The Philippines Bureau of the Treasury (BTr) announced in a press release on 5 November 2024 the implementation of a streamlined tax treaty procedure for non-resident investors in Government Securities (GS).
This initiative is part of the Bureau’s ongoing efforts to attract foreign participation in the GS market and strengthen the domestic capital market.
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 GS income items, nor will they have to repeat this application process for each new GS 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.
This is 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 GS held within this securities account. Additionally, non-resident investors don’t need to be holding GS to benefit from this initiative as they can set up their securities account in advance of any GS purchases.
“This is just one of the many reforms underway to boost the Philippine capital market and reinforce its competitiveness. With this streamlined process, we are confident that more foreign investors will seize the opportunity to invest in our government securities, which would enhance market liquidity. This is another key step in deepening our capital market, driving sustainable economic growth, creating more job opportunities for our people, boosting their incomes, and uplifting more Filipino lives,” said Finance Secretary Ralph G. Recto.
Currently, the Philippines has 43 Double Tax Agreements or Tax Treaties that provide preferential tax rates from 10% to 15% depending on the country (See Annex A). The NRoSS system’s tax tracking feature will automatically reflect the relevant rates from the said Tax Treaties. The application of these rates shall remain effective as long as the non-resident investor maintains an updated Tax Residency Certificate (TRC) through their custodian.
For additional information on the new tax treaty procedure, investors are encouraged to review the memorandum released dated 22 August 2024 with subject “Streamlined Procedure for Tax Treaty Implementation in the National Registry of Scripless Securities (NRoSS)” posted on the BTr website.