Treasury streamlines tax treaty procedure

To boost local capital market

MANILA, Philippines — The Bureau of the Treasury has rationalized tax treaty procedures for government securities in a bid to boost the local capital market.

In a statement, the Treasury said it would implement a streamlined tax treaty procedure for non-resident investors of government securities.

The move is part of the government’s efforts to attract foreign participation in the securities market and strengthen the domestic capital market.

Finance Secretary Ralph Recto said the streamlined procedure is one of the many reforms underway to boost the Philippine capital market and reinforce its competitiveness.

“We are confident that more foreign investors will seize the opportunity to invest in our government securities, which would enhance market liquidity,” Recto said.

“This is another step in deepening our capital market, driving sustainable economic growth, creating more job opportunities, boosting incomes and uplifting more Filipino lives,” he said.

Under the streamlined process, non-resident investors no longer need to submit several tax documents to the issuer to claim tax treaty benefits on specific government securities income items, nor will they have to repeat this application process for each new government securities income event.

This removes the risk of claim denial and eliminates the need to file for tax treaty relief and go through a lengthy tax refund process.

According to the Treasury, this was made possible by integrating the streamlined process into the tax tracking system of the National Registry of Scripless Securities (NRoSS).

As a result, non-resident investors only need to complete a one-time process to create their securities account, after which treaty rates are automatically applied to all government securities held within the account.

Further, non-resident investors need not be holding government securities to benefit from the initiative as they can set up their securities account in advance of any purchases.

Currently, the Philippines has 43 double tax agreements or tax treaties that provide preferential tax rates from 10 to 15 percent depending on the country.

The NRoSS system’s tax tracking feature will automatically reflect the relevant rates from the tax treaties.

The application of rates shall remain effective as long as the non-resident investor maintains an updated tax residency certificate through its custodian.