defined
Person
Tax Resident
A "tax resident" is a person who is considered a resident for tax purposes under the laws of either Singapore or the Philippines. In general, a tax resident is subject to taxation on their worldwide income in the country of residence. The criteria for determining tax residency can vary between the two countries:
- Singapore: An individual is considered a tax resident if they are physically present or exercising employment in Singapore for 183 days or more in a calendar year. A company is considered a tax resident if its central management and control are exercised in Singapore.
- Philippines: An individual is considered a tax resident if they stay in the country for more than 180 days during any calendar year. For companies, tax residency is determined by where the management and control of the company is exercised.
If an individual is considered a resident of both Contracting States, their tax residency status is determined as follows:
- Permanent Home: If the individual has a permanent home available to them in both countries, they are deemed a resident of the country with which their personal and economic relations are closest (their "centre of vital interests").
- Habitual Abode: If the centre of vital interests cannot be determined, or if the individual has no permanent home in either country, they will be deemed a resident of the country in which they have an habitual abode.
- Mutual Agreement: If the individual has an habitual abode in both countries or neither, the competent authorities of both Contracting States will resolve the issue by mutual agreement.
For entities, a company is deemed a tax resident in the country where its place of effective management is situated. If the place of effective management cannot be determined, the competent authorities will settle the issue by mutual agreement.
Tax residency is important because it dictates the rights of the country to tax the income of the individual or entity. A tax resident may benefit from certain exemptions, credits, or deductions under the DTAA.
Permanent Establishment (PE)
Withholding Tax
"Withholding tax" is the tax deducted at source from income (e.g., dividends, interest, royalties) before it is paid to the recipient. The payer is responsible for withholding the tax and remitting it to the tax authorities of the country where the income arises. For more details on this tax mechanism, check out our Withholding Tax Guide.
To understand how withholding tax works in Singapore, including domestic rates and filing obligations, see our Singapore Withholding Tax guide.
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Philippines–Singapore DTAA: Tax on Business Profits
How business profits are taxed under the treaty
Under the Singapore-Philippines DTAA, the taxation of business profits is primarily determined by the presence or absence of a Permanent Establishment in the country where the income is derived. The general rule is that business profits are taxable only in the country where the enterprise is a tax resident, unless the enterprise operates through a PE in the other country. If there is a PE, then only the profits attributable to that PE will be taxed in the country where the PE is located.
1. Singapore Company Earning from the Philippines – No PE in the Philippines
Assume a Singapore company earns S$500,000 in business profits from its operations in the Philippines, but does not have a PE in the Philippines. According to the DTAA, these profits are taxable only in Singapore. The Philippines does not have the right to tax these profits.
- Profit earned: S$500,000
- Taxable in: Singapore (Philippines cannot tax the profits)
2. Singapore Company Earning from the Philippines – With PE in the Philippines
Now, if the Singapore company has a PE in the Philippines, only the profits attributable to that PE will be taxed in the Philippines. Let's assume that the PE generates SGD 200,000 of the total S$500,000 business profits.
- Profit earned: S$500,000
- Profit attributable to PE in the Philippines: SGD 200,000
- Taxable in:
- Philippines: S$200,000 (as income attributable to PE)
- Singapore: S$500,000 (total profit, less the tax credit for Philippines tax paid)
3. Philippine Company Earning from Singapore – No PE in Singapore
If a Philippine company earns SGD 400,000 in business profits from its operations in Singapore but does not have a PE in Singapore, these profits are taxable only in the Philippines. Singapore does not have the right to tax these profits.
- Profit earned: SGD 400,000
- Taxable in: Philippines (Singapore cannot tax the profits)
4. Philippine Company Earning from Singapore – With PE in Singapore
If the Philippine company has a PE in Singapore, the profits attributable to that PE will be taxable in Singapore. Let’s assume that S$150,000 of the total S$400,000 of business profits are generated by the PE in Singapore.
- Profit earned: S$400,000
- Profit attributable to PE in Singapore: S$150,000
- Taxable in:
- Singapore: S$150,000 (as income attributable to PE)
- Philippines: S$400,000 (total profit, less the tax credit for Singapore tax paid)
In each case, the profits attributable to the PE are subject to tax in the country where the PE is located, while the remaining profits are generally taxed in the country of residence.
Philippines–Singapore DTAA: Tax on Dividends
How dividends are taxed under the treaty
Under the Singapore-Philippines DTAA, dividends paid by a company in one contracting state to a resident of the other contracting state may be subject to taxation in both countries. However, the DTAA provides relief by limiting the rate of withholding tax that can be applied by the source country.
1. Dividends Paid by a Singapore Company to a Philippine Resident
If a Singapore company pays dividends to a resident of the Philippines, the dividends may be taxed in the Philippines. According to the DTAA, the maximum rate of withholding tax that the Singapore company can apply on the dividends is 15% if the recipient is a company that owns at least 15% of the voting stock of the paying company. Otherwise, the tax rate will be 25%.
- Dividend amount: S$500,000.
- Taxable in:
- Philippines: 25% withholding tax (if the recipient company does not meet the 15% ownership threshold)
- Singapore: No additional tax (dividends paid by a Singapore company are typically not taxed further)
2. Dividends Paid by a Philippine Company to a Singapore Resident
If a Philippine company pays dividends to a resident of Singapore, the maximum rate of withholding tax that can be applied by the Philippines is also 15% if the recipient is a company that owns at least 15% of the voting shares of the paying company. Otherwise, the rate is 25%.
- Dividend amount: S$500,000
- Taxable in:
- Philippines: 25% withholding tax (if the recipient company does not meet the 15% ownership threshold)
- Singapore: No additional tax (dividends paid to a Singapore resident are typically not taxed further)
In both cases, the withholding tax paid in the source country may be credited against the recipient’s tax liability in their country of residence, in accordance with the provisions of the DTAA.
Philippines–Singapore DTAA: Tax on Capital Gains
How capital gains are taxed under the treaty
Under Article 13 of the Singapore-Philippines DTAA, the taxation of capital gains from the alienation (sale) of property depends on the type of property being sold and its location.
1. General Rule
By default, gains from the alienation of any property that does not fall under the specific rules are taxable only in the country of residence of the seller.
- Example: A Singapore resident sells equipment that does not form part of a PE or fixed base. The gain from this sale is taxable only in Singapore, as the seller is a tax resident of Singapore.
2. Gains from the Alienation of Movable Property that form part of the Business Property of a Permanent Establishment (PE)
Gains from the sale of movable property (e.g., business assets) that are part of the business property of a PE or fixed base in the other contracting state may be taxed in that state.
- Example: A Singapore company sells machinery used in its Philippine PE. The capital gain from this sale would be taxable in the Philippines because the property is tied to the PE.
3. Gains from the Alienation of Immovable Property
Gains from the sale of immovable property (e.g., land, buildings, natural resources) are taxable in the country where the property is located.
- Example: A Singapore resident sells a piece of land in the Philippines for S$500,000. The Philippines will tax the capital gain from this sale as the property is situated in the Philippines.
4. Gains from the Sale of Shares in Companies or Interests in Partnerships or Trusts
Gains from the sale of shares in a company, or an interest in a partnership or trust, where the property of the company or entity consists primarily of immovable property situated in a contracting state, may be taxed in that state.
Example: A Philippine resident sells shares in a Singapore company, where the company’s property primarily consists of real estate in the Philippines. The Philippines has the right to tax the capital gain from this sale.
Philippines–Singapore DTAA: Tax on Interest Income
How interest income is taxed under the treaty
Under Article 11 of the Singapore-Philippines DTAA, interest income is generally taxable in the country where the interest arises (i.e., the source country). However, the country of residence of the recipient can also tax the interest income. The DTAA limits the withholding tax rate to 15% in the source country for interest paid to a beneficial owner.
1. Interest Paid by a Singapore Company to a Philippine Resident
According to the DTAA, interest arising in Singapore and paid to a resident of the Philippines is subject to tax in the Philippines. However, Singapore also has the right to tax the interest, but the withholding tax rate is limited to 15% of the gross interest amount.
Example: If a Singapore company pays S$100,000 in interest to a resident of the Philippines, the taxation will proceed as follows:
- Interest amount: S$100,000
- Withholding tax in Singapore: 15%
- Amount withheld: S$15,000
- Taxable in the Philippines: The interest income is also subject to tax in the Philippines, but the tax paid in Singapore (S$15,000) can be credited against the Philippine tax liability. The total tax burden will depend on the specific tax rate applicable in the Philippines.
- 2. Interest Paid by a Philippine Company to a Singapore Resident
Interest arising in the Philippines and paid to a resident of Singapore is subject to tax in the Philippines. However, the withholding tax in the Philippines is capped at 15% of the gross interest amount, in accordance with the DTAA.
Example: If a Philippine company pays S$100,000 in interest to a resident of Singapore, the taxation will proceed as follows:
- Interest amount: S$100,000
- Withholding tax in the Philippines: 15%
- Amount withheld: S$15,000
- Taxable in Singapore: The interest income is taxable in Singapore as well, but the tax paid in the Philippines (S$15,000) can be credited against the Singapore tax liability, reducing the overall tax burden.
3. Exemptions or Special Cases
There are special provisions under the DTAA that may exempt certain types of interest payments from withholding tax or provide a lower tax rate. For example, certain government bonds or public debt may be subject to different withholding tax rates, depending on specific agreements or exemptions under national laws.
Philippines–Singapore DTAA: Tax on Royalties
How royalty income is taxed under the treaty
Under the Singapore-Philippines DTAA, royalties paid by a company in one contracting state to a resident of the other contracting state are subject to taxation in both the country of origin (where the royalties are paid) and the country of residence of the recipient. However, the DTAA limits the rate of withholding tax that can be applied by the source country.
1. Royalties Paid by a Singapore Company to a Philippine Resident
Royalties arising in Singapore and paid to a resident of the Philippines are subject to tax in the Philippines. However, the withholding tax rate on such royalties is limited to 15% of the gross amount of the royalties if the recipient is the beneficial owner.
For example, if a Singapore company pays S$100,000 in royalties to a resident of the Philippines, the taxation would proceed as follows:
- Royalty amount: S$100,000
- Withholding tax in Singapore: 15%
- Amount withheld: S$15,000
- Taxable in the Philippines: The royalties may also be subject to tax in the Philippines, but the tax paid in Singapore (S$15,000) can be credited against the Philippine tax liability.
2. Royalties Paid by a Philippine Company to a Singapore Resident
Royalties arising in the Philippines and paid to a resident of Singapore are subject to tax in the Philippines. However, the withholding tax rate is limited to 15% of the gross amount of royalties if the recipient is the beneficial owner.
For example, if a Philippine company pays S$100,000 in royalties to a resident of Singapore, the taxation would proceed as follows:
- Royalty amount: S$100,000
- Withholding tax in the Philippines: 15%
- Amount withheld: S$15,000
- Taxable in Singapore: The royalties will also be taxable in Singapore, but the tax paid in the Philippines (S$15,000) can be credited against the Singapore tax liability.
3. Exemptions or Special Cases
Certain types of royalties may qualify for a reduced withholding tax rate or exemption under the provisions of the DTAA. For instance, royalties for the use of scientific, industrial, or commercial experience may be subject to different tax rates or exemptions based on domestic laws or specific treaty provisions.
Philippines–Singapore DTAA: Tax on Personal Services
How Independent and Dependent Services are taxed under the treaty
Under Article 14 of the Singapore-Philippines DTAA, income from both dependent and independent personal services is generally taxable only in the country of the individual's residence. However, if the services are performed in the other contracting state, the income derived from those services may also be taxed in the country where the services are performed.
However, the income is taxable only in the country of the individual's residence if the following conditions are met:
- Condition (a): The recipient is present in the other contracting state for 90 days or less for professional services, or 183 days or less for other services in the calendar year.
- Condition (b): The income is paid by, or on behalf of, a resident employer in the individual's country of residence.
- Condition (c): The income is not borne by a Permanent Establishment (PE) in the other contracting state.
Example 1: Income from Personal Services Earned by a Singapore Resident in the Philippines
Scenario 1: A Singapore resident works in the Philippines and earns S$150,000 in salary for the year. The individual stays in the Philippines for less than 183 days and the income is paid by a Singapore resident employer (not borne by a PE in the Philippines).
In the Philippines:
- Since the individual meets the 183-day exemption rule and the employer is a resident of Singapore, the income is not taxed in the Philippines.
In Singapore:
- As the individual is a resident of Singapore, their worldwide income is taxable in Singapore.
Example 2: Income from Personal Services Earned by a Philippine Resident in Singapore
Scenario 2: A Philippine resident works in Singapore and earns S$150,000 in salary for the year. The individual stays in Singapore for less than 183 days and the income is paid by a Philippine resident employer (not borne by a PE in Singapore).
- In Singapore: Since the individual works in Singapore for less than 183 days, and the employer is a resident of the Philippines, the income is not taxed in Singapore due to the exemptions in Article 14(2).
- In the Philippines: As the individual is a Philippine resident, the income earned abroad is subject to taxation in the Philippines.
Example 3: Income from Personal Services with Exceeding Duration in the Other Contracting State
Scenario 3: A Singapore resident works in the Philippines for more than 183 days in the calendar year and earns S$200,000 in salary. The income is paid by a Singapore resident employer and is not borne by a PE in the Philippines.
In the Philippines:
- Since the individual has worked in the Philippines for more than 183 days, the income will be taxed in the Philippines.
- The individual will be taxed based on Philippine tax rates.
In Singapore:
- The income is also taxable in Singapore, as the individual is a resident of Singapore.
- The foreign tax credit will be applied to offset the tax paid in the Philippines, ensuring that the individual is not double-taxed on the same income.
Final Result:
- Taxed in the Philippines based on Philippine tax rates for the income earned in the Philippines.
- Taxed in Singapore, but the foreign tax credit offsets the taxes paid in the Philippines.
Philippines–Singapore DTAA: Tax on Director Fee
How director fee is taxed under the treaty
Director’s fees are covered under Article 15 of the Singapore-Philippines DTAA.
How director’s fees are taxed under the treaty:
Director’s fees received by a resident of one country for serving as a director of a company in the other country may be taxed in the country where the company is a resident. This rule overrides the general rule for personal services (Articles 14 and 15). Taxation applies regardless of where the services are performed.
Key point: The “paying company’s country” has taxing rights, not necessarily the country where the director resides or performs their duties.
Example 1: Director’s Fees Paid by a Singapore Company to a Philippine Resident
Scenario: A Philippine tax resident (individual) receives S$100,000 as director’s fees from a Singapore company, for serving on its board.
In Singapore:
- Under Article 15 of the DTAA, Singapore has the primary taxing rights as the country of the paying company.
- Director’s fees are taxed according to Singapore's domestic tax rates.
- The director’s fees paid to a non-resident individual (a resident of the Philippines) are subject to withholding tax at the applicable rate, which may be 15%.
Estimated Tax in Singapore:
- Withholding Tax Rate: 15%
- Amount Withheld: S$15,000
In the Philippines:
- Director’s fees are foreign-sourced income for the Philippine resident.
- The Philippines grants a foreign tax credit for any tax paid to Singapore on this income.
- Since the tax paid in Singapore (S$15,000) is higher than the Philippine tax liability, the foreign tax credit fully offsets any Philippine tax.
Final Result:
- Taxed in Singapore: At the 15% withholding tax rate.
- Not taxed in the Philippines: Due to the full foreign tax credit.
Example 2: Director’s Fees Paid by a Philippine Company to a Singapore Resident
Scenario: A Singapore tax resident (individual) receives S$100,000 in director’s fees from a Philippine company, for serving as a non-resident director.
In the Philippines:
- As per Article 15 of the DTAA, the Philippines has the taxing rights as the country of the paying company.
- Director’s fees paid to a non-resident individual are subject to a withholding tax of 25%, as the DTAA does not cap the rate for director’s fees.
Withholding Tax in the Philippines:
- Withholding Tax Rate: 25%
- Amount Withheld: S$25,000
In Singapore:
- Singapore taxes residents on worldwide income.
- The Singapore resident must report the S$100,000 as foreign income.
- Singapore allows a foreign tax credit (FTC) for the S$25,000 tax paid in the Philippines.
Estimated Tax in Singapore:
- Foreign Tax Credit: S$25,000 (for the tax paid in the Philippines).
- Singapore Tax: Based on Singapore's domestic tax rates for foreign income, potentially up to S$11,500 to S$15,000.
- If the tax paid in the Philippines exceeds the tax liability in Singapore, the foreign tax credit fully offsets the Singapore liability.
Final Result:
- Taxed in the Philippines: At the 25% withholding tax rate.
- Taxable in Singapore: But fully offset by the foreign tax credit, so no additional tax is payable.
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